The $25,030 Dollar Question still unanswered about the AIM scandal:
Why do the deal at all?
Why sell public property into party political hands for a pittance?
Teo Ho Pin and the PAP have been scratching around in a state of panic to justify the deal that has had Singaporean’s scratching their heads for weeks. On releasing a desperate – and desperately confusing – press release yesterday it appeared at first glance that they had succeeded – the deal could be justified on operational and financial grounds. But as soon as Singapore’s online community got their teeth into it, the explanation immediately started to fall apart. The suggestion that the whole operation was intended as a “fix” to inconvenience any democratically elected opposition to the PAP increasingly looks like the only credible reason.
The first justification appears to come from paragraph 18 of the statement “[T]he TCs expected to gain a modest amount (about S$8,000) from the disposal of IP in the existing software”. This supposed justification was repeated by both the Straits Times and Channel News Asia – Teo, AIM & the PAP would like you to know that the TCs made a profit and therefore the deal was a good one – but actually that is not the whole story. Teo’s cleverly worded statement focuses only on the “disposal of IP in the existing software” and that is only one part of the whole deal. Read on to paragraph 25 and the S$25,030 dollar question rears its ugly head
“from November 2011 to April 2013, the management fee payable to AIM for the whole suite of services it provided was S$33,150”.
So why boast about an S$8,000 gain, when you later go on to pay S$33,150 in management fees?
Confused? Teo hopes you are, but let me explain. The S$8,000 gain comes from the fact that AIM paid S$140,000 for the software rights, but received only S$131,880 (S$785 per month from 14 town councils for 12 months) in return – the difference being S$8,120. But then the TCs also paid a further S$33,150 in management fees, so the net loss to the Town Councils is actually S$25,030 dollars. So this is the first problem for Teo and the PAP. Why use the S$8,000 gain made by the TCs from selling the software to justify the deal when in fact the deal as a whole yielded a net loss of at least S$25,030.
Further question: The statement by Teo does not mention if any management fees were paid for the first phase of the contract, from November 2010 to October 2011. Where there any, and if so, how much?
The second potential justification for the deal actually came in paragraph 5:
The main issue, however, was that the system was becoming obsolete and unmaintainable. It had been built in 2003, on Microsoft Windows XP and Oracle Financial 11 platforms. By 2010, Windows XP had been superseded by Windows Vista as well as Windows 7, and Oracle would soon phase out and discontinue support to its Financial 11 platform.
Apparently this is the “main issue”. In 2010 Teo was advised that the system was becoming obsolete. Yet the tender notice mentions nothing of replacing an obsolete system or commissioning a replacement. From a careful reading of Teo’s statement we can see that the maintenance contract for the old system has been renewed until April 2013 (paragraph 23), so it is still running a full three years after Teo was advised that it was out of date Again, there is practically no information in the statement regarding what steps Teo has taken as coordinating chairman for the TCs to replace this obsolete system. Given that the main issue was obsoleting and not depreciation, why have Teo, the TCs and the PAP entered into this bizarre and unjustifiable sale and lease-back deal rather than work full speed on replacing the old system?
This whole saga has been dragging on for weeks, and if the PAP want to win back the trust of the people on this issue, they need to take some serious steps. This author would like to see the books of AIM fully opened to public scrutiny, would like to see all minutes of all meeting where not just the sale and lease-back deal were discussed, but also the discussions, if any, regarding upgrading the obsolete systems. Finally the report presented by Deloitte and Touche Enterprise Risk Services Pte Ltd regarding the review of the TC software that apparently led to this deal being undertaken should also be released to the public. Nothing less will restore confidence that the deal was done for the right reasons.