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Ghana CHRAJ Investigation Report On MP Car Loans
Ghana CHRAJ Investigation Report On MP Car Loans
ADMINISTRATIVE JUSTICE
INVESTIGATION REPORT:
(INTERIM ONLY)
PROFESSOR STEPHEN K. ASARE
V.
CLERK OF PARLIAMENT.
INVESTIGATOR
AYAMDOO CHARLES
HEADQUARTERS
APRIL 2003
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INTERIM INVESTIGATION REPORT
_____________________________________________________________
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the payment terms must have been the equivalent of $630 per month. Therefore,
if the payment terms laid out for the MPs fell short of $630 per month, then the
MPs had not paid for the loans fully.
To understand how our MPs were using this loan proposal as a means to
“steal” from the consolidated funds require a little discussion of the
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mechanics of a loan. A loan is nothing more than a contract which
commits a borrower to make a series of specified future payments to a
lender in exchange for an immediate consideration that the borrower
receives from the lender. The loan contract is consummated because the
lender and the borrower have different time preferences for money. The
MPs want the money today to buy their cars and promise to repay the
consolidated fund at a future date. The trick to making the contract
workable is a concept, called present value, which simply requires the
MPs to return to the consolidated funds an amount in the future that is
worth the same amount of money that they are borrowing today. This is
where the interest rate comes in….
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¢38,882,415. The difference of ¢101,117,585 (140,000,000 – 38,882,415)
would have been a clever transfer from the consolidated funds to the MPs.
It is important to understand that this calculation is based on the 30 per
cent interest rate and the 48 months. If one changed these assumptions,
one would come out with different numbers but the same qualitative
results. By way of sensitivity analysis, consider the situation where the
loan was given at zero percent interest rate for 48 months. Even making
this highly unrealistic and certainly foolish assumption, will still imply
that the MPs will only be paying the equivalent of ¢67,200,000 (or
$9,600). The difference of ¢72,800,000 (or $10,400) is a net raid on the
consolidated fund and can buy a nice used BMW in Europe or USA. For
the deal to work at zero percent and be a real loan, the MPs must pay
¢2,916,667 every month for 48 months.
But the analysis should lead us to ask for the full terms of the car loans
(and any other loan granted to MPs) in 1993 and 1997. We know that
¢890 million were disbursed to 178 MPs to acquire vehicles in 1993. We
also know that MPs were given loans of ¢26 million each ($15,000 at the
time) in 1997 to acquire vehicles. What we do not know for sure are the
payment terms and whether the MPs have paid the full amount of the
loans using the concept of present value as explained earlier.”
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significant consequences, especially when those involved are the nation’s
lawmakers.”
The complainant then concluded his complaint thus: “The zero tolerance for
corruption slogan will be meaningless unless CHRAJ’s investigative arsenal is
brought to bear on key political leaders who abuse their power or engage in acts
of corruption…”
3.0. INVESTIGATION
3.1. Persons Interviewed/ contacted.
I interviewed/contacted the following:
Office of Parliament;
i. Hon. Kenneth E. K. Tachie - Clerk to Parliament
ii. Mr. Dan Chirawura - Internal Auditor
iii. Mr. Amponsah Boateng - Head of Finance
iv. Mr. Agama. - Deputy Clerk
v. Mr. Azumah - Former Auditor
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Social Security Bank;
x. Mr. Kojo Thompson - Managing Director
xi. Mr. Jackson Abbiw - Legal Department
xii. Mr. Mark Ofori- Kwafo - Legal Department
3.2. Documents
I also inspected a few documents, including the following:
vi. List of MP’s who took loans from the GCB and SSB
vi. Others
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Upon receipt of the complaint, the Commission submitted a copy of it to the Clerk
to Parliament, (the respondent), Hon. Kenneth E.K. Tachie, who submitted to the
Commission his written response to the allegations made against it by the
Complainant.
He said that consequently, the salaries of the MPs were paid through the MPs
banks and those banks made monthly deductions in respect of the loans, which
they granted to the MPs up to December 1996, when that Parliament stood
dissolved. According to the respondent, any remaining balances were deducted
from exgratia awards granted to the MPs at the end of that Parliament.
8
Total 31,600,000
He stated further that the money was released through the Office of Parliament for
the purchase of the cars and deductions in respect of the said loans also
commenced the same month that payment was made for the cars.
The respondent disclosed that by 1999, a total deduction of 7,193,000 per MP had
been made and the remaining balance of 21,827,000, presumably with interest,
was fully deducted at source at the Ministry of Finance against the exgratia award
paid to each MP in December 2001
Each MP was to select a vehicle of his/her choice provided that the cost of
Insurance and Freight (CIF) value of such vehicle, together with taxes and
Comprehensive Insurance Cover did not exceed US$20,000.00 ceiling to the
dealer.
The process of payment for the vehicles includes the completion of application
forms as required by the Public Services Regulations and the establishment of
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Letters of Credit by the Controller and Accountant General to enable the various
motor firms import the said vehicles.
The respondent disagreed with the complainant that “… the car loans for
Members of Parliament in 1993 and 1997 were not car loans at all but gifts
disguised as loans.” According to him, in so far as any amount advanced or
loaned to any Member of Parliament for the period covered has been fully
recovered, it is difficult to see how even “an expert” can classify this as a case of
“gifts” and not loans. Most certainly, the description of the arrangement both in
1993 and 1997 as “a bipartisan raid on the consolidated funds” is an extreme
exaggeration and totally without foundation. There is no basis, therefore, for the
allegation that the arrangement constituted instances of corruption and abuse of
power justifying an investigation by the Commission under article 218 of the
Constitution”
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vii. Copies of payment vouchers covering the payment of ex-gratia
awards to Members of Parliament of the First and Second
Parliaments of the Fourth Republic.
ii. Evidence of deductions made against the Ex-gratia award of M.Ps of the
Second Parliament of the Fourth Republic, which was paid in December
2001.
The Ministry regretted that it was unable to accede to the Commission’s request.
The Ministry’s reply is as follows:
“We acknowledge receipt of letter no. CHRAJ/2102/2001/
648 of 27th November, 2002 in which you requested the
Ministry to furnish your Office with copies of loan
guarantees issued to Ghana Commercial Bank and the
Social Security Bank in favour of Members of Parliament
(MP) of the First Parliament of the Fourth Republic
together with Evidence of Deductions made against Ex-
gratia awards of MP’s in December, 2001.
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We regret to inform you that we are unable to accede to
your request as the required documents are not readily
available to us. The Office of Parliament operates with
some level of autonomy and as such has not been relating
with this Ministry in all aspects of their accounts and
financial matters”
4.0. FINDINGS
4.1. The Car Loans of the First Parliament
Documents from Parliament reveal that the respondent did not only facilitate
Members of Parliament of the 1st Parliament of the 4th Republic to obtain car
loans from the GCB and SSB but also from the NIB and Barclays Bank as shown
in Table 1.
Table 1: MPs Car Loans (1994) and Banks
S/No No. of MPs Bank Amount Interest
(Millions - ) Rate
(%)
1. 111 GCB 5 & 5.5 2
2. 72 SSB 5 &5.5 2
3. 1 NIB - -
4. 1 Barclays - -
The Ghana Commercial Bank (GCB) and the Social Security Bank were
contacted and requested to provide information regarding the loans.
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regarding the car loans the GCB granted to the MPs of the First Parliament of
1993-1996.
The GCB confirmed that it granted car loans to about one hundred and eleven
(111) MPs between August 1993 and November 1994 (Appendix A). The loan
amount was 5,000,000 and 5,500,000 (While some MPs took 5,000,000
others took 5,500,000.)
The Office Of Parliament undertook to pay the salaries of the MPs through the
GCB to enable the GCB to deduct monthly installment payments from the MPs
salaries, which was done. Accordingly, the MPs salaries were paid to them
through the GCB and the GCB made monthly deductions from the salaries. The
amount of monthly deductions made from each MP’s salary depended on the
amount of loan taken and the number of months within which to pay. Thus, those
MPs who took 5,000,000 and had 38 months to pay, suffered deductions of
131,578. 94 and those who were to pay within 25 months installment period
were to have 217, 391.30 deducted. For those who took 5,500,000, the
monthly deductions were 144,736.84 for 38 months duration and 239,130.43
for 25 months duration. (See Table 2)
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8 Hon. Paul K. Peprah 27/8/93 154,084.63
9 Hon. Seidu Yahaya 9/8/93 142,928.38
10 Hon. Joseph E. Ackah 15/10/93 150,238.32
During investigations, it was confirmed that pubic servants do obtain loans from
Government to purchase means of transport an interest rate of 2% is placed on the
loan, and the loan is deducted at source on monthly installments until the loan
amount plus the interest is fully recovered. However, where a public servant
obtains a loan from the Bank to purchase means of transport, the usual bank
interest rate would apply.
Documents from the GCB reveal that a sum of between 416,666.662 and
2,105,263.043 was deducted from the salary of each MP in repayment of the
loans they took from that bank4. The deductions were effected at source from the
beginning up to December 1994 and not December 1996, as stated by the
respondent5. Consequently, the loan was not fully recovered from the monthly
deductions. As the documents reveal, the MPs had over 2,000,000, each as debt
due and owing to the GCB as outstanding balance on the loans.
1
List of interest rate provided by the GCB
2
Hon. Domnic Azimbe Azumah
3
Ho. Nketia Johnson Aseidu and many others
4
GCB.8 “Debit-Transfer
5
see schedule to letter submitted by Office of Parliament dated 6th February 1994, under the heading” CAR
LOAN REPAYMENT-MEMBERS OF PARLIAMENT” REF. No. NA/GCB/95
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4.1.3. How were the balances to be paid?
The Respondent stated that “… the salaries of the MPs were paid into the MPs
banks and those banks made monthly deductions in respect of the loans they
granted to the MPs up to December 1996, when that Parliament stood dissolved.
Any remaining balances were deducted from ex gratia award to the MPs as
provided for in the Greenstreet Report”
The following items of deductions were to be made from the exgratia awards:
CEPS Deduction (Car); GCB Shares; and other loans. Save the GCB shares item,
for which some deductions were made from those who bought shares, no other
deduction was made from the exgratia award of the MPs, not even the car loan
installment. Therefore, the balance outstanding was not deducted from the ex
gratia award of the MPs.
4.1.5. How was the Outstanding Balance paid then ?
On 20/1/95 and 6/02/95, and before that Parliament stood dissolved in December
1996, the Office of Parliament paid 234,919,129.20 to the GCB to offset the
outstanding balances on the car loans due that bank “…on behalf of Members of
Parliament as per schedule attached”7
6
The Speaker, Ministers and Deputy Ministers are not on this list”
-payment of exgratia award to MPs
7
letter submitted by Office of Parliament dated 6th February 1994, under the heading” CAR LOAN
REPAYMENT-MEMBERS OF PARLIAMENT” REF. No. NA/GCB/95 confirming that it had paid for the
MPs
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(See Box 1)
Box 1- Parliament’s Letter Confirming Payment
It is quite clear from the foregoing that, if indeed, the MPs “… contracted the
loans directly with their bankers with only a guarantee by the Ministry
(which the Ministry denies) that Members salaries would be passed through
those banks to enable the latter recover the said loans”, then Parliament
should and ought not to have paid for the MPs even before the end of their term of
office (only within one year into their assumption of Office). Parliament, even
after paying off the loans for the MPs failed/refused to deduct it from the exgratia
awards, when it was paid to the MPs.
From the conduct of the respondent with respect to the payment of the car loans
for the Parliamentarians, it is reasonable to infer/conclude that, the car loans
granted to the Parliamentarians of the 1st Parliament of the 4th Republic (1994-96)
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“… were not loans but gifts disguised as loans.” When the low interest rate the
GCB placed on the loans for the MPs, is added, it makes the assumption even
stronger.
i. only two MPs took the loans through those banks( one through Barclays
and the other through the NIB)
ii. it is reasonable to assume that the facility granted to the 111 MPs at GCB
would have been extended to the other two from those banks
8
See Respondent’s written Comments to the Commission dated 17 th April 2002, ref. No. OP/A.001, titled
“Car Loans for MPs and signed by Hon. Kenneth E.K.Tachie, Clerk To Parliament, p.3
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An interest rate of 2% per annum was placed on the loan, bringing the total
amount of the loan to 37,920,000.
4.4.2. Deductions
Monthly deductions were made from the salaries of the MPs but the exact amount
per month, which was deducted, was not accessible to me. However, P.V.s of the
ex gratia indicate that by the end of the term of Second Parliament, a total of
7,193,000 was deducted from each MP’s salary9. If this amount were taken
away from the 37,920,000, each MP should or ought to have paid to government
an amount of 30,727,000( 37,920,000 minus 7,193,000= 30,727,000.)
Thus, the outstanding balance to be paid by the MPs after the deductions from
their salaries was 30,727,000 and not 21,827,000, as stated by the respondent.
Similarly, the C&AGD wrote to the Commission saying that “… the personal
emoluments of members of Parliament are not processed by the Controller and
Accountant-General’s Department. Consequently, the salary payment vouchers
are not available in the Payroll Processing Division of the Controller and
Accountant-General’s Department. It is suggested that you direct your request
9
Except the following MPs, who paid of the loans from the exgratia at a go; Hon. Akuffo-Addo Nana, Blay
FWK, Nortey Okuley Victor,Dzirasah kenneth, Boon Teni Alice, Koi Larbi Agyare, Mensah Joseph,
Henry, Yankah Kojo and A,Rt.Hon. Justice DF Annan
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to the Office of Parliament as it subsists on subvention and thus discharge its
own financial obligations, including the payment of salaries and other
expenses…”.
This implies that both the Ministry and the C&AGD did not have anything to do
with the recovery of the loans taken by the MPs and they did not deduct any
monies from their salaries. Therefore, if the MPs fully paid their loans it ought to
been done at the Office of Parliament.
Documents procured from the Office of Parliament disclose that the MPs had not
fully repaid their car loans. The amount paid by each MP was 29,020,000.10 The
mode of payment is as summarized in Table 3.
10
Extracted from a document labeled “ Computation of Difference in the Payment of Ex-gratia for
Members of the 2nd Parliament”
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4.5.1. Loan Approval
Following negotiations by the leadership of Parliament and Government, on 4th
September 2001, Hon Yaw Osafo-Marfo wrote to the Majority Chief Whip, under
the heading: PARLIAMENT CAR LOAN ACCOUNT, (Ref No/OOP/003)
thus:
“ The ministry of Finance approves that an all inclusive credit
facility amounting to $20,000 be granted to each MP, to purchase a
car for official duties under a Hire Purchase Agreement to be
approved by the Ministry of Finance. This is consistent with
similar arrangements made for MPs in 1997
Installments will be deducted at source with effect from September
2001 at the rate of 1,200,00 per month. Unpaid balance is to be
settled from other entitlements of MP’s at the end of
parliamentary term of 4yrs.
Pursuant to this letter, a $ 20,000 loan facility was granted the MPs’ and
deductions of 1,200,000 started in Sept 2001, which means that the MPs had 40
months from September 2001 to December 2004 to pay for the loans.
4.5.2. Deductions
Total expected deductions from the salary of each MP would look as follows
(Table 4:
Table 4: Expected Total Deductions(Sept 2001-December 2004)11
S/No Year Monthly deduction Total Deduction
(cedis)
1 2001(Fro
2 m Sept) 1,2000,000 4,800,000
3 2002 1,2000,000 14,400,000
4 2003 1,2000,000 14,400,000
11
Based on the respondent’s confirmation that deductions started in September 2001 at 1,200,000 per
month.
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2004 1,2000,000 14,400,000
Total 48,000,000
Table 4 shows that by the end of the Third Parliament in December 2004, a total
amount of forty eight Million (48,000,000) cedis would have been made from
the salary of each MP in repayment of the car loan of US$20,000.
“Ex-Gratia Awards
14. The executive and the legislative positions are often occupied by officers
whose appointments are transitory and contractual.
Thus, except for the President who is to retire on his salary, the
Vice President, the Speaker, the Ministers and Deputy Ministers as
well as Parliamentarians are paid ex-gratia awards on completion of
12
The exchange rate of the dollar to the cedis at the time the loans were granted was 1 dollar : 7,000
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their term of office. These awards take the form of a lump sum paid
at the end of a defined period.
13
Report of the Committee Appointed by the President to Advise on the Determination of Emoluments of
the Specified State Functionaries, June 1998, p.7
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The MPs of the 3rd Parliament are on a monthly salary of 5,216,278.1514
Assuming that by 2004, the salary remains the same, each MP would be entitled
to 4 years x 3x 5,216,278.15, which equals 62,594,373.80.
Quite clearly, this amount would not fully repay the outstanding balance of
92,000,000 cedis. There will still be a balance of 29,406,627.80 to be paid by
each MP. Indeed, it will require raising the salary of the MPs significantly to be
able to recoup the loan fully from their end of term entitlements as envisaged.
5.1. Parliamentarians of the 1st ,2nd,and 3rd Parliaments of the Fourth Republic were
given car loans to purchase means of transport. Those members who retained their
seats since the 1st Parliament of the Fourth Republic in 1993 and who have
retained their parliamentary seats have therefore benefited three times each, one-
car very four years.
5.2.2. Whereas, the prevailing interest rate at the time the GCB granted the loans to the
MPs was 32% the GCB placed an interest rate of 2% n the MPs’ loans.
5.2.3. The GCB made monthly deductions from the salaries of the MPs in respect of the
loans it granted to the MPs up to December 1994, when the Office of Parliament
paid off the balance outstanding as at that date for the MPs.
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5.2.4. The amount paid to the GCB by the Office of Parliament was Two hundred and
thirty-four million, nine hundred and nineteen thousand, one hundred and twenty-
nine cedis, twenty pesewas (¢234,919,129.20) vide Cheque Nos. 591387 of
20/1/95 and 591393 of 6th February 1995
5.2.5. No deductions were made from the ex-gratia awards paid to the MPs in 1996 in
repayment of the outstanding balances of the loan as suggested by the respondent.
5.2.6. Each MP of the First Parliament owes the state about 2,000,000
5.3.2. A total of 7,193,000 was deducted from each MP’s salary and the outstanding
balance to be paid by the MPs after the deductions from their salaries was
30,727,000 and not 21,827,000, as stated by the respondent.
5.3.3. Each MP had paid a total of 29,020,000 ( 7,193,000 monthly deductions and
21,827,000 from ex gratia award)
14
Reference, “Payroll Spread Report for the Month of September 2001(Normal Payroll)M.U. MP 001”
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granted to each MP, to purchase a car for official duties under a Hire Purchase
Agreement to be approved by the Ministry of Finance.
5.4.2. Almost all MPs of the Third Parliament have availed themselves of this facility
and an amount of 1,200,00 per month is being deducted (with effect frorm
September 2001) from the salaries of the MPs for the payment of the loans.
5.4.3. The MPs have 40 months from September 2001 to December 2004 to pay for the
loans from the monthly deductions and from any end of term entitlements
5.4.4. Total expected deductions from the salary of each MP for the 40 months
would add up to 48,000,000 and expected end of term entitlements are expected
to amount to 38,002,345.2815 based on the Greenstreet Report and provided the
salaries of the MPs are not increased substantially before end of December 2004,
when that Parliament is dissolved.
Should the Office of Parliament decide to use the gross salary of the MPs for the
calculation of their end of term entitlements, the MPS would be receiving
¢129,768,848(footnote 16)
6.0. CONCLUSION/RECOMMENDATIONS
Considering the importance of this matter, I recommend that the Commission
initiates a formal investigation into this matter if warranted.
15
Monthly salary of about2,375,146.58 cedis basic as at May 2003
16 Monthly gross salary(including all allowances) was 8,110,553 as at May 2003.
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