Hyatt heist!

1 July 2015 06:31 am - 23 - {{hitsCtrl.values.hits}}

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-Initial cost of Rs. 13 b doubles due to massive mismanagement including
-Rs. 5 b EPF funds
-Former board had no formal meetings, contracts doled out with no tender procedure
-Rs. 300 m spent on H’tota Hyatt even before start, project to be cancelled by new officials
-Colombo Hyatt to open by 2017 after three-year delay

A forensic audit into the Hyatt hotels in Colpetty and Hambantota has uncovered mass fraud resulting in initial cost estimates more than doubling from Rs. 13 billion to Rs. 27 billion and the company facing a shortfall of nearly Rs. 9 billion to complete the project, its new director board said yesterday.

Canwill Holdings Ltd. is a fully state-owned public enterprise that was initiated under former President Mahinda Rajapaksa’s tenure. It was entrusted with Rs. 18.5 billion in equity sourced from its key shareholders Sri Lanka Insurance Corporation, which contributed Rs. 8.5 billion as well as Litro Gas and the Employees Provident Fund (EPF) that provided Rs. 5 billion respectively.

Forty-six percent of the shares were held by Sri Lanka Insurance while the rest was divided between Litro Gas and EPF.

Canwill Holdings then invested its equity in two subsidiaries, Sinolanka Hotel and Spa, which was behind the Hyatt hotel in Colpetty and Helanco Hotels and Spa that backed the proposed Hyatt in Hambantota.

“The Hyatt in Colombo has been under construction for over three years. During the audit we uncovered instances of massive wastage and mismanagement right from the inception of obtaining the land. Three additional properties were acquired by paying Rs. 40 million more than was suggested by the Government Valuer at the behest of the company,” new Chairman Hemaka Amarasuriya told reporters but assured the company has sufficient funds to “carry on for now.”
The main land was leased for 99 years from the Urban Development Authority (UDA) after the former Ceylinco property was controversially expropriated by the previous government. Canwill Holdings was previously managed by former Chairman Gamini Senerath and former Managing Director Piyadasa Kudabalage and the audit report found no regular board meetings had been held with major decisions taken via email, Amarasuriya said.

Among the host of irregularities and mismanagement highlighted by the audit were payments of Rs. 10 million to a lawyer with no agreement, Rs. 16 million losses in steel purchases, fittings supplier given Rs. 80 million without board approval, international tender for $ 37 million signed with an international contractor the day before the presidential elections and Rs. 12.8 million spent on a signing ceremony. An additional Rs. 300million had been spent from Rs. 5 billion earmarked for the Hambantota Hyatt without even the foundation stone being laid for the project. The new board plans to revert the remaining funds to complete the Colpetty Hyatt and cancel the project in Rajapaksa’s hometown. Many of the contracts were handed on personal basis without open tenders, the audit report found.

A bag of foreign consultants were also appointed to the interior design, restaurants, food services, laundry, lighting, lifts, landscape and facade that have been combed through by the new board and largely dismissed. A foreign engineering consultant was also hired at Rs. 16 million a month, which the new board has terminated. A corporate credit card with a limit of Rs.1.5 million was issued to the former managing director and both his children were employed by Canwill Holdings with special perks, charged Amarasuriya. The results of the audit will have handed over to the Criminal Investigation Department (CID) of police.
“So far we have saved about Rs.150 million by cancelling and renegotiating contracts. This work will continue and we hope to save an additional Rs. 100 million. Tenders have already been called for fresh work and we will work to ensure transparency. It is essential for the public to know about this wastage as it involves public funds,” he added.

A foreign general manager was hired for a salary of Rs. 1.4 million but he has been sent back to Hyatt by the new board of directors as his services would not be immediately needed. However, Amarasuriya was quick to assure no oversights had been found in connection to the management and profit sharing agreement signed between Canwill Holdings and Hyatt International. The new opening date for Hyatt Colombo has been extended to 2017. The agreement was initially entered to by Hyatt Hotels Corporation in 2012 and it was to have been completed in 2014. (Courtesy –Daily FT)

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Comments - 23

J R Rajasinghe Wednesday, 01 July 2015 03:58 PM

bullshit. Please complete the project without bullshit.

banda Thursday, 02 July 2015 05:54 PM

they have talked, now you act on 17th August to send the culprit to the gallows

Ryan Thursday, 02 July 2015 03:35 PM

this is not fraud, the initial budget was not properly done, how do you say initial budget correct

clifford Thursday, 02 July 2015 11:58 AM

So it is very clear evidence that this project is totally based on fraud by the previous regime and these topics must be carried forward for open debates with the so called desha premis. So how do they expect the people to vote them back for power when so much of unlimited corruption had taken place in every single development projects

saternina Thursday, 02 July 2015 10:13 AM

What a mess? This Nation needs New politicians . And the corporate sector also should be cleaned up.

Vasa Thursday, 02 July 2015 09:58 AM

This was the so called development of the corrupt regime thrown out by the people.Rulers and henchmen developed,ordinary people and the country was pauperised.

DJ Thursday, 02 July 2015 06:23 AM

Not much can be done now, when leaders like MR who had zero principals and cap it all a dictator, the hard working public funds are not only misused but they do not have anysay either

Sikuru Wednesday, 01 July 2015 07:29 PM

MS has not yet given nominations to MR but I have lost my trust in him after he gave ministries to crooks

DOmiya Wednesday, 01 July 2015 06:12 PM

JUst like Sri Wickrama Rajasinghe, JR Rajasinghe also has the mindset to somehow ruin and separate this country.

Hakuru Wednesday, 01 July 2015 05:38 PM

Sikuru - what the hell was proved on the said allegations?

Chryshan Wednesday, 01 July 2015 05:00 PM

Evan after most of the frauds have surfaced, MS decided to give nominations for MR. Does this mean MS also encourages bribery, corruption, drugs, Mafia, Casinos etc. Duminda, Wimal, Namal back in action.

Dilip Wednesday, 01 July 2015 04:21 PM

Preparations for the next elections. We will hear more new stories.

Amila Wednesday, 01 July 2015 12:09 PM

Any good news from previous gvt? Can anyone explian the return on investment of 57000million Magampura Mahinda Rajapaksa port and 27000million Maththa Air Port?

kgb Wednesday, 01 July 2015 03:57 PM

its sad to see that in lanka we still have educated anthayo who can be fooled (moda rela) all the time.

Realist Wednesday, 01 July 2015 03:23 PM

Damien, what foreign investments in Hambanota apart from the Chinese hotels? Infrastructure for Sri Lanka built by foreign contractors is not investment.

Calistus Jayatilleke Wednesday, 01 July 2015 03:08 PM

With all these exposures, it is really shameless for Mahinda Percy Rajapakse to contest elections. He seems to be thinking that all Sri Lankans are buffaloes.

Damien Wednesday, 01 July 2015 02:21 PM

Stop preaching things you hear out of politicians mouth.The return of these investments will be long term and when it happens these politicians will be proved wrong. Do you know how much foreign investments are in hambanthota,foreigners have seen opportunities while us srilankans criticize the leader that created these opportunities

Pagara Wednesday, 01 July 2015 02:16 PM

It looks like the Chickens are coming home to roost and MR wants to contest again? ha ha ha.

raspi Wednesday, 01 July 2015 02:11 PM

Well I think we should have had more audits to check out the rest of the projects before going for the elections.

karu Wednesday, 01 July 2015 01:47 PM

Only talk. No action.

kumudu Wednesday, 01 July 2015 12:30 PM

This is not a secret to people. This audit should continue transparent even with the deal of insurance taking over and forming the new company with EPF. The misappropriations should be not hidden.

Sikuru Wednesday, 01 July 2015 12:22 PM

Meanwhile MR cultists are denying all the wrong doings of the MR regime and MS is scared to act against MR

Shamantha Welgama Wednesday, 01 July 2015 12:15 PM

Totally Fraudulent/Miss management by Uneducated thugs, Drug dealers ,Rapiers, Robbers before Jan 08,2015.

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Hyatt heist!

Comments - 23

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