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The Vietnam News

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Ministry denies purge, cover-up allegations at scandal-hit firm

The recent replacement of some top executives at a corruption-ridden Ministry of Construction firm was just normal personnel rotation, and had nothing to do with alleged scams in the firm, a ministry official has said.

Nguyen Thanh Minh, the Ministry of Construction's office chief, Tuesday also denied allegations the ministry had hushed up massive financial wrongdoings at the firm, the Da Nang-based construction and building materials manufacturer COSEVCO. Last week COSEVCO's chair Tran Xuan Dinh and six other officials were arrested. They have been charged with "deliberately violating state economic management regulations, causing serious consequences," and are being held in Hanoi pending further investigation. Before the arrests, many senior personnel stepped down for unexplained reasons.

State Audit reports released last year showed COSEVCO owed around 4.1 trillion dong (US$257 million) to creditors. They also showed it had incurred a total loss of 220 billion dong (US$13.8 million) during Dinh's tenure as chair and then CEO from 2003. Speaking to Thanh Nien Tuesday, Minh said the ministry would dispatch a task force to assist the police in the investigation into possible scams at the corporation, promising anyone violating the law would be punished. But he insisted that the officials had stepped down and been replaced as part of the firm's normal rotation policy.

Curious corp

In late 2003, after a slew of financial wrongdoings came to light, Dinh was sacked as chair of the company but remained its CEO. His successor, Nguyen Cong Huan, retired within a few months, but not before complaining to the ministry about massive corruption by Dinh. But Minh told Thanh Nien that Huan had only stepped down because he was incapable of handling the corporation and not due to any infighting. After Huan departed, the ministry appointed Pham Huu Minh as the new chair. Pham Huu Minh sought Dinh's explanation about some construction projects that had incurred heavy losses but he was soon transferred to another job in the ministry. But the ministry's Minh claimed Pham Huu Minh had resigned only because of poor health. Astonishingly, in 2005 Dinh was reinstalled as chair and Ngo Khiet became the new CEO. Many of Dinh's subordinates had sent letters to the ministry accusing him of corruption and nepotism. Grilled about the suspicious reappointment, Minh said it had been carried out properly. Whispers of a purge within the corporation became loud last August after Dinh proposed Khiet be dismissed, though the latter was credited with turning things around after replacing Dinh as CEO at the foundering company.

Despite widespread protests by the company staff, Khiet received the sack. But the ministry's Minh told Thanh Nien that Khiet's dismissal had been for incompetence. Asked if someone was orchestrating a cover-up of Dinh's wrongdoings, the Ministry of Construction, predictably, said no. But it promised to get to the bottom of the case.

Thanh Nien - March 7, 2008.

Wrongdoings detected at Cosevco

The main reason why Cosevco’s chair, Tran Xuan Dinh, was arrested is making wind investments into infeasible project and managing the corporation in a form of family company.

In 1999, Cosevco borrowed capital to build MDF-Cosevco Wood Processing Manufacturer with annual capacity of 30,000 square metres at Dong Luong ward, Dong Ha township, which is now Nam Dong Ha-Quang Tri Industrial Zone. Tran Xuan Dinh assigned Hoang Cong Uyen, director of the 78 Construction Co in Quang Tri province, a member of Cosevco, to represent as the head investor and Ho Si Quang as chief accountant. After the project with total investment of 299.755 billion dong was approved, Cosevco opened a foreign bid contract, bought production assembly lines. After different adjustments, Cosevco instructed the 78 Construction Co to raise the manufacturer’s capacity from 30,000 square-metre products a year to 60,000-square-metre products a year and continued opening the foreign bid contract based on previous contracts.

This time, Maschinenfabrik J.Diffenbacher GmbH&Co (German) won the bid at US$16.545 million [the price of bid package was US$16.121 million]. Right after that, contractor Metso (Sweden), which offered a far lower bid price of US$14.146 million but failed to win the bid, submitted a complaination to the construction ministry. On June 7, 2002, the construction minister enacted an official letter asking Cosevco and the 78 Construction Co to seriously review their responsibility in selecting the contractor for supplying major production assembly lines. Instead of re-organising the bid, Tran Xuan Dinh, general director who is now Cosevco’s chair, signed a bid winning contract with Tilman Helmer, director of Maschinenfabrik J.Diffenbacher GmbH&Co on January 10, 2004, COSEVCO’s managing board issued Decision 21/TCT-DA approving to revising total investment from 299.755 billion dong to 387 billion dong and to 456.578 billion dong on September 27, 2006.

In fact, Cosevco’s leaders did suspicious things in signing the contract on buying foreign equipment, raising investment but also failing to construct 18 necessary items when carrying out construction for the manufacturer. It was estimated that the difference compared to the initial investment was more than 160 billion dong and the loss was 53 billion. As a result, the manufacture’s capacity was low, the environment was seriously polluted and others. The Gianh River Cement Manufacturer Project located at Tien Hoa commune, Tuyen Hoa district, Quang Binh province which was kicked off in July 2003, had capacity of 4,000 tonnes of clinker a day with total investment of 3.2 trillion dong. In May 2005, the manufacturer came into operation and so far often meets with various difficulties. The reasons were that Cosevco omitted a series of regulations, changed equipment without changing prices, causing a loss of over 500 billion dong.

In addition to the two above projects, Cosevco has long focused on investing into some 160 projects across the central region of Vietnam. All projects resulted heavy losses, and debts. By the end of 2005, total bank debt of Cosevco was up to 4.143 trillion dong. Furthermore, Tran Xuan Dinh guaranteed his member companies to borrow 1.5 trillion dong. Particularly, although the Gianh River Cement Manufacturer was on the edge of bankruptcy, on February 25, 2008, Cosevco continued approving the second phase of the manufacturer with total investment of nearly 1.4 trillion dong. Fortunately, the leadership members of Cosevco headed by Tran Xuan Dinh were arrested otherwise Cosevco would suffer a loss of several billions of dongs among 1.4 trillion dong.

In 2004, because there were many complaints about Cosevco, the construction ministry sent an official letter dated March 28, 2004 asking Tran Xuan Dinh, who is now general director, to review the five points as below:
Firstly, investment projects were invested widespread and had low efficiency. Cosevco did not pay due attention to management, many projects failed to follow procurement regulations, principles on signing equipment purchase contracts. There were many signs of personal gains.
Secondly, regarding finance, the company’s finance was very difficult but failed to be reported exactly. Cosevco’s members lacked of capital for operation. Many companies suffered from heavy losses, big bank loans.
Thirdly, the management board have for many years always dominated the whole corporation. Those who had good capacity were placed in improper positions for different reasons. Leaders abused their power to nominate their relatives, who had bad capacity, to important positions.
Fourthly, regarding management, the general director was monopoly, undemocratic and failed to respect his junior posts and follow the family-management form. The general director failed to respect the management board and did not implement decisions of the management board. As a result, some vice general director, director, vice director, many skilled workers applied for resignation.

Regarding the lifestyle, there were signals of unhealthy social relations. The general director had illicit sexual relationship with some female employees inside and outside the corporation. Furthermore, Dinh let his wife and children interfere into the internal affairs of the corporation so much that construction minister Nguyen Hong Quan in an official letter asked Tran Xuan Dinh not to let his wife and relatives in his family intervene into affairs of the corporation or its members. Thus, it can be said that the construction ministry has long known what happened at Cosevco. Perhaps, some people will ask why everyone knows how Dinh was so arbitrary however there remains no measures to prevent him from making Cosevco devastated. After the investigating agency investigated corruption at Cosevco, the Ministry of Police arrested and house-searched Tran Xuan Dinh and six key officials of Cosevco. Right after the introduction of instance for the seven above people, the Party Committee of Da Nang City and the construction ministry decided to suspend party activities for Tran Xuan Dinh.

On 29 February, the government's inspectorate said "previously, we had discovered many wrongdoing signals at Cosevco including serious wrongdoings of the Gianh River Cement Manufacturer Project from payment to purchase of equipment that caused great losses for the corporation. From those wrongdoing signals, the Corruption Fighting Agency under the government's inspectorate directly worked with the investigating agency. When working with relevant agencies, the investor had not yet explained the difference in price of the imported equipment." What people expect is that the investigating agency will investigate wrong-doers.

Thanh Nien - March 6, 2008.