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Maldives Asset Recovery STO Singapore

Draft Report Private and Confidential - in anticipation of legal proceedings


Last updated 16 September 2010

Contents
1 Introduction 2 History of the Republic of the Maldives 3 STO Maldives (Singapore) Pte Limited - Background 4 STO plc Audit 5 Key Persons within STO and STO Singapore 6 Initial Forensic Examination 7 Further Forensic Examination 8 Mocom/Myanmar 9 Commission paid to Mr Rashid 10 Companies trading with STO Singapore 2002 2006 11 Next Steps

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Grant Thornton Draft Audit Report 2010 STO Singapore

Introduction
1.1 Grant Thornton UK LLP were requested to undertake an asset tracing and investigation exercise via an engagement letter dated 23 March 2010, subsequently amended on 8 July 2010, on behalf of the Government of the Republic of the Maldives ("the government") with regards to a number of individuals. In addition, we were requested to investigate the assets of the former president Mr Maumoon Abdul Gayoom ("Gayoom"), his family members, and connected parties following the findings of the Auditor General's Audit reports in 2007 and 2008 that government funds and national institutions were being used for personal benefit. During our investigation in the Maldives, we were provided with three hard-drives from the Presidents Commission, which investigates allegations of corruption and misappropriation of assets. These hard-drives contained copy images of the harddrives in the STO Singapore office as at 2009. Allegations of skimming from oil trades were provided. We were informed that although the hard-drives had been imaged, that no further investigation had taken place into the allegations, due to various reasons of which lack of resources and technical knowledge. This report outlines the investigation process that Grant Thornton UK LLP undertook, and our findings to date.

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History of the Republic of the Maldives


2.1 In order to understand the political set up of the Maldives, I set out briefly below the political history of the Maldives in order to provide some background knowledge of the Maldives during the period when Gayoom was in power. The countrys current political system was established in November 1968 when it was proclaimed The Republic of Maldives Islands. It was renamed The Republic of Maldives in April 1969. The Maldives first President, Amir Nasir, remained in office until November 1978, when Gayoom, who was at the time the Minister of Transport, assumed the presidency. President Nasir abolished the role of Prime Minister in 1975 leaving only the Presidency. Mr Gayoom was elected with 92.96% of the votes as the new President of the Maldives. He was last re-elected to a sixth five-year term in October 2003 with 90.28% of the vote; he was the sole candidate, having been chosen by the Majlis. The Peoples Majlis, (the Parliament), consists of 50 members of whom eight members are appointed by the President, two members are elected from the capital, Mal, and two members from each of the 20 Atoll constituencies. The speaker of the Majlis - who is not a member - is appointed by the President. A deputy speaker is also appointed by the President from among the members. These appointments gave the President considerable power to influence the conduct of the Parliament.

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2.7

Although the Maldives did not have a party system, a 1998 constitution gave citizens the right to contest the vote for the presidency in parliament. Before then it had been a criminal offence to offer oneself as a candidate. During his Presidency, Gayoom was also the Defence Minister, Finance Minister and Chief Justice of Maldives (among others), but following international pressure and media attention stepped down from these additional positions in 2004. The October 2008 Maldivian presidential election was the first presidential election Maumoon Abdul Gayoom allowed to be contested. Standing as the DRP candidate, Gayoom lost in the election's second round, in which he received 45.75% of the vote against 54.25% for his opponents, President-elect Nasheed succeeded Gayoom as President on November 11, 2008.

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2.9

2.10 According to an Amnesty International report, in 2003 "there were severe restrictions on freedom of the press, and political parties were unable to function." Their report introduction stated that "This report provides information on arbitrary detention of government critics and their continued imprisonment before and after convictions in grossly unfair trials. It also highlights a pattern of torture and illtreatment, and serious flaws in the criminal justice system. In the past decade, dozens of people - including politicians, journalists and others protesting government policies - have been detained arbitrarily in defiance of their fundamental rights to freedom of expression and assembly. Several prisoners of conscience have been tried and convicted by the Criminal Court without having access to a lawyer, or to an independent and impartial appeal mechanism. Their cases highlight the failure of the government to address fundamental flaws in the criminal justice system resulting in arbitrary detention, grossly unfair trials and long term imprisonment of government critics." (Source: Amnesty International)

STO Maldives (Singapore) Pte Limited - Background


3.1 STO Maldives (Singapore) Pte Limited ("STO Singapore") is a subsidiary of State Trading Organization Plc ("STO") a state owned organisation. The State Trading Organisation Public Limited Company (STO) was established in 1964 and its main task is importing and trading goods. The government currently owns 92.29% and 7.71% is held by the general public The STO specialises in the import of staple foods, fuel, lubricants and construction materials. Its main aim is to supply these goods at a reasonable price to the public. The majority of the STO's activities is the supply and sale of petroleum and aviation fuel. STO Singapore was set up in 1997 in order to purchase diesel and related products on behalf of the Maldives, but progressed to include the sale of these products to other countries. The majority of its sales were to STO in Male, and to Myanmar with the exception of 2002 where the majority of sales revenue came from Malaysia. This is shown in the Appendix XXX. We were only able to obtain information from 2002 to 2008, as

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Grant Thornton Draft Audit Report 2010 STO Singapore

there were no accounting data back up files prior to 2002, and paper documentation was sparse.

STO plc Audit


4.1 During the audit planning for 2007, comments were made under "Entity risk fears" regarding STO plc. That "STO revenue is in all most all the years just the same as its cost of sales leading to very low profit margin. in financial year 2006 there has been a decrease of approximately 87% of the net profit compared to financial year 2005. Similarly Maldives National Oil Company is operating under a very low profit margin. In 2006 profit margin has declined by approximately 67% compared to 2005. The main risk assocated in the entity is segregation of duties at the top level. Transfer of money within the organisation ".

It was also mentioned in the audit approach that Mr Maniku " was also the Chairman of STO Maldives Singapore, Maldives National Oil Company, Fuel Supply Maldives, Allied Insurance Company, so there might be related party transaction between these subsidiares. Therefore control risk is very high."

Key Persons within STO and STO Singapore


5.1 The following individuals were directly appointed by Gayoom and held significant strategic and influential positions within the organisation.

Abdulla Yameen 5.2 Abdulla Yameen is the younger half brother of Gayoom and was given the Chair of the STO position and the Trade Ministry in 1990. Mr Yameen was also the Minister of Tourism and of Civil Aviation. 5.3 5.4 Abdulla Yameen stepped down from the position of STO Chairman in 2005. However evidence found within STO Singapore (Exhibit XXX - source STO Singapore Hard-drive, copied in 2009) of debit notes being created from STO Singapore to STO, for payments made on account of Mr Yameeen during 2007/2008. On further examination, we were informed that these debit notes were created as a result of receiving funds from Mr Yameen deposited to the STO head office, which were then transferred to STO Singapore's bank accounts. This corresponded with a document received from STO Head Office confirming the payments were deposited by Yameen into STO's bank accounts via cheque. In conversation with Mr Muneez, the Managing Director of STO Singapore, this was to provide monies for the living expenses of his son and daughter, both studying in Singapore. Their living expenses were distributed by Mr Muneez.

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5.8

Two issues arise in the above process; a) Why Mr Muneez was tasked with the responsibility over many years of the distribution of funds to Yameens family when no apparent consideration appeared to be given to Muneez for this. b) That despite stepping down from his role as Chairman in 2005, he was still using nationally owned institutions (STO) and their company bank accounts to transfer personal funds to members of his family up until late September 2008.

5.9

It would be highly unusual for a person no longer connected to the company of which he used to be Chairman to use company bank accounts for personal use/money transfers.

5.10 It should be noted that this continued up until very shortly before the elections took place that resulted in a change in government, removing his brother Gayoom from the Presidency. 5.11 As Chairman, Yameen should have been aware of the strategic risks and opportunities being presented to STO and would have needed to provide his guidance. He would have been aware of the oil trading as the Singapore arm would not have been incorporated without his approval. 5.12 From copy letters translated from Dhevi, Mr Yameen has previously requested Gayoom to sign letters, drafted by Yameen, to foreign leaders/ministers with regards to oil production and sale. 5.13 This further corroborates our view that Mr Yameen was aware of and would have been involved in the oil strategy that took place within STO and STO Singapore, not just through his position as Chairman but through his various visits to Singapore and his use of the STO Singapore bank accounts for personal use, and his relationship with Muneez, the Managing Director of STO Singapore. Mohamed Maniku 5.14 Mohamed Maniku was made Managing Director of STO in 1993 and served until 2008 until he was appointed as an Ambassador to Washington. 5.15 Mr Maniku was also a director on the Bank of Maldives Board, due to his position within the STO, and this remained throughout his tenure. This is referred to in a separate report. 5.16 Due to this longevity as MD of STO it could be concluded that he had significant influence within the organization. 5.17 We have reviewed various purchase invoices regarding Mr Maniku's visits to Malaysia and Myanmar from the STO Singapore office, which clearly indicates that Mr Maniku was acutely involved in the STO Singapore oil strategy involving Myanmar and other third parties.

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Initial Forensic Examination


6.1 Our initial investigation centred on the hard-drives received from the Presidents Commission. We completed a search on the files obtained within the hard-drives and picked out documents of interest. During the searches we discovered various documents that required further investigation, these are broadly categorised into the following: Mocom/Myanmar sales Unusual Debit Notes/Payments Unusual contracts of sale We also reviewed the STO Financial Statements for 2001 to 2009. The STO was audited by PWC in Male until 2003. For 2004 onwards it was audited by KPMG based in Sri Lanka, which for the first time in STO received a qualification in the audit with the following opinion: "A company incorporated in Singapore by the name of Mocom Trading Pte Ltd in 2004 has not been disclosed under Note No. 30 to the Financial Statements. There was no evidence available with regard to approval of the incorporation. Further we are unable to establish the volume and the nature of the company with the group ." In 2005, KPMG further qualified the audit with the following opinion: A company incorporated in Singapore by the name of Mocom Trading Pte Ltd in 2004 has not been disclosed under Note No. 33 to the Financial Statements. There was no evidence available with regard to approval of the incorporation and we are unable to establish the volume and the nature of the transactions of company with the group. However, the name of the company has been struck off on 20th April 2006". Further to the above, Grant Thornton staff travelled to STO Singapore office on 14 July 2010 for two days to obtain initial documentation and to review the accounting files. This was not a perfect process as STO Singapore's files are poorly organised and not in any clear order. There were 5 small bays of files for approximately 13 years of accounting records, sale contracts, purchase invoices, bank statements, oil trading information etc.

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6.10 At the office copies of sales invoices, letters of credit and bank statements were obtained for 2004, as it appeared to have the most available documentation and the KPMG audit first identified Mocom in 2004. 6.11 Work continued on the review of the sales invoices, and of the STO Singapore Financial Statements.

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6.12 A general review of the Financial Statements from 2001 to 2009 can be found in Appendix XXX. 6.13 This review shows that revenue increased dramatically from 2001 to 2002, after which sales hovered around the SD$100million mark until 2005. From 2006 onwards, sales decreased significantly and revenue in 2009 dropped to SD$17million its lowest to date. 6.14 A review of the sales invoices in 2004 showed that for each trade sale to Myanmar Petrochemical Enterprise, there were two sales invoices, one from STO Singapore and one from Mocom Trading Pte Ltd. 6.15 This was an anomaly as all other sales from STO Singapore to the following companies STO Plc, Sirus Marine PTE Ltd, Petroleum Nasional Berhad, and Prestige Marine Services PTE Ltd only had the one sales invoice on STO Singapore letterhead. 6.16 The sum total of all the Mocom invoices to Myanmar Petrochemical Enterprises was $45,751,423, whereas the sum total of the invoices raised by STO Singapore to Myanmar Petrochemical Enterprises was $51,423,523. A difference of $5,672,500. 6.17 Further, for both invoices, the invoice number and the quantity was the same, however the unit price per barrel of oil, and therefore the total gross amounts were different. 6.18 The invoices issued by each of the companies bear striking similarity to each other, in everything but the price per barrel. The price per barrel is usually somewhere in the region of US$5 per barrel higher in the STO invoices than the Mocom invoices and there was no obvious explanation for this. See Appendix XXX. 6.19 In addition, Mocom and STO Singapore invoices suggested that they are trading from different addresses, but they carry the same contact numbers. 6.20 Bank statements for STO were reviewed for the period 2004 in an attempt to reconcile any differences. It was discovered that monies were received in an account with the United Overseas Bank Ltd ("UOB") for the sales to Myanmar, and could be identified via the invoice numbers which were stated on the bank statements. 6.21 The amounts received ($27,588,887) did not exactly match the invoices raised by STO or Mocom, however they were closer to the amounts raised by Mocom then STO. 6.22 On UOB receiving the monies, cheques were written out to transfer these monies out of UOB. We traced $3.245m being paid to STO Singapores' Standard Chartered Account. 6.23 Bearing in mind that there appeared to be no obvious sizeable debt write offs, there was no apparent logic for the disparity in values between the two sets of invoices.

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6.24 We considered the view whether it could be a simple commission calculation with the basis being the STO invoice value. i.e. the invoices were being used to solely back this up and nobody seeking to agree the trades back to the sales ledger? However it is clear from discussions with Muneez and Ravi (the office accountant since 2002) and through reviewing the ledgers during the second visit to the offices that this was not the case. 6.25 We researched the company who had audited the accounts for STO Singapore, and found that the company looked as if it was a sole practitioner. 6.26 Given the above and the fact that the financial statements were audited by small perhaps one person firm, it was agreed that further forensic examination of the accounts was required in order to understand what figures represented the sales and which value (STO or Mocom) was shown in the financial statements.

Further Forensic Examination


7.1 Our strategy was to focus on the oil trades (sales and purchases), tracing through the invoices to the revenue stated values for 2004, to complete the initial examination, and to then review the sales and purchases for other years. STO Singapore appear to have purchased fuel from Shell Eastern, the Singapore Petroleum Company and Petronas, and then sold it to STO, its parent company, or to third parties. Occasionally sales were made for shipping of items on behalf of a government organisation, such as the Office of Election Commission. In order to ascertain whether all purchases of fuel were delivered and sold to either STO or other third parties, work included comparing the purchases of fuel shown in STO Singapore's purchase ledger with: purchase invoices; and sales shown in STO Singapore's sales ledger. As part of this process, we compared the purchase invoices with bills of lading and other documentation such as manifests in order to ascertain where the fuel had been delivered. As referred to above, this was not a perfect process as STO Singapore's files are poorly organised. The folders containing bills of lading etc were difficult to locate and we could not find all of the material we had expected to find.

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a) b) 7.4

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Sales 7.6 We reviewed the sales invoices for 2004, which as per Appendix XXX showed 78 sales transactions for the year. 7.7 Of these transactions 75% were to Myanmar or to Myawaddy Trading Pte Ltd, also based in Myanmar.

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Grant Thornton Draft Audit Report 2010 STO Singapore

7.8

On three of the STO/Mocom Invoices the debtor was stated as being Myawaddy Trading Pte Ltd, which was different to the debtor ledger in the accounts. These are highlighted yellow. All of the transactions were relating Myanmar/Myawaddy were for marine diesel oil. Of the remaining transactions, the next largest debtor was STO plc, buying SD$25million of fuel products.

7.9

7.10 The sales invoices themselves showed the following information: Customer Invoice date and number Bill of Lading date BL number Where the shipment was from and its port of discharge The vessel used to transport the products The letter of credit number Description of goods Quantity sold Unit price Sale price

7.11 Appendix XXX shows a summary of the sales transactions that took place in 2004. 7.12 To reconcile the sales invoices back to the purchases made, we reviewed the documentation supporting the transaction, including the bills of lading, insurance documents and purchase invoices. 7.13 In addition we used IDEA software to link specific purchases of oil with the sales, therefore confirming the basis of the transactions.

Bills of Lading 7.14 Bills of Lading for each shipment of oil should show to whom the shipment had been consigned and the corresponding port of discharge. They are created by the supplier from which the fuel product was purchased.

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Grant Thornton Draft Audit Report 2010 STO Singapore

7.15 The consignees shown on Bills of Lading where Myanmar has been invoiced for supply are summarised in the following table. Period 27/1/04 - 7/3/04 Consignee to order of Notes These Bills of Lading are endorsed: "Notify: Myanmar Petrochemical Enterprise Myanmar Investment and Commercial Bank" 21/3/04 - 27/3/04 8/4/04 - 13/6/05 Myanmar STO or STO Singapore

7.16 Although the Bills of Lading did not define the consignee in the period from January 2004 to March 2004, notes within the Bill of Lading made it clear that the goods were being supplied to Myanmar and the port of discharge was shown as Yangon, a port in Myanmar. 7.17 However, from April 2004, all of the fuel invoiced to Myanmar is reflected in Bills of Lading where the consignee is shown, as either STO or STO Singapore. These shipments appear to have been discharged in the Maldives instead of Yangon as per the sales invoices. 7.18 Exhibit XXX shows the various documents that support the sale transaction. It can be seen in this example that the bill of lading port of discharge is different to the sales invoice. 7.19 It should be noted that the Bills of Lading are signed by the ship's master and should therefore be highly indicative of where the cargo had been delivered. 7.20 In many instances, we have located fax messages which tend to correspond with the information shown on the Bills of Lading. See, for example the fax dated 10 January 2005 attached to Exhibit 3. This stated that the port of loading was to be Singapore, the consignee was to be STO and that the Maldives was to be the Port of Discharge. 7.21 Although we don't have a Bill of Lading for this delivery, we have a "manifest" completed by Shell which corresponds with the fax. The manifest included in Exhibit 3 states that the port of discharge was to have been the Maldives. 7.22 The fax was addressed to Shell Eastern and was produced by Gemyl Aung. 7.23 In other examples, the corresponding fax was sent by Gemyl Jamal (for example, the fax within Exhibit 23). The signatures for Gemyl Aung and Gemyl Jamal appear to be the same. 7.24 To further corroborate the above, insurance documents were reviewed in relation to oil shipments. Evidence was found to show that the insurance documents for the same transactions stated that the oil was loaded at Singapore and discharged in the

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Maldives, again contradicting the sales invoices which had stated that they were being discharged in Yangon. (Exhibit XXX). 7.25 Of the 33 sales invoices directly to Myanmar Petco in 2004, 20 of those shipments appeared to have been discharged in Maldives, and not Yangon. The total sum of these invoices for 2004 is approximately US$30million dollars, equivalent to 653,475 barrels of oil. 7.26 We understand that Gemyl Aung/Jamal was STO Singapore's General Manager, but no longer works for STO Singapore. 7.27 We requested to see Mr Jamal. Mr Muneez called Mr Jamal and requested that we meet. During the phonecall, Mr Jamal was heard to say that he is "not liable" for STO Singapore. We were unable to ascertain what the statement referred to. He refused to come to the office, we understand however, that he remains based in Singapore and we have been provided with a contact number for him by Mr Muneez. 7.28 On occasion, we have located two types of Bills of Lading which tend to show a different port of discharge. For example, a Bill of Lading contained within Exhibit 3 indicates that this shipment was to have been delivered to Yangon Port in Myanmar and the cargo consigned to Myanmar. However, these Bills of Lading have been completed by a cargo agency, Raysun Shipping Lines and are not signed by the ship's master. 7.29 We have discussed sales to Myanmar in more detail in section XXX However, it seems possible that shipments invoiced to Myanmar may have been delivered to a third party. 7.30 Further information is currently being sought regarding shipments invoiced to Myanmar in order to ascertain where the ships delivered their cargo. Purchases c) STO Singapore appears to have purchased fuel from Shell Eastern, the Singapore Petroleum Company and Petronas. 7.31 Although the content of purchase invoices varies slightly from one supplier to another, these tend to show: the product type numbers of barrels the name of the vessel used to transport the fuel the loading date. 7.32 As part of this process, we compared the purchase invoices with bills of lading and other documentation such as manifests in order to ascertain where the fuel had been delivered.

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7.33 There were payments made to Sinotex Shipping & Trading Co Ltd that differed from all other purchases in the nature of their transactions. This is set out below. Suppliers - Sinotex Shipping & Trading Co Ltd 7.34 A number of payments were made to Sinotex Shipping & Trading Co Ltd which were in round figures. 7.35 These were different to the standard freight purchases, whereby it appeared that payment is normally given for actual shipping costs were bought on the basis that the same oil was being delivered and sold to a third party. 7.36 It therefore appeared unusual to discover that payments were made on a regular basis for the oil. 7.37 Company information shows that the company is a Thai company. Its managing director is Mr Maung Aung Aung Lwin. 7.38 The company is a majority shareholder of a Myanmese company which also appears in the purchase ledger; Trade Sea Company Ltd. Suppliers - Trade Sea Company Ltd 7.39 Trade Sea Company Ltd is located in Yangon, Myanmar and was incorporated in 2002. 7.40 Senior Personnel as per its company records are Kyaw Kyaw Lin and Aaron Lwin. 7.41 It's majority shareholder is Sinetox Shipping & Trading Co Ltd.

Mocom/Myanmar
8.1 Mr Muneez, an STO Singapore director has advised us that Mocom was a large corporation based in Malaysia; Mocom Corporation Sdn Bhd, and that one of its directors is a Mr Kamal Bin Rashid. We have confirmed that Mr Rashid was a director of Mocom Corporate Sdn Bhd, as was Mr Raja Abdul Rashid Bin Raja Badiozaman, and Bilal Bin Rashid @ Maung Myo Myint Lwin (deceased). Mocom Trading Pte Ltd was incorporated on 4 February 2004, company registration number 200402297N. Authorised capital was 1,000,000, Issued and paid up ordinary shares were 4. Shareholders were registered as: Kamal Bin Rashid@myint Lwin. 14, Jalan BJ/1 Taman Bukit Jaya Bukit Antarabangsa, 68000 Ampang Malaysia, Nationality Myanmar; Raja Abdul Rahsid Bin Raja Badiozaman, 64 Taman Bukit Ampang Jalan Bukit Belacan 68000 Malaysia, Nationality Malaysia;

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8.5

Fathimah Ashan, G Nagin Koimalaa Higun Male, Maldives; and Sana Mansoor, MA Manas Nikagas Higun Male Maldives

Directors were registered as: Kamal Bin Rashid Raja Abdul Rashid Bin Raja Badiozaman Fathimah Ashan Sana Mansoor Ahmed Muneez

8.6

A review of the audited financial statements for the financial year ended 30 September 2004 shows a loss of RM 156,988, and in 2003 a loss of RM186,109. Its principal activites are described as trading in car spare parts, accessories and diesel. In discussions with Mr Muneez he explained that Mocom Trading Pte Limited (Mocom Singapore) was set up as a joint venture between Mocom and STO Singapore in order to sell oil to Myanmar. We were informed that Mocom Corporation had the rights to sell oil to Myanmar through a tender process, along with three other companies, Daewoo, Petrocom and Hyundai. Daewoo shortly withdrew from selling oil to Myanmar in 2004. STO Singapore wished to sell oil to Myanmar, however as Mocom had the contract, it was agreed that STO Singapore and Mocom would form a joint venture, known as Mocom Trading Pte Ltd, incorporated in Singapore.

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8.10 We were also informed that STO Singapore wished to have a joint venture set up with Mocom, as it was concerned that during the process of buying and shipping the oil to Myanmar, that the letter of credit could be revoked by Mocom Corporation thereby leaving a financial loss to STO. 8.11 However, letters of credit by their very nature are irrevocable and cannot be cancelled without the beneficiary agreeing. The following information regarding letters of credit was found on Wikipedia: 8.12 "Letters of credit can also be source of payment for a transaction, meaning that redeeming the letter of credit will pay an exporter. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled

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Grant Thornton Draft Audit Report 2010 STO Singapore

without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any". 8.13 Therefore our view is that this claim is not a valid reason for creating a joint venture company. 8.14 An example of a contract over April to July 2005 setting out the relationship between Mocom Singapore and STO Singapore is attached as Exhibit XXX. In summary, the contract explained that: STO Singapore was to supply Mocom Singapore with diesel;

As Mocom Singapore held the contract to supply the Union of Myanmar that Mocom Singapore were therefore entitled to a "commission payment" being approximately 40% of the profits made; It was confirmed that commission should be paid direct to a Singaporean bank account, which was a USD account in Mr Rashid's sole name with United Overseas Bank, Singapore. 8.15 Attached to the contract was the commission invoice from Mocom Singapore for the period April to December 2005. Therefore in the ledger, it appears that the commission is being paid to Mocom Singapore, but in fact is paid to Mr Rashid personally. 8.16 Throughout the above, it remains very unclear to us what STO Singapore's role in the process had been, given that Mocom already had the contract to sell oil to Myanmar. It would have been more profitable for Mocom to set up a trading arm in Singapore and purchased the fuel itself , benefiting from all related profits. 8.17 STO Singapore and Mocom Singapore each generated sales invoices addressed to Myanmar for each delivery showing the quantity of barrels delivered and the unit price. The content of the invoices are alike, except for the price per barrel. 8.18 We understand from Mr Muneez that the unit price shown on the Mocom Singapore invoices reflect the values supported by Letters of Credit. Our work suggests that, generally, the unit prices shown on the STO Singapore invoices were higher than those shown on the Mocom Singapore invoices. 8.19 We understand from Mr Muneez that, in order to settle the STO Singapore invoices (ie the difference), Myanmar paid round sum amounts by cheque to "top up" the account. 8.20 However, this is not documented and Mr Muneez explained that this process involved making contact with the Myanmar government in order to seek payment. 8.21 We were also informed that at the year end, the debtor ledger was "squared off" in order to balance the books. However it is unclear if the topped up amounts were paid in round sum figures (approximately $100,000 at a time) how the accounts were easily reconcilable and why they were paid in such sums.

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Grant Thornton Draft Audit Report 2010 STO Singapore

Commission paid to Mr Rashid


9.1 Commission paid to Mr Rashid from 2001 to 2006 which were the last commission amounts paid were as follows:

Kamal Rashid Commission Payments Singapore Dollar 2002 Commission Myanmar Sales (UMEH/MPE) PL International Pte Ltd S H N G Trading Kanbawza International Pte Ltd Golden Aaron Pte Ltd Total Sales to Myanmar Commission as % of Sales Total sales % of total sales 02 144 011 18 184 646 403 55,789, 975 67,613, 418 87,000, 324 66,309, 230 14,685, 572,8 50,544, 1,112, 606,4 2,329, 1,197, 975 2003 820 203, 67,613, 418 2004 43 124,2 87,000, 324 2005 27 44,4 66,309, 230 2006 309 52, 14,685,

1.03%

0.30%

0.14%

0.07%

0.36%

294,123,621 86,100,402 19% 79%

115,725,144 105,170,183 56,530,328 75% 63% 26%

9.2

What is interesting to note from the above is the decrease in commission paid to Mr Rashid from 2002 to 2006, despite the sales increasing significantly over the same period. Commission was paid to Mr Rashid in relation to four other companies above, however no sales appeared for these companies from 2003. These companies are discussed in section XXX Initially it may be considered that the decrease was due to a change in the working relationship, i.e. commission was a direct consequence of sales introduced by Mr Rashid in 2001 and 2002, but that due to a new agreement to create a joint venture, that the commission structure changed. However, as per the contract, commission was still to be paid to Mr Rashid as a result of the Myanmar sales albeit they now were invoiced through Mocom.

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9.4

9.5

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Grant Thornton Draft Audit Report 2010 STO Singapore

9.6 9.7 9.8

It is unclear why STO Singapore paid commission to Mr Rashid and on what basis. Mr Rashid is confirmed as director of Mocom Corporation Pte Ltd. Exhibit XXX shows that Mr Rashid was previously Myanmese, and changed nationality in 2009 to Malaysian. His name is stated as Kamal Bin Rashid @ Myint Lwin Oo. We believe that Myint Lwin Oo may be his Myanmese name.

9.9

9.10 Another company officer on the same document also changes nationality from Myanmese to Singapore in 2009.

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Companies trading with STO Singapore 2002 2006


Kanbawza International Pte Ltd 10.1 We were unable to source this company in Singapore and believe that it is part of the Kanbawza Group based in Myanmar. 10.2 Further information is required to confirm the above, however the Kanbawza Group is owned by Aung Ko Win. 10.3 Aung Ko Win, also known as Saya Kyaung, is a longtime associate of the junta's No 2, Vice Snr-Gen Maung Aye. He also owns a soccer club, Kanbawza FC and Kanbawza Bank. Aung Thaung's son Pyi Aung is married to Maung Aye's daughter Nandar Aye. 10.4 Sales were registered in 2002 only. PL International Pte Ltd 10.5 PL International Ltd appears to be a Singaporean company 10.6 It's website states that "Metro PL International Private Limited was incorporated in Singapore in 2002 as a general commodities wholesale trading company. We have since grown and evolved into an international oil and gas trading company ". 10.7 The website is very limited and has only four pages of information with brief text. 10.8 Information is being sought as to the ultimate interested party for this company. Sales were registered in 2002 only S H NG Trading Pte Ltd 10.9 According to information sourced from PI International Ltd, the company had been inactive for over 7 years as no accounts had been filed. 10.10 Research into the ownership of S H NG Trading Pte Ltd appeared to show that the company is owned by Ms Cecila NG.

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Grant Thornton Draft Audit Report 2010 STO Singapore

10.11 Ms Cecilia NG is the wife of a Myanmar national, Mr Tun Myint Naing, also known as Steven Law. The US Treasury Department's Office of Foreign Assets Control (OFAC) has accused Steven Law of being part of a drug empire which his father, Mr Lo Hsing Han dubbed the "Godfather of Heroin" by OFAC had set up in the early 1970s. 10.12 According to OFAC Mr Tun is also one of the wealthiest individuals in Myanmar. Mr Tun is also suggested to be linked with the Myanmar's Junta leaders. (Exhibit XXX) 10.13 Ms Ng (and Mr Law) and the company have been blacklisted by US sanctions for having ties with Myanmar. (Exhibit XXX) 10.14 Sales were registered in 2002 only. Golden Aaron Pte Ltd 10.15 Golden Aaron Pte Ltd is also owned by Ms Cecilia Ng and is also blacklisted by OFAC. (Exhibit XXX) The Union of Myanmar Economic Holdings Ltd (UMEH) 10.16 Sales were made to the above named company in 2002. 10.17 In July 2003 it was targeted by OFAC and written into the Burmese Freedom and Democracy Act 2003 (US) as one of the companies for which it was now illegal for US companies and citizens to trade with. Myawaddy Trading Ltd 10.18 Myawaddy Trading Ltd is a subsidiary of the The Union of Myanmar Economic Holdings Ltd. 10.19 The company is blacklisted under OFAC and it is illegal for the US or US citizens to trade with the company. 10.20 Three of the sales invoices in 2004 were Myawaddy Trading Ltd, however appeared in the accounts ledger as being sold to Myanmar Petrochemical Enterprise. 10.21 This adds further to the assumption that UMEH changed its name to Myanmar Petrochemical Enterprise Ltd, discussed below. Myanmar Petrochemical Enterprise (Myanmar Petco) 10.22 Myanmar Petrochemical Enterprise is the main buyer of oil according to the sales documentation from STO Singapore for 2003 to 2005, and still accounted for 26% of sales in 2006, the final year of trading with the company. 10.23 Information is being sought as to the ultimate interested party for this company. 10.24 However it should be noted that the following companies, all with very similar sounding names have been added to OFAC's SDN list: MYANMAR GEM ENTERPRISE (a.k.a. MGE; a.k.a. MYANMAR GEM ENTERPRISE)

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Grant Thornton Draft Audit Report 2010 STO Singapore

MYANMAR PEARL ENTERPRISE (a.k.a. MPE; a.k.a. MYANMAR PEARL ENTERPRISE) MYANMAR TIMBER ENTERPRISE (a.k.a. MTE; a.k.a. MYANMAR TIMBER ENTERPRISE) 10.25 It would be reasonable to assume that the Union of Myanmar Petco effectively was a change of name for the Union of Myanmar Economic Holdings Ltd and that sales continued albeit under a different name to the same interested parties. 10.26 The company's managing director is Col Kyaw Shen. The company according to company records is a state owned company responsible to the Ministry of Energy. 10.27 The Minister of Energy is Brigadier General Lun Thi. According to a number of sources including the Canadian and US government websites Brigadier-General Lun Thi, born July 18, 1940 has been the Minister of Energy since December 20, 1997. 10.28 All oil sales contracts have to be negotiated directly with the Ministry of Energy. Vietnam 10.29 We have also located one shipment which, according to the corresponding purchase invoice received from the Singapore Petroleum Company Ltd, was delivered to Vietnam. This contradicts the corresponding STO Singapore sales invoice which was addressed to STO. 10.30 The supporting documentation we have collected is included within Exhibit 27 and this refers to the delivery of 2,977.563 metric tonnes of HSFO 180 CST, which was invoiced to STO at a cost of US$881,730.84.

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Next Steps
11.1 At the current position in time it appears that a number of oil sales made to Myanmar were not shipped to the port of discharge as per the sales invoices, but rather to the Maldvies. 11.2 This leads to possible theories, of which will need to be further investigated mainly concerning the concept of shipping fraud through the diversion of chartered vessels and where the oil cargo was delivered to after reaching the Maldives. 11.3 If the oil delivered to the Maldives was sold on the black market. This may have created a "super-profit" being the difference between the sale amount and the amount sold on the market. Following which an investigation would need to be undertaken to confirm if the sale proceeds were then returned to Myanmar to cover the original sales "cost" and the additional profit split between individuals. 11.4 Further research on the oil trade has shown that there have been numerous allegations and prosecutions for the smuggling and selling of oil on the black market, of which one means is through the diversion of oil tankers to destinations other than that shown on the original sales invoices.

2010 Grant Thornton UK LLP. All rights reserved.

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Grant Thornton Draft Audit Report 2010 STO Singapore

11.5 The International Maritime Organisation estimates that 80,000 barrels of oil a day go missing through theft, diverting of oil lines and through fraud in shipping, helped by corrupt government officials and businessmen. 11.6 We should consider undertaking the following: 11.7 Confirm basis for round figure payments to the following: Glencore Capt Shahid

11.8 for which there are no invoices but requests from STO to pay from STO Singapore accounts. 11.9 Ascertain where the tankers delivering fuel invoiced to Myanmar travelled to. National research are looking into this, but we may wish to consider: 11.10 Obtain information from the ports authority in the Maldives re shipments delivered there 11.11 Obtain information from the ships' owners to establish where the ships travelled to and confirm ownership of the vessels. We hope to find out from Lloyds Shipping Register who owns the ships. 11.12 Ascertain where the shipment apparently delivered to Vietnam was delivered. 11.13 Obtain copies of the cheques/paying in slips used to settle debts between STO Singapore and Myanmar. We should consider obtaining copies of the cheques from Standard Chartered to determine where cheques used to pay STO Singapore by Myanmar in were obtained from. 11.14 Consider disclosure order for individuals mentioned in the report from Singapore Monetary Authority. 11.15 Consider and analyse any breaches of UN sanctions in the trading of oil with Myanmar and any criminal consequences for individuals who commit the same.

2010 Grant Thornton UK LLP. All rights reserved.

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