Some questions for Mr. Robert Badal

Apr 09, 2009 Letters

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Dear Editor,
It was interesting to read Mr. Robert Badal’s letter featured in SN on 6th April 2009 and titled, “Not a party to Court proceedings initiated by NICIL”.
The Government of Guyana, via its holding company, National Industrial and Commercial Investments Limited (NICIL) would not be in Court, if Mr. Robert Badal had properly separated his roles of majority shareholder, Chairman of the Board of Directors and CEO/Manager of Guyana Stockfeed Inc (GSI). One can argue that Mr. Badal has fused the roles of shareholder, Board and Management into one.

The real issue for any shareholder of GSI should be the level and quantum of related party transactions between GSI and Mr. Robert Badal and serious questions are posited on whether these transactions are arms length transactions. Given that the Board of Directors is appointed by Mr. Badal and is composed of persons who are largely related to or work for Mr. Badal, there is little independence of the Board or management of GSI from Mr. Badal’s influence.

The result of Mr. Badal’s actions is considered by NICIL to be with prejudice to the minority shareholders. Based on the Court’s ruling of Justice Jainarine Singh of September 2008, which has been appealed by GSI, GSI is resisting the return of NICIL to its prior ownership position as a 38% shareholder (instead of the current 7%). During this time, Mr. Badal’s control of GSI and its decisions to acquire assets of companies controlled by Mr. Badal are considered to be with prejudice to NICIL receiving its fair share of dividends.

Instead, GSI’s cash flow (partly financed by bank overdrafts) has been used almost exclusively to provide cash flow to Mr. Badal by GSI purchasing assets, based on Directors’ valuations, from companies previously owned/controlled by Mr. Badal, e.g. the purchase of assets of the now defunct National Edible Oil and Fats Inc (a company owned by Mr. Badal) which are now idle, and most recently the acquisition of the assets of the Popeye’s franchise.
Noteworthy is that while the annual sales of GSI have more than quadrupled in the last 10 years, now standing at G$4.7 billion in 2007 vs. G$1.2 billion in 1999, profit after tax was G$106 million in 1999, whereas it was G$38 million in 2006 and G$99 million in 2007. At best, the profitability has relatively declined.

Additionally, the dividends paid out have been almost negligible. Are we to believe that GSI is so poorly managed that the rate of profit has decreased over 10 years but sale revenues have increased over 400%; or is there another reason?
We know that part of the cash flow has been used to acquire interests previously owned by Mr. Badal. While a number of these transactions are disclosed in the accounts, it is unclear what the rationale for these transactions was, if not to unduly benefit Mr. Badal in his role as shareholder.

Maybe one possible explanation for the company’s low profitability, and therefore of grave concern to NICIL, is the payment of management fees to and purchases from a company incorporated in Trinidad with the same name of Guyana Stockfeeds Limited. This issue probably dwarfs the other related party transactions.
This Trinidad registered company is listed as a related party of GSI (Guyana) but GSI has no shares in this company. Based on this listing in the financial statements of GSI, we have to conclude therefore that the Trinidadian company is owned and controlled by Mr. Badal.

As a shareholder of GSI, we are putting the following questions to Mr. Badal: –
* Why in 2007, did GSI pay over G$1.1 billion for purchases from this Trinidadian company?
* Where is the transparency?
* Who are the auditors of this foreign company and are the audited financial statements available for inspection?
* Why is this company not a subsidiary of GSI (Guyana)? How can Mr. Badal set up a company using the same name of Guyana Stockfeeds Ltd in Trinidad and operate this company separately from the Guyana company?
* Is it at least not an abuse of the goodwill of the name of Guyana Stockfeed Inc in Guyana and around the Caribbean?
* How can the minority shareholders of Guyana Stockfeed Inc know the true nature of the large cash transactions and whether these transactions are not another vehicle for Mr. Badal to transfer money out of GSI?

So, for the record, Mr. Badal is correct to state that it is GSI that is the party to the legal actions and not Mr. Badal personally.
He is also correct to state that he did not acquire the assets of NEOCOL but rather the assets of the privatised NEOCOL, which were acquired by Mr. Badal in 1997 through his own similarly named company NEOFI. With respect to Popeye’s, we are not privy to details about its financial performance other than what are disclosed in GSI accounts. We therefore cannot comment on whether this new asset of GSI is profitable or not.

But we believe that the substance of our concerns are quite legitimate, which is why the Court ruling of September 2008 was entirely in support of NICIL/Government; it is also why an interim injunction was recently granted by the Honourable Chief Justice Mr. Ian Chang S.C. on April 7th in favour of NICIL preventing GSI from paying out dividends (of which NICIL would receive only 7% instead of 38%) and why the Court has ruled that related party acquisitions and investments between Mr. Badal or his companies and GSI should not occur.
We look forward to Mr. Badal clarifying all of these related party transactions to the Court and appropriately disclosing which party is benefiting from these transactions. We hope that GSI (or Mr. Badal) has the assets to make whole NICIL’s rightful entitlements when these matters are finally concluded.
Marcia Nadir Sharma

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