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Cyprus

Auditor-general eyes actions of former CyTA board

By Elias Hazou

AUDITOR-general Odysseas Michaelides has indicated that the previous board of telecoms utility CyTA may be liable for criminal and civil offences, and is advising that the current board look into it.

In a lengthy letter addressed to the current CyTA (Cyprus Telecommunications Authority) board, the official advises that the board query their employer (the government) to recommend possible investigation of such offences by the Attorney-general.

Moreover, in a first for Cyprus where semi-governmental organisations are concerned, Michaelides proposes that the telecoms utility seek damages from the previous board in the event the latter’s actions are found to have caused losses to CyTA.

“It appears that the actions of the previous board may have on several occasions been illegal and/or exceeded their authority and/or constituted abuse of power and/or led to the loss of assets for the Authority,” Michaelides writes.

“The loss of moneys from the Authority’s pension fund (in which the previous board participated), which burdens the Authority itself, as well as the investment of tens of millions of euros in the CytaVision Service with non-transparent procedures, seem to be due to the actions by the previous board and boards.”

Michaelides’ findings are based on an audit of CyTA’s books for the year 2013, a routine function of the auditor-general who inspects the finances of all semi-governmental organisations.

The reference to possible criminal offences may entail – though not necessarily – embezzlement or fraud. As Michaelides yesterday explained to the Mail, abuse or misuse of power likewise qualifies as a criminal offence where public functionaries (such as directors of SGOs) are concerned.

In the event that potential civil offences are ascertained by the Attorney-general’s office, Michaelides argues that the current leadership of CyTA is entitled to take the previous board to court and demand compensation, for example by seizing the assets of former board directors.

Consultants hired by CyTA are now conducting an actuarial study to determine the precise deficit to the CyTA pension fund. But it’s understood that the fund – in the news over the dubious real estate investment in Dromolaxia – has a hole of several dozen millions due to a series of suspected mal-investments.

Other than the Dromolaxia land lead – where several former CyTA officials are facing criminal charges – such problematic ventures might include CyTA’s loss-making subsidiary in Greece CyTA Hellas, and an investment of some €20m in the University of Central Lancashire,(UCLan Cyprus) in Larnaca. There are also reports of CyTA purchasing buildings belonging to employees’ family relations.

Whereas the auditor-general can audit CyTA, he has no authority to scrutinize the CyTA pension fund itself, as the latter is a separate legal entity. But the official comes in where possible mal-investments with the pension fund may have impacted the organisation’s bottom line: any losses incurred by the pension fund must be covered by CyTA’s revenues.

In his letter, Michaelides also cites other loose ends at CyTA. One involves letting go of former marketing manager Yiannis Souroullas, one of the accused in the ongoing Dromolaxia criminal trial. Souroullas resigned when charges were brought up against him, but is now claiming that he quit under duress and is demanding that CyTA rescind its prior decision to accept his letter of resignation. Meanwhile Souroullas is entitled to all the benefits (monthly pension, one-off bonus) of a former CyTA employee. The auditor-general notes that the case should have been handled better by the previous board.

Elsewhere, Michaelides draws attention to the purchase of an Audi Q5 for CyTA CEO’s Aristos Riris. CyTA’s budget for 2013 included a provision for €58,000 for the car- stipulated in Riris’ contract – but parliament had refused to release the funds.

CyTA intended to circumvent parliament’s refusal by resorting to a standard practice, whereby state-funded bodies can spend money prior to their budgets being approved to cover administrative expenses.

The law allows parliament to authorise bodies to spend part of their budget – up to a maximum of two months’ spending of the previous year’s budget – if it is considered necessary for the provision of public services.

But the auditor-general argues that no such expenditures whatsoever are permitted unless an SGO has written permission from parliament, and says CyTA should have cancelled the purchase order for the car – which it did not.

In the interim, despite the funds being withheld, CyTA found an ingenious way around this. According to Michaelides, CyTA and the car seller have apparently come to an arrangement, whereby the seller has for weeks not been paying his phone and Internet bills but has not had his service cut by CyTA.

The auditor-general’s findings are set to be discussed by the House watchdog committee.

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