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Auditor-general takes on CyTA over past sins

Auditor-general Odysseas Michaelides slammed the board of CyTA for consciously attempting to cover up the alleged wrongdoings of previous boards.

By Angelos Anastasiou

USING surprisingly blunt language, Auditor-general Odysseas Michaelides yesterday slammed the board of state telecoms company CyTA for consciously attempting to cover up the alleged wrongdoings of previous boards.

In a letter to board chairman Christos Patsalides, dated June 24th, Michaelides referred to an earlier letter from May, in which he asked the board to investigate the actions of previous administrations that may have led to the loss of money, leading to possible criminal or civil liability. Patsalides’ letter of response appears to have left Michaelides underwhelmed as he suspected an attempted cover-up.

“We received a response on June 13, which made no mention of any improper decisions on the previous board’s part, not even areas for improvement,” Michaelides told state radio on Thursday. “It’s as if this board was answering on behalf of the previous one, painting a rosy picture where everything was done perfectly well. We cannot accept such a picture.”

Michaelides referred to a similar process is being followed by CyTA employees’ pension fund administrators, who are currently investigating the behaviour of the previous administration with a view to uncovering any misconduct. The pension fund has been involved in the notorious ‘Dromolaxia scandal’, in which land was bought illegally from the Turkish Cypriot owner to build a large office complex and various people received kickbacks to help grease the wheels.

“Our suggestion to investigate possible wrongdoing by members of the previous Board of Directors was clear,” the Auditor-general told Patsalides. “Determining the specific issues in which there has been abuse of power (which would constitute a criminal offence by members of the board) , as well as actions or omissions that may have led to financial losses by CyTA (which would incur civil liability for members of the board) must be carried out by the Board of Directors.”

Elsewhere in the letter, Michaelides clearly accused the current administration of actively trying to let members of the previous board off, warning that explanations would be called for.

“I presume that your decision to offer full cover to the members of the previous board by adopting their decisions as unimpeachable (as objections on your part to decisions made by the previous board are nowhere to be found) is a conscious one, based on your review of all available information,” Michaelides said. “I also expect that you will be in a position to explain your decision before the Parliamentary Committee that will discuss our report.”

Another point that appeared to have met the Auditor-general’s disapproval was the appropriation of CyTA’s advertising budget. Unsound and shady advertising deals were reported in the Auditor-general’s initial letter, which Patsalides glossed over in his response, Michaelides charged.

“As we consider this matter a serious one and our Service intends to investigate it in depth, we record your position and note your responsibility for it, advising you that we will revisit the issue after conducting the relevant investigation,” he warned.

Michaelides’ finger-wagging extended to the planned expansion of CyTA’s Greek arm – Cyta Hellas – ventures into the Greek telecommunications market, with the introduction of mobile telephony services, which have not been appropriately presented to the competent body. This matter, he said, touched not only the previous board but the incumbent one as well.

“The law is clear,” Michaelides said in his letter. “Any arguments in support of your decision to introduce Cyta Hellas into the mobile telecommunications services industry in Greece must be made before the competent Ministerial Committee. Informing the Finance Minister instead will clearly not suffice. I need not note the responsibility incurred by a Board of Directors that opts to ignore and overlook legislative provisions.”

According to consultant reports cited by CyTA, one of the major hindrances to Cyta Hellas’ penetrating the Greek market is its inability to offer combined landline and mobile services. The reports also project Cyta Hellas’ value to increase by €60 million over the next ten years.

CyTA’s pay-TV arm, Cytavision, did not escape the Audit Service’s scrutiny. In his May letter, Michaelides had pointed out to CyTA’s board that no expenditure must be undertaken if its financial return cannot be substantiated in advance. In his response letter, Patsalides argued in favour of keeping Cytavision alive, which caused Michaelides to reiterate his initial observation.

“At no point did we suggest discontinuing the Cytavision service,” he clarified. “We pointed out the lack of transparency with regard to the process and the criteria set in the selection of sports clubs with which broadcasting arrangements have been agreed, and that the comparison of the amounts agreed with expected returns appears not to follow sound business rationale. Therefore, what we suggested is the immediate redesign of Cytavision’s strategy.”

Asked for comment on state TV, Patsalides tried to play down the Auditor-general’s accusations and diffuse the crisis. Michaelides simply jumped the gun and came to the wrong conclusions, he said.

“There is no way this board, under my chairmanship, to take a decision that is not governed by proper management, transparency and lawfulness,” he said. “Most of the Auditor-general’s observations relate to the previous board and my intention has never been to go after the previous board before their decisions have been reviewed and assessed.”

But Patsalides also sought to counter Michaelides’ criticism by explaining his stance with regard to the two major points raised.

“The major issue raised by the Auditor-general is the Pension Fund,” he said. “I’d like to point out that the head of the fund and the head of CyTA is the same person. So I can’t be accused of running a serious, thorough and transparent investigation in one case while trying to keep another in the dark.”

“The second serious matter is Cytavision,” Patsalides added. “An external consultant has been tasked with looking into this matter and will soon submit conclusions. The Auditor-general knows this, he has been fully informed.”

But in any case, Patsalides said, CyTA’s new board has yet to come across any evidence pointing to wrongdoing by the previous board. If any comes up, “all necessary measures” will be taken.

“Based on everything we have seen up to now, there is nothing that warrants further investigation, but we won’t stop there,” he said. “We are already analysing each and every advertising disbursement and will make any corrections necessary.”

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