Confidential RSM report: Bundy ignored PBS rules, did not tell directors of €400,000 deal

Former Public Broadcasting Services CEO John Bundy’s decision to steam ahead on a massive car leasing agreement with Burmarrad Commercials, was in violation of the PBS procurement procedures, an internal inquiry carried out by auditors RSM concluded.

The audit, carried out between October-November 2017 and now seen by MaltaToday for the first time, motivated the final decision by the PBS board to dismiss Bundy, who however this week won an unfair dismissal case before the Industrial Tribunal.

The confidential RSM inquiry was the second investigation carried out at the behest of PBS, after the Department of Contracts itself found that the €400,000 leasing contract of eight years, was a “flagrant breach” of procurement rules.

But RSM’s audit concluded in no uncertain terms that Bundy had ignored procurement rules by not issuing a tender administered by the Director of Contracts.

“The CEO did not inform the Board of Directors of the process being followed, the discussions and decisions being made and the agreement entered into with the selected leasing supplier. Accordingly, there is no board decision approving the lease of vehicles,” the audit concluded.

Indeed, the report states that it was Bundy himself who admitted to the RSM inquiry that the procurement procedures of the company had not been adhered to and attributed this fact to his “ignorance of the existence of such procedures and to the procurement manager of PBS not making him aware of the same.”

According to witness statements given to RSM, corporate services manager Edmund Tabone had indicated to Bundy of the need to issue a tender.

“Bundy, unilaterally, opted to overrule this recommendation and to go for quotations. Due to the different versions given during interviews held it is not clear as to why this decision was taken by the CEO.

“According to the CEO it was taken because he was not aware of the existence of the company procedures and because Tabone did not inform him of the requirements emanating from these procedures. The latter does not seem to be the case because there are three officials who, at least on this point, all stated that the tender matter was brought to Bundy’s attention,” RSM said.

“As regards to him not being aware of the existence of the procedures – it is difficult to accept this as a justification – even more so when our review of the January 2017 Board meeting minutes there is a note to the effect that the CEO had been ‘discussing the Procurement Procedures with the Ministry as different guidelines had been issued’.”

Bundy informed of procurement rules

In January 2017, Bundy was requested by the PBS board to review the procurement procedures – “consequently it would seem that the CEO was aware of the existence of these procedures,” the audit concluded.

Additionally, all three PBS staff members who formed part of an internal team that manages the leasing process, stated they had brought the tender requirement to the attention of Bundy. “It is the CEO who unilaterally decided to ignore this advice and go for a quotation process when it had been pointed out to him that the tender process should be followed,” RSM said in its conclusions to its inquiry.

Apart from the need to issue a call for tenders, the PBS procedures also state that the approval of both CEO and the board of directors was required prior to the publication of a tender document. Such approval was not sought from, or extended by, the board.

Bundy’s employment at PBS was terminated shortly after the RSM audit. Prior to the audit, in September 2017, the PBS board passed a motion of no confidence in Bundy after learning of the car leasing contract, in a bid to put the brakes on the CEO’s profligate spending.

Bundy gave Burmarrad Commercials green light

Bundy delegated the task to an internal committee to source quotations from car importers to purchase the fleet, sometime in November 2016. The first quotation was received from Burmarrad Commercials on 22 November 2016. Just a week later, by 1 December 2016 the company had already submitted a second revised quotation.

In January 2017 quotations were received from other lease suppliers. But negotiations were conducted only with Burmarrad Commercials, although the quote originally submitted was not the cheapest. 

A third and final quote was negotiated with Burmarrad Commercials, but it is not clear when this negotiated quote was received although it bears the same date as the second quote, 1 December 2016.

On 13 February 2017, Bundy informed Burmarrad Commercials to proceed with the order for the leased vehicles; yet prior to this date, the only reference in board minutes to the vehicle fleet project was made in a January 2017 board meeting. The note stated that ‘CEO referred to car fleet of PBS and noted that cars are now old. He had sought advice on whether to buy new cars or go for leasing and found it was cheaper to go for leasing’.

“It is not clear as to what advice the CEO is referring to here,” RSM said in its audit. “Our inquiries indicated there is no written advice to this effect. At any rate this note reference in the minutes by no means indicates that the Board was being kept informed as to what was being done. In fact up until the 13 February, which is the date when PBS was committed to the deal, the Board was not aware of the process followed, the decisions made and the agreements entered into.”

In another revelation in the RSM audit, it turns out that PBS managers were under the impression that Bundy had obtained ministerial approval.

But a ministry official told RSM that “she was not consulted on the PBS vehicle lease matter and there are no emails from her to PBS on this matter. This was also confirmed by the CEO.”

But three PBS managers all maintained with RSM that Bundy “had informed them that he had got or was getting the ‘go ahead’ from the ministry on the quotation process. As already stated however whether this was the case or not is not relevant as such ‘go ahead’ cannot contradict company procedures, or indeed substitute board decisions.”

Board never informed of lease deal

On 12 June 2017 PBS signed 14 lease agreements with Burmarrad Commercials for a period of 8 years and a total value of approximately €424,000, apart from €66,000 in VAT. As part of this deal Burmarrad Commercial undertook to purchase the old vehicle fleet for €26,200.

In April 2017, the PBS board approved two resolutions to sell and scrap the nine cars: six for €26,200 and another three to be scrapped.

But RSM’s investigation states that the resolutions do not indicate that these transactions were part of a wider agreement with Burmarrad Commercials to lease 14 vehicles for eight years. “By no means can one conclude that through this action the board was being made aware of what had already been agreed, way back in February 2017, with regard to the leasing of the vehicle fleet.”

The minutes of 30 August 2017 indicate that the matter of the vehicle leasing agreement was raised by a board member who was questioning “what was happening as to his knowledge this matter had never been discussed at board level. The CEO was not present for this meeting.”

No study to determine need for new fleet

There were further findings from the RSM audit into Bundy’s car leasing deal with Burmarrad Commercials.

Way before the CEO decided to bring on Burmarrad Commercials to provide staff and himself with a new fleet of leased cars, no study was carried out to determine what type and number of vehicles were required and how these could be financed taking into consideration the liquidity position of the company.

“A project that was likely to cost the company a material amount should never have moved ahead without the completion of such an operational and financial analysis. We were informed that the vehicle replacement project, way back in August and September 2016” – right when Bundy was single-handedly made CEO by the Muscat administration – “started off with getting quotations to purchase vehicles and then somehow veered off into leasing following observations made by car importers.”

The old PBS fleet of nine vehicles was then replaced with 13 leased vehicles but the operations manager, who is also deputy CEO, “maintains that some of the vans leased are not fit for purpose as they are too small and according to him more than one van is sometimes sent out with an OB unit to be able to carry crew and equipment.”

Additionally, none of the decisions taken by internal management were even documented. “We were also verbally informed by certain of the managers that more often than not they are presented with a fait accompli which they are asked to rubber stamp, rather than contribute to,” the RSM audit found.

“These same managers also implied that they are bullied into making certain decisions. The veracity or otherwise of this is outside the scope of this inquiry but we strongly recommend that such matters are investigated.”