The Iraqi government has cancelled a $1.2-billion power-generation contract with a Vancouver-based company after learning the company existed on "paper only," according to press reports.
On Sunday, Reuters quoted an unnamed source in the office of Iraqi Prime Minister Nuri al-Maliki as saying that Iraq had cancelled powergeneration contracts with two foreign companies after finding "manipulation and misleading information" concerning their finances and their ability to carry out the work.
Reuters also reported that the prime minister has ordered the resignation of his minister of electricity, Raad Shallai, after government officials uncovered "irregularities" in the two contracts.
The first contract, signed in July, was a $1.2-billion deal with Vancouverbased Canadian Alliance for Power Generation Equipment Inc. (CAP-GENT) to build 10 power stations, with a total capacity of 1,000 megawatts, over the next 12 months.
On Monday, Reuters quoted Iraqi Deputy Prime Minister Hussain al-Shahristani as telling reporters that Iraq's investigation found CAPGENT was "fake," with no offices, manufacturing facilities or ability to carry out the work it had contracted to do.
The second contract, also signed in July, was a $625-million deal with a German company, Maschinebau Halberstadt, to build five power stations with a total capacity of 500 megawatts.
According to Reuters, the deputy prime minister told reporters that this firm had declared bankruptcy before signing the Iraq deal.
He also said the contracts had "damaged Iraq's reputation" and the Iraqi government planned to sue the two companies for fraud, even though no money had been advanced to them.
Reuters said these developments have adverse social and political implications for Iraq.
"Iraq needs investment in most industries, but power generation is especially sensitive. Iraq's war-battered grid provides only a few hours of power a day and chronic shortages were at the heart of anti-government protests earlier this year," the news service reported.
"The incident may also have fallout for Maliki's delicate coalition among Shiite, Sunni and Kurdish blocs. Electricity Minister Raad Shallai belongs to the Sunni-backed Iraqiya bloc that accuses Maliki of reneging on parts of their cross-sectarian power-sharing deal."
However, CAPGENT's managing director, Muhannad Samara, a Canadian citizen with strong ties to Vancouver, denied his company is a "fake."
In a telephone interview from Amman, Jordan, Samara said CAP-GENT's principals - whom he declined to identify due to the sensitive security situation in Iraq - have extensive experience in the design, financing and construction of major power projects.
He said CAPGENT will not do the actual work. Instead, it has entered into joint-venture agreements with major contractors in Iraq and elsewhere in the Middle East. Once again, he declined to name them for security reasons.
Samara said he is puzzled by the suggestion that CAPGENT is trying to defraud the Iraqi government. He said his company is responsible for financing the proposed power projects, and the Iraq government is not required to make any payments to the company until they are up and running.
He also said the company has "not received any official correspondence from the ministry of electricity advising us that they have cancelled the contract." Until it does, the company "will continue with what we started to do," he said.
Questions about the bona fides of CAPGENT were first raised by Jawad Hashim, an Iraqi national who lives in West Vancouver. He conveyed his concerns to high-level Iraqi officials late last week.
According to his biography, Hashim earned a doctoral degree from the London School of Economics in 1966. Two years later, when the Baath party took power in Iraq, he was appointed Minister of National Economic Planning and presidential adviser to Saddam Hussein.
In early 1980, his relationship with Saddam began to deteriorate and in 1982, he defected to Canada with his wife and two sons, where they obtained Canadian citizenship.
In an interview earlier this week, Hashim said he had never heard of CAPGENT, so he began making inquiries.
He learned that the company was incorporated as 825450 B.C. Ltd. in May 2008 by Coquitlam resident Gisele Summers. It was a shelf company, with no business or assets.
In May this year, Summers handed off the company to Samara, who changed the company's name to Canadian Alliance for Power Generation Equipment Inc. The company's address is now listed as 440-319 West Pender, which is the office of the company's lawyer, Harvey Meller.
Two months later, when it signed the contract with the Iraqi government, CAPGENT was billing itself as "a leader in thermal and diesel power plant construction management with over 5,000 MWs successfully constructed in various jurisdictions around the globe."
"Our engineering team has decades of technical experience in the energy sector, and have built electricity generation facilities in several countries," the company stated in a release.
The company's website mentions a contract to build a 500-megawatt power project in Hanoi, for completion in September 2012, and a potential wind-farm operation in Yellowknife, but no customer names are mentioned. A Google search failed to produce any evidence that CAPGENT has developed any other projects.
Samara is a Canadian citizen who works as "the senior immigration consultant" for Associated Canadian Immigration Consultants Inc., a B.C.-registered company. Its directors are listed as Samara and Abul-Hadi Hamouden, also of Jordan. On its website, the company listed its Vancouver office address as 398-2416 Main Street, but that is simply a mail drop.
Why would the principals of CAP-GENT - whoever they are - hire an immigration consultant with no prior experience in power-plant construction as its managing director?
Samara said that, while running ACIC, he developed a network of investor contacts. He said the principals of CAPGENT wanted somebody who could set up a company in Canada - which is viewed in Iraq as "politically unbiased" - with proper legal and tax counsel. He said he had the experience to do that.
It's easy to see why Hasim's inquiries made him suspicious of CAP-GENT and why he rang the alarm in Baghdad. It's also easy to understand why Iraqi authorities have reacted so strongly. On the other hand, Samara made himself available to me and responded to my questions in a very straightforward manner. He doesn't appear to be running from any of this. If it is scam, I have difficulty understanding what it is.
Read more: http://www.vancouversun.com/technology/Vancouver+company+major+political+financial+scandal+Iraq/5239690/story.html#ixzz1UkRriC4Q