The Commission Against Corruption (CCAC) has completed the “Investigation report on the granting of loans to Viva Macau Limited by the Industrial and Commercial Development Fund”. According to the findings, no one has intentionally violated the criminal law. However, concerning the vetting and approval of the applications for loan made by Viva Macau, the relevant department neither strictly required the completeness of the application documents nor carefully scrutinised the applicant’s repayment capacity. Also, there was lack of prudence in the requirement for and supervision of the guarantee for repayment. The CCAC considers that the public servants responsible for the vetting and approval, the follow-up on and the supervision of the loan applications by Viva Macau failed in their duties.
In July 2018, the Industrial and Commercial Development Fund (FDIC) transferred the information of Viva Macau’s loan case to the CCAC. The CCAC subsequently conducted an inquiry in order to review the loan processes from the perspectives of criminal illegality, administrative illegality and disciplinary liability.
The report detailed the processes of the granting of five loans totalling MOP212 million to Viva Macau by the FDIC between 2008 and 2009. The CCAC found that Air Macau, which was affected by the financial crisis at the same period, also sought financial aid from the SAR Government. In 2009, the SAR Government, as a shareholder of the airline, injected a sum of MOP215 million into it. As far as Viva Macau was concerned, given that the close-down of the privately held company would have negative impact on travellers who had booked tickets with it as well as the tourism of Macao, the SAR Government decided to offer interest-free financial aid to it through the FDIC.
The Administrative Council of the FDIC comprised five members. Apart from the Director of the Economic Bureau and a representative of the Financial Services Bureau as prescribed by the regulation, the remaining three members were from the Economic Bureau. Each time Viva Macau made a loan application to the FDIC, the Administrative Council of the FDIC convened a meeting to discuss the report prepared by the Economic Bureau, which would then be approved by the then Secretary for Economy and Finance or the then Chief Executive. However, all of the then members told the CCAC that they did not have professional knowledge of operation and financial management in the aviation industry. The Council did not refer to other applicable regulations, as it neither formed an evaluation committee with individuals with professional experience nor invited persons whose presence is in the interest of the decision making to attend the meetings.
The CCAC also found that the documents of Viva Macau were disorganised and the bank transaction and accounting information was fragmentary. There were only unaudited financial reports among the accounting records. The controlling shareholder, Eagle Airways Holdings Limited, used promissory notes as guarantees, but the competent authorities had never carefully scrutinised its repayment ability. Neither had the financial status of Viva Macau been checked or followed up. While Viva Macau had never fulfilled any of the loan repayment agreements, it repeatedly requested to extend the repayment periods and used part of the financial aids to repay the loans earlier provided by its executive members in their own names instead of using them directly for the purpose of improving the operation as required by the agreement signed with the FDIC. The company even failed to submit the loan spending report in time as required by the agreement. These violations of loan agreement may have constituted relevant civil contractual liabilities. It seems that such negligent attitude of the members of the Administrative Council of the FDIC was of little avail to the uncooperativeness of Viva Macau, placing the Public Administration in a passive position in the entire incident.
In the report, the CCAC carried out in-depth analysis of the acts of Viva Macau as well as its shareholders and executive members so as to ascertain if the relevant acts violated any of the provisions of the criminal law, particularly the provisions of fraud, issuance of bad cheque, intentional bankruptcy, unintentional bankruptcy, frustration of credits, favouring of creditors and active bribery. According to the findings, those persons might have committed the offence of unintentional bankruptcy. However, the right of complaint became extinct due to expiry of prescription. Also, there was no sufficient indication that the other acts could be considered constitutive element of the relevant crimes.
The CCAC also analysed the acts of the members of the Administrative Council of the FDIC and other public servants involved. The existing evidence could not prove that the relevant acts should be considered constitutive elements of passive bribery to perform licit acts, power abuse and dereliction of duty.
However, the CCAC considered that regarding the acts carried out by the relevant authorities and personnel, there are some issues that deserve review and reflection in terms of administrative illegality, administrative irregularity and even concerning the need for legislative improvement.
The CCAC also found that following the approval of Viva Macau’s first application for loan, the company, again and again, ignored the various demands made by the FDIC at each subsequent request, postponing the presentation of accounts and financial reports audited by auditors or accountants. However, again and again, the FDIC accepted its applications and suggested approving them. In addition, both the FDIC and its supervisory body neither vetted the repayment capacity of the guarantor – Eagle Airways Holdings Limited nor gave any prod to such vetting. They never took a serious look at the financial conditions of such a private company established outside the territory of Macao before allowing its representatives to write the promissory notes as the guarantor. Obviously, in the vetting and approval processes for the applications for loans made by Viva Macau, there was a serious lack of requirement for and supervision of document searching, analysis and quality of the reports. In other words, there was no effective and close follow-up.
The CCAC pointed out that Viva Macau was not a SME as prescribed by the relevant laws in effect. However, the public servants who handled the loan applications, who were clearly aware that there was no legal basis directly applicable to the vetting of the applications, did not order any legal research and analysis for such purpose but hastily suggested approving the applications merely for the reason that they accorded with the objective of the Regulations of the Industrial and Commercial Development Fund. There was lack of analysis on the financial condition of the guarantor of such considerably huge amounts of loan – Eagle Airways Holdings Limited, which was exactly the key to the FDIC’s failure at recovering the repayment from the guarantor after Viva Macau was declared bankrupt. The imprudent, careless and neglectful acts and omissions carried out by the relevant public servants could definitely constitute disciplinary liability and reflected that they failed to fulfil their due responsibilities and obligations of supervision.
Finally, the CCAC suggested that the legislation for the supervisory of use of financial aid offered by the FDIC should be promoted and enhanced as soon as possible. Especially, it should establish a robust loan guarantee mechanism and clearly require that loans involving large sums should be guaranteed by assets with adequate repayment capacity. The guarantor’s assets should be strictly examined in order to ensure that the loan can be repaid with the assets when the debtor is unable to repay the loan by the deadline and to avoid waste of resource to take unsuccessful legal actions to dun for the payments. Meanwhile, necessary risk warning and control mechanism should be set up in order to ensure that public funds will not be abused due to loose supervision of credit. All officials and public servants of the Macao SAR should bear in mind that regardless of their ranks and positions, in execution of public duties, they should ensure that the duty of impartiality is carried out effectively in order to uphold the impartial and just image of officials and public servants.
The report has already been submitted to the Chief Executive in accordance with the law and is downloadable on the CCAC’s website.
