‘Due Diligence’ – After The Fact: Liberia’s Deal With Eton Takes a Twist


Monrovia – President George Manneh Weah’s quest for US$1 billion dollar in loans for his ambitious coastal highway road project took a twist Thursday when Finance and Economic Planning minister Samuel Tweah acknowledged for the first time what critics and the media have been advocating all along – that the government failed to conduct due diligence on Eton Financial Private Limited, the company with whom the government recently signed a US$536 million loan agreement.

Analysis by Rodney D. Sieh, [email protected]

The Eton deal centers around a US$536 million arrangement geared toward the construction of a coastal corridor connection of counties’ capitals road project, via the construction of the Buchanan-Cestos City to Greenville to Barclaryville Road, the Barclayville to Sasstown Road and the Barclayville to Pleebo Road. Other roads to benefit from the loan include; the Medina to Robertsport Road and the Tubmanburg to Bopolu Road. Also to be constructed are ‘rest stops’ and ‘roadside service areas.’

Despite repeated red flags and warning signs from the press and international stakeholders, legal and financial advisors to the president pressed on, convincing members of both houses in the national legislature who glossed over the red flags and rewarded the president with a 4-G passage of both the Eton agreement as well as the Ebamof deals.

The red flags were many. From criticisms that the company was a fraud, many questions were raised regarding the ability of Eton to come up with the cash – and their ability to provide financing for the President’s ambitious undertaking.

In addition, a FrontPageAfrica investigation found that Eton was in fact struck off the Singapore business registry and has been dormant for at least a decade and only recently resurrected after the election of President Weah in January. The company has no online profile or physical office space. In fact, a separate FPA investigation found that the some of the same players in the Eton deal had floated the idea of a similar loan to the previous administration headed by former President Ellen Johnson-Sirleaf without success.

Acknowledging ‘Legitimate concerns’

On Thursday, Minister Tweah, flanked by Information Minister Lenn Eugene Nagbe and Public Works Minister Mabutu Nyenpan, acknowledged that the government was aware of all the concerns in the public domain and was in fact carrying out some due diligence along with international partners about the Eton deal.

Said Minister Tweah: “Now, let me say also that there have been legitimate concerns about either the viability of Eton, the legitimacy of Eton – we’ve received all of those queries and we have conducted our due diligence and we are still in the process of conducting our due diligence. Due diligence is not a one-off event – it is a sequence of things that you can do. So, coming out of all of these conversations will ensure that we are making progress. But the notion that Eton is off the table is not true. Eton Finance – the loan we enter with Eton is a highly concessional loan and as I told the partners yesterday (Wednesday), that loan is concessional and I don’t’ think they have an objection to its concessionality.”

One of the major criticism of the Eton loan was the concern that Liberia could risk alienating international stakeholders like the World Bank and the International Monetary Fund. In particular, the issue regarding taking on additional loans after debts have been waived.

Mr. Boakai Jalieba, who has been a staunch critic over the lack of transparency and accountability regarding the loans posted in May:

“Whilst the rationale for seeking the loan for investment in capital projects is good, it must be emphasized that the ETON Finance PTE Limited agreement is problematic. It leaves no flexibility for future negotiations. Better options through bilateral and multilateral partners are available and must be sought as opposed to the ETON Finance PTE Limited loan. The ETON loan has no possibility of flexibility or an opportunity for waiver. This is a loan and not a grant. The agreement should not insist that a subsidiary of ETON Finance PTE Ltd, MAEIL Liberia Construction Co Ltd, be the primary firm for the implementation of loan. This is a flagrant violation of the PPCC laws and/or does not support competitive bidding. Besides, this demonstrates a lack of due diligence from the Government of Liberia. More information is required on the Liberian subsidiary of ETON Finance PTE Limited and its legal status. The repayment period is too short for the size of the loan. The use of a CBL Sovereign Guarantee and the stipulation of the clause “ the Sovereign Guarantee should take the form and substance satisfactory to ETON” is a financial black box.  The balance sheet of the CBL will be affected and the guarantee will be placed as a contingent liability thus posing a threat to the net reserves of Liberia.”

On Thursday, Minister Tweah acknowledged that the administration which had until now been reluctant to heed to criticisms, was finally taking into consideration the sticking points being raised. “One of the challenge, one of the things is that when we signed the HIPC agreement – we agreed that – I think it was signed in 1986 or so with debt waiver – that countries that waived their debts cannot take loans that will then be non-concessional meaning high interest rates,” Minister Tweah said.

Partners: Eton Deal ‘Too Good to be True’

The minister explained: “Interest on the Eton is 1.46 percent. So, under the World Bank rules, concessional rules, Eton is fine – in fact they believe it is too good to be true.”

The minister, however, said Liberia’s international partners while embracing the generosity the 1.46 percent Eton is offering, have been a bit skeptical. “In fact, since it’s so generous coming from a private entity, there’s been this concern that maybe this thing is a hoax – it’s not real – maybe because these people are set up to make money. How are they going to give a country seven years interest-free grace period, no payment – even the World Bank and ADB(African Development Bank) rules, we pay interests on them during the grace period.”

As a result, Minister Tweah acknowledged Thursday, the Eton deal has attracted a lot of scrutinies. “So, this is some of the conversations we’ve had that going forward all of these questions with Eton viability will have to be put on the table – if the government has to continue and they have committed that they are viable, that they are legitimate – and the government can verify with all of the parties. So, the next step has a whole range of actions with banks that are all on the table. The other point is that Eton transferring money, the money is going to be transferred through the international financial system. So, federal reserve system can verify, the legitimacy of the fund, all of these other banks that are in part of this. So, as a government, we don’t believe that we are engaging in anything illegitimate. So, those are some of the concerns that people have with Eton.”

This week, the 50-banking-day deadline for Eton elapsed raising eyebrows as to whether the deal had hit a snag.

The Eton contract stipulates that “the first tranche will be disbursed within 50 banking days after ratification by the National Legislature and the issuance of Sovereignty Guarantee by the Central Bank of Liberia. The final disbursement will be given 60 days after the first tranche disbursement or such amount of time agreed to in writing by Eton and the GoL, after the Sovereign Guarantee is issued by the Central Bank of Liberia in the form of substance satisfactory to Eton”.

Last Thursday, the government’s chief spokesman, Information Minister Lenn Eugene Nagbe called a news conference to declare that while the two loan agreements were bound into law and not quite dead, the World Bank was coming in to save the day. “The World Bank now has presented to the government of Liberia an offer of US$500 million initially for the support of road. We have not concluded the agreement yet; the Minister of Finance is leading the discussion. We have been given an offer and the government will pay over the concessional period at the interest rate of 0.5 percent,” the minister said.

When FrontPageAfrica sought clarity from the World Bank in the aftermath of the minister’s declaration, the bank sent the following message:

“The World Bank has offered to support the government of Liberia to explore potential sources of funding for the development of roads in Liberia. The Government expects to raise close to US$500 million with potential contributions from development partners, including from the World Bank Group; and by mobilizing private financing through guarantees and other instruments. The government is already working with the World Bank on developing a similar financing model for the proposed South-East Corridor Road Asset Management Project (SECRAMP) to support the construction of the Ganta – Tappeta – Zwedru road.

Over the past decade and a half, the World Bank has mobilized more than US$450 million under the Multi-Donor Trust Funds and the International Development Association (IDA), an affiliate of the World Bank Group, to finance the rehabilitation of about 500 kilometers of paved roads, including the Cotton Tree-Bokay Town-Buchanan road, the Monrovia city streets, the Monrovia-RIA road and the Monrovia-Gbarnga-Ganta-Guinea Border road.

Clean or Dirty Money – Scenario Laid Out

Late Wednesday, news began filtering in that the Dr. Yungseoung Jin, a South Korean national and Executive Director of Eton was in town to seal the deal.

Minister Tweah was quoted by the Daily Observer newspaper as saying: “He is here on a two-day visit with top officials to discuss and finalize financial and technical details of the proposed US$536 million loan financing agreement.

The minister averred that the government is now at a critical stage in the loan process with Eton. “What that means is that there are series of steps that have to happen in realization of this. That’s what we do, there are a series of things that need to happen. The delegation is here to see whether, how to begin that process – and it will take some time as we go down that path. So, at every stage of that process, we will duly inform members of the press as well as the Liberian public. Let’s state one thing clear here. There’s been a lot of rumors of Eton’s collapse – and all those things are rumors. Government is a responsible entity and we enter into discussions with entities it perceives to be legitimate.”

“The government of Liberia and at least the President that I know does not want to get in the business of black money, he(President Weah) doesn’t want to trade in anything that is not legitimate – so those are valid concerns. The question then is that when we all verify together, that this is not dark money, that this is legitimate financing from a legitimate source.” – Samuel Tweah, Minister, Fiance & Development Planning

Amid the rumours, Minister Tweah went on to say Thursday that he and his team have been able to lay down a scenario to international partners in a bid to address some of the concerns they are having. “So, I’ve asked the partners – if we went down this route and say what all the concerns you have are addressed, that this group is legitimate, that the money is indeed passing through the international system, would you then advise that the government should not take the money? And yesterday at the partners meeting they said go ahead and take the money – if it’s clean money and it is concessional – it doesn’t violate our lending rules why would the government not want to take such a money. But we do have our concerns that even – with my dinner with the European Union representative- ambassador last night, we do have our concerns but if through this process we are not starting going forward, if we can verify Eton is viable – if they’re able to bring US$500 million to the system and it’s clean money – I don’t see why that money along with the US$500 million the World Bank is bringing, we can’t treat it as clean as long as we do the necessary supervision.”

In making his case, Minister Tweah says no one in the government- including President Weah would settle for dirty money. “The government of Liberia and at least the President that I know does not want to get in the business of black money, he(President Weah) doesn’t want to trade in anything that is not legitimate – so those are valid concerns. The question then is that when we all verify together, that this is not dark money, that this is legitimate financing from a legitimate source.”

The minister said he made a point to the partners that if the Eton money clears international standards it should be allowed – and the partners agreed. But even in agreement, the minister’s numbers appear to contradict the numbers announced by Minister Nagbe last week. The minister said the World Bank was putting up US$500 million for the road project.

Minister Tweah on Thursday sliced that amount to less than half.

“As legitimate as the money from the African Development Bank or the World Bank, why should we reject this money – and they say no, we are not advising you to reject that under those terms. So, if this is clean money we can put it under a framework – and that’s the framework we are going to structure. So, what we do know is – even with the partners, we are going to have US$500 million dollars, that $US500 million as we speak right now is not cast in stone. We know that the World Bank through all of its process will bring about $US150 million to $US180 million on the table. It is then going to reach out to other development partners like the European Union and the African Development Bank. As a matter of fact, I am going to lead a delegation to meet with the AFDB President to talk about the bank’s role in the scaling up of financing for Liberia’s infrastructure under this framework. So, the ADB will then do its numbers game and see how much it can bring to the pot.”

The minister said the World Bank has also notified him that the government needs to reach out to non-traditional partners in the Arab world that we’re going to explore. “So, all of this exploration, it is not fix. It could lead to US$400 million, US$500 million. So, let’s not be too gun ho and put an exact on it but it is an attempt to get that US$500 million. When we get that US$550 then we can turn to the private sector to leverage an additional US$500 million using these multilateral systems. This is the path we’re on… we’re still on that path. The Eton path is still there, once it’s clear, Eton joins that fray and relaxing the financing process further. So, we’re all exploring going forward – under the World Bank path. So, there is process to go and get all this stuff, we’re just pushing for the timeline to get this money so that a lot of work can happen in the summer when we hit. We want the next summer to be busy in road construction. So, we want to use a lot of this wet season where roads are really not built to put all these fundamentals in place.”

What Happens If Eton Fails?

Minister Tweah further explained that the framework the government is now putting in place with the World Bank is to ensure that – “if we have this Eton financing and we are able to mobilize for an additional $US500 million, we have a billion dollar financing and we do leverage out of those two and we have $US1.5 billion, this is now the framework for road financing. We can subject this frame to the World Bank and the African Development Bank, the Liberian procurement rules and processes and the kind of rigorous supervision the international community demands.”

The government, according to the minister is now sitting at the table with the international partners they once appeared reluctant to engage in pursuit of two controversial loans in a bid to ensure that President Weah’s coastal highway is materialized. “Where we are beginning conversation with the World Bank and we are also now finalizing the stage with – still subjecting Eton again – and I say that, to scrutiny. And as we speak now, the international financial people are doing their due diligence. So, we’re taking the Eton route and we’re moving with the framework with the World Bank as well. The goal is to get US$1 billion in financing.”

Minister Tweah said as the government takes this new approach at finding a way forward, much of what happens from here going forward will be done with the international partners in the know. “As we take this approach, the World Bank is having may US$150 million, maybe the AFDB we will have discussions with them to generate US$500 million, that part is clear.”

The minister said in the event that there is a glitch in the next stage, nothing will be lost on Liberia. “We go on the Eton path and we reach a point where it is difficult to determine that this funding cannot be accessed of course, the government loses nothing, we drop that, in lieu of that we raise the leveraging to get to one billion. If we stay on the Eton path – so it’s a realization thing – it’s a loan – Eton has to access the money- there’s a whole complex structure accessing this fund. So, we are working on all of these details.”

Nevertheless, the minister said, the deal is not quite dead. “The notion that the Eton loan is off the table is not true that’s why the delegation came to assure the government that we can continue but as a government also, we’re very critical going every next step of the way to ensure that we bring our international partners on board in this because at the end of the day if it succeeds, we’re putting this together so that we can have one financing framework for the president’s road infrastructure. So, this was the essence of the meeting and this will be the sequence of the next steps as they happen and the public will be duly informed as we go forward.”

“If at any point we decide that we want to move forward, the deal would be called off. “We shake hands and we go and find an additional US$500 from another source. This search is continuing. The search for US$500 and US$1 billion has been continuing for the last 171 years in our history, it’s not going to stop, it’s going to continue, until we change the country.”

‘Let’s Face it’: Late Due Diligence Explained

Even in his admission Thursday, Minister Tweah when pressed as to why the government waited for this late in the ball game to begin carrying out due diligence – particularly after the deal had been ratified, said: “I mean… the question of due diligence is not a one off… Due diligence doesn’t mean… even if you sign you continue to do due diligence to find anything along the way. One of the things that this government is trying to do, let’s face it. The problem this country has had is pace of delivery.”

The minister said part of the reason is that the new government came in with a plan to move fast. “The President came over, he wanted to move very fast. And even the path… when we took this approach we wanted to move aggressively. Do due diligence as you moving forward, we sign the memorandum of understanding… the ratification doesn’t mean the loan is acquired.”

The minister continued: “Let’s face it. There is no Eton debt on Liberia. You understand that. There is no money Eton has received that has committed Liberia to debt. So, we technically don’t have an Eton debt and we technically don’t have a US$500 million debt. The country enters debt when that whole process is consummated. So, ratification moving forward. Loans are ratified and they are not disbursed. I’m from the African Development Bank, the World Bank, ratified loans become ratified and because of disbursement issues those loans never realize all across Africa. So, just because you ratify a loan doesn’t mean you disburse. When the country receives the money then you have entered into a debt obligation. So, let the public be aware that when the legislature agrees to ratify a loan that doesn’t mean that’s the end of the story.”

The finance minister proffered: “What if you ratify the loan and the bank says we are not interested in this deal because of uncertainty in Liberia economic environment, we don’t’ think that this is viable and the deal is off. Do you blame the government?”

Guaranty Issue Still Unsettling

With the acknowledgment Thursday, the government of Liberia’s deal with Eton could face some complications particularly over the subject of guaranty. What would Liberia be giving up that Eton could then use as an appetizer to banks who will have the final say in whether or not to dole our the US$536 million?

The issue of guarantee has been a sticking point and some say it was a contributing factor behind the decision of former Central Bank Governor Milton Weeks’ forced resignation. Weeks, who still had three years into his 5-year tenure, when he resigned recently, was reportedly constrained to resign after resisting pressure from the Presidency to allow the use of Liberia’s Consolidated Accounts as a collateral for the US$536.4 Loan deal with ETON.

The new governor, Mr. Nathaniel Patray has vowed not to stand in the way of anything that will interfere in the dispensation of Weah administration’s pro-poor agenda.

It is unclear what guarantees are being laid on the table for Eton. The sovereign guaranty is key to Eton convincing bankers to go along with their loan plan.

For Minister Tweah, a whole series of things could happen along the way to ratification. “Now, that the mission came over, we begin the implementation, we’re not guaranteeing because this money is going through commercial banks. We have to do certain guarantee structure – and we will have to verify whether we’re comfortable with doing those guarantees and all of that. When we did the thing it was a financing thing to ratify. If we all sit around the table and meet to the point where the government can meet the guarantee, the banks issue the loans to Eton and comfortable in doing that, we verify all of this process going forward and the path is clear and the partners all involved in this, then we’re fine.”

The minister averred that if at any point the Weah administration decides that it does not want to move forward, the deal would be called off. “We shake hands and we go and find an additional US$500 from another source. This search is continuing. The search for US$500 and US$1 billion has been continuing for the last 171 years in our history, it’s not going to stop, it’s going to continue until we change the country.”

For now, the Weah administration finds itself racing against time – a three-year time frame to construct roads in southeastern Liberia and put itself in a position to convince voters to give the ruling party a second term.

It is a quest minister Tweah acknowledged Thursday has been a driving force for the government’s rush to ensure the two loans become a reality. “We’re moving very fast. Let me tell you one of the accusations of this government. It is that this government is moving too fast. In fact, the President has been told that I think he wants to move too fast. Sometimes they say, haste makes waste. So, let that be clear. We are a government that wants to move fast. We don’t want to repeat what we saw in the last twelve years.”

Is the administration proceeding too fast or running on a fast lane?

Blood Shed for Democracy

It is a perplexing dilemma the government finds itself battling even as it juggles the unfolding realities from other sectors like education, health and the pressing state of poverty many languishing at the bottom of the economic ladder continue to find themselves. “They’re saying we enter into a bogus agreement. I don’t get the point,” Tweah insisted Thursday as he trumpeted a line that has been abandoned since the administration took office in January. Accountability and transparency. “We will do the legitimate process. Everything here will be subjected to transparency, the works that will be done will be subjected to World Bank and African Development Bank procurement standards and the compliance and we will call all of our partners to come in on this. But what we will not want to do in this country is to say six years after today, we only did 50 kilometers of road, because we took three years to do procurement and all of that.”

As gracious as Minister Tweah was in acknowledging the frailties of a controversial loan Thursday, critics of the government may take solace in the minister’s reflection on Liberia’s past and why many jumped on the party’s band wagon in the last elections, as he urged the press that has been on the government’s tail on this issue to remain vigilant.

After all he trumpeted: “This is what our democracy calls for. We fought for this democracy today. So that public policy can be amenable to the people of this country. People died in this country, great men died. Tonia Richardson, for the first time since he died I just saw his son today. Tonia Richardson might be my greatest inspiration, he died in this war. Their blood were shed today so that today you can criticize any president, so that you can hold truth to power, to the extent that your truth is true.”

For critics of the controversial loan, many of whom were labeled “enemies of the state” and “unpatriotic” by President Weah and his supporters, Minister Tweah’s acknowledgement Thursday signaled a pyrrhic victory of sorts in a continuing battle to keep government in check and Liberia on the right trajectory toward restoring its economic sanity.