THE PREFECTURE PUMP

The Prefecture's imminent illegal purchase of 4 unnecessary ships for 320 MMUSD is a bomb that will destroy 4,000 jobs and 120 MMUSD of national resources. Let's help deactivate it! ...Tick, Tock, Tick, Tock… Raúl E. Podetti (*)

30 de July de 2024 06:43

"It is one more case of naval fratricide, which has the morbid component of allowing us to be online observers of a crime in progress," says Raúl Podetti.

In recent weeks I received several requests to expand my investigation into fraud in the recent tender of the Ministry of Security to purchase 4 unnecessary ships (300 MMUSD) for the Naval Prefecture. Weeks ago, the note titled “A Prefecture fraud reveals corruption in the Navy” had a lot of impact, which barely showed the tip of the iceberg of this case. That is why I decided to present other details of this scam started by the previous government and continued in the current one, confirming that the negotiations and national predation do not have political flags.

This forces me to spoil a particularly juicy chapter of my next book about to enter the final editing stage. I had no choice but to delay it – something like that, I think happens to political humor scriptwriters, who find in Argentina an inexhaustible source of inspiration. In that next book: CAIN. Wild Tales of National Predation , the results of my investigations of several, too many, real cases of the predation of ordinary Argentines, at the hands of their own brothers, also Argentines, perched on the heights of power, will be presented, fictionalized. political, military, union or business.

What concerns us today is one more case of naval fratricide, which has the morbid component of allowing us to be online observers of a crime in progress.

I propose to empower us to abandon the comfortable roles of spectators of this macabre national reality show and jump onto the screen to be protagonists through denunciation in self-defense. Only in this way can we stop a new crime that steals thousands of jobs and millions of resources from us and keeps us from the future; also perpetrated precisely by civil and military officials who are supposed to be in their positions for our defense and security.

Having made this introduction, it is time to briefly analyze the very inconvenient specifications of the recent tender 038/2023, designed by the Ministry of National Security with the expert contribution of the Naval Prefecture.

The analysis of this case of national depredation is divided into two chapters, depending on whether the effect of the crime analyzed is concentrated in immediate damage or in one with a delayed effect (time bomb type) much greater in destructive power.

 

 

Immediate Effect Fraud.

 

This immediately effective fraud would materialize on the day the tender was awarded. It is very obvious and arises from the unusual method chosen by Ministry of Security officials to define the winner of the tender using an award system that uses two criteria: one technical and one economic.

 

The technical criterion , according to Article 18 of the specifications, contributes 25% of the award score and in its last line it mentions that 4 points will be awarded to the bidder who builds the 4 ships in the country, which means a paltry 1% of incentive to the development of the economy and national work for constructions that by law should be done in the country.

 

The economic criterion , which provides the rest (75%) of the award score, focuses on the price offered, but there requires differentiated treatment depending on where the boats are built. The “subtle” difference defined in Article 5 of the document indicates the following:

 

-          If the boat is built in Argentina, the price must be quoted in DDP ( Delivery Duty Paid ) condition, including absolutely all national fees and taxes (43% of the net value, as detailed in the Annex);

 

-          But if the boat is built abroad, the price must be quoted in DAP ( Delivery At Place ) condition, leaving that offer magically exempt from all national taxes, even import taxes (!).

 

Thus, the design of the document manages to generate an insurmountable advantage in favor of the shipyard abroad, and a consequent loss for the Argentines twice since:

either   Not only are jobs, national development and tax contributions lost,

but also,

either   All possible revenue is lost, even on the imported ship.

Machiavellian.

 

 

The application of these criteria is clearly expressed in the tender offers, as shown on the official portal COMPRAR.GOB.AR and which are summarized here in a simple way:

 https://comprar.gob.ar/EVALUACIONOFERTA/VerCuadroComparativo.aspx?qs=Gbut9cInK75gI4QY9/z8cms8umQ1PmwOHzjLn|Q1py|I7CAEZn9qTrSfwUP|SH/1/yOC4f3ezKROIhAYzXeN3h7vYflvPxUpvel095tOPrxpd|5|iF0nFN/sHh/n3HtheiSCcOz5pgLXemFEY1bL08oE1U4hcylMEmYdOHsyt/1kaY7j4dQD|HOIQdqaK4to4xwEo4g4YeFDkr43hyxGCqU7b/jzKDPKAlnsRI2wDMpmqWZxgr6USLIW1hEIh1EqswMusD7cS7tbQUW6v3mE4DZhhRF|xcoaOjTJw2aWDlzMsdRNyo59lRIbaPZjWTMzoR3iJ4ZQTBz6ktRAORod5DEV4jqhA5Hykv0zWUDR2a88ALydAcEOWG9Jr6oUCrJ|onH6SlQKxql81h43xKSr8FeyL8CKdWnnTxSgzHcylPY=)

  

 

This comparison shows that construction abroad and in the country have similar costs (60 vs. 70 MMUsd/u), since the colossal Argentine taxes are not considered. It also shows that, by making them in the country, about 30 MMUSD/boat is collected (Annex 1), which is lost when they are built abroad and make it easier for them to enter the country tax-free.

What must the geniuses of the Ministry of Security and the Prefecture have thought when they designed this document and projected these basic and obvious numbers? Can they be so incapable of not having realized the damage they were doing to Argentina? It's hard to believe it.

Fraudulent bidding document design has the following consequences (and someone should pay for them):

 

-          With such a colossal difference in advantages between national construction (1%) and foreign construction (43%), the Prefecture ensures that no bidder will propose to build in Argentina more than the “required” minimum of 2 units.

 

-          The strange union support for this fraudulent process facilitates the loss of some 4,000 total jobs (direct and indirect) during the construction time of the 2 units that, at a minimum, are going to be carried out abroad instead of in the country. , thanks to our naval unions (!).

 

-          With this design of the document, the Ministry of Security achieves that Argentines lose 120 MMUSD of tax contributions corresponding to the units to be built abroad instead of being built in the country.

 

 

Delayed Effect Fraud

 

The second fraud analyzed here is a delayed effect. It works on a time bomb-like clockwork mechanism and is as serious but not as obvious as the previous fraud. To understand this, a projection exercise of the evolution of the contract is required, which is presented below.

 

The design of the document is designed so that, halfway through the contract, the need for a modification arises that, supposedly, suits the National State, but which involves a colossal scam on the Argentines.

Some additional information from the document is presented here to understand the parts of the deadly clockwork of this delayed-effect fraud:

 

-          Partial national construction obligation (2 units ): In a very light way, the document presents the minimum national construction requirement of at least two units, disguising it as a supposed need for technological transfer that, in reality, is absolutely unnecessary.

§  This ambiguous obligation without any relevant specific guarantee was introduced in the document in order to pave the way for future fraud.

 

-          Imports first, national constructions later (perhaps) : According to Article 24 of the specifications, in the first 30 months two imported units must be delivered and in the following 18 months the two national ones.

§  At the time, the modification of this clause was requested since 80 years of permanent fraud in naval industrial history show that this is never fulfilled, and the series of the last (national) ships end up being canceled. To avoid this obvious potential fraud, it was requested to include the requirement of a specific guarantee of a value equivalent to that of the complete national loss. In this regard, the PNA promised, before the Naval Industry Advisory Council, that the second and third ships would be constructions carried out in the country. Of course, such a commitment was never reflected in the document nor was the corresponding guarantee required since this undermined a key piece of the mechanism of this delayed-effect fraud.

 

-          Payment method : According to Article 30 of the specifications, after a 20% advance payment of the entire contract, payments are made for the progress of work during the construction of each boat. Thus, when the first unit is delivered, in addition to the advance payment, 25% of the contract must have been paid, and so on.

§  This seems very logical as a payment system but the reality is that, as will be seen below, it leaves the country with a gigantic exposure since, once the first two ships have been paid (50% contract: 160 MMUSD), the balance to be collected (160 MMUSD) does not cover the cost of the missing constructions (200 MMUSD), which means there is an absolutely unacceptable risk situation that is easily detectable for any official in good faith who reviewed the specifications and knew basic arithmetic.

 

Each of these clauses in themselves do not appear to generate any damage in isolation, but as clockwork pieces that they are, when operating within the explosive mechanism they are deadly. Let's see, or rather, let's listen to the Tic, Tac, Tic, Tac...:

Once the contract is signed, the foreign contractor collects the established 20% advance payment and receives partial progress payments for the two ships that are being built abroad, ahead of the construction schedule.

Midway through the contract (approximately month 18), and just before the Argentine shipyard begins work on the third ship, the deadly detonator is activated. BOOM! At that moment the national shipyard declared – conveniently – that “it will not be able to fulfill” its part of the contract, generating “surprise and discomfort” in the Prefecture and the Ministry of Security. As a solution, the external construction shipyard offers to take charge (at no additional cost) of the missing deliveries and, in addition, shorten the total deadlines. Everyone involved applauds as thousands of jobs and tens of millions of dollars in fiscal resources disappear. This detonation caused by the very timely withdrawal of the local shipyard magically provides 104 million solutions to be distributed among the participants.

 A colossal increase (400%) is generated in the profit of the external shipyard and an equivalent loss for Argentina. This is because the 2 national constructions that are fraudulently canceled in the “renegotiation” are the ones that were going to provide the national work and fiscal resources. Obviously all this was planned from the beginning in the very design of the document when organizing this macabre scam mechanism with a delayed effect. Annex 2 shows the detailed analysis of the projected flow of funds and then the fraud implicit in the future and secure renegotiation is graphically explained.

 

It is observed that the total income (blue line) is 320 MMUSD and the original total expenditure (red line) estimated is 294 MMUSD, resulting in a reasonable profit of 26 MMUSD. This would generate some work in Argentina due to the construction of two ships that would contribute about 60 MMUsd in fiscal resources to the country. It is not what it should be, since the four ships would have to be built in the country, but at least it would be something.

As seen in the graph, after the renegotiation of month 18, the expenditure curve (dotted red) begins to be much lower (since it does not pay Argentine taxes) totaling 216 MMUSD. Thus, the original profit of the foreign shipyard is quadrupled (104 versus 26). The new total gain of 104 MMUSD will arise mainly from the loss of national tax contributions that all Argentines suffer, but especially those most in need.

We still have time to defuse this bomb that a group of bad civil and military officials, together with some unionists and businessmen from the naval sector, have organized since the very design of the document.

 

Conclusion

 

Some of the salient aspects of this case are summarized here, which, without a doubt, leaves many certainties about who the predators of Argentina are and how they act.

 There is illegality of Origin . By law 27418 of 2017, ships for the Prefecture (PNA) must be built in Argentina. To enable construction abroad, it would have to be proven that it is impossible to do so in the country, which never happened because it is not true, and is also demonstrated in the offers presented that explain that 2 ships could be built in the country.

This illegality of origin of the tender is proven in complaint CFP 1117/2024 B-21403 (Complainant: Raúl E. Podetti), presented in the Federal Criminal and Correctional Court # 1 by Dr. Servini and that, Currently investigating the Prosecutor's Office No. 4 in charge of Dr. Stornelli, who has judicialized the process.

 

 It is unnecessary to spend 300 million dollars now, and even less on 4 patrol boats equal to the other four that were already purchased in 2018 and that have practically never been used since 2020 when the first one arrived.

          Corruption in the 2018 Navy purchase is revealed . At that time, the Navy paid double the market price for almost identical ships now tendered by the Prefecture. This scam was achieved by making a direct purchase from the same French state shipyard that today, having to compete in a tender, offers half the price for those ships. And furthermore, in this case, the ships are somewhat larger, all new, with greater financing and with the “promise of national construction.”

          The preferred shipyard of the Prefecture and the Navy is the most corrupt in the world . Research by the Fletcher Institute at Tufts University in its Compendum of Arms Trade Corruption indicates that the French state shipyard, preferred by ARA and PNA, accumulates about 1,000 million USD in bribes covered up with murders with cases in Pakistan, Taiwan, Arabia, Malaysia and Brazil.

The Prefecture usually commits fraud in its naval purchases . Historically, the 40 new ships acquired by the Prefecture were suspected and unnecessary imports due to there being excess local competitive capacities. The last case, in 2017, was 5 patrol boats purchased in Israel at double the market price as proven in case CFP 3978/2022 (complainant: Raúl E. Podetti) through the Anti-Corruption Office, which is processed in the Federal Criminal and Correctional Court #3 of Dr. Rafecas, in which the General Auditor's Office of the Nation was also interested, which was investigating other similar frauds involving weapons of Israeli origin purchased through the same Ministry and with the intervention of the same known person. and “usual house dealer .”

The design of the document includes a large fraud in two stages . As detailed above, the specifications include a perverse system of valuing national offers to obscenely favor foreign constructions with criteria that are very inconvenient for the national interest. But the worst thing is that there is another organized scam with a delayed effect of colossal dimension, which allows the foreign contractor to quadruple its profit with the extra resignation of 60 MMUSD and 4000 jobs by the Argentines to favor the external contractor.

 

We must ensure that this tender is canceled as soon as possible. And , furthermore, that an investigation be carried out to make the criminals who organized these scams pay, and those who facilitated them through their participation, for example, in the Naval Industry Advisory Council.

 

 

 

 

(*) Raúl Podetti is a naval engineer (ITBA), MSE (U. of Michigan) and MBA (IAE). In the naval field he was an industrial entrepreneur, civil servant and business leader. He is a consultant, postgraduate professor, member of the Naval Vector of the UBA, director of the Blue Collection ( www.raulpodetti.com ), and author of L'Affaire Argentine, Stories of Military Naval Corruption. Contact: [email protected]

 

 

ANNEX 1

 

The following analysis is based on the tender offers, the Argentine tax system and the usual cost distribution of an OPV type ship built in a national shipyard. It emerges that the tax contribution of national construction is 43% of the price without taxes.

 

ANNEX 2

The development of this contract with its main milestones indicates the Income and Expenses assuming that the Expenses of the imported ship are 54 MMUSD/u (10% profit). For the national case, Expenses are computed by adding: a) taxes of 30 MMUSD/u and b) 90% of the Price without taxes (70 x 90% = 63 MMUSD/u), generating a total Expenditure of 93 MMUSD/u. Expense line 1 corresponds to the Original Contract, while Expense 2 represents the fraudulent renegotiation raised in approximately month 18.

 

By Agenda Malvinas

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