Pohnpei police execute search warrants and arrest three for alleged bid rigging on infrastructure projects

By Bill Jaynes

The Kaselehlie Press

October 24, 2018

Pohnpei—On October 22, Pohnpei Supreme Court Justice Joseph issued a search warrant on seven homes and offices. The warrant said that the Court is satisfied that probable cause exists to believe that ZJ Construction Co., Zaiger Sonden, Emerenciano Canama, and Jack Yakana conspired to engage in bid rigging and collusion to obtain contracts in favor of ZJ Construction Co. in violation of 61 PC 6.147, “Cheating”; in violation of 61 PC 6-141, “Grand Larceny.” Moreover, the Court found probable cause to believe that Emerenciano Canama’s and Jack Yakana’s conduct amounts to a violation of 61 PC 10- 112, “Misconduct in Public Office”.

“Probable cause” does not mean that the men have been convicted of anything and are presumed to be innocent unless otherwise proven in a court of law.

Yesterday the warrant was executed at the residential and business premises of Emerenciano Canama, the residential premises of Zaiger Sonden and his business office, “ZJ Construction Company”, the residence of Jack Yakana, and the Transportation and Infrastructure office where Canama and Yakana work or did work, and the Project Management Office of the Pohnpei Government. State police officers executed the warrant seizing personal and business records, document, computers, hard drives, flash drives, electronic data storage devices, emails, bank records, check book registers, passbook saving accounts, bank statements, business books and records, files and other documents related to 20 Pohnpei infrastructure projects.

Additionally, officers arrested Sonden, Yakana and Canama based on arrest warrants issued by the Court. Though today was UN Day in the FSM, a national holiday, Associate Justice Nickontro Johnny held a hearing at just before 5:00 this evening. He released the defendants based on a surety and the surrender of their passports to the court.

On October 11, based on an examination of the Office of Transportation and Infrastructure (T&I) by a Joint Investigative Team, the Pohnpei Office of the Public Auditor (OPA) issued a Management Advisory Report to Acting Administrator of T&I, Mr. Ricky Lebehn. The investigation team consisted of one representative from each of the Department of Public Safety, Office of the Attorney General and from the Compliance Investigation Division OPA. “The special review was brought on by allegations of impropriety with T&I bidding and awarding processes,” the letter said.

The report advised the Acting Director that the Attorney General would commence an investigation that could lead to possible prosecution “relating to potential collusion, fraud, abuse and corrupt practices resulting (that were) identified and reported by the Joint Investigation Team.”

The report informed Lebehn that of the total of 30 construction projects with an aggregate value of $1,180,030.16 awarded during FY 2017, 15 projects totaling $651,421.51 were awarded to ZJ Construction, a total of 50% of the contracts and 55 percent of the total project funds.

The team selected an in-depth examination, including on-site visits of ten projects each with a contract value of $20,000 and higher. T&I had awarded all those contracts to ZJ Construction.

The report said that a majority of contract files reviewed showed that the company was a non-responsive and non-responsible bidder. There were instances where contracts were awarded to ZJ Construction even though they were not the lowest responsible bidder. The company’s bids also often did not include a detail of its qualifications and other items usually required in bids.

The report said there was an appearance of collusion, conflict of interest and mismanagement of the contract bidding and award process. It alleged that the State Government Architect exerted his influence to divert business to ZJ Construction. It alleged that he directly leaked information to his wife who worked as an Auto-CAD operator for the company. It implied that leak may have powered the bids that ZJ Construction submitted to T&I. Most of the bid proposals submitted by the company were within 10 percent of the government estimates and were also the closest in terms of quantity of materials when those quantities were not published in the invitations to bid.

“The Administrator/Contracting Officer of T&I admitted not following the bidding laws required under the Financial Management Regulations,” the report alleged. “He also admitted to negligence for not reviewing bid proposals thoroughly and awarding projects for efficient and effective implementation of the projects.”

The report included photos and other information from their site visits to six of the reviewed infrastructure projects. At each of the sites it found examples of materials that were not the quality of materials that were bid, or items such as new doors required under the scope of work that were not provided at all, or work that was said to have been complete that did not work or did not last longer than one use, or overdue jobs that had barely even begun though they had long ago been scheduled for completion, or other discrepancies, or all of the above.

The report made several recommendations to T&I in order to keep the problems they found in the bidding process from happening again.

“Open competitive bidding is a transparent procurement method in which bids from competing contractors, suppliers or vendors are invited by openly advertising the scope, specifications and terms and conditions of the proposed contract as well as the criteria by which the bids will be evaluated,” Pohnpei Attorney General Dana Smith wrote in a draft press release. “Competitive bidding aims to obtain the best value for the government by stimulating competition and preventing favoritism. As a result, the government can obtain goods and services at the lowest price.”

He continued, “The government Contracting Officer and those other government officers responsible for the fair administration of the contracting process have a fiduciary duty to protect the interest of the people of Pohnpei and its Treasury. When the procurement process fails this breakdown may allow corruption in the award of public contracts. Here in Pohnpei, one result has been that many contractors refuse to even submit bids for government projects because they believe that the process is rigged and that only one or two contractors get all the work. Mismanagement of the procurement process results in waste of limited financial resources, loss of value and increased cost to the tax payers.”