NOT MY BILL

Scientific and Medical Supplies has rejected findings by the auditor general that the company benefited from a “misuse” of the University Hospital of the West Indies’ (UHWI) tax-exemption status for imports, and has signalled it has no intention of repaying a cent.

Managing Director Howard Lau dismissed the audit conclusions outright, maintaining that the shipment of 40 specialised waste bins linked to his company belonged to the hospital and not his company.

“Well, it is wrong, you know. … It is totally wrong,” Lau said last week when The Sunday Gleaner sought his reaction to findings that his company was among four private firms that benefited from the controversial use of UHWI’s tax exemption.

In a report released in January, the Auditor General’s Department (AuGD) concluded that UHWI facilitated the importation of goods for private companies, resulting in an estimated $23 million loss to the public purse.

In the case involving Scientific and Medical Supplies, identified as Private Company 4, the audit found that the hospital enabled the import of 40 waste bins valued at $6.6 million, attracting a customs duty waiver of approximately $3 million.

The report further stated that UHWI later paid $11 million to the supplier for the bins, along with additional import-related charges, and that there was no evidence of a competitive procurement process.

But Lau disputed the central premise of that finding, arguing that the goods were always intended for UHWI and were shipped directly to the institution.

He outlined what he described as a longstanding arrangement with public hospitals, under which he sources goods from overseas suppliers and directs shipments straight to the institution.

“Let’s say the hospital said, ‘Mr Lau, we’re out of garbage bins on the batch that you sold us. They’re being destroyed by the workers. So we need another shipment’,” he explained. “I will get in touch with China, my supplier. And then they will send me a bill. I pay the bill, and then I tell them the entire container is for UHWI. So they ship it to UHWI, and I pay them for it. So the shipment goes to UHWI, because it’s their shipment. So I don’t see what I’ve done wrong.

“They ordered it from me, and I tell the manufacturer, [in] China, to send it to them – send it straight to the hospital. Because there’s no point me getting it and then me having to deliver it to you. That don’t make sense.”

He said the arrangement is one he has used for beds and other items shipped directly to hospitals from Chinese manufacturers, and that it is not unique to UHWI.

“Doing this for like

30-odd years”

“It’s just not the first time sending them. Beds, everything that is ordered from China, it’s shipped straight to them. I mean, I’ve been doing this for like 30-odd years.”

Lau did not dispute the auditor general’s finding that Customs records showed the overseas supplier invoiced his company for the bins, and that the supplier’s invoice, dated April 26, 2024, predated the hospital’s formal procurement process, which began in May 2024.

He maintained the transactions were legitimate.

“Yes, but that wouldn’t be my fault. If the guideline is wrong, then it would be the hospital,” he said.

Lau dismissed questions about a repayment of customs duties.

“No, why should I pay the duty? The shipment is for UHWI,” he said.

He drew a parallel with how UHWI handles General Consumption Tax on his invoices.

“When I bill UHWI for anything, they never ever pay the GCT. They will send me a certificate that I get from GCT office. Yes. I put it against their accounts and it’s done.”

The businessman was firm when pressed on whether he understood public concern about a transaction in which the hospital appears to facilitate importation and then pay the supplier for the same goods.

“No, no, no. They don’t buy it back from me. They gave me an order for it. So I just ordered it for them. And they get it. ... It’s not like I use them to clear the goods and then sell it to them.”

Despite the report having been published in January and his company’s name having since appeared in Parliament and in the press, Lau said he has not been contacted by the authorities.

“How come Customs don’t call me?” he said, noting that he is an authorised economic operator (AEO), a designation from the Jamaica Customs Agency recognising trusted traders and granting preferential treatment.

“Customs don’t really bother me. Customs don’t even search my container. Once in a while they’ll do it. ... I’m legit.”

Lau said he first became aware that the shipment was being scrutinised before the report was published, when someone from UHWI contacted him and he provided documentation he held.

Companies Office of Jamaica records show Scientific and Medical Supplies was incorporated on March 23, 1989, with address at 175 Mountain View Avenue, St Andrew. Lau is one of three directors and one of two shareholders.

“I have been in this business 30-odd years. And I supply nearly all the hospitals, all the labs. So it’s a long-time business,” Lau said, listing UHWI among several longstanding clients.

He described routine arrangements in which hospitals request urgent supplies, sometimes before formal purchase orders are issued.

“Sometimes the hospital will call and say, ‘Mr Lau, we’re out of vacutainer (a sealed tube used to collect blood samples)’ … So they will say, ‘Just send this component. We’ll send you the PO (purchase order) later’, … and then I bill them,” he said.

“So, to me, I don’t know what the [AuGD] people are picking up. But they have to look at everything.”

Practice not new, other companies

Government bodies being listed as the importer of goods procured through private contractors is not without precedent, though the practice carries established rules. In one recent case, the Ministry of Health was named as importer for a surgical drill supplied by a private company to a public body. In another, a ministry said it was the importer of 110 used school buses provided by a private contractor.

The auditor general’s report found that UHWI’s conduct in the waste bins case “undermined the integrity of the procurement process” and that it was impossible to determine whether the hospital paid a fair market price for the bins, given the absence of a competitive tender.

The report also noted that UHWI used direct contracting to award the contract to Scientific and Medical Supplies on the basis that the company was the exclusive distributor of specialised biohazard waste bins.

UHWI’s management subsequently acknowledged the findings and said the practice of facilitating imports for private entities using its tax-exempt status had been terminated.

Jamaica Customs has not responded to Sunday Gleaner questions submitted in January. Questions sent last week to Tax Administration Jamaica also went unanswered.

At Parliament’s Public Accounts Committee hearing on April 14, UHWI Acting Chief Executive Officer Eric Hosin said Customs had not yet returned findings from its probe into three of the four tax-exemption cases, including the Scientific and Medical Supplies transaction. He had named the companies at a previous meeting.

SECOND COMPANY

Supreme Laundry Services, another beneficiary, stated as “Private Company 1” in the audit report, declined to comment when contacted by The Sunday Gleaner. Last Wednesday, General Manager Josephine Chambers-Lynch said she had no statement at this time, pending a meeting with UHWI and “relevant people”.

She said there was no date for that meeting.

The auditor general’s report found that on three separate occasions between December 2023 and December 2024, UHWI improperly used its tax-exempt status to import laundry equipment intended for Supreme Laundry, with a combined CIF (cost, insurance, and freight) value of approximately $28 million.

It said the tax relief generated was $6.6 million. UHWI also incurred an additional $1.9 million in fees in connection with the transactions.

The report said the costs were absorbed by the hospital even though the equipment did not belong to it. The audit said the laundry equipment was the property of Supreme Laundry Services. The total monetary loss attributable to the transactions was assessed at approximately $8.5 million, the report said.

The Sunday Gleaner first submitted questions to Supreme Laundry Services on January 30. Chambers-Lynch acknowledged on Wednesday that those questions were received.

Companies Office records show the St Andrew-based Supreme Laundry Services was incorporated in 2003. Michael Hill, whom the general manager said she took over from following his death, remains listed as the sole shareholder. Chambers-Lynch is one of two directors.

THIRD COMPANY

Willman Sales Company Limited, incorporated in June 1959, has also pushed back against its characterisation as a beneficiary of UHWI’s tax-exemption misuse.

The company’s attorney, Dirk Harrison, described the auditor general’s framing as “unfortunate”.

“The report says that the goods are at UHWI’s stores. So, you’re saying that my client benefitted, but the very goods that you say were subject of the shipment are in stores at UHWI. So, I think it is an unfortunate characterisation,” Harrison said in an interview with Emily Shields on Radio Jamaica’s Hotline on April 16.

Willman Sales is “Private Company 3” in the report.

Harrison also said that Willman Sales paid customs duties of $95,947.44 on July 18, 2024, following an assessment at the time.

“I suspect – but I certainly won’t speak for the auditor general’s office – I suspect that this is the payment that they are positing that there was a benefit. However, these goods, it was to facilitate UHWI obtaining or clearing the shipment, and this was paid on their behalf.” he said.

The attorney also raised concerns about what he termed as “inconsistent” findings in the audit report – “on the one hand to say that there is a benefit, but on the other hand, you are conceding and acknowledging in the report that, in fact, there was a process, a bidding process that they were successful”.

The auditor general’s report found that UHWI facilitated the import of cups and dishes with a CIF value of $1.41 million for Willman Sales. It said UHWI cleared the goods, resulting in a tax relief of $615,784. It noted that the hospital subsequently purchased the items from the company for $6.9 million.

Companies Office records show the firm’s sole director is Shawn Manley, registered since April 1998. No shareholders are currently listed.

FOURTH COMPANY

JACDEN Group of Companies, the healthcare and janitorial services firm owned by People’s National Party (PNP) Member of Parliament Dennis Gordon, is the largest single beneficiary identified in the auditor general’s report.

The audit found that UHWI misused its tax-exempt status to import office furniture and over a dozen dialysis machines with a CIF value of $40.6 million on JACDEN’s behalf, generating a tax relief of $10.1 million.

Unlike the cases of Willman and Scientific and Medical Supplies, the items were identified at JACDEN’s St Andrew address, according to a copy of the Jamaica Customs letter on its findings shared with the UHWI in March.

Gordon has maintained he did nothing wrong, and that the arrangement his company entered into was a longstanding one.

“My company entered into an arrangement with an entity which approved the use of its facilitation, which is convention, [and] this has been going on for more than 20 years. Having realised that a mistake was made, I could only do the honourable thing by correcting that mistake,” Gordon told The Jamaica Observer.

He subsequently paid Jamaica Customs approximately $10.1 million after the agency assessed the duties owed.

“I was not directly involved, but that does not mean I don’t have to take responsibility for my company’s actions, because I own the company. ...”

“They (Customs) reached out to me and said I should pay approximately $10.1 million, which I paid. So, what is the crime? My only crime is my success and that I am a PNP member of parliament,” Gordon told the newspaper.

PNP President Mark Golding has said he has no reason to doubt Gordon’s assertion that he did nothing wrong, but removed him from both the Public Accounts Committee and the shadow cabinet pending a review by the party’s Integrity Commission.

The auditor general’s review also raised concerns about the authenticity and verification of signatures on key import documentation, noting that a former CEO’s signature appeared on one document long after the official had demitted office.

The Integrity Commission, Jamaica Customs, and the police are all currently investigating the matter.

Last week, lawmakers voted to summon UHWI CEO Fitzgerald Mitchell, his predecessor Kevin Allen, and former board chairman Wayne Chai Chong to a PAC meeting on April 28. Chai Chong, who resigned December 2023, said he will accept the invitation. Mitchell said he had not yet received formal communication, and Allen has not responded to a request for comment.

editorial@gleanerjm.com