At home, the RPCL lost a case in a Mymensingh court in October last year for failing to prove that the LIPPS along with its Managing Director (MD) AZ Rezaul Haq had sabotaged the Mymensingh plant in August 2005. Sources said this happened because the police report submitted to the court suspiciously sided with the LIPPS and lacked versions of the RPCL.

These defeats of the RPCL and the government have now allowed controversial LIPPS chief AZ Rezaul Haq to return to Bangladesh from Singapore, where he had fled in August 2005 to avoid arrest for sabotaging the Mymensingh plant, and prepare to claim Tk 200 crore penalty. Another case accusing Reza of subversive activities is now under trial in a Mymensingh court.

Under the directive of the government, the RPCL is however preparing itself to fight AZ Rezaul Haq, better known as Captain Reza, in the court. Now running with a new management with a mandate to clean its massive irregularities, the RPCL has appealed against the lower court verdict earlier and also filed a case against the international arbitration verdict locally.

"We shall legally fight the claim of LIPPS," said MD of RPCL Md Nazmul Hossain Chowdhury. "The RPCL has badly suffered from financial chaos which we are trying to overcome now. We hope that if we can successfully complete the 3rd phase of Mymensingh plant, RPCL will become a financially healthy organisation in the next five years.”

Highly placed sources said internal investigations are underway to gather evidence against the past managing directors and directors of the RPCL who had dubiously cooperated with Captain Reza in signing totally unnecessary Operation and Maintenance (O&M) contracts with highly damaging terms against projects that did not exist or did not come in to operation.

That these contracts undermined the RPCL's interest are revealed through the fact that while the LIPPS was being paid Tk 27 crore in 2004 for O&M of the two 70 megawatt Mymensingh plant units, the same job is now being done by the RPCL at an annual cost of only Tk 5.73 crore. Had the LIPPS continued to serve, the authorities would have paid it Tk 27.64 crore in 2006.

Illegally using his Hawa Bhaban clout and financial influences on the past RPCL board as well as the power ministry, Captain Reza had also made two irrelevant contracts "effective" years ahead of actual delivery of any service.

The Daily Star had been reporting on a nexus involving Captain Reza for many years but failed to draw the government's attention till 2005. The Asian Development Bank and German KfW had been major financiers of RPCL's works, and they have categorically identified Captain Reza as the source of irregularites.

His influence on the RPCL was so strong that the company refused an audit by the German government in a German- funded power project, which ultimately resulted in cancellation of a 40 million euro German grant in 2004.

On April 4, 2004, the ADB in a letter to the RPCL said, "AZ Rezaul Haq, Managing Director of ... LIPPS... and local representative of Lahmayer International, GmbH remains present in meetings of the Board of Directors of RPCL, and his presence had infleunced decisions of the Board...It is unethical to allow a representative of contractor/ consultant to be present... in the board of directors of a company.”

Earlier in February 2004, KfW had made similar remarks that a representative of the LIPPS influences all board decisions of the RPCL.

IRRELEVANT CONTRACTS
The RPCL board, which was controlled by Captain Reza, had awarded three O&M contracts by 2005 to the LIPPS on the basis of unsolicited negotiations. The first one was signed in 1999 for Mymensingh 70 mw unit 1 and 2 for a 15-year term, and it gave a lot of scope for the LIPPS to charge excess bills on various pretexts. The terms were otherwise friendly to the RPCL.

But in 2004, when this contract was still effective, the RPCL managing director without approval of its board signed a second O&M contract for 22 years for Mymensingh 1 and 2 units and the upcoming unit 3. The ADB, a major financier of the RPCL, raised serious objections but those were ignored.

The MD also did not consult any lawyer or legal adviser before signing this contract on the basis of unsolicited negotiation.

This contract incorporated new clauses that would penalise the RPCL if the contract is terminated, and imposed a number of risks on the RPCL. The earlier contract gave no provision for compensation for contract termination due to contractor's faults. It even replaced Bangladesh law (as in the past O&M contract) with English law.

One clause dictated that the RPCL will withdraw all its shares from the LIPPS when this O&M contract will become effective.

Soon afterwards, Reza took Tk 34 lakh as mobilisation fee to make this contract effective.

"An O&M contract is supposed to be signed two years after a power plant is launched. In this case, the third phase plant being built by German Siemens company will come into commercial operation in August this year. For the next two years, Siemens will operate it. After that in August 2009, we will have an O&M operator. Then how can the RPCL sign an O&M contract with LIPPS in 2004, that too covering the previous O&M operation which is still under another contract," asks a high official of the RPCL.

After signing this deal, Reza again influenced the RPCL chief to sign another contract for Dhaka North 450 mw Power Plant (DNPP) in 2005. Till now, there is no trace of this project but the contract was made effective as many of the top RPCL officials and some Rural Electrification Board (REB) officials were allegedly on his payroll.

The operation contract for the non-existent DNPP is supposed to give him Tk 25.20 crore each year for 22 years from 2005-06, and he had taken Tk 32 lakh in 2005 to make the contract effective.

CONFLICTS WITH THE GOVERNMENT
As a friend of Giasuddin Al Mamun, now in detention, Captain Reza had enjoyed unusual support from the alliance government in converting the RPCL into his personal property and obtained absurd contracts against future projects undermining the national interest.

But conflicts emerged when Reza tried to unilaterally take over the government's 35 percent share in the LIPPS in April 2005. Earlier, he had secretly obtained 65 percent share from German Lahmayer.

The conflicts intensified into a final showdown on August 4, 2005 on a different pretext when hundreds of police personnel along with high officials raided Mymensingh plant, and LIPPS officials were refusing their entry. Finally, LIPPS officials damaged and shut down the two 70 mw units of the plant and fled the spot.

On August 5, 2005, the government filed cases with the Mymensingh Kotwali Police Station against Captain Reza as managing director of LIPPS and his accomplices. Charges were framed against them under various clauses of the Special Powers Act and Bangladesh Penal Code.

The charges include hindering government works, plundering power plant equipment, illegal gathering of more than five people at the power plant site, sabotaging the power plant and committing subversion. The maximum penalty for these charges is capital punishment.

Within one month, the government cancelled the contract with the LIPPS for "abandoning" the power plant.

On instruction from the prime minister, RPCL officials re-started the power plant next day -- on August 5-- after some emergency repairs. This action was later used against the government in the Singapore arbitration council.

ARBITRATION
With these flawed contracts, Reza won an arbitration in the Singapore International Arbitration Council (SIAC) in late 2006 accusing the government of unlawfully terminating contract with LIPPS.

According to a well-placed source, there was no RPCL representative at the arbitration and Reza engaged some people to pretend as RPCL representative at the SIAC. The SIAC imposed a Tk 200 crore penalty on the government.

The SIAC said that the contract was terminated on the ground that LIPPS had abandoned the power plant in August 4, 2005. As per the contract, the plant should remain shut for five days to be termed "abandoned". But in reality the plant was restarted on August 5--one day after the shutdown and therefore it was not abandoned, and termination of contract was illegal.

RPCL sources said Captain Reza is not authorised to file the arbitration as he did not legally own LIPPS. Therefore, fighting this SIAC arbitration is pointless.

The LIPPS was formed in 1999 with 35 percent share belonging to the RPCL, which is under the Rural Electrification Board (REB), and the remaining to Lahmayer International of Germany, locally represented by Capatain Reza. But Reza had acquired all the German shares without board approval or government's knowledge and acquired the RPCL shares in 2005 using his influence on the RPCL MD. At the SIAC, Reza showed that procurement of the shares was signed by the relevant authorities and therefore, the SIAC upheld his ownership.

Upon receiving the SIAC verdict in October last year, the RPCL consulted Attorney General Mohammad Ali. Ali said the RPCL was not required to go to Singapore to appeal against this verdict and this can be done in Dhaka.

Accordingly, the RPCL filed an appeal arguing that the LIPPS had filed the arbitration case illegally as Captain Reza was not authorised to file it. Sources said this RPCL case will be automatically activated when Reza would formally claim demurrage.

Sources close to Reza said he is preparing to formally make his claim.