Greaves Vs. Zazay – Who’s Correct And Who’s Wrong?

By: James W. Harris

The Perspective
Atlanta, Georgia
February 2, 2007


Unless the Liberian people stop taking things for granted, they’re likely to get more of the same

There is an old saying which goes something like this: “You can fool some of the people some of the time, but you [definitely] can’t fool all the people all of the time.”

The above quotation is in direct reference to those Liberians, who, apparently due to their personal egos, self interests, greed, selfishness or whatever, continue to believe that they can fool Liberians forever without any repercussions.

However, I can assure all those who fall in this sorrowful category that they’re dead wrong this time around as the ears and eyes of Liberians are now wide open and they are determined more than ever before to hold their government accountable for whatever it does. Just as we’ve scrutinized the Tolbert, Doe and Taylor regimes in the immediate past, it’s no kidding that we’re also determined to do the same with the Johnson Sirleaf administration for no other reason than to ensure that the lives of more than 200,000 Liberians were not wasted in vain.

As Liberians awake gradually from their long slumber and hopefully watch their government’s every move, especially, financial, some people undoubtedly will be caught right in their tracks like a dear frozen in time after encountering an unexpected bright light coming from a moving car.

This just may be the case with Mr. Harry A. Greaves, Jr., Managing Director of the Liberia Petroleum Refining Company (LPRC) and his latest exchange with Mr. Francis K. Zazay, a presumably promising Liberian accounting and financial professional.

I certainly don’t know what Mr. Greaves may have been thinking when he decided to publish his company’s financial statements for the 3rd Quarter without providing an accompanying “cash flow” statement as is the standard practice in the accounting field, unless, of course, the LPRC is an exception.

In his recently published reaction to the LPRC report, Mr. Zazay said: “’Show Me the Money! Cuba Gooding Jr. demanded in his Oscar winning performance in the movie, Jerry McGuire’. That line has since come to become a common saying that parallels ‘full disclosure’, an important accounting concept. Full disclosure in accounting imposes a requirement on management to provide all relevant information regarding the financial performance of operations. The goal of this authority includes providing an assurance that interested parties reading an accounting report for a particular period would arrive at the same conclusions. Failure to adhere to full disclosure requirement has been causes that raise eyebrows particularly in recent times. For the sake of satisfying my full disclosure curiosity, I attempted to give the 3rd Quarter report of the Liberian Petroleum Refinery Corporation (LPRC), as published in The Perspective a closer look. I also thought my comments were necessary as a way of encouragement for the new management that has began such a positive move by providing regular reports, now that the end of the fourth quarter is near’”.

Titled the “LPRC’s Third Quarter Financial Results: An Element of Departure From Full Disclosure” [], which obviously should be a must read for every Liberian who is interested in seeing things done correctly at last in the collapsed West African state, he explained that: “The first lack of full disclosure is the absence of a statement of cash flow. The Statement of cash flows is a third financial report that provides information about the cash position and quality of liquidity of a company. The fact that LPRC had failed to provide such information does not exclude reasons that one cannot be prepared using the information provided in the 3rd Q report. While the two financial statements presented by management are important, their failure to correlate with information provided by the statement of cash flows renders the report inconclusive.”

“In view of the importance of this document, I chose to analyze the financial statement by attempting to derive one since management did not provide us this vital information. I soon realized the moment I started my analysis that the balance sheet was more of something else, replete with many disclosure issues left unanswered, than the report it claims to represent. My analysis revealed that LPRC did not offer all information necessary that would allow others to arrive at the same conclusions reached by them and the board of directors. It was discovered during the analysis that the cash balance reported in the amount of $1,666,105, as of 3rd Q Balance Sheet appears not to be accurate. My analysis of the reports resulted in cash overstated by about $124,716. All variances in the 3rd Q Financial Statements, along with other information provided in the write-up were taken into account in conducting my analysis. I did not consider Cost of Sales assumption that would have probably reduce net profit and the resulting cash balance”, Mr. Zazay’s article pointed out.

It further explained: “A cost of sale figure assumption, for example of $1,000,000 for a $9,000,000 sale (although not realistic) would lead to an understatement of cash by more than a million dollars, thereby leaving more room for questions. Disregarding the cost of sale assumption, however, one would think that a difference of this magnitude would suggest that the balance sheet should be out of balance. This does not appear to be the case given that the debits and credits are all tied out: $12,218,128 Debit and $12,218,128 Credit.”

For those of you who are interested in reading Mr. Zazay’s well written paper from his professional point of view, you would find that he actually observed at least six (6) instances where the LPRC report lacked full disclosure.

But even at that, he made it abundantly clear that: “While the absence of one of such report may not be sufficient reasons to pass judgment, their failure to interconnect and yield similar conclusions as those reached by their preparers would provide room for doubts. It therefore behooves me to state that the failure of the recent Third Quarter financial report of the LPRC to provide such reliability renders LPRC the obligation to provide further clarity essential to the tenants of full disclosure requirement.”

So, you can see that the man was certainly not writing out of prejudice or ignorance [because from the little excerpts that I’ve provided above, he knows exactly what he’s talking about], but because he evidently loves his country and wants to see things done correctly as they’re supposed to.

That is why every sober thinking Liberian should really appreciate Mr. Zazay’s attempt to make Mr. Greaves, or better still, the government, fully aware that indeed a brand new day is actually dawning in Liberia. This also shows that Liberians of good conscience everywhere, for that matter, won’t shy away from pointing out the obvious deficiencies that are so rampant in financial reports published by the government or its functionaries whenever it becomes absolutely necessary. That is what “transparency” and “accountability” as preached so often by the President is all about!

In this context, here’s a direct quote from her [President Ellen Johnson Sirleaf] when she spoke in Addis Ababa, Ethiopia, at a conference on 11 October 2004 in her capacity as chairperson of Liberia’s Governance Reform Commission: “Transparency and accountability are the key elements in the practice of good governance. There are several dimensions to these tenents and several reasons for the failure of governments and other [state] actors in the society to be open and accountable [to the people].”

“Transparency requires that the public has access to knowledge and information regarding the decision-making process in the management of the affairs of state. Accountability requires participation and responsiveness to the public regarding the effect of [official] policy decisions”, she added.

Therefore, considering the ugly fact that the LPRC has in the immediate past been a big “cash cow” for a few unscrupulous Liberians who have become wealthy overnight at the total expense of our suffering people as well as detriment to our now war-ruined nation, it’s very imperative that we collectively continue to keep a close eye on the company. It goes without saying that just because there has been a change in management at the LPRC necessarily means that things have changed for the better – not by a long shot.

In fact, when one reads the latest United Nations Panel of Experts Report on Liberia dated 15 December 2006 [], you’d see clearly why there’s a dire need for Liberians to scrutinize the wrongly named public corporation even more.

For example, here’s partly what the report says about the reasonably profitable LPRC under Mr. Harry A. Greaves, Jr.: “In June 2006, LPRC entered into a one-year [deal] with the Nigerian National Petroleum Corporation to buy 10,000 barrels of crude oil a day. Despite its name, LPRC is not in a position to refine the crude oil. Thus, in August [of] 2006, LPRC sold the contract to Addax Ltd, the largest independent oil producer in Nigeria, at the rate of 14 cents a barrel. The contract, worth $0.5 million, was awarded without any competitive bidding. When the Panel sought clarification as to how the firm and price were determined in the absence of competitive bidding, the Managing Director of LPRC said it was not possible to call for bids in such situations because of the lack of time.” Oh, really?

“He stated that the transaction had been handled by himself and one of Liberia’s [so-called] ambassadors-at-large, and that the order had been given after the LPRC board had approved the sale. However, the minutes of board members dated 1 and 4 August indicate that the board had been informed of the selection of the firm [Addax Ltd] and the price only after the firm and the price had already [the key words] been determined”, the UN Panel report also said.

I’ve since learned that the “ambassador-at-large” who connived with Mr. Greaves on this deal is none other than the ever controversial, Dew Mason, a one-time militant firebrand of the MOJA (Movement of Justice in Africa) type, who has since switched sides and now enjoys some wealth accumulated during the late Samuel K. Doe’s regime, according to people who claim to know him as well as his present lifestyle.

I’m sure that some Liberians don’t have any problem with the LPRC deal or the two key players involved. But for an infant government like Johnson Sirleaf’s that has promised the Liberian people so much, especially, when it comes to good governance, transparency, accountability, integrity, etc., it sure says a lot, doesn’t it?

That is why I personally take my hat off to Mr. Zazay as well as other Liberian financial and accounting professionals who have seen the need to take some time off from their usually busy schedules to give their honest observations on crucial deficiencies found in the LPRC’s 3rd Quarter report. As the matter of fact, at least one accounting professional that I know calls the report under review “patently misleading and a gross disservice to the ailing Liberian nation.”

But instead of going right back and making the necessary correction by immediately providing the accompanying “cash flow” statement and other supporting documents as required by normal accounting practices, the LPRC Managing Director chose to do the exact opposite, telling Mr. Zazay in a letter [] carried on the Perspective website to “go back to his textbooks to educate himself as to [the] circumstances under which ‘cost of sales’ and ‘gross profit’ are determined.”

Personally, I find his response to Mr. Zazay to be very arrogant and offending, even though, the man had done his utmost best to be objective and respectful. Well, some people just don’t change; they remain the same which is unfortunate. He (Greaves) did admit, though, that Mr. Zazay’s criticism [observation] about the lack of a “cash flow” statement does have merit. Of course, it does!

Disagreeing with Mr. Zazay on another issue, the Managing Director said: “His comment about the absence of a ‘cost of sales’ betrays a lack of understanding of LPRC business [without saying specifically what in fact LPRC business is].”

“Therefore”, Mr. Greaves went on to say, “Cost of sales does not apply. It is irrelevant. I was in the newspaper publishing industry in the United States for 10 years. Let Mr. Zazay read the published financial statements of the Washington Post or New York Times, for example, and tell me whether or not he sees any "cost of sales" figures in their financials. He will not. Why? Because they are not manufacturers or retailers. There are countless other businesses that don’t have a “cost of sales” figure to report.”

Well, guess what, Mr. Zazay did go back to not only his textbooks as Mr. Greaves had suggested, but also to the website of the Securities and Exchange Commission to view the statements of the two newspapers, the Washington Post and New York Times, respectively.

This is what he said in his rejoinder [] to Mr. Greaves, who often uses his past affiliation with US-based newspapers, including, the Washington Post, to shore up his professional resume whenever his performance comes into question: “In spite of my doubts, however, as to why the managing director of a fuel company could refer me to a newspaper company to validate the virtue of his financial report, I did follow his instruction to visit the sites of the Securities and Exchange Commission to view the statements of two newspapers (Washington Post and New York Times, just as he suggested). Interestingly, there were no correlation for disclosure requirement between a newspaper house and a refinery or fuel company. According to the Securities and Exchange Commission, these are two different industries that do not have similar accounting standards, to some extent. One aspect that is, however, found in common was the fact that the two newspapers do have exemption sections of their income statement to arrive at gross income or operation income. The exemption is cost incurred to generate particular revenue. Without this exemption of cost, taxable income for businesses would be significantly high. This is why regardless of the nature of business (except for certain partnerships or LLC where partners or shareholders enjoy flow through) cost of sales is a reduction of sales figure on the income statement. The fact that cost of sales may come in varying forms and names doesn’t mean it does not exist.” Now, there you go, Mr. Greaves.

But I wonder why the Managing Director in the first place didn’t refer Mr. Zazay to a company that’s in the same industry or has the same business model as the LPRC compared to newspapers? The obvious answer could be that there probably isn’t any company out there that he (Greaves) knows about which is similar to the LPRC. I mean, that would have been the most logical point of reference to buttress his argument.

Honestly, this only shows just how far Mr. Greaves and others are willing to go in trying to fool unsuspecting Liberians about their real motives in endlessly seeking high profile government jobs. But again, I can assure them that quite a few Liberians will remain vigilant from now on going forward.

Regarding the nature of the exchange between Messrs. Zazay and Greaves, the accounting and financial professionals that I’ve personally spoken with have all sided with the former [Zazay], saying emphatically that his position is ‘right on the money’ [correct in his analysis].

In fact, another well-seasoned Liberian Certified Public Accountant (CPA), Mr. Robert Llewellyn Kilby, who is also a Certified Information Technology Professional (CITP) and senior partner of ISCI (Independent Software Certification, Inc.), based in Atlanta, Georgia, weighed in on the LPRC report issue.

Writing an article captioned “LPRC Financial Statements Deficiency” on the LIMANY [] and FrontPageAfrica websites, he said: “After carefully reviewing the LPRC financial statements for the period ended September 30, 2006, the following errors were noted, which I surmise, would render the financial statements deficient in material respects.”

He then went on to name the deficiencies which he had found as (1) Omission of the Statement of Cash Flows; (2) Inadequate disclosures of pertinent financial information; (3) Inappropriate accounting of LPRC business model; (4) Lack of due diligence and fiduciary responsibilities; (5) The use of an incomplete set of required financial statements for comparative financial reporting.

Concluding his highly instructive piece, Mr. Kilby then advised the LPRC’s management to “seek professional help in the future in formulating an accounting system and implementing adequate controls in its accounting and financial reporting process to lend [much needed] credibility so that subsequent publication of the company’s financial statements can be taken seriously.” [Amen!].

I strongly agree with Mr. Kilby as the report like the one released by Mr. Greaves and signed off by at least one member of his board, Luvenia V. Ash-Thompson, listed as the Acting Chairman/Board of Directors, unfortunately, is the very reason why a lot of people don’t take Liberia seriously. This kind of thing has got to stop!

In spite of the fact that something like this does make a laughingstock of our country, some Liberians still don’t seem to understand what the fuss is all about involving the exchange between Messrs. Zazay and Kilby on one hand and Mr. Greaves on the other. And they perhaps never will.

But unlike them, a few of us do see the lack of full disclosure on the part of the LPRC management as a BIG DEAL, because if we don’t take a person like Mr. Greaves and others of his kind to task in critical times like these when we should be departing from the status quo, then we evidently never will – now or in the not too distant future.

That is exactly what all the brouhaha is about, hoping that he and the Liberian government are listening carefully. While I certainly do have other concerns about the LPRC and its long-standing business practices, I’ll rest my pen for now, however.

© 2007 by The Perspective

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