The_Open_Door_deel1

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soon demonstrated by the calling in of L.M.C.'s aid. In the 1963 -
1975 period, this company provided assistance to N.I.O.C.-M.M.A.L.
in respect of operational matters. M.M.A.L. remained in charge of
financial affairs and the accounting system of the company but
its handling of these affairs also resulted in mismanagement. In
the absence of a register of fixed assets (!) all assets purchased
or constructed since the start of the project were included
every year in the company's Balance Sheet, regardless of the fact
that some assets had been sold or scrapped in the meantime. The result
was a situation in which the latter category of assets continued
to be subject to depreciation. The company did not have an
effective budgetary and cost control system until 1976, neither
did it have effective control over the warehouse. The practices
connected with the calculation of the depreciation rates and
the perpetual shortage of liquid cash are other examples of mismanagement
(105).
In the 196O's the fairness of the management fee paid to M.M.A.L.
had already been considered within the Treasury Department and
calculations then made led to the conclusion that the fee was
excessive but as a former Secretary of the Treasury, J. Milton
Weeks, stated (in 1972) the time had not been ripe for any formal
action. The former Secretary also was of the opinion that the
rate of return on M.M.A.L.'s investments, which had ranged from
23? to 100?, had been excessive, especially as the management fee
was exempt from taxes (106). (M.M.A.L. also received interest
income and income from shipping agency services but as a result
of the 1970 audit by Whinney, Murray & Company it paid Liberian
income taxes on this income)(107).
In the 1970's management fees amounted to $ 598,000.00 (1973),
$ 795,000.00 (1974), $ 770,000.00 (1975), $ 861,000.00 (1976) and
$ 994,000.00 (1977) (108) resulting in a total net income for
M.M.A.L. of about $ 1.6 million during these years of which
L.M.C. had received about $ 210,000. A (minor) difference of
opinion existed between the Government and M.M.A.L. as to the
appropriateness of including despatch income in total sales
revenue on" which the management fee was calculated. In 1975 the
management fee approximated 27 cents per ton of production
(compared with 10 cents per ton received by Granges for the
management of the LAMCO J.V.). In the U.S.A. in the same year
two large iron ore mining companies, which had acted as managers
of other iron ore mines in various parts of the world, had
received management fees of about 21 cents per ton (109).
Already in 1972 a Committee had advised the Government to revise
the original management agreement either by the imposition of an
Income tax of general application on the income of M.M.A.L., or
by the reduction of the 4? rate, or by an (equal) participation
by the Government and/or N.I.O.C in the equity of M.M.A.L.
(110). However, the Government hesitated to undertake appropriate
action and pending a definite decision it was eventually decided
to reduce the period of termination to one year only. Prior to