Agrexco did not make a serious effort to investigate other offers for new freighters it sought to purchase, the State Comptroller's Report revealed on Wednesday.
A company owned equally by the state and the agricultural produce boards, Agrexco exports 80 percent of the agricultural produce it is charged with distributing, by boat.
In 1999, the company decided to replace the two vessels it had been using until then. It signed an agreement with a Swedish shipping company for two new freighters. The state comptroller found that the company did not make a serious effort to investigate other offers.
Furthermore, the person who initiated the deal with the Swedish company worked as consultant for Agrexco and, at the same time, for an agency which represented the same Swedish shipping company in Israel.
Eventually, the deal fell through and Agrexco signed a contract with a German company. According to the arrangement, the German company was to build the ships and lease them to Agrexco for 12 years. The ships went into operation in 2004. However, because of problems between the Israeli and German companies, Agrexco approached another company, identified only as "A," and proposed that it replace the Germans.
"A" purchased the ships and signed a contract with Agrexco whereby the Israeli company would lease the vessels for 14 years and buy them at the end of the period.
The state comptroller found that Agrexco did not make serious efforts to find another company to replace the Germans and that it undertook to pay "A" some 4 million euros more than it would have paid the German company over the years of the contract.
It also did not receive interest estimated by the state comptroller at â‚¬2.7 million per year on the money it paid each year which served as payment for the eventual purchase of the ships.
Agrexco did not want to register the two ships in its monetary reports as company property. Therefore, it renegotiated the contract with "A" to give it an option not to buy the vessels. The state comptroller estimated that the option cost the company â‚¬6m.
After the state comptroller intervened, the contract was rewritten to include the option without costing Agrexco any money.
The state comptroller also found that the company hired an outside consultant to supervise the construction of the two ships, but did not sign a contract with him. In 2006, Agrexco's director-general paid the consultant $300,000 retroactively for work done since 2000, plus NIS 745,000 in expenses.
He also found that Agrexco did not compare its income and expenditure figures at the end of the fiscal year to the budget estimates at the beginning of the year, to monitor the differences between expectations and results. The state comptroller also found that although Agrexco transported non-agricultural goods to add to its revenues, it did not transfer the profits from these side-ventures to the agricultural produce boards.