TECHNOLOGY Minister Phillip Paulwell will this week announce the sale of NetServ Jamaica -- the company that was at the centre of the scandal over the frittering away of hundreds of millions of dollars of public money to IT start-ups -- to one of three US-based companies short-listed for the acquisition.

NetServ was put on receivership last December by the Government's National Investment Bank of Jamaica (NIBJ) for a near J$180-million debt. But the receiver has to, in addition to covering other costs, clear the company of legal tangles and ready it for sale.

"NetServ will be divested at a substantial proportion of the full loan amount, except for depreciation," a highly-placed Government source told the Observer yesterday.

Neither Paulwell nor the receiver, John Lee, a partner in the firm PriceWaterhouse-Coopers was available for comment yesterday.

But the source named the short-listed companies as:

* Alba-Baymen, a German outfit that operates from Houston, Texas;

* Latina Capital Advisers, which trades as Touch Point; and

* WCB Technologies.

The three companies were short-listed from 16 that applied when Lee put NetServ up for sale. The short-listed companies each had to put up J$10 million as an expression of firm interest, the source said.

NetServ was one of the tele-marketing and tele-services companies to which the Government, with the NIBJ as the vehicle, doled out more than $700 million in soft loans under a project in which Paulwell had promised to generate 40,000 jobs in the information technology sector over three years.

The loan funds came from that near US$100 million that Paulwell raised from the sale of two mobile telephone licences in 1999/2000. The NIBJ managed the funds for Paulwell's technology and commerce ministry and loans were based on the recommendations of a committee comprised of officials from several government agencies.

It turned out that in NetServ's case, over $90 million was disbursed before proper due-diligence was done on its parent, the Miami-based NetServ Global, and its principal, Trinidadian Paul Pereira.

Even after due-diligence reports raised questions about the business practices of Pereira and some of his business partners, the loan committee decided to go ahead with additional disbursements to the company and was supposed to have tightened oversight arrangements.

Apparently, though, funds still leaked and the NIBJ pulled the plug in December and put in Lee as receiver.

As NetServ Jamaica went to court in Florida to get access to material and equipment which Lee believed rightfully belonged to it, Pereira, who had claimed over US$3 million in debts by the subsidiary, cross-sued and then placed NetServ Global into bankruptcy.

Lee, eventually, had to pay the Florida Bankruptcy in Trustee US$150,000 (J$7 million) in order to settle the matter and to free NetServ Jamaica to use certain intellectual property to which Pereira had claimed ownership for NetServ Global.

Later on, Lee discovered a US$600,000 (J$28-million) debt to ActiveLink, a computer supplier from which NetServ had acquired the equipment. It was the remaining portion of the US$2.2-million cost of the equipment.

It was not clear last night whether Lee had, in the end, to clear this debt whose resolution, he had told the NIBJ, was critical to any final decision to restart NetServ or to sell the company. ActiveLink had taken a lien against the equipment.

Notwithstanding the difficulties, the Government has always maintained that NetServ's assets covered its liabilities and that the business was viable. In addition, Lee had previously confirmed that most of the assets held by NetServ approximated the $180-million in loan disbursement.

Observer sources claimed yesterday that the Government is being able to offload NetServ at what was described as a "favourable price" because of the firm's cutting-edge voice over Internet protocol technology.

This technology had initial hiccups but, according to the experts, should make its service delivery less expensive than other tele-marketing/call centre operators that transmit data/voice over optical fibres.

The source said that the new owner of NetServ was expected to continue operating a call centre focusing on in-bound traffic.

Analysts point out that the tele-services industry was easing out of its slowdown following the terrorist attacks in the United States last September.

Paulwell has recently argued that Jamaica still has a window of opportunity in the information and communication technology (ICT) sector, given the tension in Asia, particularly between India and Pakistan, where the industry has had a good head start.

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