Tag: NICIL

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Hand-in-Hand Trust and the Brassingtons – Part 1

Introduction
I intended to start today a two-part column on the recent disclosures on Hand-in-Hand Trust Corporation Inc. I wanted to evaluate the annual reports of the company and do an examination of the role played or not played by Mr Winston Brassington and his brother Jonathan Brassington in what the first Brassington described as “saving the company from going down the Clico road.” Ideally I would have preferred to consider the company’s financial position prior to its becoming another victim of Allen Stanford’s high profile Ponzi scheme, its performance since then and its current financial position, before addressing the role of the Brassingtons.

I am in possession of the company’s 2011 annual return, report and audited financial statements which I think raise some serious questions which in the interest of the public and more specifically of depositors of money in HIHT need to be answered. But aware that too many unanswered questions about a financial business can have serious consequences, including the loss of confidence in the institution, I will seek first some clarification from the company before commenting on the company’s performance and condition. Of course I am not unaware of the reluctance of the company and especially its point man Mr Keith Evelyn to avoid the press when things are not going well. On this occasion, such an approach is foolhardy and counterproductive and must be discouraged by the board chaired by the more enlightened Paul Chan-a-Sue.

Winston’s rescue
The board must surely recognise that Winston Brassington’s famous rescue statement was intended not to defend the Hand-in-Hand Trust but solely to counter strong public suspicions that he had misused information acquired in his official capacity for the benefit of his brother. In fact, what he did say amounts to an indictment of the Bank of Guyana as financial sector regulator, as well as the standards of governance in HIHT of which one of the country’s oldest insurance companies is a controlling shareholder.

That $225 million can save a company which was a victim of one of the region’s most high profile Ponzi schemes suggests either that there was in fact no real problem in the first place – an unlikely proposition given that the company’s equity base had been completely wiped out – or that the rescue was not as solid or deep. If the latter is the case, then the company’s financial problems and its damaged capital base might merely have been deferred rather than solved.

In a long interview given to the Stabroek News Mr Brassington side-stepped the question of whether his brother Jonathan Brassington benefited from insider information before investing in HIH Trust by stating that he had done nothing illegal or unethical. Adding that the government company of which he Winston is head, had ceased to be represented on HIHT’s board from 2002 onwards, he disclosed that he and his entity “only had access to information which a normal shareholder would have access to – annual reports.” For good measure, Winston added that “the financial institution’s business is confidential other than what is in the financial statements.”

Memory lapse
In this matter, Mr Winston Brassington either suffered a critical memory lapse or is simply dissembling. Any increase in a company’s share capital requires an amendment to the company’s articles by way of a resolution passed at a shareholders’ meeting. This has nothing to do with the company’s annual report. As the representative of the government’s 10% shareholding in the company, Mr Winston Brassington would have received a notice of the meeting and a copy of the proposed resolution to increase the company’s share capital.

Mr Brassington is also reported as saying that he had sought to clear his action by writing to the Minister of Legal Affairs and Attorney General and to the Minister of Finance. He said that both of them had responded that they found no conflict of interest in his brother taking up shares in the company. Again, Mr Brassington might wish to reflect on the fact that conflict of interest is not how honest one might think one is, but whether there is in the mind of the ordinary person the perception of a conflict. The fact that Mr Brassington sought out what he might have considered independent opinion suggests that even in his own mind there was a perception of a conflict.

Exchange

To ensure maximum fairness to Mr Brassington, early last week I sent to him the following email:

Dear Winston,

I propose writing on Hand-in-Hand Trust this weekend and would be grateful if you would provide me with a response to the following:

1. a) Did Jonathan learn that HIHT was looking for investor(s) by way of any public announcement by HIHT?

b) If the answer to a) is no, did you approach him and if so in what capacity?

c) Does Jonathan have any other major investment (over $25 million) in Guyana?

2. Did you play any role in Jonathan’s due diligence investigation in HIHT? (This does not mean that there would be a conflict.).

3. Do you hold a power of attorney for Jonathan in respect of his shares in HIHT?

4. Did the Attorney General and Dr. Ashni Singh provide you with written responses to your request for advice on whether or not there was or was likely to be a conflict of interest?

Thanks and I am again extending an invitation to you to come on Plain Talk.

Christopher Ram

To which Mr Brassington responded as follows:

Chris:

I have already responded to many of the relevant issues on this matter.

Regards

WB

Insider information
More developed markets and economies have been grappling with the phenomenon of insider dealing for decades. These almost invariably deal with the use of information by “insiders” a term generally defined to mean directors and officers but which in some cases includes a 10% shareholder as NICIL is in Hand-in-Hand Trust. The rationale here is that of the fiduciary obligation imposed by law on those in a position of trust, an obligation owed in any case to the company and not to any shareholder or member of the public.

Guyana’s general laws on the use of insider information are not well developed and any progress appears to have ceased with the Securities Industry Act 1998. The 1991 Companies Act was an improvement over the Companies Act it replaced, but as far as insider trading goes, it deals with the concept only in respect of narrowly defined transactions and persons. The Financial Institutions Act and the Securities Industry Act are both limited in their scope and only to companies within the ambit of those two Acts. The FIA’s provisions deal with conflicts of interest involving directors and officers and the disclosure of customer information, while the SIA defines “insider” to include a person (an outsider) who is informed of a material confidential fact by an insider.

This is not unlike the UK Criminal Justice Act 1993 which creates a distinction between a primary insider (a person who has direct knowledge of inside information) and a secondary insider (a person who learns inside information from an inside source). Under this definition, Winston Brassington would clearly be, at the very least, a secondary insider, except that the SIA deals only with a certain kind of company.

Wrong advice
But even applying private laws as Dr Luncheon (“NICIL is a private company”) and Mr Brassington (“I did nothing illegal”) seek to do, Mr Brassington may in fact be considered an insider. The general perception is that he made use of confidential information (an offer) which was not available to members of the public.

More relevantly, the persons who are reported to have supported or defended Mr Brassington including two Attorneys General, a Finance Minister and a medical doctor fail to recognise that his conduct has to be judged against the specific circumstances involving a public officer and a state company in which matters like conflicts of duties and duties are as likely to arise as those of conflicts of interest and duties in a private sector setting, which the Companies Act addresses. It would be unfair to expect Dr Luncheon and possibly Dr Singh to know that the framers of our Companies Act had explicitly rejected the Companies Act as the medium under which government companies should operate. That concession is certainly not available to any Attorney General.

A different dimension
But it suits their purpose to look at these general laws rather than whether Mr Brassington’s role was tantamount to misconduct in public office, which is a common law offence. Few would ascribe to the Guyana Police Force any capacity to recognise any breach of the Companies Act let alone pursue such a complex matter of misconduct in public office which seems relevant to this issue. Nor would they be able to count on the office of the Director of Public Prosecutions which appears to suffer from a crisis of confidence about its ability and capacity. In any case, the Attorney General Mr Anil Nandlall has already pronounced, gratuitously and wrongly in my view, that there is no conflict of interest.

It ought not to come as a surprise to Mr Brassington’s assurers that a recent West Indian book, Corruption: Law, Governance and Ethics in the Commonwealth Caribbean written by Derrick V McKoy, a former Jamaican Contractor General deals extensively with the question of such misconduct. What I found surprising is that in the nascent Caribbean jurisprudence, there is already a useful body of case law on the subject.

Conclusion
As the Ombudsman of Victoria Australia wrote in a paper recently sent to me, he finds particularly troubling the widespread, mistaken belief that a conflict of interest is not of concern if there is no actual wrongdoing. He noted that the ‘perception’ of a conflict of interest – even when the conduct of a public officer is nothing short of exemplary – is as damaging to public trust as any misconduct.

The Guyana State Corporation of yesteryear has effectively been replaced with nothing. There is a vacuum in the governance of state-owned companies particularly in key organisations where ministers and their surrogates play a dominant role. Mr Bharrat Jagdeo has left a legacy of weak, corrupt or no governance. Things will get worse, particularly as the state increases its participation in the economy. The deafening silence of regulators in the face of calamitous developments in Globe Trust and Clico will almost certainly guarantee that they are not the last of the country’s financial failures.

We need to have rules of governance of state-owned or controlled enterprises. The head of one state body should never be placed in a position where he or a family member has to use their personal resources to save a regulated financial business as the Brassingtons claim to have done. The OECD has published a model Governance of State-owned Enterprises which we may find helpful. Let us use it.

Next week I will review the annual reports of Hand-in-Hand Trust Corporation Inc.

Note: Ram & McRae acted as advisor to the Privatisation Unit on the privatisation of the GNCB Trust in 2002. The issues raised in this column all relate to events which took place at least seven years after that engagement came to an end and are all matters in the public domain.

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Contrary to what Luncheon claims NICIL is a government company

I find the earlier pronouncements of Drs Roger Luncheon and Ashni Singh and now Mr Winston Brassington that National Industrial and Commercial Investments Limited (NICIL) is a private company with the legal right to withhold public moneys annoying, self-serving, misinformed and mischievous. It is sad, and even dangerous, that individuals with the power to make major decisions over the resources of the country and the lives of its people can be so deficient in their knowledge and reckless in their actions.

Dr Luncheon wrongly informed the media that there are “20-something articles that underpin the creation of NICIL and none of them says that money from NICIL has to be put in the Consolidated Fund.” Mr Brassington adds his share of vacuity with his pronouncement that “proper accounting requirements dictate that money from the sale of government assets should first be placed in the company account, provided it can adequately discharge all of its liabilities.” In my 42 years as a professional, I have never heard anything so absurd and facile.

In fact, the Articles of Continuance of NICIL comprise nine articles (see attached) and it operates under, and is classified by the Companies Act 1991 as a “Government Company.” The Act imposes on NICIL the following obligations over and above those imposed on companies generally:

1. that sections 48 and 49 of the Public Corporations Act dealing with accounts and audits apply;

2. NICIL is required to submit to the Minister of Finance an account of its transactions and audited financial statements no later than June 30 of the following year; and

3. the Minister of Finance is required to lay in the National Assembly the statement of transactions and the audited financial statements no later than September 30, ie, within 90 days of receiving them.

The public is reminded that the Chairman of NICIL is Dr Ashni Singh and the Minister to whom he must submit the report and accounts is the same Dr Ashni Singh. If it was only these breaches of which he is derelict, it would still be a serious matter. But there are more, and worse. The Government of Guyana “vests” lands and other properties in NICIL – on whose Board also sit Drs Luncheon and other Cabinet members – which then sells the assets and pockets the money. The government also uses NICIL to collect dividends from Guyoil, GT&T and other investments which are also retained by NICIL.

This scheme, which assumed scandalous proportion under the Jagdeo-Ashni Singh duo, has become a ruse to get around Article 216 of the Constitution which requires “All revenues raised or received by Guyana to be paid into and form one Consolidated Fund.” By their own boasts, NICIL has collected tens of billions of dollars and not paid these into the Consolidated Fund.

To any ordinary person, so far as the land transactions are concerned, NICIL is merely an agent for the government. Therefore, the moneys it collects should be paid over to the Ministry of Finance to be deposited into the Consolidated Fund. Instead, in an arrangement which in neighbouring Trinidad would be considered criminal, NICIL’s board uses the funds as a second budget to do the things which the Finance Minister would not be comfortable in bringing to the National Assembly, like the Marriott Hotel, like getting involved in Pradoville 2 and for miscellaneous purposes including secret overseas trips, etc. Article 217 of the Constitution dealing with spending public moneys does not allow any of these.

Now, to go back to the absurdity about state companies being subject only to the company laws, I refer the financial doctors to the following two documents: 1) the Report of the Working Party on the Harmonization of Company Law in the Caribbean Community, and 2) the Report of the Review Committee on the Companies Act of Guyana.

This is what the Working Party Report under the heading Public Accountability has to say in paragraphs 19.142 [in part] and 143:

“Whether the company is a mixed enterprise or wholly State owned, public funds are employed for the capital of the company. In the view of the Working Party, this introduces an important dimension with which existing company law does not deal….”

“With respect to companies with capital drawn from public funds, however, the State shareholder is in theory the party which should ensure that proper use of those funds is taking place. In practice, this cannot provide a system of accountability to the public for the effective use of public funds. It by no means follows that the assessment of the State as shareholder with respect to the running of the company will stand up to scrutiny when viewed as a public investment. Increasingly, arguments are made in this context for some additional mechanism whereby the performance of the company in relation to the investment of public monies is subject to accountability beyond the company itself.” And the Guyana Review Committee appointed by the Hoyte administration to consider the report of the Caricom Working Party proposed the adoption of its recommendation that “wholly-owned government companies should be constituted under the Public Corporations Act.

Presciently, the authors of the Working Party Report, including our own Bryn Pollard, were saying thirty years ago, that there could be no accountability under the NICIL-type model, even if it did not have the degree of egregiousness practised by Drs Singh and Luncheon and Mr Brassington.

And finally, with respect to the chorus that it is for the directors to decide if and when NICIL would pay any dividends to the government, let us recall that in 2009, the government, a mere 20% shareholder in GT&T, caused that company to pay more than $6 billion in dividends. And guess who the Finance Minister was and who was the government director on the Board of GT&T when that “persuasion” took place? Dr Ashni Singh and Mr Brassington respectively.

Now the same Messrs Luncheon, Singh and Brassington are bold enough, in respect of a 100% government company in which public property is routinely vested, and which has a 100% Cabinet Board, to plead impotence in calling for a dividend which the country badly needs to help the working and the non-working poor.

To show how reckless and ridiculous it has become, only a couple of years ago the government forced the Geology and Mines Commission to pay $1.8 billion to NICIL to build/repair roads in the hinterland communities, all done by way of a Cabinet directive signed by Dr Luncheon.

For too long constitutional violations, financial improprieties, mis/malfeasance in public office and breaches of fiduciary duties have been tolerated by this bleeding country. It is time for the talking to stop and for the courts in Guyana, and if necessary the Caribbean Court of Justice, to be invited to address these matters. Sooner rather than later some Guyanese will decide that enough is enough.

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The GT&T share sale

Introduction
Even before the debate on the 2012 Budget begins, it is overtaken by an event not outside the control of the government, but well within it, an event that has been in the pipeline for years. Drs Jagdeo and Ashni Singh and their loyal servant Mr Winston Brassington had been speaking about, offering and negotiating to sell the government’s 20% shareholding in the telecommunication company Guyana Telephone and Telegraph Company Limited (GT&T) for at least three years. Yet the Finance Minister could not find a place in his 87 page speech to alert the plebians that an investment that brought in around US$2 million per year was in the final stages of disposal.

Guyanese must thank Cabinet Secretary Dr Roger Luncheon for the timeliness of the announcement at a press conference just one day after the decision by Cabinet to sell the pearl of the cacique crown for US$30M ($6B) to a “Chinese company” whose name, incredibly, Dr Luncheon could not remember. Guyanese would find it difficult to accept that Dr Luncheon, who also sits on the Board of NICIL under the chairmanship of Dr Ashni Singh and which is legally the owner of the shares, does not know the identity of the buyer!

NICIL
For close to two decades NICIL has acted like it does not know that it is subject to an Act called the Companies Act with which it ought to, but does not comply. As a result, NICIL has practically zero experience in complying with the law and may need to be reminded that the certificate representing the 20% shareholding in GT&T is in fact held by NICIL which must also sign the transfer form to pass ownership to the Chinese company.

The CEO of NICIL is Mr Winston Brassington who has been at the centre of all the major sales/disposals of state assets and who has impressed the Guyanese public with his ability to carve up transactions in which the Guyanese taxpayers are often the biggest losers. Except that in the case of the Berbice Bridge Company, Mr Brassington’s iconic show of private-public sector partnership, the big losers are both taxpayers and commuters. The taxpayers suffer as a result of the excessively generous concessions which have been given to the investors in the Bridge Company, and the commuters, as a result of some of the most exorbitant rates for a river crossing anywhere in the world. Just by way of reminder, NICIL recently waived hundreds of millions of dollars of interest (payable to NICIL) so that the private investors could be paid theirs!

Apparently intending to impress the media, Dr Luncheon whose performance as Chairman of the National Insurance Scheme has been exceptional for all the wrong reasons, volunteered to the media that the Chinese company had “conducted its due diligence and decided to purchase the shares.” What the public needs to know is not what the Chinese did but what the government did in arriving at a fair price for the 4,125 shares which it has owned for more than twenty years. Under a 1991 agreement between the Hoyte administration and ATN of the US Virgin Islands, the government received a 20% stake in the new company that took over the assets and liabilities of the Guyana Telecommunications Corporation in a process that itself raised eyebrows. To put the latest transaction into perspective, what the people need to know is how NICIL/Cabinet arrived at the sale price, not how the buyer arrived at the purchase price.

The changing profile of the international investor
The experience in many countries is that the Chinese – and one assumes that this is neither a phantom nor a pseudonym – are more likely to sell, rather than buy, a pig in a poke. They will have looked after their interest and we ought to have looked after ours. The question is, did we?

Unless Guyana is becoming the playground for Chinese investors, the nationality of the investor is surely intriguing, since we now have a picture of one set of Chinese investing in GT&T and another investing in the competing LTE GoG network. There must be something that the Chinese know about Guyana that the ordinary Guyanese does not, but hopefully it is not too late to learn. It is well known that the Government of China invests abroad, ostensibly through private individuals and companies. With their unimaginable reserves, a managed exchange rate and a colonizing mentality, China has been throwing its power around the Third World including Guyana.

They seem willing to get involved in sugar, bauxite, hydro-electricity, airport expansion, Guyana Power and Light, ferries and bauxite, many of which have benefited the Chinese disproportionately.

Led by Mr Jagdeo, there has been a fundamental shift in the profile of investors in Guyana. The implications for Guyana in the medium term can be fundamental, although this is not to suggest that the GT&T share sale is part of some bigger picture.

The strange silence of the Minister of Finance
GT&T is regulated under the Public Utilities Act, and one wonders whether the government had notified the PUC of the proposed sale of its holding in the company and whether, in view of the nature of the company, the identity of the buyer ought to have been similarly communicated.

Unfortunately, there are too many persons of influence and power who think that the law is an ass, and need not be observed or obeyed. Hence, it may be wrong to assume that the buyer has taken advice that as a substantial shareholder under the Companies Act 1991 (10%) it must give written notice to the company within fourteen days of becoming a shareholder.

Given this scenario it is not beyond the realm of possibility that in doing its “due diligence,” the Chinese may not have met with GT&T and might have relied on assurances from the same Mr Winston Brassington, the second-in-command negotiator-in-chief for the government.

What is more disturbing is that the share sale agreement was concluded on Wednesday April 4, less than one week after the Minister of Finance presented the 2012 National Budget to the National Assembly. By then, the discussions with the Chinese – in which the Minister would have played a major part – must have already arrived at the framework of an agreement including the price to be paid to the government.

But the Minister of Finance chose to remain silent on this major development and the budget he presented did not include any income from the sale of these shares.

NICIL again
The frightening possibility is that this money will be put into NICIL’s hands, later to be paid into the Consolidated Fund only if and when the Board of NICIL – which is chaired by the Minister of Finance and which includes Cabinet ministers and as said above, Dr Luncheon – decides to pay a dividend. The law does allow for the payment of interim dividends by all companies, but if NICIL’s directors choose not to pay any dividends, there is little recourse available short of court action.

Meanwhile, NICIL will be free to spend the $5 billion dollars it receives from the Chinese as it pleases, including on the Marriot Hotel which NICIL is bent on financing whatever the perceived risks associated with the industry and the project. It is clear that NICIL has now abandoned any pretence of being the Privatisation Unit of the Ministry of Finance which ensured that proceeds of privatisation transactions went direct to the Consolidated Fund.

By interposing NICIL in the mix, that direct relationship no longer exists, and Dr Singh as Minister of Finance must wait until Dr Singh as Chairman of NICIL’s board of directors decides to pay a dividend before he could bring any money into the public coffers. That just does not sound kosher.

There is some hope from a precedent from a couple of years ago when dividends payable by GT&T to NICIL went into the Consolidated Fund, bypassing NICIL. Parliamentarians, the public, the University of Guyana and the country’s pensioners await with interest the course of the Budget deliberation and whether the Minister of Finance will follow that course and amend the revenue numbers in the Estimates to include the $5 billion.

If he does not, we know then that the fears that the Minister administers at least two budgets – one for the Consolidated Fund and the other for NICIL – are in fact justified.

The agreement
Now back to the agreement. It was always incongruous for the government to be a player (shareholder) in a sector as well as the regulator (PUC), a principle that applies as much to telephones as it does to the media, or any other business.

On that basis, the sale is welcome, although there are disturbing signs that the previous administration has been paving the way, at taxpayers’ expense, for its associates to enter the sector and enjoy major benefits.

In the disposal of shares, a sensible negotiator would contract a price that is cum div or ex div, meaning whether or not outstanding dividends go to the buyer or the seller. GT&T would be concluding its 2011 financial statements in time for April 30 filing deadline. It will probably have its AGM shortly thereafter at which the question of dividends for 2011 will be considered. Since the government-Chinese agreement is made in 2012 the government as the seller could have done one of two things about the 2011 dividends: agree for the buyer to receive the dividend but paying for this in the purchase price, or selling the shares while retaining the right to the dividend.

Dr Luncheon did not mention whether this was considered, nor, unfortunately, did any of the media ask him the question.

We will look at this in the concluding part next week.

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A potpourri of NICIL, the Berbice Bridge and the TUF (with some computers added)

Introduction
It has been all quiet and stable on the business scene this past week, or at least what could make news. The column will resort to a number of issues which could not individually justify a column but together represent matters of some concern. One rather publicised issue was the appearance of the Minister of Finance Dr Ashni Singh with the Minister of Education Mr Shaik Baksh at a press conference to defend questionable contracts valued at approximately $300 million for the procurement of computers for schools.

The result was hardly what they would have intended. It was defending the indefensible. But please remember that this most recent contract is separate from the $5.4 billion for the laptop computers that have also generated concerns from beginning to end. One wonders whether this is why the PPP/C has made a joke of the constitutional requirement of a National Procurement Commission. If such a commission is established, the cabinet would have no role in the award of contracts and the country would be spared the extravagance and corruption we witness with each disclosed contract.

NICIL
Readers will recall that the Minister of Finance last year stoutly defended the award of the Amaila Falls Road Contract to Mr Fip Motilall – that time not for $300 million but $3 billion – ten times more than the school computers’ contract. The joke about road contracts is the building of a road to nowhere. In this case it is no road to anywhere, as far as Mr Motilall is concerned. Prominent in the award of Motilall’s contract was the Privatisation Unit headed by the ubiquitous Mr Winston Brassington, the Chief Executive Officer of National Industrial and Commercial Invest-ments Limited (NICIL), a company that enjoys corporate infamy even by Guyana standards for its failure to have audits and to file statutorily required Annual Returns for decades.

Despite this failure being raised on numerous occasions NICIL, whose directors are mainly ministers of the government, continue to receive public monies and to spend it however it pleases. It infamously played the role of handmaiden to President Jagdeo and his cabinet in the unlawful tax concessions to Queen’s Atlantic Investment Inc and has failed to provide properly audited financial statements for its expenditure of hundreds of millions of dollars of GGMC funds to build hinterland roads. It is at the heart of the proposed Marriot Hotel deal and indeed has been busy shopping around for any partner which would give the project legitimacy. No one knows where the funds will come from.

What is clear is that NICIL continues to receive public funds and late last month the Official Gazette (Legal Supplement) of June 25, 2011 carried fourteen Orders under which public lands were disposed of to individuals mainly in Linden, under agreements of purchase and sale in which NICIL was named as the seller.

One wonders whether the nest egg being built up by NICIL is for the Kingston Marriot which President Jagdeo wants to see before the elections – whatever the financial and other implications.

The Berbice Bridge Company
Some weeks ago, a group of courageous Berbicians joined in a protest at the high cost of traversing the Berbice River Bridge, demanding that it was time that something was done about it and calling on the Transport & Harbours Department (T&HD) to reintroduce the services of the pontoon MV Sandaka on a regular basis. The government has been less than responsive. To make the bridge feasible for the investors – many of them friends of the government – persons seeking to cross the river have little option but the bridge.

At the protest, persons complained that only the rich people could enjoy the bridge, describing it as “terrible” since the bridge was one of those elections promises to Berbicians. According to reports, individuals have to pay $100 to go to the Rosignol Stelling and wait a long time until the bus is full and pay $300 to cross. In all they pay $800 return and lamented that some persons who work in NA earn just $1,200 per day and are barely left with a little money. Security guards receive less.

One of the big defenders of the high fares is President Jagdeo who had told Stabroek News that especially for private cars and minibus operators crossing the river using the bridge, the one-time toll of $2,200 toll was cheap. Mr Jagdeo and his entourage never have to pay a cent so he would not know what is cheap or expensive. Unlike the Demerara Harbour Bridge, pedestrians and cyclists are not allowed to use the bridge. This would surely be what a low carbon economy would require.

With the range of concessions under the Berbice River Bridge Act surpassing those given to the Ramroops, one would have expected that these would have been seen as subsidies to be used to make the tolls affordable. Compare the toll between the two bridges: Cars – Demerara Harbour Bridge $100 while for Berbice it is $2,200.

Here is a summary of the concessions that the company and its shareholders whose names seem to be a state secret receive: Exemption from all the duties and taxes under the Tax Act; all imports of goods, equipment and services on design, construction, expansion, rehabilitation, repairs are exempt from taxes, import duties, purchase tax, consumption tax, motor vehicle taxes and all other taxes; and licence fees and other similar fees or charges. This applies to the concessionaire, contractor and subcontractor.

Other concessions are: Complete exemption for the concessionaire from corporation tax, income tax and withholding tax for the entire concession period; exemption from corporation tax, income tax and withholding tax of all dividends and interest paid. Additionally, all income earned by a contractor or sub-contractor pursuant to the Concession Agreement is exempted from income tax.

Like NICIL, the Berbice Bridge Company Inc, whose chairperson is Ms Geeta Singh-Knight of Clico fame, has not filed annual returns and financial statements since its incorporation, so we cannot tell whether the company is making money or not and if so how much. So much for the rule of law, transparency and good governance.

The PPP/C’s embrace of free enterprise
In a letter to the press earlier this week Mr Dennis Lee, an executive member of the TUF, claimed a pivotal role for his party’s leader Mr Manzoor Nadir in the PPP/C government’s adoption of the free enterprise system. That the statement has not been challenged by the ideological wing of the PPP is probably more surprising than the accuracy of the actual claim.

It is true that the government has practised a crude form of the free enterprise system in which major segments of the economy are at best poorly regulated and at worst allowed to run literally on illegal oil. Many of the nouveau riche actually started and or sustain their empire with illegal fuel, narcotics and customs evasion.

That key pieces of legislation including the Prevention of Money Laundering Act are poorly administered with none of the requisite resources to make them work is not free enterprise but abject lawlessness and deception. Indeed the TUF leader can take credit for his role in weakening the trade unions and in keeping the minimum wage of $800 per day for security workers.

But it is also true that despite his decades of railing against the IMF, Dr Jagan came to power in 1992 after he had given commitments to run with the Hoyte-inspired IMF- directed Economic Recovery Programme. The PPP/C under four successive Presidents including Mr Jagdeo who was Finance Minister to three of them comfortably ran with the free enterprise system so warmly embraced by Mr Lee.

It would be interesting to learn whether the new TUF leader Ms Valerie Garrido-Lowe shares Mr Lee’s exuberance over the free enterprise system. What she did tell me on Plain talk was that she would like to see a more compassionate system to take account of our present situation where the free enterprise system has widened unbridgeably the gap between the rich and the poor.

One might also question Mr Lee’s praise of Mr Nadir as the TUF’s investment in Guyana’s future and whether in fact the TUF was Mr Nadir’s investment in his personal future.

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The case for the Marriott Hotel – conclusion

Introduction
As yet, other than saying that Atlantic Hotels Inc is a public-private sector partnership, the government and its handmaiden NICIL have been silent on where the money to build a hotel in Kingston to be operated under the Marriott label will come from. We have heard about some group operating in Grenada that has run into problems in that country and have heard that some friends may be interested. The fact is we do not know. Meanwhile NICIL is proceeding with speed to identify a contractor to begin construction of the hotel.

Where indeed is the money going to come from? Last week, in part 2 of this series on the decision by President Jagdeo to build a hotel, I wrote that it would take more than investigative journalism to ascertain the labyrinthine sources from which the funds for the hotel would be derived. That it would take an enquiry with full powers to demand information and explanations. And that it would need to look into the books of the Consolidated Fund, NICIL, Guysuco, the Lottery Funds, and other unknowns at this stage.

The strategy of no systems
As this closing piece argues, the first stage in a strategy of misusing money is either to have no system or to undermine the existing system and then exploit its weaknesses. Add to the mix opaque rules such as those dealing with the Lottery Funds, spice it up with an entity that depends on you for its survival (Guysuco), have a few non-accountable entities at the ready (NICIL) and neutralise with carrots those likely to oppose (the leadership of the opposition) and have ready a sufficient number of persons who would be prepared to execute your work. It would help if the press and the public are uninformed or apathetic. When all these forces serendipitously come together, you are on top of the galaxy, with Zeus and Atlas at your side.

There are sufficient secret or hazy sources which could provide some if not all the funding for the hotel. With the role of the Leader of the Opposition becoming increasingly a sinecure, with so many prepared to do the work out of fear or favour, with the carrots dangled to emasculate individuals and groups accustomed to handouts, the government is almost guaranteed not even a whimper of opposition if it decides to use one of these hazy sources to finance the hotel.

A consolidated mess
Despite the boasts by the government, the Consolidated Fund is in a mess. In its 2008 report, the Audit Office reported that it had received confirmation from the Bank of Guyana that the government was holding in special accounts, outside of the Consolidated Fund, some $35.031 billion. But that was the only certainty. The Audit Office’s assessment of the balances held in the special accounts indicated that thirteen accounts with balances totalling approximately $7.868 billion appear to be funds that are transferable to the Consolidated Fund. Of those thirteen accounts, nine reflected static balances totalling $4.778 billion over the last five years; amounts of $10.980 billion held in Other Ministries/Departments Bank Accounts; and twenty inactive bank accounts.

The 2008 report tells of a new and an old Consolidated Fund and it would be fair to assume that the new would be an improvement on the old. Wrong again. The New Consolidated Fund bank account reflected a balance of $2.376 billion compared with an overdraft of $11.602 billion as stated in the cash book as at December 31, 2008. This represents a difference of fourteen billion dollars but was probably considered not too important and so no effort was made to reconcile the difference in the two amounts.

You would think that there would be some serious effort by the government to resolve this mess. Year after year, even as the quantum of the special funds keeps increasing, the only word coming out of the Ministry of Finance is that it is addressing these matters.

Contingencies Fund and the lottery
Then there is the Contingencies Fund provided for under the constitution and the Fiscal Management and Accountability Act 2003 which allows the Minister of Finance, on being satisfied that “an urgent, unavoidable and unforeseen need for the expenditure has arisen (a) for which no moneys have been appropriated or for which the sum appropriated is insufficient; (b) for which moneys cannot be reallocated as provided for under this Act; or (c) which cannot be deferred without injury to the public interest….” to approve a Contingencies Fund advance. This account has been ripe for systematic abuse, year after year as routine payments are made well outside the criteria set out in the law.

Increasingly it seems that the public interest is determined not by law or the technocrats but by the President and the other politicians. And in any case, if expenditure for Carifesta and Amerindian Month could qualify, then maybe with a little bit of a stretch, so could the President’s Marriott.

Then there is the President’s former favourite, the Lottery Funds. I say former because I now believe that his new favourite, based on value and opacity, is NICIL, which I will return to presently. Either as Finance Minister or as President, Mr Jagdeo has unconstitutionally and unlawfully made or authorised payments out of the Lotto Funds totalling $3.097 billion during the period 1996 to 2008. These funds are closely hidden away and spent purely at the discretion of the President on such things as $20 million given to the Commissioner of Police to acquire a steel band; paying to bring Indian cultural groups to Guyana; funding the construction of mosques; Amerindian activities; youth awards; empowerment activities, etc.

If the truth were ever to be told, we might even hear that the Lotto Funds will finance the President’s Buxton initiatives.

The PNC’s black hole
Why the government accounts are in such a mess is hard to imagine. Yes, there was a black hole ten-year period beginning in 1981 when we had no audit reports, and while that in itself was unlawful and unacceptable it did not mean that there was necessarily any major improprieties. But the deteriorating situation over the past five years or so probably has to do with the supine leadership of the political opposition; the departure of Goolsarran from the Audit Office and the quality of staff there; Jagdeo’s increasing boldness if not contempt for accountability and the total failure of the Public Accounts Committee to do any serious work.

Guysuco
This state-owned entity is now pivotal to a matter that is pivotal to a hearing of a matter by the Privileges Committee of the National Assembly. In that matter, the Speaker of the Assembly has ruled that a prima facie case has been made out against one minister of the government. The National Assembly is in recess and it is not known when the matter will come up. Both numerically and qualitatively the composition of the committee weighs heavily in favour of the minister and he may come out of it unscathed. The role of Guysuco in that matter is best left until it is dealt with, not because one attorney-at-law has said – wrongly – that it is sub judice, but for more practical reasons.

What can be said now, however, is that despite a clean audit opinion, Guysuco has not been properly accounting for its land sales. In November 2007 four hundred acres of land were transferred from the corporation to the government and in May 2008 another two hundred acres. The disposal proceeds of those lands do not appear in the books of the corporation. Nor are lands disposed to Republic Bank, GBTI and Demerara Bank.

NICIL
Where did this money go? Even if it was gifted to the government, it should have been accounted for as a distribution. It was not. One probability is that the money went to NICIL which has now replaced the Lottery Funds as the slush fund of choice. It is bigger, more opaque, more convenient and therefore more useful as a fund to be used for anything and everything. NICIL has received hundreds of millions as privatisation proceeds, including lands sold to John Fernandes Limited, GBTI and Queens Atlantic Investment Inc. It is also a rent collector and incredibly an asset fund manager to build roads for the GGMC from which it received $1.8 billion in 2007 and 2008.

The law defines most if not all of these as public moneys which should therefore be placed in the Consolidated Fund. NICIL is many things, but it is not even part of the Consolidated Fund. Its objects set out in its corporate documents do not allow it to do many of the things it purports to do. But it is convenient and, being a private, state-owned company is outside of the formal government accounting rules. The Privatisation Unit that was set up as a department of the Ministry of Finance is not even listed as a budget agency which seems to exclude it from the strictures of the Fiscal Management and Accountability Act. The stage is therefore set for NICIL to do the kind of work which it has been doing for some time and with an increasing sense of impunity.

LCDS: the big one
But even NICIL may be overtaken by another vehicle to channel public moneys into questionable investments. And that is the LCDS funds. As we see with Mr Fip Motilall and the road to Amaila, such funds are already being used by the government, even before their receipt. That I fear is the wave of the future. It would not matter how many lives and jobs in forestry and mining are sacrificed, how many royalties are foregone and how many entrepreneurs and their investments are jeopardized, it is politically expedient for the government to have full control of the LCDS funds.

As a major forester described the matter, the ‘S’ in LCDS stands for sacrifice to be made by the forestry and mining sector as they are strangled by draconian regulations and the commitments by President Jagdeo to the Norwegians. Currently the income from forestry and mining flows to the operators and the government, while jobs are provided for both coastlanders and members of hinterland communities. There is a perception that the persons making the money from these sectors are not supporters of the government, and in consequence, they are dispensable and will be sacrificed to the LCDS.

LCDS funds flow directly to the government which alone decides how they will be spent. If it wants to support a particular project or person, all it has to do is put it in the context of the LCDS as in the case of Amaila and Fip Motilall. And if another project – like a hotel – is not that easy, just prefix the project with the word “green.”

Conclusion
The Office of the President has spent scores if not hundreds of millions on LCDS already. It does so without accountability and transparency. The Audit Office has turned a blind eye to that and to the misdeeds of NICIL. The government can count on the office doing the same with LCDS. And if perchance the hotel succeeds, the government can always sell its interest to a friendly partner.

The case for the Kingston hotel then has little to do with tourism and a top-of-the-line, international standards hotel. When built, it will be a monument to the extent to which egomania has gripped President Jagdeo, testimony that civil society is dead and it will explain why Guyana lags far behind even the smallest Caribbean island, barring Haiti. It will be our beacon of arrogance and attitude to spending public funds on the one hand, and the cowardice of a nation on the other.