This is the interview on Caribbean Corruption for ‘Time to Face the Facts‘ which was broadcast out of Barbados-based Caribbean Media Corporation on Sunday 26th May 2013.
The audience was regional via cable and global via their Facebook page. The interviewer is Jerry George and the format was a live call-in. Video courtesy Jerry George
Part 1:
Afra Raymond is on ‘Time to Face the Facts‘ to discuss Corruption with host Jerry George…
This is a live telecast on Sunday 26th May 2013 – today being the 50th anniversary of the establishment of Africa Liberation Day, for those of us who still remember…- from 7pm to 9pm on Cable TV as CaribVision or streaming on the internet via their FaceBook page –https://www.facebook.com/timetofacethefactsshow?fref=ts
Please spread the word and be sure to tune-in…
Silence is the Enemy of Progress!
Best Wishes
Afra
The last four articles in this series have focused on what I call ‘two sides of the same coin’ – the coin being the large-scale and improper use of Public Money.
I examined the THA/BOLT office project called MILSHIRV being undertaken with the Rahael group and the Calcutta Settlement land scheme in which the HDC acquired developed lands at several times the proper price the State could have paid.
Throughout this type of critique one has to strive for effective balance and fundamental integrity. The extent of the waste and/or theft is never easy to pinpoint when one is working from outside and relying solely on published documents, but my best efforts to establish those facts is what is presented. Of course it is impossible to say for sure that any amount of money was stolen in a particular project, hence the phrase ‘wasted or stolen’.
Objectively, it does not matter whether the money is wasted or stolen, if it is ultimately unavailable for the benefit of the Public. Once spent, that Public Money is gone forever, which is why Value for Money is of such importance in any proper Public Procurement system.
Subjectively, however, the errors of inexperience or poor process must be differentiated from an active conspiracy to defraud. Although the objective measure of loss might be identical in terms of the dollar-amount, there are different long-term consequences. Innocent errors and miscalculations can be rectified over time by ongoing review processes. Deliberate conspiracies to defraud require concerted and well-grounded attacks in order to be eliminated. What is worse about the deliberate conspiracies is that they affect the very atmosphere in which public business is conducted.
We end up with a situation where it pays to pay a bribe and the decision not to pay is to suffer delay.
That is why we are where we are today. Simple so.
One of the important lessons emerging from the Wall St disaster is that the variety of financial regulators with their varying rules and experiences allowed financial players to engage in ‘Regulatory Arbitrage’. That was the scenario in which financial players shopped for pliable or suitable regulators within which to channel their products, resulting in the unprecedented financial disaster we are all living through.
Here in T&T we have seen a similar pattern in our financial markets, but the point being made here is that it has also emerged in the Public Procurement arena, with TIDCO paving roads; the rising profile of State-owned entities which were deliberately excluded from the formal procurement controls; those same companies breaking their own rules and so on. That is the emergence of a toxic kind of ‘Procurement Arbitrage’, which is the reason why we must have over-arching regulations to control all transactions in Public Money.
So, there are two types of losses being charted here –
Only a Court can establish whether the lost Public Money was wasted or stolen, so I have ventured no opinion as to which is which. Readers can reach their own conclusions.
These charts illustrate the extent of the waste or theft of Public Money in the THA/BOLT and Calcutta Settlement projects.
Click on the charts above to see full size version
Click on the charts above to see full size version
This is the Order by Justice Boodoosingh to grant me the right to have the Judicial Review heard in Court…our first hearing is set for 1 May 2013
This is my filing for the Judicial Review of the continuing refusal of the Ministry of Finance to reply to my Freedom of Information request of 11 May 2012 along with my sworn affidavit.
The case is a critical challenge to the detrimental notion that $24Bn of Public Money can be spent without Accountability or Transparency. That notion does violence to any healthy conception of the Public Interest, so I expect this contest to be a sharp one.
“Power concedes nothing without a demand…”
Frederick Douglass…Freedom Fighter and esteemed ancestor…
“Sunlight is the best disinfectant!”
Former US Supreme Court Justice Louis Brandeis…
The simple, inescapable fact is that the State could have lawfully acquired the ‘Eden Gardens’ property for less than $40M. The HDC paid $175M in November 2012 to Point Lisas Park Ltd (PLP) for that property, which is the reason I am calling this an improper use of Public Money.
Despite having available the advice of the Commissioner of State Lands, the Commissioner of Valuations and various attorneys at HDC and so on, the Cabinet approved this transaction. This Cabinet, with two Senior Counsel at its head and several other seasoned legal advisers, appears to have been unaware of, or intentionally ignoring, the legal safeguards.
Some readers may be surprised at those assertions, so here are my reasons for making such.
The last two articles examined the steps leading to the HDC’s purchase of land at ‘Eden Gardens’ in Calcutta Settlement. In my opinion that transaction, as well as the one which preceded it, are both highly improper and very probably unlawful. The HDC purchase must be reversed and the responsible parties investigated/prosecuted as required by our laws.
This ‘Eden Gardens’ episode is an object lesson in what can go wrong when elementary policy is set aside for stated reasons of expediency. Apart from the lack of any Needs Assessment, the unclear role of the Commissioner of State Lands is a source of serious concern. That Commissioner’s role is to advise the State on the strategic implications of its land policies and transactions, so this is a straight example of a case which required a solid input from that critical State Officer.
So, what should have happened? How would a proposal like the ‘Eden Gardens’ one have been handled if the various parts of the system were functioning properly?
When parties are in commercial negotiations, there is always a Plan ‘B’, to be adopted in case the main plan goes awry. Each side has a different Plan ‘B’, since they have different interests.
What was Point Lisas Park’s Plan ‘B’ in case their negotiations with the State were unsuccessful? While we can never know for sure, PLP being a private company, the fact that those lots were widely offered at $400,000 can allow us to form a view as to the benchmark they were likely using.
The State’s Plan ‘B’ is far simpler to establish, since there exists the legal power to compulsorily acquire private property for a public purpose. That was the third unique facility enjoyed by the State as set out in the previous article.
In the case of a landowner making unreasonable demands, the State has the lawful option of compulsorily acquiring the property.
The Land Acquisition Act 1994 (LAA) establishes the right of the State to compulsorily acquire private property for a public purpose. At S.12, the LAA specifies the rules of assessment used to arrive at the sum offered to the owners of private property interests being acquired.
S.12 (4) states –
“…(4) In making an assessment under this section, the Judge is entitled to be furnished with and to consider all returns and assessments of capital value for taxation made or acquiesced in by the claimant and such other returns and assessments as he may require…”
The point in this case being that, having registered a purchase at $5M in February 2010, PLP would have been unable to legally resist a compulsory purchase which adopted that price as its basis. Even if the State, in recognition of the roughly $29M spent by PLP on building the infrastructure for ‘Eden Gardens’, were to add that sum, the final offer would only be about $34M.
Those provisions at S.12 (4) of the LAA are a critical safeguard against persons who might seek to under-declare their properties to evade taxes, then seek to make exorbitant claims if the State seeks to acquire compulsorily. S.12 (4) prevents the State from falling victim to any such games, it is a critical safety-valve to protect our Treasury from those who seek to pay as little as possible when taxes are due, but boldly make huge claims from the Treasury when seeking to sell.
That is why I am calling for this matter to be swiftly investigated and the responsible parties prosecuted to the full extent of the law.
This was in reality a potent dilemma for PLP, in that if they were served with a proper compulsory purchase notice, they would have either had to stick with the $5M figure as a 2010 baseline, or reject that deed and incur the strong penalties at S.84 of the Conveyancing and Law of Property Act.
One of the three deeds executed on Wednesday 3 February 2010 recorded the purchase of ‘Eden Gardens’ for $5M, which is a massive understatement of consideration. The true market value of that undeveloped property at that date would have been of the order of $50M, so the loss of Stamp Duty to the Board of Inland Revenue would have been in excess of $3.0M. The underpayment of Stamp Duty is tantamount to a defect in title of a property. Are we witness to the State making a massive over-payment for marginal lands with defective title?
Did the Cabinet and the HDC receive the proper advice from the Commissioner of State Lands and the Commissioner of Valuations, as well as the other legal advisers? If yes, that advice was plainly not followed, so in that case the question would have to be ‘What caused the Cabinet and the HDC to abandon that sound advice?‘
If the true situation is that the proper advice was not provided, we need to know why. If the advice was not sought, then we need to know why. If the advice was sought, but not provided, those advisers need to be rusticated so that our processes are protected from more of this nonsense.
The State has an overriding duty to comply with the law and be exemplary in its conduct. That is not negotiable, if we are to build a society which is orderly, progressive and just.
Episodes such as the ‘Eden Gardens’ sale and the THA/BOLT deal continue the erosion of Public Trust and the loss of that intangible, almost-forgotten, source of ‘soft power’, the Benefit of the Doubt.
This Prime Minister has made repeated statements that any evidence of wrongdoing will be investigated, so that the offenders can be prosecuted according to law. These three articles have detailed the evidence and breaches of sound public policy, so it is now over to the authorities.
The ‘Eden Gardens’ transaction is a prime example of a large-scale economic crime against the State and the interests of its citizens.
Again, I ask – ‘Who were the beneficiaries?‘
The final point here is that the parties to the PLP purchase and improvement of ‘Eden Gardens’ are now in litigation, with the contractors – SIS Ltd. – suing Point Lisas Park Limited for various monies and demanding an account of the $175M. Case CV 2012 – 5068, so we have interesting times ahead.
What is being pursued here is our right as citizens of a modern republic to the details of these huge expenditures of Public Money – the CL Financial bailout is costing some $24Bn, about $3.5Bn USD! – and the background to how critical legislative support is obtained. It is my view that S.34 was not the first time and that the spectre of ‘regulatory capture’, which underlines much of the discourse around the Great Depression 2, is in fact founded on a sinister degree of ‘legislative capture’.
Having had a series of ‘cat and mouse’ exchanges with the Ministry of Finance since my Freedom of Information Act application made on 11 May 2012, this is my pre-action protocol letter sent to them by my attorney on Thursday 7 March, seeking their proper reply in 7 days…that time expires at midnight today, Wednesday 13 March, so stay tuned, because we are going to the High Court after that…
Last week I set out my main concerns in relation to poor procurement processes with the THA/BOLT project. A large amount of Public Money was being committed to a project with little apparent regard to Value for Money concerns in an arrangement which seems to expose the THA to the principal risks at a time of limited financial resources.
This article is a critical examination of the controversial proposed purchase of 50.6 acres of land at Calcutta Settlement by the Housing Development Corporation (HDC).
The HDC’s role is to build and maintain homes to satisfy the requirements of its main client, the Ministry of Housing and the Environment. According to that Ministry –
The Corporation is mandated by the Act to:
- Provide affordable shelter and associated community facilities for low and middle income persons and;
- Carry out the broad policy of the Government in relation to housing.
With over 125,000 applicants on the HDC’s waiting-list, there is no doubt that, for many poor people, the HDC is their only hope of getting a reasonably affordable home of decent quality. That means that the HDC is an important implementing agency in our nation’s welfare provisions, which is a role I fully support.
This post is about ‘Eden Gardens’, which is on the western side of Calcutta Settlement Road No. 2 in Freeport, just north of Central Park, opposite to Madoo Trace. The property comprises 264 residential lots at an average size of 5,600 square feet, 2 residential/commercial lots, 2 nursery school sites, 2 recreation grounds and 4 playgrounds.
In November 2011, the HDC obtained a valuation from Linden Scott & Associates at $52M. In January 2012, the owners of Eden Gardens, Point Lisas Park Limited, offered the property to the HDC at $200M.
That is an intriguing sequence of events, since the HDC would hardly pay for a valuation on a property they were not interested in. If we accept that the property was likely offered to the HDC before they ordered the Scott valuation, then one has to ask on what terms was it offered. That letter of offer, the original one, must be disclosed now.
In April 2012 the Commissioner of Valuations advised the HDC that the current open market value of the property was $180M. In June 2012 Cabinet approved the HDC purchase of that property for $175M, which is $663,000 per lot – at an average lot size of 5,600sf that equates to $118 per sf.
The normal professional and commercial practice when buying in this quantity, is to obtain a discount on the unit price. It would be reasonable to expect that these lots could be sold for significantly more than the HDC agreed to pay. We will see.
There was a lot of argument in the public about this transaction, so I was prompted to look closely at the deal.
I have these serious concerns –
These purchasers were prepared to pay $17M for this undeveloped property in mid-2004, but ended up paying only $5M for it in early 2010. This is the same property which was offered to the HDC at $200M in early 2012, two years later. Literally unbelievable.
The stated payment of $5M shown in that 2010 deed is a massive understatement of value, probably being only 10% of the true market value. The Stamp Duty properly payable on a $50M sale of land would have been $3.5M. The Stamp Duty Section of the Board of Inland Revenue has the discretion to refer transactions to the Commissioner of Valuations in cases where they suspect that the consideration shown on the deeds is understated. I am reliably informed that in this case the BIR did not seek an opinion from the Commissioner of Valuations.
I am calling for that 2010 transaction to be revisited immediately, with a view to the State recouping the proper Stamp Duty. The Public Interest demands no less.
Between 2004 and 2012, the infrastructure for Eden Gardens was built, which included the roads, street lights, drains, water and electricity supply. Eden Gardens lots were available in 2011 via at least two real estate agents – Golden Key Real Estate Ltd. and Samko Realty – at $400,000 per lot. This was widely advertised.Those lots were known to have been on sale at $400,000 in 2011, so the entire development of 264 lots could have earned its owners a total of say $106M. Even if we allow a figure of $5M for the “2 residential/commercial lots and the 2 nursery school sites”, we are still in the range of $110M as the ‘Gross Development Value’.
Given that these lots were clearly not selling at the $400,000 price-point, those estimates are at the upper end of possibility. Which means that we have to adopt a lower ‘Gross Development Value’, say $95M-100M.
If the entire development is to be acquired by a single purchaser in early 2012, that purchaser must deduct from the Gross Development Value to cater for –
I estimate that those discounts would amount to 35-40% of the Gross Development Value. If we adopt that approach, the maximum net present value of Eden Gardens in early 2012 as a fully-infrastructured property would be in the $60M range.
The usual accepted practice of residential development can be expressed by this ‘rule-of-thumb’, to spend less than twice the cost of the lot does not make best use of that land.
Even if we ignore the ‘rule-of-thumb’, one has to wonder
‘In what way does this transaction satisfy the HDC’s mandate?’
It is most disturbing that there has been this amount of debate without the issue of the end-user ever being mentioned. How do the real needs of the homeless feature in this massive HDC transaction, if at all?
To my mind this Calcutta Settlement scheme resembles the HDC’s flagship project at Fidelis Heights in St. Augustine which created an elaborate, expensive multiple-family project with no allocation of new homes to the needy people on the waiting-list.
I have established via a separate enquiry that only about 2% of the HDC output of new homes is allocated to those who can only afford to rent and this project is likely to be a continuation of that detrimental trend. The HDC continues to allocate vast sums of money to housing those who can afford to buy, while leaving the left-overs for those who can only afford to rent. That policy is inimical to the interest of the poorest members of the public, to whom the HDC is literally the last refuge for decent housing.
In all the circumstances, it seems that we need to have the air cleared on these issues –
I close by reminding readers of the corruption ratio set out in the first article. As I wrote in June 2008, referring to the Manning government and its UDECOTT antics –
…Either the Cabinet or its advisers are responsible. We are either dealing with a lack of rectitude at the highest level of our republic or a sobering naivete…
Declarations –
Each week TED selects four of their favourite talks, highlighting just a few of the enlightening speakers from the TEDx community, and its diverse constellation of ideas worth spreading. Afra’s talk was chosen. Congratulations to Afra and the TEDxPortofSpain Community.
With the THA elections having become a kind of national contest, the issues of governance and integrity loom large. The two relevant controversial issues, both of which emerged late last year, were the THA/BOLT office project and the HDC’s proposed purchase of land at Calcutta No. 2 Settlement.
Both those projects have given me serious cause for concern in terms of proper public procurement practice, so much so that I see them as being two sides of the same coin. Both these cases are models of inadvisable dealings in Public Money of a type which no prudent or reputable company would undertake. I am choosing my words carefully since recent reports are that litigation has already started on both projects.
I do not at all agree with the widespread myth that corruption is a minor thing which adds maybe 10% or 15% to the cost of projects. That misinformation is nothing but public mischief which has blinded us to the scale of the theft of Public Money, so it must be completely demolished. In the case of the 1970s to 1980s ‘Government to Government Arrangements’ the then PM, George Chambers, told the nation that two out of every three ‘Petro-dollars’ was wasted or stolen. In the ongoing imbroglio over the $1.6Bn Piarco Airport project, we learned from the DPP’s S.34 statement that $1.0Bn of Public Money had been located in offshore bank accounts.
The DPP’s S.34 Statement on Wednesday September 12, 2012
“…These cases involve allegations of a conspiracy to defraud the Republic of Trinidad and Tobago of over TT$1 billion by the fraudulent use of bonds and the rigging of the contracts for the various Construction packages for the Piarco Airport Project…”
The DPP’s full statement is here.
Also, from “Cops target MP in $1Bn airport scam” in Trinidad Guardian of Friday 5 March, 2004 –
“…TV6 News reported last night that Lindquist and Interpol officers had discovered more than $1billion stashed away in off-shore accounts, arising out of corruption in the airport project…”
This article deals with the THA/BOLT project, which is a Public Private Partnership. The PPP is a procurement model now being pursued by this government, according to the strategy outlined in the 2013 budget.
Build Own Lease Transfer (BOLT) is a subset of the PPP procurement method. Under a BOLT arrangement a client has a facility built by the private sector at their expense – the client makes agreed rental payments so that the developer can cover the cost of building the project and a reasonable profit. At the end of the agreed lease period, the facility is transferred to the client.
There has been effective use of PPP to produce Public Goods like the Brian Lara Promenade. BOLT has also been used to procure prominent POS buildings such as NALIS, UTC HQ and Ministry of Works HQ (via Republic Bank) and the AG’s office at Cabildo Chambers (via NIPDEC).
The PPP can be a feasible method of procuring public goods, offices or other facilities in situations where the State is unable to commit to the capital expenditure and there is a pressing need. The strong selling-point of the PPP is that the private sector takes the risks and is allowed to make a reasonable profit while the public sector can add to its stock of capital goods without the risks of project execution.
These PPP arrangements are now being intensely criticized in developed jurisdictions as having served the public interest very poorly. The focal point of much of the criticism has been the fact that, despite the rubric, the private sector has seldom taken any genuine risk.
Turning to the actual THA/BOLT deal, I have to say that the decision to publish a large number of the important documents in relation to this arrangement is to the credit of the THA.
• The bundle of documents are here.
In response to the request from the Minister of Finance, THA leader Orville London said:
…that under the laws and the T&T Constitution the Finance Minister has no authority to instruct him to provide information to him within any timeframe.
However, London said, in the interest of public disclosure and considering that this particular transaction has generated so much discussion he believed that he had a responsibility to make the information available to the public and the Minister…
This is a bold and in my view admirable initiative by a leading Public Official and I have to say that it has tempered my scepticism over this project. I only wish that Cabinet Ministers took a similar view of their responsibilities.
The THA ‘bundle’ details the ongoing financial shortfall in allocations from Central govt, the main point of which is the fact that the THA is definitely resource-starved in relation to the arrangements with Central govt. When one considers the financial state of the THA alongside the national economic outlook – we are in our fourth year of deficit financing in relation to the national budget – it is a sobering background to this discourse.
I have spoken with all the main parties to this arrangement and this is a summary of the THA/BOLT deal. The THA purchased a 3-acre parcel of land at the corner of the Claude Noel Highway and the Shirvan Road from private landowners for $12M and immediately leased it back to them for a 199-year lease at a nominal rent. The private developers have agreed to erect an 83,000sf office building at a cost of $143M and the THA has agreed to lease it for 20 years at a fixed rent of $15.61psf – an annual rent of about $15.55M, totalling some $311M over the term of the 20-year lease – with the property reverting to the THA at the end of the lease. Those offices are to be built for the THA’s Division of Agriculture, Marine Affairs, Marketing and the Environment.
There have been recent reports of the AG’s lawsuit to test the legality of the THA/BOLT arrangement, so this is not an attempt to pre-empt the Court in ruling on those submissions.
My concerns arise at the level of the Needs Assessment, which must be the first stage of any proper procurement process, public or private. The purpose of the Needs Assessment is to determine the rationale for and scope of the project so that preliminary consideration can be given to the key elements before any high costs are incurred. In this case, we are told that the developer approached the THA, which is unusual to the extent that best practice requires that extra care be taken with unsolicited proposals.
The main points concerning me are that once again we are seeing large-scale expenditure of Public Money without a proper business case having been made. The opinion of Hamel-Smith & Co as to the legality of the transaction is of no comfort to me, this is a matter of making a sound investment decision. A legal opinion is necessary but not sufficient.
That 6-page legal opinion,dated 3 January 2011,by Timothy Hamel-Smith (who was appointed Senate President on 18 June 2010) is at page 168 of the ‘bundle’.
…the monthly payment of $15.61 per square foot per month was not an unreasonable rate because there were properties in Scarborough where tenants were paying as much as $10.00 per square foot. He stressed that even if there was inflation the rate will remain the same…
The first issue I have with that is the attempt to use the $10psf comparable to justify the $15.61psf rent. That is an unreasonable ‘stretch’ by my standards as a professional valuer. Did the THA seek the opinion of the Commissioner of Valuations? Secondly, the fact that the rent cannot be increased in the event of inflation is a distraction, since the likely effect of this new, huge THA office building is that the rental market in Tobago will become saturated with the offices they vacate. The result of that is the decline in office rental values, so in the absence of any provisions for rent adjustments, the burning question has to be ‘What real risk is this developer taking?’. Risk Allocation remains a real issue.
So, in summary, we have a semi-autonomous Public Authority contracting, at a time of tremendous financial strain, to build first-class facilities three times larger than the second-class ones it currently occupies. Finally, please note that according to the ‘Note’ I cited earlier, the current monthly rent bill of the THA Division is $231,788, while the new monthly rent under this arrangement will be $1.295M – over five times more.
At the start of this article, I gave examples of the ratio at which Public Money was wasted or stolen, so just compare this project to those figures.
My next article will delve into the Calcutta Settlement land deal and its own peculiarities.
AfraRaymond.net 