Two significant events in the previous week heralded a fresh round of Board Games, as we strive for higher standards of governance and accountability in our State Enterprises.
The first of those events was the Privy Council ruling on Monday 19th February 2018, in the case which eTeck brought in 2011 against its former Board, chaired by Professor Ken Julien, related to alleged negligence for a US$5M investment gone awry.
The second event was the publication of Transparency International’s 2017 Corruption Perception Index on Wednesday 21 February 2018, in which T&T improved its score from 35 to 41 and moved up the scale from 101st out of 176 countries in 2016 to 77th out of 180 countries in 2017. The average country score in the 2017 CPI was 43, so T&T is still below average, but the improvement in that perception has already been welcomed by the current administration.
At the end of January 2018, the Ministry of Trade & Industry and its implementing agency, Evolving Technologies & Enterprise Development Company (ETECK), announced the completion of a $7.6M project for the renewal of the Trinidad Hilton Pool. According to the official statements, that project was completed on time and within budget, as part of the State’s long-term obligations at that 418-room hotel. Despite those assurances, there was a series of condemnations which need to examined.
Trinidad Hilton Management Agreement
Three of its interesting details –
Hilton pays ETECK a rental of 76% of the ‘Annual Gross Operating Profit’ which is defined in the lease;
ETECK is responsible for doing replacements, renewals, extensions or improvements to the Trinidad Hilton at its expense. That means that ETECK was acting within the lease terms in paying for those pool improvements;
Hilton is required to prepare detailed accounts of the hotel’s operations and submit those to ETECK.
Please note that Trinidad Hilton is undergoing a hugely expensive improvement program since 2008 (see Sidebar).
I am not making an issue of the decision to do these improvements or making allegations of cost or time over-runs. There may be issues in those aspects of the project but I am not engaging those.
My issue has been and remains, that despite all the smooth press releases and so on, we are unaware of the underlying commercial arrangements by which these hotels exist. The three largest hotels in our country are State-owned – Trinidad Hilton; Magdalena Grand (formerly known as Tobago Hilton) and Hyatt Regency. Those hotels are operated by foreign entities under management agreements with the State agencies which hold the ownership interest. They can therefore be classed as Public Private Partnerships (PPPs). Since PPPs are currently being promoted as a development approach, those arrangements certainly ought to be closely examined, looking beyond the Hilton pool. Continue reading “Property Matters – Trinidad Hilton Improvements”→
The Integrity Commission is continuing its efforts to revise the Integrity in Public Life Act (IPLA) to give greater effect to its anti-corruption work. I fully support those efforts.
The key challenge is to discern how Public Officials commit the corrupt acts the Commission is meant to reduce. It is therefore necessary to conduct a scrupulous examination of Commissions of Enquiry and other Inquiry (eg LifeSport) Reports & evidence; Auditor General’s Annual Reports; as well as the leading international learning on these questions.
Once the main methods of corrupt agents are discerned, it will then be necessary to consider how the existing powers of the Commission might be deployed in tackling those and if there are new powers needed.
‘Public Money’ is the term used to describe money due to or payable by the State, including those sums for which the State would be ultimately liable in the event of a default. Public Money is sometimes called Taxpayers’ Money. It is our Money. The leading learning from which we have drawn serious lessons in the campaign for Public Procurement reform is Lord Sharman’s 2001 Report to the British Parliament – Holding to Account – which was a thorough examination of the definition, role and need for control of ‘Public Money.’ We expanded on Sharman’s definition of ‘Public Money‘ so as to capture the full range of possibilities, but we have accepted his key finding as to the requirement that ‘Public Money‘ is to be managed to a higher standard of Accountability and Transparency than Private Money. The contemporary, best-practice position in respect of the management of and accountability for Public Money being that the private sector rules are the bare minimum. That position must be at the centre of any reform of the IPLA and should be enshrined in law.
Code of Conduct
The IPLA effectively contains two limbs – the first requires that Public Officials make declarations of their income, assets and liabilities and the second requires those officials to perform their duties in accordance with the ‘Code of Conduct’ as set out in Part IV. The majority of cases brought by or Notices from the IC are directed at Public Officials who fail to make proper declarations. Is there a single case in which breaches of the ‘Code of Conduct’ were cited in making a case or an adverse finding? It is in this failure or refusal to apply those IPLA provisions that much of the current mischief in our Public Affairs is left to flourish. Some of the largest State Enterprises are functioning in breach of the ‘Code of Conduct’ and as such the Public Officials running those bodies are liable to censure. The IPLA does not contain any penalties for breach of the ‘Code of Conduct’, so that needs to be rectified. I support the Commission’s proposals to make examination of declarations optional, as that shift would release resources for a greater focus on the ‘Code of Conduct’.
Power to make recommendations
S.36 (1) of the IPLA states –
“36. (1) A person in public life or a person exercising a public function may, by application in writing, request the Commission to give an opinion and make recommendations on any matter respecting his own obligations under this Act.”
The key flaw with this power is that it is limited to cases in which the Public Official first requests an investigation and what is more, the Commission can only release its findings/recommendations with the consent of that Official. That power must be extended to all cases, with the discretion as to publication of its findings/recommendations left to the Commission. The fundamental importance of the Public Interest should not be subordinated to the agenda of obstructive Public Officials. A good example of how those powers were used recently in a positive way was the Commission’s 12 September 2014 Report on the Ministry of the Environment & Water Resources with relation to issues of alleged improper conduct in relation to the grant of Saw-Millers Licences.
At present, the Commission notifies Public Officials who are being investigated. It seems counter-productive, to say the least, that the same Public Officials who are in charge of the papers which could prove their guilt are being notified by the Commission at the start of investigations. Little wonder that the Commission has had little impact on corruption. It is emblematic of the flagrant double-standards with respect to the detection and prosecution of ‘White Collar Crime’. One can hardly imagine the courtesy of ‘prior notice’ being extended to suspected rapists or murderers. The Commission needs to eliminate that practice of notifying persons to be investigated.
Improving the impact of the Commission’s findings
The Commission’s findings and recommendations must be effectively linked with other ‘gatekeeper’ regulators – eg ‘Fit & Proper’ regulations as controlled by the Central Bank, Professional bodies, T&T Securities and Exchange Commission and the Stock Exchange. The linkages need to be backward and forward, so that the Public Interest can be upheld by better-informed regulatory bodies. I have seen notices of penalties imposed by the TTSEC in relation to various Public Bodies which have issued bonds and failed to provide timely accounts. If the TTSEC fines were paid, it would have been out of Public Money, so there would be no personal cost to those Directors for their lawbreaking. Those findings would seem to constitute a breach of the ‘Code of Conduct’, but was the Commission formally notified? – examples are in the sidebar.
SIDEBAR – Lawbreaking State Business
The SEC has made Orders in respect of Contraventions of the Securities Industry Act 1995 and the Securities Industry Bye-Laws 1997. Those Orders are in relation to the failure of these huge State-owned Enterprises to publish their accounts –
Some of the largest State Enterprises and Statutory Bodies are operating in breach of the ‘Code of Conduct’ in the IPLA, which requires at S.24 (3) that –
“(3) No person to whom this Part applies shall be a party to or shall undertake any project or activity involving the use of public funds in disregard of the Financial Orders or other Regulations applicable to such funds.”
At this time, there are no audited accounts for Caribbean Airlines Ltd (since 2008) or UDECOTT (since 2005) or Housing Development Corporation (since its inception in 2005). That is very serious since some of the largest State Enterprises and Statutory Bodies are refusing or failing to publish audited accounts as required by the published guidelines of the Ministry of Finance or their own statutes.
Declarations also to be linked
The declarations of Public Officials must also be linked to the Inland Revenue and Financial Intelligence Unit, so that they can be reconciled. With today’s information technology, that is no great task.
The October 2007 High Court ruling that members of the Judiciary were exempt from the provisions of the IPLA needs to be urgently revisited. The fact is that the Judiciary has an immense amount of power and discretion which at present is being exercised outside of the framework which binds other Public Officials. It is true that judicial decisions are subject to review, but the appearance of a beneficial exemption from the Integrity Framework does not inspire confidence.
The G20 countries recently agreed to start moves against secret shareholdings and nominee Directors. The effect of those proposed changes would be to effectively embargo Nominee Directors, Unissued shares and other ‘masking devices’ which are intended to conceal the ‘Ultimate Beneficial Owner’ of a company. Our Integrity laws need to reflect those practices.
Public Private Partnerships
The IPLA needs to restate the position that all Directors of State Enterprises and bodies under the control of the State are liable to its provisions. Of course, that would include the gigantic CL Financial.
It is critical that we get these issues right, there is no room for compromise here.
Next Monday, 8 September 2014, is carded for the Finance Minister to deliver his 2015 Budget Statement to the country and of course speculation is great as to whether this will be an ‘election budget‘ or if a more restrained approach might be taken.
In preparing to write this column, I took a look at our budgets since 2005 and it was really striking that many of the key issues identified a full decade ago are still at the fore of the more recent budgets. Some of those issues were the imperative to reduce our dependence on the energy sector; the constant push to upgrade our infrastructure; the demand for more resources dedicated to national security and of course, the repeated statements about this or that program to reduce white-collar crime.
These expenditure and revenue figures were drawn from the Budget Statements, so no account has been taken of either actual outcomes or supplemental appropriations – this is the process used by the Government to obtain authorisation from the Parliament to exceed the approved spending limits in the national budget.
Clearly, we are seeing a trend as to the constant increases in expenditure, with only one decline, in 2010. Given that background, it also appears that surpluses are rare, occurring only twice, in 2006 and 2009.
The reality that we are on the verge of a national election which is sure to be strongly-contested, leaves me in little doubt that the 2015 budget is also likely to be a deficit budget, with the State spending more than it earns.
There is a constant stream of allegations of ‘Grand Corruption’, which is little surprise in our society in which an unsupported allegation is so often used to discredit an opponent. There is no comfort to be had in that observation, since the other reality is that thorough investigations and prosecutions are only done against ones political enemies, inside or outside the ruling party. That is the sobering reality in our Republic, in which we should all enjoy equal rights and be held to common standards. Different strokes for different folks, just like back in the ‘bad-old-days‘.
It seems to me that the defining question, in terms of whether the various financial crimes are taken seriously, is whether the accused persons are ‘members in good standing‘, so to speak.
The extent to which our Treasury is protected from being plundered by criminal elements is a serious question which should concern every citizen, given that the Public Money in the Treasury belongs to us as citizens and taxpayers. The frequency with which these financial crimes are overlooked is nothing less than scandalous, as any of the Auditor General’s Reports in the previous decade would attest. Permanent Secretaries approving payments in breach of financial regulations; payments made with no documents (leases, contracts or agreements) on file; failure or refusal to produce documents as required by law upon the Auditor General’s request and so many other types of lawbreaking. The same types of conduct is also rife in State Enterprises, which is why so many of the larger ones are unable to produce accounts as required by the very Ministry of Finance which sets those rules and continues to fund them.
The wicked part is that these Public Officials are virtually never charged with breaking the law or made to face any other serious consequences for their misbehaviour in Public Office. We need a new beginning in terms of how we handle the reality of our country’s wealth and its intentionally-degraded laws for controlling how our Public Money is used. A big part of that would be a political dispensation in which full investigations and prosecutions were the norm, especially when key members of the ruling party are the target of allegations.
Our budgeting process now shows all the signs that our system of Public Financial Management is ineffective in dealing with the seasoned criminals who are hard at work helping themselves to our money, whatever the political party in power. At that level, at least, there is little evidence of discrimination.
The growing complexity of the budget is of no comfort. For example, the 2014 documents totalled some 2,997 pages, yet the Billion-Dollar-Plus Beetham Water Recycling Project (BWRP) was omitted. Despite questions as to what did he know and when did he know it, the Minister of Finance continues to ignore the fundamental requirement to provide for this huge project within our national accounts. There has been no attempt to give the public the necessary explanation as to how the BWRP is to be paid for, since the underlying commercial arrangements which are driving this project remain obscured. The BWRP also shows a strong theme as to the privatisation of our nation’s water supplies, which is a growing area of concern globally. Not the first one, it is true, since we had DESALCOTT before, but this second, huge project implies a trend, in my mind.
The inescapable question is ‘To what extent can we rely on our national accounts, if huge projects like BWRP are omitted?‘
All of which brings us to the continuing and unexplained delay in passing the Public Procurement & Disposal of Public Property Bill. That new law would play an important part in greatly reducing the scope for waste and theft of Public Money. The JCC and its Kindred Associations in the Private Sector Civil Society group continue to call for this law to be passed without any further delay.
Of course all of this is driven by the political parties’ imperative to raise money from various financiers to fund election campaigns, so Political Party Financing laws are essential to control those influences. The Parliament recently unanimously approved a Private Members’ Motion laid by Independent Senator, Helen Drayton, to appoint a Joint Select Committee (JSC) to start the long-overdue process of agreeing just what are the new laws we need to deal with this influence, described by President Carmona, in his inaugural address as a ‘veritable juggernaut‘. The JCC continues to call for the JSC to be appointed so that this critical work can be started to control Political Party Financing.
Having observed the two-week spectacle of prolonged debate in the Parliament on the recently-approved Constitutional Amendment Bill, one can only wonder as to the priorities which are being displayed.
One of the big unanswered questions arising out of the recent ‘grand corruption’ cases in relation to the Public Sector remains – ‘How can we lawfully punish those wrongdoers who are looting our country?‘
Most discussions proceed along the lines of what I call the ‘bag of money‘ idea, in which we are looking for the actual stolen money. The belief being that the stolen loot can actually be located and linked to the thieves, who will then face a harsh penalty. My preferred solution is for full disgorgement of all the stolen monies as a starting-point, even if that is a remote goal.
In re-examining the issue practically, one has to ask “Why do we persist in these ‘pipe-dreams’, while ignoring the ‘low-hanging fruit’ all around us?” So I am considering a new strategy for action on these critical issues.
‘Public Money’ is the term used to describe money due to or payable by the State, including those sums for which the State would be ultimately liable in the event of a default. Public Money is sometimes called Taxpayers’ Money, it is our Money. Continue reading “Money is the Problem”→