Calcutta Settlement again

In light of the many questions raised by readers after the last article on the HDC’s purchase of land at ‘Eden Gardens‘ in Calcutta Settlement, I am continuing there.

The previous article discussed the Calcutta Settlement scheme and its relation to implementation of national housing policy. There is little, if any, connection between the provision of affordable housing and the acquisition of those ‘Eden Gardens‘ lands, at what is surely the highest price in Central Trinidad. How we create and implement a progressive housing policy is a critical part of this discourse, but there is more.

Another important aspect of this episode is the fact that sound land administration policy appears to have been abandoned for expediency. Expediency should never eclipse proper policy, especially when neither the process nor end-result advance the ultimate objective of serving our citizens.

The sidelining of sound land administration policy was essential in order to get the Calcutta Settlement scheme approved. National Land Administration policy is important so that we can be strategic in using the country’s property assets for proper national development, as opposed to the enrichment of a select few.

The State is a unique player in our country’s land arena, so we need to place this Calcutta Settlement episode into proper context from a land administration viewpoint.

This is the framework –

Size – The State is by far the largest land-owner in the country, which means that there are only limited situations in which it will require private lands;
Wealth – The State is the wealthiest entity in the country, which means that it alone can bid at certain levels for the best properties. Applied to this case, a reasonable question would be ‘Who would have purchased ‘Eden Gardens’ and at what price, if the State had not proceeded?‘;
Compulsion – The State is the sole entity in the country able to lawfully acquire land for a public purpose against its owner’s wishes, which means that if an owner of private property takes an unreasonable position during negotiations, the State can compulsorily acquire it;
Planning Authority – The State is the national planning authority, which means it has the power to approve its own designs and proposals;
Statutory undertaker – The State has ownership and control of the principal utilities, electricity and water/sewerage;

So, if the State intended to construct affordable housing in Central Trinidad, it could have chosen from the abundant State-owned property in the area, granted planning permission for its own proposed development and provided services. The State could only have bought the ‘Eden Gardens‘ land by ignoring sound land administration principles. Elementary policy was ignored in favour of sheer expediency, or worse, the enrichment of carpetbaggers at the expense of the Public Interest.

What was the advice of the Commissioner of State Lands on this transaction? Was his advice sought? Bizarre and expensive precedents are being set in situations of zero benefit to the Public Good. This deal is detrimental to the Public Interest.

At a level of State policy, there was a collapse into expedience and a continuing silence as to the role of ‘Eden Gardens’ in the national housing policy. But when I delved into the documents in my possession, there were even more causes for concern.

The Registrar General’s records show that there were three transactions executed on the same day for this property – It was Wednesday 3 February 2010 –

Deed # DE2010 004276 02D001 rescinded the 2004 Sale Agreement (the one for $17M, registered in 2007), with the deposit returned and no claims made;
Deed # DE2010 007816 95D001, Point Lisas Park Ltd (PLP) purchased the property from the owner, Sookdeo Deousaran, for $5M, paying Stamp Duty of $350,000;
Deed # DE2010 003449 63D001, PLP mortgaged the property to said Sookdeo Deousaran for $18.5M at 8%, to be repaid on the last day of January 2012.

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. On the same day, they mortgage it for $18.5M. By happy coincidence, or otherwise, the property with infrastructure added was offered to the HDC at $200M in late January 2012, two years later. Literally unbelievable.

What is more, the fact that the second and third of those deeds were executed on the same day is deeply perturbing as to the operation of the Stamp Duty section of the Board of Inland Revenue. The second deed transfers the property for $5M and Stamp Duty is paid on that, yet the third deed shows a mortgage granted the same day on the same property for $18.5M. Normal practice in the finance world is for a mortgage to be taken on a property at some fraction of its current market value. Both those deeds were registered at the San Fernando office of the Registrar General’s Dept.

If there were a reasonable gap between the first sale to PLP and the new owners mortgaging the property, it might be possible to claim some increase in value due to its physical development or obtaining permission to develop. But since both transactions took place on the same day, there is no way anyone can claim a genuine difference in value.

The 8% interest rate on the two-year mortgage is instructive, in that the actual rate at which finance was offered at that time for similar projects was in the 10.5-12.0% range. The reasonable conclusion being that both sides had a high degree of comfort with each other, indicative of close collaborators.

S.84 of The Conveyancing and Law of Property Act (1939), states that the penalty for falsely stating the consideration in a deed is a modest fixed fine and a further penalty payment of 5 times the amount of the understatement. Those penalties apply to both the buyer and seller, perhaps to discourage these dishonest practices. The Act goes further to offer the penalty payment as a reward to the person making the report of the understatement.

S.86 of that Act also specifies a small fixed penalty for an attorney found guilty of “…knowingly and willfully…” recording a false consideration and mandates that the said attorney “…shall…” be disbarred. Of course an attorney who had prepared only one of those deeds could reasonably claim to be genuinely unaware of the entire transaction, so we will see.

Sad to say this ‘Eden Gardens’ scheme is reminding me of the CL Financial antics. I am thinking about the the affidavit of the Inspector of Financial Institutions stating that Clico Investment Bank did not file its Corporate Tax returns for 2007, 2008 and 2009 and the fact that, despite those lapses, they were able to obtain a bailout on ‘sweetheart terms‘. The Eden Gardens chiefs were able to understate the property value to avoid the true level of Stamp Duty, but were also able to get Cabinet to agree to effectively bail them out, also on ‘sweetheart terms‘.

Always remember that the land at ‘Eden Gardens‘ cost $663,000 per lot as agreed by the Cabinet, seemingly unaware that the developers were offering lots there for sale at $400,000 only months before.

The HDC purchase was completed on 9 November 2012 and recorded in DE 2012 026026 11D001. The para before the $175M sale price is the one which specifies the 2010 deed for $5M, just so.

I approved of the diligence of our AG in challenging the legality of the THA’s BOLT project. This ‘Eden Gardens‘ scheme is also in need of urgent investigation, so we will see.

My final point is that all the information cited in this article is available on the internet, so where is the basic due diligence? These sorts of schemes should not even get past the first gatekeeper, far less into the Cabinet for consideration.

From THA/BOLT to Calcutta – tangled webs: Part 2

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.

edengardensplan 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 –

Point Lisas Park Limited (PLP)
1. On 1 June 2004, Anthony Sampath, Patrick Soo Ting and Azad Niamat agreed with the owner, Sookdeo Deousaran, to buy the property for $17M. That Sale Agreement is registered as deed # DE2006 023638 20D001.
2. On 26 April 2007, PLP was incorporated as Co. # P2956 (95), with the same three individuals who agreed to buy the property for $17M as its Directors. On 6 May 2011, the Companies Register recorded that Kayam Mohammed became a Director.
3. On 3 February 2010, according to deed # DE2010 007816 95D001, PLP purchased the property from Sookdeo Deousaran for $5M, paying Stamp Duty of $350,000.
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.
The missing link
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.
The valuations
- Linden Scott & Associates in November 2011 – $52M
- Commissioner of Valuations in April 2012 – $180M
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 –
- Stamp Duty – at 7% of the Purchase Price;
- Legal Fees;
- Developer’s Profit – at a minimum of 25%;
- Agents’ fees for the sale of the lots;
- Cost of Finance to account for the cost of borrowing that sum until the lots are sold;
- Time Value of Money, to account for the element of delay in recouping one’s investment.
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 meaning of it all

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 –

What is being done about the under-stated consideration in the 2010 deed for the sale of Eden Gardens?
How many of the 264 lots were sold at the 2011 asking-price of $400,000? That is important since it establishes a benchmark for the proper value of these lots in the open market.
When did Eden Gardens receive all the required approvals?
When was the infrastructure completed at Eden Gardens?
On what terms was Eden Gardens originally offered to the HDC?
There is an abundance of develop-able State-owned lands in the vicinity, particularly since the 2004 closure of Caroni Ltd. So why did Cabinet agree to buy private lands in Calcutta Settlement at these prices?
Who owns Point Lisas Park Limited?

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 –

Raymond & Pierre Limited, under my leadership, provided certain professional advice on this property in 2007. No aspect of that advice has formed part of this article.
Linden Scott is a former colleague of mine, having trained at Raymond & Pierre Limited. He is now a rival professional.
Raymond & Pierre Limited have provided professional advice to the HDC in the past.

Property Matters – Spending and Savings

Discussion is revolving around the country’s earnings from our energy resources and the likely size of the next year’s budget, expected to be delivered in early October.

Given the fact that our energy resources are reported to be declining in both quantity and value, it is very important that we make best use of that stream of resources to both sustain the existing arrangements and create a new series of industries to replace those declining earnings.

In my view, our focus in this critical transitional period has to be on making best use of those limited tax dollars. Although that is an objective on which we can assume broad consensus, there seems to me to be far too little discussion on the ways in which that can be achieved.

When we consider that most of the capital expenditure in the country takes place via the State and its agencies, it is clear that proper control of that expenditure is key to making the transition for our society. The other parts of State expenditure are recurrent, such as salaries and rents.

The growth of corruption in State expenditure is a clear danger to good order and national development. White-Collar crime, as it is sometimes called, is a growth industry because there is almost zero chance of being detected or punished and huge rewards.

The danger to good order is the fact that merit has a declining role in the way State spending decisions are made. It is clear that other factors have become dominant – things like friends, family and political affiliation are now well-understood to be the ingredients of success in getting work from the State. That is the case for all political administrations so far in our country, but it must change if we are to make the transition to a sustainable economy in which different values and income sources take the lead.

The budget of the present financial year is the largest in our country’s history and it is true that the major part of that expenditure could be classed as exceptional items, having to deal with settling large debts of State Enterprises and the huge CL Financial bailout payments. The point here is that those huge expenses arose in situations with a distinct lack of transparency and accountability, from the lack of accounts at UDECOTT and HDC to the naked corruption of the CL Financial bailout, there is a pattern.

If there is no transparency and no accountability, there will be corruption and that is inescapable.

Expenditure of Public money – Accountability – Transparency = CORRUPTION

Public Procurement
Public Procurement refers to any expenditure or receipt of public money, which is money due to, or ultimately payable by, the State. That definition covers all the Ministries and State agencies as well as modern arrangements such as BOLT, PPP, concessions and so on. In the PP’s first budget, there were disclosed plans to spend almost $14.0Bn in the capital program of the Ministries and State Agencies. We need a proper Public Procurement system to manage these vast sums of money.

It is for this reason that the People’s Partnership commitment to implementing a new and effective Public Procurement system is to be welcomed. The JCC and its partners – the Chamber of Commerce, the Manufacturers’ Association and the Transparency Institute – have submitted a draft Bill for consideration of the Joint Select Committee established by Parliament.

Finance Minister Winston Dookeran made good on the PP’s pre-election promise to lay in Parliament the new Public Procurement proposals within one month of the election.

The level of political support for this initiative has been encouraging, but there is the issue of priorities to confront in this matter.

I am referring to the fact that the second part of the PP commitment to a new and effective Public Procurement system was that it was to have taken effect on the anniversary of the election.

That target has been missed and the work of the Joint Select Committee has been preserved so that it can proceed when the Parliament re-opens at the Waterfront.

The challenge we have to confront is the race to implement public projects in a manner which reminds me of the phrase I had coined for the last administration – ‘Project Fever’, like a new strain of political dengue.

The need to stimulate economic activity is something everyone appreciates and the perceived competition between Ministers is becoming part of the new reality. Provided that there are effective local content provisions, the more projects the country is doing, means more work for our professionals, contractors, workforce and suppliers. No one would argue against an increase in economic activity.

The problem is that, in the absence of proper controls, those short-term imperatives can lead directly to the dire long-term consequences which I referred to earlier. The State now has to spend immense sums to clear up debts which arose during an earlier spending frenzy, with operatives, who would have all said at the time that this or that project was essential.

These frenzied moments of activity are the correct place for the application of real leadership in terms of the national priorities, particularly in relation to the issue of expenditure. I am calling on Finance Minister Dookeran to make this issue of controlling expenditure a number-one priority in this budget.

Given that the ongoing flow of projects is strong and constant, a proposed program would look like this –

New Public Procurement policy – Minister Dookeran must make this new system an absolute priority with a firm commitment to have the new framework made law by the end of this session of Parliament, which is in December. That is an indispensable part of building a new economy going forward and it would definitely be a manifestation of New Politics.
Embargo new projects – In relation to projects which are not yet at the stage of Requests for Proposals, there needs to be an embargo until the new Public Procurement system is in place. There will be appeals that the struggle is for economic stimulus over proper process, but those must be dismissed. There is no way you can get to the right place after making a wrong turn. No way. Everybody knows that. Expediency taking precedence over principle has cost our country enormously, both in cash terms and lost opportunity.
Projects ‘in the pipeline’ – Projects which are already at the stage of Requests for Proposals must conform with the principles underlying the new Public Procurement proposals – Transparency, Accountability and Value for Money.

Without proper control over expenditure, we will continue to lurch from crisis to crisis. We need to stabilize the economy and restore the importance of merit in our public decision-making.

Property Matters – The EFCL Query part 5

On Wednesday 21st September I received this letter dated 15th September from EFCL’s attorney together with the Confidentiality Policy Agreement I had requested on 5 September 2011 under the Freedom of Information Act.

As readers can see, this is exactly the document posted as part of the first story in this series, published in the Sunday Guardian on 9th July 2011. Which means that my essential assertions remain unanswered in that staff who are forbidden to disclose the existence of an agreement would be unable to get external advice on it, without being in breach. Which has the real effect of giving this document an oppressive flavour.

Of course it also puts into question the assertion in Lalla’s first letter to me, that this new EFCL policy was “…consistent with what obtains in many companies…” Literally unbelievable. Obviously.

I can only hope that this policy was not approved by our Ministry of Education.

But we will revert to EFCL after the budget season…readers can draw their own conclusions.

Property Matters – The EFCL Query part 4

On Friday 2 September, the EFCL’s attorneys delivered to my office this letter dated 8 August 2011.

That letter was written by Larry N. Lalla who warned me in his opening paragraph that EFCL was concerned at the tenor of my articles on their Confidentiality Policy. (Parts 2 and 3 here.)

The letter ended by warning me that EFCL would meet any defamatory statements with legal action…seeing that he never said “…further defamatory statements…” or identified any such, this appears to be yet another waste of taxpayers’ money in an attempt to avoid answering my five original questions.

The intention here seems to be intimidation.

It is sad and ineffective, let me tell you why.

Sad, because, according to clause d. of EFCL’s Staff Confidentiality Policy Statement which was sent to me, employees are forbidden to reveal the terms of the policy or even its very existence. Lalla’s letter states at 2. that EFCL’s Confidentiality Policy is “…consistent with what obtains in many companies…”. Both of those cannot be true, since it is simply not the norm that a normal commercial company forbids its employees from even disclosing the existence of a policy. Those provisions are not at all consistent with what obtains.

The sad part is that the only way to settle this is for EFCL to release its Confidentiality Policy, as I have been requesting. They have been reluctant to do so, for whatever reason.

EFCL prefers to spend money to obfuscate and intimidate rather than just answer these simple questions, originally contained in my email of 1 July –

Is there a new EFCL Confidentiality policy?
When did that come into effect?
Would you please provide a copy of that policy?
Was that policy approved by the Board of Directors?
Is the Ministry of Education aware of this new policy?

There seems to be an attempt to change the reality that all these State Enterprises are spending public money and therefore ought to be responsive to our reasonable requests.

Earlier today I made a request under the provisions of the Freedom of Information Act and we will see what happens next.

EFCL’s warning letter

efcl-lalla-letter Yes, Readers, I received this letter from Larry Lalla, attorneys for the Education Facilities Company Limited (EFCL).

The letter was hand-delivered to my office this morning, although it is dated 8th August – over three weeks ago.

I sent this email in immediate reply:-

From: Afra Raymond <afraraymond@gmail.com>
Date: Fri, Sep 2, 2011 at 4:57 PM
Subject: EFCL’s Confidentiality Policy
To: kiran.shah@efcl.co.tt
Cc: ronald.phillip@efcl.co.tt, larry.lalla@gmail.com

Good Day to you, Mr. Shah,

A copy of EFCL’s attorneys’ letter dated 8th August was hand-delivered to my office earlier today and I will soon be replying to those points in public.

In particular, I noted the third point in that letter –

“3. EFCL remains at all times committed to the principles of transparency in all aspects of its operations.”

Accordingly, I am again requesting a copy of the EFCL’s Confidentiality Policy.

Of course I am publishing this, in keeping with our shared commitment to transparency.

Thank you.
Afra Raymond

Property Matters – Taking Stock

As part of this pre-budget series, I am going to ‘take stock’ of some recent, significant happenings in relevant areas.

Given the unstable situation in relation to the State and its operations, many examples of which have been set out in previous ‘Property Matters’ columns, it is very important that a critical stance be maintained. That said, it is also important that any progress be properly recorded and acknowledged.

The notable items were –

Housing Development Corporation (HDC)

I was very pleased to read of the success HDC was having in collecting the serious rent arrears owed by its tenants, reportedly in excess of $240M. Of course this is not the first time there has been an effort to rectify this situation, so hopefully this will be a sustained program as it is vital that housing be treated with proper responsibility. That responsibility would extend from the quality of the designs and construction, the treatment of contractors and suppliers all the way to housing policies which respond to the needs of the needy.

Last week, there was a report in this newspaper that the Housing and Environment Minister, Dr. Roodal Moonilal, disclosed a new housing policy. According to that report, the new policy will favour distribution of serviced lots, with foundation slabs, over the provision of new homes. I have been calling for a review of our housing policy for some time now, so it was very disappointing to read that Cabinet had recently approved this important new policy without some formal process of dialogue or seeking wider views, much less a thorough examination of the shortcomings of the 2002 policy. Yes, a new housing policy was sorely needed, but there are solid benefits to wider dialogue.

Housing is too important an element of our Welfare State to ever become solely a creature of Cabinet, whatever the credentials of the current crop of Ministers.

This leads directly into my point about the poor flow of basic information, which can be detrimental to the best intentions. The 2002 housing policy disappeared from the internet about 6 months ago, but despite several written requests I have had no success in having those links restored, for whatever reason. The new housing policy is also not available online. In contrast, last month the Ministry of Finance issued a revised State Enterprises Performance Monitoring Manual and that is available online, together with the 2008 Manual it replaced.

Building code

Dr. the Honourable Roodal Moonilal, Minister of Housing and Environment

The impending new Building Code is to be welcomed, having been developed in collaboration with key stakeholders. There needs to be a solid commitment by all parties to establishing proper enforcement of those critical standards. The Building Code will cover important areas such as earthquake and fire hazards as well as other quality issues.

The initiative is being piloted by Dr. Roodal Moonilal, Minister of Housing and the Environment. UDECOTT and the HDC both form part of his responsibilities, so that is a good fit. We will have to be vigilant to ensure that all State construction conforms to the new standards.

I can scarcely believe that the very Minister who understands the importance of collaborating with stakeholders on the new National Building Code, would state a week earlier that the new Housing Policy had been agreed by Cabinet, with no visible attempt at consultation. Incredible, but true.

A Culture of Consequence

I have consistently stated that the absence of consequence is inimical to any development and that consequence has to be restored to a proper place if we are to progress. Up to last Thursday, 11 August, I stated at a public meeting that I was unaware of any government in this country taking decisive action against its own appointees in the State Enterprises. The pattern has been one of charging people from the last political administration in what almost always looks like revenge.

Dawn Annamunthodo, former chairman of the National Schools Dietary Services Ltd. Photo © Trinidad and Tobago Guardian

The Sunday Guardian headline of 14 August ‘Cabinet fires Chairman of School-feeding Programme’ was as welcome as it was surprising. It was reported that the Cabinet had taken decisive action to fire a Chairman who had been appointed about 6 months before and that is a positive step, the first time any government in this country has done that, as far as I am aware.

According to that exclusive story, the fired Chairwoman of the National Schools Dietary Services Ltd (NSDSL)—Dawn Annamunthodo – had obtained extensive and expensive security guards for herself, due to some alleged death threats. There were also details of what seemed to be deceptive attempts by that individual to become a signatory to the bank accounts of that State-owned company. If those reports are true, there are two serious implications –

Firstly, it is extremely unlikely that this is the first time that this individual was involved in acts of that kind. Grown people do not just change their behaviour in a few months’ time, we all know that. My point being that this episode calls into question the screening which is carried out in relation to these appointments. Whatever screening processes now exist, will definitely have to be made stronger, together with ongoing reviews of Board performance.

Given that the Prime Minister is widely reported to have approved the Chairpersons of State Boards, that screening process needs to be reviewed urgently so as to preserve the integrity of that office.

Secondly, this individual is reported to have attempted to convince Republic Bank’s Ellerslie Plaza branch to make her a signatory and that matter must be promptly investigated by the Fraud Squad, with charges to follow if those allegations are true. It is an echo of the point I made here last week about a dutiful police officer allowing a motorist with a defective vehicle to just drive-off after a ticket is issued. Not good enough, if we are serious about road-safety. We have to restore a Culture of Consequence if White-Collar Crime is to be challenged.

But, even though no money appears to have been stolen in that School-Feeding episode, the saddest part was the bold-faced question that individual asked the Guardian reporter, when invited to give a comment

How did you get hold of those documents? Those are state documents. These questions are state business.

It reminded me very much of the response of Jewan Ramcharitar, former PriceWaterhouseCoopers partner, who suddenly resigned as eTeck Chairman almost a month ago. That entire affair remains mysterious, with Stephen Cadiz, the line Minister, stating that it was due to a ‘difference of opinion’ and the departed Chairman reportedly stating –

I am actually working on a project in the public service arena on a full-time basis and my time at eTeck is eroding the time and attention I pay to that.

“Just what that project is, he won’t say.”

I wonder if Ramcharitar would have found that dismissive answer to be acceptable when he was a partner at PWC? Probably not, yet we are continually beset by these evasive attitudes in public affairs. We need to hold our leaders to a high standard.

The latest twist is the sudden resignation of George Nicholas as Chairman of Caribbean Airlines and the opaque statement by the Minister of Transport, Devant Maharaj – “…Yes. I can confirm this. I am in receipt of his letter but I cannot say anything more…”

In the three cases, bare-faced conflation of State Business with Business which is private, personal or confidential.

Good steps are to be recognized and applauded, but we must always strive for better. We need to continue onward and upward. It would be good to have a statement from the Minister of Foreign Affairs and Communications as to the governments’ commitment to a progressive policy in these important matters. The Housing policy needs to be published for comment and we also need to have a clear statement as to whether there can be any such thing as a confidential state policy.

Confidential State Policy may seem like an oxymoron, but readers will be aware of the reluctance of the Education Facilities Company Limited to publish its new Confidentiality Policy. I don’t want to say refusal, but when this budget season is over we will be continuing to examine those EFCL operations.

Property Matters – State Enterprise Accounts

State Enterprise Performance Monitoring Manual
In the next few weeks, this column will cover some of the issues which are likely to have a bearing on the 2012 Budget.

In my view the State and its Agencies must perform in an exemplary fashion if we are to progress. A good example is worth a thousand words.

At page 22 of the 2010-2011 budget statement, the Minister of Finance said –

…Mr. Speaker, no coherent, co-ordinated planning or strategy for state enterprises exists. As a result we have begun to rationalise the state enterprises, including the special purpose companies, which will incorporate a new accountability system that goes beyond the presently operating company ordinances. It is these loopholes in public accountability that resulted in the UdeCOTT scandal. This must never again happen in Trinidad and Tobago…

The Ministry of Finance has now published a new State Enterprises Performance Monitoring Manual 2011, it is over three times longer than the previous edition, so it will be something to consider in weeks to come.

Certainly, there are stricter requirements in relation to the filing of accounts – at pg 30 of the 2011 guidelines –

3.2.5 AUDITED FINANCIAL STATEMENTS

State Enterprises are required to submit the following:

Audited Financial Statements (2 originals and 120 copies) to the Minister of Finance within four (4) months of their financial year end. These reports are to be laid in Parliament and subsequently submitted to the Public Accounts and Enterprises Committee for consideration;

Copies of their Management letters issued by Statutory Auditors…

At pg 16 of the 2008 edition –

1.3.10 Publishing of Financial Statements by State Enterprises

Government has agreed that State Enterprises be required to publish in at least one (1) major daily newspaper a summary of the audited financial statements within four (4) months to the end of their financial year and a summary of the unaudited half-yearly statements within two (2) months of the mid-year date.

Such summary statements must be in accordance with the requirements of the Securities Industry Act, 1995.

The new guidelines appear to be stricter, but the requirement to publish to the press seems to have been removed.

There are swirling issues on this –

No accounts for years – As I have pointed out before, some of the largest State Enterprises have published no accounts for years. UDECOTT and NHA/HDC are just two examples of this flagrant breach of the shareholders’ instructions as set out above. In the case of HDC, there is a greater concern in my view, since sections 18, 19 and 20 of the HDC Act require the audited accounts to be produced and published. Anyhow you try to spin it, those are terrible signs. For a private company to have no accounts, for even a few months, is indicative of poor performance at the very least. No accounts for years is unacceptable. One can only wonder how clearly could anyone plan if basic information is being obscured in this fashion. We expect better from the chiefs of these State Enterprises and certainly we expect better from the Peoples’ Partnership. In his preamble to the 2010-2011 budget, Minister Dookeran said –

…We must at all times remember who we work for. We must make Government work for the people. As our Prime Minister always says: serve the people, serve the people, serve the people…

Serious debts outstanding – There are continuing reports, despite some efforts, that contractors, consultants and suppliers are owed substantial monies by State Enterprises for extended periods. That has a disastrous effect on our local economy both on an immediate tangible level and in terms of the more subjective element of confidence.
Ambitious new projects continue to be announced, even as the basic accounts are incomplete and substantial bills remain unpaid.

Apart from the evident confusion, at the very highest levels of the State and Government, the unacceptable part is that there is not even an attempt to explain what is the hold-up or what areas of the accounts remain unresolved. The few times anyone in authority has attempted to explain the delays in those accounts, it has been a model of vagueness and ambiguity. That uncommunicative behaviour does not augur well. These State Enterprises are not building a wartime bunker or a new spy satellite, only new homes and offices.

But there is more, according to S. 99 (1) of the Companies Act 1995

every Director of a company shall in exercising his powers and discharging his duties act honestly and in good faith with a view to the best interests of the company; and
exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Those provisions make mismanagement of a company an offence. It is literally impossible to manage or direct the affairs of a multi-billion dollar company in the absence of audited accounts. So there must be serious concerns as to how the Directors of those State Enterprises without accounts could have properly discharged their obligations under S. 99 (1).

SEC logo Apart from these points, there is now the fact that 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 –

19th March 2010 against HDC, with fines totalling $121,000 – see http://www.ttsec.org.tt/content/pub100326.pdf.
15th June 2011 against UDECOTT, with fines totalling $120,000 – see http://www.ttsec.org.tt/content/Order-for-settlement-re-UDECOTT.pdf.
25th July 2011 against HDC, with fines totalling $400,000 – see http://www.ttsec.org.tt/content/Order-for-settlement-re-Trinidad-and-Tobago-Housing-Development-Corporation.pdf.

I was pleased to see the SEC taking this firm action against these offending State Enterprises, it is an important and necessary intervention. I am not at all sure what, if any, ongoing penalties are being applied. If there are no ongoing punishments or fines, this important regulator needs to take a tougher stand. It is simply not good enough in my view for the regulator to levy these fines and allow the companies to carry on with ‘business as usual‘. That would be like a dutiful policeman ticketing a motorist for smooth tires, no seatbelt and no headlights – issuing the ticket and then letting that motorist drive off. The SEC needs to consider heavy daily fines and banning orders against Directors of these companies in breach of the law, if such do not already exist.

The era of irresponsibility in high office needs to be brought to a close. The role of the Treasury in supporting this grossly irresponsible behaviour is questionable. The silence on the missing accounts is intolerable. The chapter of getting away with it needs to be ended.

Expenditure of Public money – Accountability – Transparency = CORRUPTION

Property Matters – The EFCL Query part 3

On Thursday 14th July, the EFCL published a full-page response to the first article in this series – it was also the same day that the second article in this EFCL Query was published. Although it was comforting to see the clear statements on EFCL’s ‘speak out’ component, Whistle-Blowing policy and procedure and Fraud Policy, the central concerns are greater, if anything.

I deliberately used the word response, since no reasonable person could consider that advertisement to be a reply to my emailed queries.

If EFCL were really replying to my query, it would have been no problem to provide a copy of the documents and answer the simple questions.

EFCL’s preferred course of action is to spend more taxpayers’ money on expensive artwork and advertising, so the further question is ‘Why?’.

Considering that all I was doing was questioning the existence and origin of an important policy of this State-owned company, it is perturbing to be having this level of challenge in getting a simple clarification.

As I wrote in this space last week – ‘So, what is the secret?’

What could be the delay or difficulty in providing a copy of the EFCL’s Confidentiality Policy, as requested?

In the first article in this series, I posted the documents which had been passed to me. The simple question is whether these are the genuine documents. There was no attempt by EFCL to even answer that important query.

It is important because the EFCL advertisement told readers that “…Employees were not asked to sign under threat of dismissal…”

The first sentence of the preamble of the Staff Confidentiality Agreement is –

“All new and existing employees will be given a copy of this confidentiality policy and will be required to sign a confidentiality agreement at the time of hiring or during their service to the company.”

The emphasis is mine – yes, it reads ‘required to sign’.

But there is more, because the EFCL advertisement also stated that –

“Staff who asked for time to get external advice, were allowed to.”

However, clause 1 d. of the Confidentiality Agreement states –

“The existence of this agreement and its terms are confidential and none of the parties to this agreement may disclose anything about this agreement or its subject matter or implementation to any person except if required by law to do so.”

It is clear that the EFCL advertisement and the documents sent to me cannot both be true.

So, which is true?

Why did EFCL not send or publish the documents?

Quite frankly, it appears that EFCL is making a great effort to conceal or obscure its true policy on confidentiality, for whatever reason.

If this is the kind of effort being put into obscuring the elementary policy of this State-owned company, I can scarcely imagine their reaction to queries on particular projects, Directors’ benefits or tender procedure.

The behaviour of the State and its agents must be exemplary. Public Officials have an obligation, in my view, to behave in a fashion which fosters trust and good order.

It is all starting to resemble a tangled web, sad to say.

Again, I hope that my doubts are misplaced.

SIDEBAR

Five simple questions for EFCL…

Is there a new EFCL Confidentiality policy?
When did that come into effect?
Would you please provide a copy of that policy?
Was that policy approved by the Board of Directors?
Is the Ministry of Education aware of this new policy?

Property Matters – The EFCL Query part 2

efcl-confidential Despite the first column in this series, I have had no direct reply or even acknowledgement from any of the EFCL officials to whom my initial queries were directed.

It seems that the people concerned would rather not write, on this matter at least. A meeting has been indirectly suggested, which of course would have to be properly recorded and minuted – no word on that meeting as I write again.

What could be the delay or difficulty in answering the five simple questions posed last week –

Is there a new EFCL Confidentiality policy?
When did that come into effect?
Would you please provide a copy of that policy?
Was that policy approved by the Board of Directors?
Is the Ministry of Education aware of this new policy?

Four of those questions require basic yes/no responses, while only one requires a date.

I closed Sunday Guardian’s article by reminding readers of the equation

Expenditure of Public money – Accountability – Transparency = CORRUPTION

The elementary accountability of a public company having its policies available for the public to consider seems to be either lacking or of low priority in the case of EFCL. As we move along, it will be interesting to see how the Transparency part of the equation works out.

In researching this article, it emerged that our country is a signatory to two relevant international conventions. As I understand it, the effect of our State having become signatory to those agreements is that the country has adopted those standards.

The first one is the Inter-American Convention against corruption, which was signed by our country in April 1998. At that time, UNC was in power, under PM Basdeo Panday. At Article III, clause 8, we are obliged to

“…consider the applicability of measures to…create, maintain and strengthen…Systems for protecting public servants and private citizens who, in good faith, report acts of corruption, including protection of their identities, in accordance with their Constitutions and the basic principles of their domestic legal systems…”

The second convention is the United Nations’ Convention against Corruption, which was signed by our country in December 2003. At that time, PNM was in power, under PM Patrick Manning. At Article 8 – Codes of Conduct for Public Officials, clause 4 obliges us to

“…4. Each State Party shall also consider, in accordance with the fundamental principles of its domestic law, establishing measures and systems to facilitate the reporting by public officials of acts of corruption to appropriate authorities, when such acts come to their notice in the performance of their functions…”

So, what is the big secret?

I do understand that staff at companies like this can jeopardize the integrity and effective operations of the organisation by leaking certain confidential information. That would be a proper concern of management and a confidentiality policy is one of the ways that could be dealt with, just one.

During the Uff Enquiry, UDeCoTT claimed several times that this or that document was confidential and used its lawyers to protest strongly, sometimes even seeking the protection of the High Court. That was outrageous conduct by a state-owned company, which appeared to be trying to frustrate the Uff Commission, appointed by the State, by seeking to conceal documents. A case of ‘the tail wagging the dog’.

This situation is one in which it seems that the dangers of leaks in relation to tendering estimates, for example, has been conflated to cover all information in the company. It appears to be part of a new policy which does not conform to either good labour relations or our country’s international obligations with respect to Whistle-Blowers.

Given the electoral promises made by this government and the importance of the struggle to reduce the menace of corruption in our society, it is very important for us to be attentive to these matters.

UDeCoTT wanted to conceal certain documents and one had to wonder why, given that they are not involved in secret work. If it was not so serious it would be comical, they are not a spying, military or health institution. UDeCoTT is just a facilitator for erecting buildings, yet their chiefs were able to pretend to the public that a large part of what they did was confidential. That kind of secrecy could never be in the public interest. Not ever.

Similarly with EFCL, one has to ask – What is the secret? That organisation is responsible for the repair and maintenance of schools, using Public Money to do so.

I wonder if that document, which a number of EFCL staff have now been required to sign, is legal and binding? Could it withstand a challenge in the Courts? Did EFCL take proper legal advice in this matter? Was that advice followed?

The legitimate interests of taxpayers require that the management of State Enterprises take proper steps to handle these integrity challenges – Does the EFCL Confidentiality Agreement achieve this?

There is a certain kind of way in which this episode with EFCL is starting to remind me of the early UDeCoTT grappling, before Uff and so on, with tremendous difficulty in getting basic dialogue going, shadow-boxing and bizarre positions being taken.

I really hope that I am wrong, because the correct, encouraging attitude to Whistle-Blowers is essential for the success of the larger Public Procurement agenda.

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Tag: special purpose entities