Tag: state enterprises

Integrity threat from the Appeal Court

ictt-vs-tsttOn 27th June 2013 the Appeal Court ruled that –

  • TSTT is not a State Enterprise. The members of its Board are not subject to the Integrity Provisions.
  • It is only the members of the Boards of those Statutory Bodies which exercise public functions that are subject to the jurisdiction of the (Integrity) Commission.

Telecommunications Company of Trinidad & Tobago (TSTT) is a company established between the T&T State and the British-based multinational, Cable & Wireless. C&W holds 49% of the shares in TSTT, while the State holds about 42% of the shares together with the right to nominate 5 of its 9 Directors.

That unanimous ruling has serious consequences for the viability of our nation’s integrity framework.

The intended purpose of that framework is to ensure a satisfactory level of transparency and accountability in the way Public Money is transacted and Public Functions are discharged.  There is still a strong case for this Integrity Framework as a necessary ingredient in the Good Governance of our nation. The Integrity Framework includes the Auditor General; the Integrity Commission; the Investments Division of the Ministry of Finance and the two Parliamentary Accounts Enterprises Committees.  Ours is the most vibrant Caribbean economy and the State is clearly the largest player, so the proper management of that sector is critical. Given the continuing rise in the waste and theft of Public Money, there will always be a need for an improved, more effective Integrity Framework to oversee these huge, controversial operations.
Continue reading “Integrity threat from the Appeal Court” →

VIDEO: Time to Face the Facts about Caribbean Corruption – 26 May 2013

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:


Part 2:

Part 3:

Charting our losses: ‘A picture is worth a thousand words’

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 –

  1. Firstly, inexperienced officials or poor processes can approve wasteful uses of Public Money through sheer ignorance.
  2. Secondly, there is deliberate conspiracy to defraud the Treasury of our precious Public Money.

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.

‘A good example is worth a thousand words‘

THA/BOLT – MILSHIRV Project

Rental Rates THA- BOLT chart
Occupancy Excess THA-BOLT
Rental increase chart with table THA-BOLT

 

Click on the charts above to see full size version

Calcutta Settlement Land sale – Eden Gardens

stamp duty Eden gardens Chart 1 20130405-1
Acquisition options HDC chart 2 20130405

 

Click on the charts above to see full size version

Calcutta Settlement review

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.

Calcutta Settlement again

163940In 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 –

  1. Deed # DE2010 004276 02D001 rescinded the 2004 Sale Agreement (the one for $17M, registered in 2007), with the deposit returned and no claims made;
  2. 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;
  3. 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.

edengardensplanThis 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 –

  1. 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.

    calcutta-timeline_v4

    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.

  2. The missing link 
    163940Between 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.
  3. 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 –

  1. Is there a new EFCL Confidentiality policy?
  2. When did that come into effect?
  3. Would you please provide a copy of that policy?
  4. Was that policy approved by the Board of Directors?
  5. 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.