REPORT OF THE COMMISSION OF INQUIRY

Appointed by His Excellency the Governor General
Sir Cuthbert Montraville Sebastian GCMG, OBE, MD, CM
by Letters Patent dated 28th July 1997

VOLUME 1

THE AIR AND SEA PORTS AUTHORITY
FRIGATE BAY DEVELOPMENT CORPORATION
CENTRAL MARKETING CORPORATION

Randolph Williams Ph.D, FCCA, Attorney at Law
Commissioner

His Excellency
Sir Cuthbert Montraville Sebastian, GCMG,
OBE, MD, CM
Governor General
Government House
St. Kitts

Your Excellency,

Letter of Transmittal

Pursuant to the Commission issued by Letters Patent under Public Seal dated 28th of July 1997 and continuations thereof I have enquired into the conduct and operations of various ministries and other entities listed therein.

On the 25th of May 1999 in the course of my enquiries the decision of the Court of Appeal in Civil Appeals Nos 4-6 of 1998 was delivered whereby I was prohibited from making any determination, findings or recommendation which specifically relate to the conduct, decision making or activities of Dr Kennedy Alphonse Simmonds. I have been guided accordingly.

I am . . .

His Excellency
Sir Cuthbert Montraville Sebastian, GCMG,
OBE, MD, CM
Governor General

I am engaged in preparing my report on the several matters into which I have enquired. In the interim I submit in this volume my report in respect of Saint Christopher Air & Sea Ports Authority, Frigate Bay Development Corporation, The Central Marketing Corporation.
Yours faithfully

Randolph Williams
Commissioner

Dated this 10th day of February 2000

TABLE OF CONTENTS

Title Page Page 1
Letter of Transmittal 2 - 3
Table of Contents 4 - 6
Index of Tables 7
Acknowledgments 8
Introduction 9 - 14

Saint Christopher Air & Sea Ports Authority

Outline of Report and Summary of Findings 15 - 23
The Saint Christopher Air and Sea Ports Authority Act 24 - 30
The misuse and abuse of Port positions and property by persons
involved in its administration and/or daily operations
Misuse and abuse of Port positions 30 -32
Misuse and abuse of Port property 33 - 42
Maladministrative and mismanagement practices
Effectiveness of the Directorate 43 - 47
Control of Expenditure 47 - 54
Circumstances touching and concerning the disbursements of
money as donations
54 - 63
Circumstances touching and concerning the advance of funds
for travelling
64 -75
Circumstances touching and concerning expenditure incurred
as ("Advances to Government")
76 -77

FRIGATE BAY DEVELOPMENT CORPORATION

Outline of Report including summary of findings 79 - 84
Outline of the Frigate Bay Development Act 85 - 89
The circumstances touching and concerning the sale
of the Royal St Kitts hotel
89 - 96
The purchasing of corporation land by officials of the
corporation giving rise to the abuse of their position
96- 97
Administrative and management practices 98 -110
Misuse and abuse of corporation position and property by
persons involved in its administration and/or daily operations
110 -113
Financial mismanagement of the corporation's funds 113 - 123

THE CENTRAL MARKETING CORPORATION

Outline of Report including Summary of Findings 125-129
The Central Marketing Corporation Act 130 -133
Misuse and Abuse of CEMACO positions, property and funds
- Misuse and abuse of positions 133 -140
- Misuse and abuse of property and funds 140-156
Administrative and Management Practices
- Reports on Management Practices 156
- Some Management Practices 157
- The effectiveness of the Corporation 157 -167

Index of Tables

Air and Sea Ports Authority

Table 1 "Contribution to Government Projects"
charged to Port Authority 1989 - 1995
Pg 34

Frigate Bay Development Corporation

Table 2 The use and sources of funds 1990 - 1994 114
Table 3 Rate of return on assets employed 1990 - 1994 115
Table 4 Composition of Current Assets - 1990 - 1994 116

Central Marketing Corporation

Table 5 Donations paid to individuals 148
Table 6 Payments to Chairman - Overseas Travel 155
Table 7 Some Management Practices of CEMACO 157

ACKNOWLEDGMENTS

This enquiry could not have been possible without the assistance of a number of persons. I would like to acknowledge the assistance of the counsel to the Commission, the team of investigators, the secretary Mr William Dore M.B.E. J.P, and the secretariat staff.

The co-operation of witnesses and counsel who appeared before the Commission is appreciated.

Special mention must be made of the stenographers for their services in preparing the verbatim record and of Ms Thornhill in the preparation of this report.

R. L. Williams
Commissioner

INTRODUCTION

THE CONDUCT OF THE INQUIRY

Terms of Reference

The Letters Patent dated 28th July 1997 set out the terms of reference of the inquiry as follows:

" . . . to publicly inquire into and report upon the extent of and the methods employed in the conduct and operations of the following:

(a) The Ministry of Lands and Housing
(b) The Ministry of Home Affairs
(c) The Ministry of Finance
(d) The Ministry of Communications, Works and Public Utilities
(e) The Central Marketing Corporation
(f) The Saint Christopher Air and Sea Ports Authority
(g) The Frigate Bay Development Corporation
(h) Solid Construction Limited
(i) Envenalca Limited
(j) The St Kitts Sugar Manufacturing Corporation
(k) The National Caribbean Insurance Company Limited"

Another document of the same date set out specific areas of the conduct and management of the ministries and corporations listed above which should be inquired into.

Outline of Procedure

At the first meeting of the commission held on the 18th August 1997, the procedures to be employed in the conduct of the inquiry were outlined. The following is an extract from my statement at the first meeting of the commission:

"The task which has been delegated to me is an onerous one. It is expansive. It covers a period of over fifteen (15) years and embraces many activities of government. From my observation it involves not only the discipline of law but also accountancy and financial administration.

To complete this task within the time allotted will require much effort and co-operation of all persons concerned. Above all this task requires the co-operation of the citizens and residents of Saint Christopher and Nevis. It is a task which in the opinion of His Excellency, the Governor General is for the public welfare. I urge all persons who may be able to provide any information on the matters the subject of this inquiry to come forward and render your assistance and cooperation. Persons should get in touch with the Secretariat of the Commission which is located at the Youth and Community Affairs Building, Victoria Road, Basseterre.

The procedure of the commission of inquiry is relatively simple and to a large extent is set out in the Commissions of Inquiry Act Chapter 288 of the Laws of the Federation. Section 9 of the Act states:

"The commissioners acting under this Act may make such rules for their own guidance, and the conduct and management of proceedings before them, and the hours and times and places for their sittings, not inconsistent with their commission, as they may, from time to time, think fit, and may from time to time, adjourn for such time and to such place as they may think fit, subject only to the terms of their commission."

From this we see that the commission is not a court of law. We are not engaged in an adversarial process; one side against another side. We are not engaged in a prosecution against anybody. We are in effect engaged in a co-operative activity to obtain information about certain allegations affecting the public welfare; and it is in the public interest that these allegations should be ventilated, examined, findings made and recommendations offered to His Excellency the Governor General.

Throughout the inquiry we must be concerned with the words of the oath of the commissioner - "a full, faithful and impartial" inquiry and these words must be given their full meaning. The inquiry must be "full", it must not exclude relevant matters, it must be "faithful", findings must be based on evidence. These findings must not be irrational. It must be "impartial", there must be fairness in procedure. This is the kind of inquiry I intend to conduct

As commissioner the Act empowers me to summon witnesses and to call for the production of books, plans or documents. Persons summoned are bound to obey. It is hoped that many persons will come forward without the need to be summoned. Any person who is in any way implicated in allegations before the commission is entitled to be represented by counsel at the whole of the inquiry. A statement given by a person who appears as a witness in answer to any question before the commission may not be used in any civil or criminal proceedings. The answers given before the commission are privileged. There is an exception, that is perjury, the object is to arrive faithfully at the truth or otherwise of allegations. The inquiry will be in public and we invite persons to come and render any assistance possible."

When in the course of the inquiry it appeared that a person's conduct was the subject of inquiry, and was liable to be criticised, a notice (referred to as a Salmon letter) was sent to that person outlining the potential criticism. Such a person was entitled to be represented by counsel and to enlist the assistance of the commission in securing the attendance of witnesses.

Further, when on a review of the evidence adduced before the commission it appeared that an adverse finding may be made against a person, he was notified of the preliminary finding and invited to submit in writing any additional evidence he may wish.

The Staff of the Commission

The staff of the commission was as follows:

Mr William Ferdinand Dore, M.B.E, J.P, was appointed secretary to the commission by
His Excellency the Governor General,
Dr Henry Browne, Counsel,
Sir Lee Moore Q.C, Counsel,
Mr Thomas Astaphan, Counsel
Mr Dennis Merchant, Counsel
Inspector Creyton Benjamin, Sergeant S. Browne, Corporal Trevor Carey of the Royal St.
Christopher and Nevis Police Force, Inspector Sydney Bloxom of Royal Canadian
Mounted Police served as investigators and Mr. Fidel O'Flaherty as researcher.

A small secretarial, clerical and auxiliary staff provided support services.

Litigation affecting the Commission

In the course of the inquiry, the Right Honourable Dr. Kennedy Simmonds was summoned to appear before the commission. He complained of bias in the composition of the staff of the commission and that to elicit evidence relating to a policy of insurance held by him from the National Caribbean Insurance Company Ltd was in breach of the provisions of the Confidential Relationship Act 1985.

By originating summons filed on the 27th September 1997 Dr Simmonds applied to the High Court inter alia for an order that the commission of inquiry be declared null and void and of no effect on the grounds of bias and partiality and that the commission ought to be quashed on the ground that its composition and appearance demonstrated a clear breach of the rules of natural justice. He also sought a declaration that the appointment of the commission was invalid as well as a restraining order preventing the commissioner from proceeding with the inquiry pending the determination of the action.

An ex parte injunction was granted on the 2nd of October 1997 restraining the commissioner "from proceeding with the inquiry commissioned by the Governor General as such relates to matters directly affecting Dr Simmonds until the 17th day of October 1997 or further order."

Mr Richard Caines and the Honourable Hugh Heyliger, former ministers of government on 15th October 1997 filed separate suits seeking inter alia orders that the commission of inquiry should be quashed on the grounds of material irregularities, in that the Prime Minister was not empowered under the Act to issue a commission jointly with the Governor General or otherwise and that the appointment purportedly conferred upon the commissioner was null and void and of no effect as the said appointment was made and granted under legislation not known to the Federation of St. Kitts and Nevis. Both applicants also sought declarations that the terms of reference of the commission were null and void and of no effect on the ground that they were vague and contrary to the Act, as well as injunctions restraining the commissioner from proceeding with the said inquiry until the hearing and determination of the actions.

The applications of Dr Simmonds, Mr Caines and the Honourable Hugh Heyliger were consolidated and came up for trial in the High Court before The Honourable Mr Justice Neville L. Smith who, on the 10th of November 1998, dismissed the three originating summonses and refused all the declarations and orders sought by the applicants. The three applicants appealed to the Court of Appeal against the decision of the High Court and pending the hearing of their appeals obtained a stay of proceedings of the commission of inquiry from a judge of the Court of Appeal.

On May 25th 1999 the Court of Appeal delivered its judgment dismissing the appeals of Mr Caines and the Honourable Hugh Heyliger but allowed the appeal of Dr Simmonds on the issue of bias in the counsel to the commission.

As a result of the order of the Court of Appeal I am prohibited from making any determination, findings or recommendations which specifically relate to the conduct, decision making or activities of Dr Simmonds.

AIR AND SEA PORTS AUTHORITY
OUTLINE OF REPORT

Introduction

First, the provisions of the Saint Christopher Air and Sea Ports Authority Act (Act No. 9 of 1993) which are relevant to the inquiry are discussed. Following this the evidence (oral and documentary) gathered in the course of the public hearings is discussed. The discussion is organised under five (5) headings corresponding to areas specified in the document outlining the terms of reference of the commission of inquiry. References to volume and page numbers are to the volumes of the verbatim record of the evidence.

Summary of Findings

A. The misuse and abuse of Port positions and Property

  1. The Saint Christopher Air and Sea Ports Authority was incorporated by Act No. 9 of 1993 and the provisions of that Act govern the operations of the authority.
  2. The authority consists of a minimum of seven (7) and a maximum of eleven (11) members appointed by the Minister of Finance. A chairman is appointed by the minister from among the members. From 1982 to 1995 the chairman was Mr Hugh Heyliger who, over the same period was a minister of government with extensive portfolio responsibilities.
  3. The Act empowers the authority to employ members of staff including a general manager and declares that the general manager is the chief executive officer of the authority and his functions are derived from the Act and any regulations under the Act.
  4. I find that over the period 1982 to 1995 the chairman involved himself in the day to day management of the authority to such an extent that he acted as if he was the chief executive officer of the authority. By so doing he acted in a manner inconsistent with the provisions of the Act amounting to a misuse of the position of chairman.
  5. 5. Section 22 of the Act enumerates the purposes to which the receipts of the authority may be applied. In my opinion the Act does not empower the authority to apply its revenue to purposes other than those specified and only in the manner prescribed in the section.
  6. Section 28 of the Act provides that after making full allowance for those payments which are chargeable against the receipts of the authority any balance which is available at the end of the financial year must be paid to the credit of the Consolidated Fund.
  7. The use of Port property (including its funds) for purposes not authorized by sections 22 and 28 constitutes misuse and abuse of such property.
  8. I find that the misuse of the position of chairman contributed to the misuse and abuse of Port property.
  9. In particular between 1989 to 1995 more than $8. million was expended on a variety of purposes under the heading "Contribution to government projects." These purposes were not related to the business of the Port and the expenditure amounted to misuse and abuse of Port funds.
  10. Between March 1991 and December 1993 more than $169,000.00 was paid to the chairman, Mr Heyliger as reimbursement of expenditure incurred by him on entertainment, donations to clubs, social and community groups, travel expenses etc. These expenses being unrelated to the business of the Port were charged to "Contribution to government projects". This expenditure was inconsistent with the Act and constitute a misuse and abuse of Port positions and property.

B. Mal-administrative and management practices

The discussion of this topic is organised under two sub-heads - the effectiveness of the directorate and control of expenditure.

Effectiveness of the Directorate

  1. The members of the authority constitute the board of directors, they are all non-executive in that they are engaged outside the business of the authority and attend meetings when called upon. In the circumstances the availability and reliability of information about the affairs of the authority were pre-requisites for the effectiveness of the board of directors.
  2. The sources of information to board members were inadequate. The principal source of information was the chairman who acted as if he was the chief executive officer. In the circumstances the business of the authority could not be adequately monitored and controlled.

    Control of Expenditure

  3. Control of expenditure was an area of weakness. Contrary to the provisions of the Act the funds of the authority were spent on purposes which had no relation to the business of the authority.
  4. The comparison of actual expenditure against budget was not timely and did not facilitate effective control.
  5. The chairman's involvement in day to day decision making, initiating expenditure, approving the requisitions for cheques and signing cheques tended to negate effective control of expenditure.
  6. There were no guidelines or policies to control expenditure on donations.
  7. Independent documentary evidence was not always required for approval of expenditure.
  8. Significant construction projects were undertaken without competitive bidding.

C. The circumstances touching and concerning the disbursements of money as donations

  1. Over the period covered by the inquiry donations became an important head of expenditure of the Port. In 1983 the expenditure under this head was only $1,000.00. It amounted to about $6,500.00 in 1987. In 1988 however the figure was about $45,000.00, an increase of about 600% between 1987 and 1988. Between 1988 and 1995 the average annual expenditure on donations was over $52,000.00 with a peak of $108,000.00 in 1993.
  2. The figures given above do not fully measure the importance of donations as a head of expenditure. Some donations were included under the heading contribution to government projects.
  3. In my opinion section 22 of the Act allows the authority to incur expenditure on donations to charities but this is subject to the concurrence of the Minister of Finance. There is no evidence that such concurrence was obtained or that it was requested. In his report to management the auditor described the expenditure on donations in 1988 as "abnormal" and recommended it should be minimised. It is my view that over the period covered by the inquiry expenditure on donations was not only abnormal in magnitude it was also incurred unlawfully.
  4. Further, the board of directors had no effective control over the expenditure on donations or guidelines as to the beneficiaries of that expenditure.
  5. There was no reliable evidence that all expenditure classified as donations was received by the beneficiaries. In some cases cheques in respect of donations were made out in favour of the chairman of the authority and were lodged to his personal account. His explanation was that he was being reimbursed for donations made by him on behalf of the Port or on behalf of the government.

D. Circumstances touching and concerning the advance of funds for travel and overseas expenses

  1. Payments made to directors and employees of the Port to cover expenses of travel overseas were not treated as advances but were charged as actual expenditure. No account was required of the persons on their return.
  2. A consequence of this method of accounting for travel expenses was that there was no systematic review of the duration, purpose or destination of the trip.
  3. Expenditure on overseas travel averaged $66,000 between 1987 and 1991. Between 1992 and 1995 the average was $112,000.00. In 1994 the expenditure on overseas travel amounted to just under $1/4 million. These figures do not fully reflect the extent of expenditure by the Port on overseas travel because in some instances the expenditure was charged to "Contribution to government projects", being unrelated to the Port's business.
  4. To the extent that expenditure unrelated to the Port's business was charged against the revenue of the Port it was inconsistent with the provisions of the Act and was unlawfully incurred.
  5. The failure to require persons to account for monies paid to them in advance to cover travel expenses overseas not only reduced the control over a significant area of expenditure, it also provided opportunities for abuse of Port funds. In particular estimates of travel expenses were not always supported by independent documentary evidence. The auditor, referring to an increase in travel expenses from $23,000.00 to $88,000.00 between 1989 and 1990, observed that in most instances there was no record to substantiate the expenditure. Similar observations were made by another auditor in a 1994 report to management.
  6. I find that evidence before the Commission was of such cogency as to require an explanation for what appeared to be cases of double billing for travel expenses. The allegation was that Mr Heyliger having obtained funds to travel overseas from the Port for which he did not have to account, was able to use vouchers for the same period to claim travel expenses from the government treasury. Mr Heyliger denied any such practice. He also offered an explanation which could not be fully examined by me without a wider inquiry over a longer period. In view of the seriousness of the allegation I recommend further investigations be undertaken by the criminal investigative authorities.

E. Circumstances touching and concerning expenditure of $7,289,363.06 incurred under the head "Advances to government"

  1. Expenditure of about $5.4 million was incurred in 1993 and in 1994 it amounted to about $7.3 million.
  2. The expenditure was charged against the accumulated surplus of the Port in 1994 as Contribution to government projects
  3. The evidence indicates that the expenditure was incurred on account of an electrification project in which the Port was a participant.
  4. Further, the evidence is that the expenditure did not relate to the Port's business but involved the supply of electricity to a section of Basseterre. Such expenditure by the Port is inconsistent with the Act and unlawful.

General Comment

I have found that there have been many violations of sections 22 and 28 of the Act. Members have a duty to the authority to perform their functions in good faith. The Act provides that no personal liability shall attach to any member with respect of anything done or suffered in good faith under the provisions of the Act.

I recommend that the opinion of counsel should be obtained on whether proceedings should be instituted by the authority to obtain redress.

SAINT CHRISTOPHER AIR & SEA PORTS AUTHORITY

First, the main provisions of the Saint Christopher Air and Sea Ports Authority Act which are relevant to this inquiry are outlined.

Incorporation

The Saint Christopher Air and Sea Ports Authority was incorporated by Act No. 9 of 1993. The main objects of that Act were to coordinate and integrate the system of airport and sea port services, to transfer and vest in the authority the assets, liabilities and functions of the Port Authority and of the Airport Division of the Ministry of Communications and Works. Act No. 9 of 1993 repealed the Port Authority Act, [Act No 8 of 1981] and the Aerodrome Act (Cap. 125) in respect of Saint Christopher but not in respect of Nevis. The Act came into operation on 1st September 1993. Except that the minimum and maximum membership of the Air and Sea Ports Authority was increased by two, the provisions of the 1981 and the 1993 Acts which are relevant for the purposes of this inquiry are in identical terms. Consequently the terms "authority" and "Port" will be used in this report to refer to the Port Authority under the 1981 Act or the St Christopher Air and Sea Ports Authority under the 1993 Act as the context indicates.

Membership

The Act provides that the authority shall consist of not less than seven (7) or more than eleven (11) members appointed by the minister, i.e the minister responsible for finance. Members are appointed for a period not exceeding three (3) years and are eligible for reappointment. A chairman is appointed by the minister from the members. No personal liability attaches to any member in respect of anything done or suffered in good faith under the provisions of the Act and any sums of money, damages or cost which may be recovered against such member in respect of any act or thing done bona fide for the purpose of carrying this Act into effect are to be paid out of the funds of the authority.

Meetings

The authority shall meet at such times as may be necessary or expedient for the transaction of business and such meetings shall be held at such place and time as the chairman may determine. Any member who is present at a meeting at which a matter is considered or proposed to be considered in which he has, directly or indirectly, any financial or other interest shall, as soon as practicable after commencement of the meeting, disclose that fact and not take further part in the consideration of that matter or vote on any question with respect to that matter. Further, if the majority of the other members present so determine, the member shall withdraw from the meeting during such consideration.

Staff

The Act provides for the appointment of a general manager, a secretary and any number of port managers as the authority thinks fit. Such appointments are subject to the approval of the minister. The general manager is the chief executive officer of the authority and exercises all the functions entrusted to him by the Act and any regulations made under the Act. The general manager is required to attend all meetings of the authority unless he is absent with the leave of the chairman or is incapacitated by illness or other cause. In addition to the officers mentioned previously the authority may employ, with such remuneration and on such terms and conditions as it thinks fit, other officers and servants as it deems necessary for the proper carrying out of its functions under the Act.

Powers

For the purpose of performing its functions under the Act, the authority may do anything and enter into any transaction which in its opinion is necessary to ensure the proper performance of its functions. The authority may delegate power and authority to carry out such duties as it may determine. Delegation does not however preclude the carrying out of the duties by the authority itself.

Directions from the Minister

The minister may, after consultation with the chairman, give directions of a general character to the authority as to the policy to be followed in the performance of its functions. The directions must be in relation to matters which appear to the minister to concern the public interest. The authority must give effect to any such directions. The authority must furnish the minister with such returns and other information as he may require with respect to the property and activity of the authority and shall afford to the minister facilities for verifying such information in such manner and at such times as he may reasonably require

Funds

The funds of the authority consist of funds received in respect of dues and charges levied and payable in pursuance of the provisions of the Act and any regulations made under the Act, loans for meeting any of its obligations, or discharging its functions and all other sums that may become payable to or vested in the authority in respect of any matter incidental to its powers and duties.

Reserve Fund

The authority is required to establish a Reserve Fund to be dealt with and applied in accordance with any direction which may from time to time be given to the authority by the minister.

Application of Funds

The Act provides that the receipts of the authority on revenue account shall be applied in payment of the following:-

"(a) the interest and sinking fund contributions on any loan payable by the authority;

(b) the sums required to be paid to the government towards the repayment of any loan made by the government to the authority;

(c) the remuneration and allowances of members and of any committee of the authority;

(d) the salaries, remuneration, allowances, pensions, gratuities of the officers and servants, employed in or in connection with the activities carried on by the authority;

(e) the working and establishment expenses of, and the expenditure on, or provision for the maintenance of the property and installations of the authority, and the discharge of the functions of the authority properly chargeable to revenue account;

(f) such sums as the authority may deem appropriate to set aside in respect of obsolescence and depreciation or renewal of the property or installations of the authority, having regard to the amount set aside out of revenue under paragraphs (a) and (b);

(g) the cost or any portion thereof, of any new works, plant, or appliances not being a renewal of property of the authority, which the authority may determine to charge to revenue account;

(h) sums to be appropriated to the reserve fund;

(i) any other expenditure authorised by the authority with the concurrence of the Minister and properly chargeable to revenue account." (Section 22)

Application of Surpluses

After making full allowance for payments chargeable against the revenue of the authority, any balance resulting from the activities carried on by the authority which is available at the end of the financial year is to be paid to the credit of the Consolidated Fund. (Section 28).

Estimates of Revenue and Expenditure

The authority is required to prepare annual estimates of revenue and expenditure and such estimates are to be adopted in respect of each year. A copy of all estimates of revenue and expenditure in respect of the financial year and supplementary estimates, if any, in respect of that year shall, upon adoption by the authority, be sent to the minister.

Proper accounting

The authority is required to keep proper accounts of all its transactions to the satisfaction of the minister and a statement of accounts must be kept and made up in respect of each financial year. The statement of accounts must present a true and fair view of the financial position of the authority and of the results of the operations of the authority in respect of the financial year to which it relates.

Audits

The Act provides that the accounts of the authority must be audited in each financial year by one or more persons who are professional auditors appointed by the authority. The Act imposes a duty on the authority, its officers and servants to grant to the auditors all accounts, books, deeds, vouchers or other documents which they may deem necessary to call for, and may require any person holding or accountable for any such document to appear before them or one of them and make a signed statement in relation to that document and may require from such person such information as they or one of them may deem necessary.

A person who fails without reasonable excuse to comply with a request from the auditors to produce a document or to enter an appearance and make and sign a statement or furnish information is guilty of an offence under the Act and is liable on summary conviction to a fine not exceeding $500.00 or a term of imprisonment not exceeding three (3) months. The auditors are required as soon as practicable and not later than three (3) months after the accounts have been submitted for audit, to send an audited statement of accounts and their report in respect of the audit for the financial year to the authority.

Annual report to the minister

As soon as practicable, and not later than one (1) month of the receipt of the audited accounts and the auditors' report the authority is required to submit a report to the minister. The report must contain: (a) the audited statement of accounts of the authority and; (b) a report on the activities of the authority during the preceding financial year in such form as the minister may direct. The minister shall cause a copy of the report of the authority together with a copy of the audited statement of the accounts and the auditors' report thereon to be laid on the table of the National Assembly as soon as may be after the receipt.

Comment

The requirement in section 28 that any available surplus of the authority at the end of the year is to be paid to the credit of the Consolidated Fund and the exhaustive list of purposes on which the authority is authorised to incur expenditure (section 22) indicate that the legislature intended the authority to be a contributor to the general revenue of the country. An important aspect of this inquiry will be to ascertain whether and to what extent, if any this objective was achieved.

The misuse and abuse of Port positions and property by persons involved in its administration and/or daily operations

The above heading refers to misuse and abuse of Port positions as well as misuse and abuse of Port property. In fact the two aspects are interrelated. Misuse and abuse of positions tend to result in the loss of authority and control within an organisation and the misuse and abuse of its property.

Misuse and abuse of Port position

An important issue in this inquiry is the role of the chairman of the authority vis-a-vis that of the general manager in the day to day management of the authority's business. The Act makes it clear that the chief executive officer of the authority is the general manager who "shall exercise all the functions entrusted to him by the Act and by regulations made under the Act."

The evidence indicates that the chairman acted as if he were the chief executive officer of the authority. He initiated expenditure, approved requisitions for cheques, signed cheques, including those in which he was the payee, and generally gave instructions to management. Mr William Kelsick a businessman of much experience, and a member of the authority gave evidence in this regard. [Vol 3, pg. 747]

"Commissioner: Was there any executive director on the Board?

Witness: Well the way I saw it, there was no Chief Executive of the Board (of the General Manager) but I think the Chairman was the one - He called the shots.

Commissioner: The Chairman called the shots?

Witness: Yes.

Commissioner: He was the only Executive member?

Witness: As far as I could see, he was the Chief Executive, that is my opinion."

Mr Hugh Heyliger was not only chairman of the authority from 1982 to 1995. Over the same period he was also Minister of Agriculture, Lands, Housing and Development and from 1994 to 1995 he was in addition Deputy Prime Minister and Minister of Education, Youth, Sports and Community Affairs.

The evidence of Miss Denise Morris, who was Manager of Finance and Statistics from 1985 to 1993 and Financial Controller from 1993 to 1996 indicates the involvement of the chairman in day to day decisions concerning initiating and approving of expenditure. She said: [Vol 6, pg. 1343].

"Dr Browne: While they are looking for that Miss Morris, tell me on what basis would the Chairman send you a terse minute and direct you to pay a bill.

Witness: What's a terse Minute?

Dr Browne: Brief, to the point, - approve, pay. On what basis do you understand he was doing that?

Witness: That he had the authority to so direct me.

Dr Browne: He had that authority?

Witness: I believe so, yes.

Dr Browne: Why that belief?

Witness: Because he was Chairman of the Board Sir, and certain authority is vested in the Chairman and the Board.

Commissioner: You believed he had authority to direct you because he was Chairman?

Witness: Chairman yes and member of the Board.

Dr Browne: So you never questioned anything he directed you to do?

Witness: No not really Sir."

Misuse and abuse of Port property

Paragraphs (a) - (i) of section 22 of the Act provides an exhaustive list of expenditure which may properly be charged against the revenue of the authority. Included in the list are: interest on and repayment of loans, remuneration of members and employees, working and maintenance expenses, depreciation and renewal of plant and equipment, expansion of plant and equipment, and appropriations to a reserve fund.

In addition paragraph (i) of section 22 gives a discretion to the authority to incur "any other expenditure." This discretion is subject to two conditions:- (1) the expenditure must be "properly chargeable to revenue account" and (2) the concurrence of the minister must be obtained for such expenditure. It should be noted that both conditions (1) and (2) must be satisfied. Expenditure "properly chargeable to revenue account" is interpreted to mean expenditure not being capital expenditure and normally chargeable against the income of the authority in arriving at its profit or loss.

Expenditure which does not fall within one of the nine (9) paragraphs of section 22 is unlawfully incurred.

An examination of the accounts reveals expenditure charged against the revenue of the authority but which is not related to the business of the authority. Four categories of such expenditure are identified, (i) contribution to government projects, (ii) donations (iii) Overseas travel and (iv) electrification project.

Table 1 "Contribution to Government Projects" charged to Port Authority Funds 1989 - 1995

Year Surplus ($) Contribution to Government Projects ($) Accumulated Surplus ($)
1982 (1,876,053) (1,876,053)
1983 (673,346) (2,549,399)
1984 319,585 (2,229,814)
1985 740,697 (1,489,117)
1986 277,478 (1,211,639)
1987 5,901,285* 4,689,646
1988 1,680.230 6,369,876
1989 2,298,044 152,806 8,515,114
1990 3,496,794 396,672 11,615,236
1991 3,862,213 377,922 15,099,527
1992 4,544,368 639,615 19,004,280
1993 3,840,161 1,508,928 21,335,513
1994 290,041 3,964,073** 17,302,808
1995 114,621 1,253,843 15,934,344
Total 8,293,859

Source: Annual Financial Statements 1982-1995. (1994 and 1995 financial statements are in draft only.)

Figures in brackets indicate losses.

* Of this $4,310,418.00 represents accumulated profit on foreign exchange translation on loans and interest payments. ** Of this amount $2,956,372.00 is in respect of Electrification programme.

(i) Contribution to Government Projects

The financial statements of the authority from 1989 reveal expenditure classified as "Contribution to Government Projects'. Over the period 1989-1995 expenditure under this head totalled over $8 million. Table 1 shows the annual surplus of the corporation, (b) contribution to government projects and (c) accumulated surpluses from 1982 to 1995. It will be observed that over the period 1987 to 1995 the surpluses of the authority were not paid to the Consolidated Fund as required by the Act, but significant amounts were spent on 'Contribution to government projects.' The expenditure classified as 'Contribution to government projects' is of a varied nature. Included under this head are the purchase of vehicles for the Police Department in 1991, transportation in connection with the 12th heads of government conference, purchase of equipment for playing fields, contribution to sports clubs, and other donations, clean-up of Sandy Point, cutting of lawns at Greenlands and West corner, Maynard's Park project etc, etc. (Appendix 3 to the Forensic Accounting Review by Kalesnikoff Martens, Chartered Accountants, dated October 1997 provides a list of such expenditure from 1990 - 1992.)

One explanation was that instead of paying any surplus realised at the end of the financial year to the Consolidated Fund, the authority was instructed by the Minister of Finance to incur expenditures on government projects.

Mr Hugh Heyliger, chairman of the authority explained the item 'Contribution to government projects' as follows:- [Vol 7, pgs 49-50]

"Witness: . . . The Ministry of Finance instructed the Port Authority to retain its earnings, for example a directive was given once that we should purchase I think either four or five million dollars from whatever funds we had in Treasury bills. . ." [Vol. 7 pg 49-50].

"Commissioner: You are saying you had instructions to keep your surpluses?

Witness: Yes

Commissioner: For what purpose?

Witness: Because for one to look at the future expansion......

Commissioner: For expansion and development of the Port.

Witness: Yes

Commissioner: This is what I understand the evidence was.

Witness: Yes.

Commissioner: But did it include trophies, gifts to school children, a variety of things.....

Witness: You will notice that was a specific item to which a specific sum was put."

Further he said: [Vol 7, pg. 49]

"Witness: What I am saying in the case of the trophies that will come under Contribution to Government projects because basically they were seeking the assistance from the Government."

However, Mr Walter Simmonds, principal of Walter Simmonds and Associates, auditors of the Port Authority from its inception until 1993 gave evidence as follows:-

"Commissioner: .... the contribution to government projects, were they arising from some obligation to government or were they a decision by Port Authority to make a contribution?

Witness: I am not sure whether it was - we didn't see any written authority from the Ministry of Finance to request contributions so I do not know if the request was an oral one, but to us they all arose from the Port Authority." [Vol 2, pgs 489-490]

Mr Omax Gardener of Pannell Kerr Forster, auditors from 1994 treated contribution to government projects as a distribution of the authority's surpluses. He said:- [ Vol.3, pg. 557]

"Witness: Well we can't get any independent confirmation that government authorised these things. The Port is just charging them to Government.

Commissioner: They are not charging them to government, they are saying they are contribution to government projects.

Witness: Well I mean somebody in Government has to authorise it, do this for us. I would think so. That is some independence to the transaction I think."

Further he said: [Vol 3, pg. 558]

"Witness: In my opinion all the money should go to the Treasury and you access it from there. Unless government says it is okay to do this and do this from the Port.

Commissioner: And you would have expected to find some request from government?

Witness: Of course Mr Commissioner, if not you are losing control. Anybody can do what they like and say it is government. I am not saying they did it but we have not been able to substantiate the independence from the government end to say we gave authority to the Port to expend these monies. It is like a Company. You get your dividend but you go and you may take goods from the company and say when I get my dividends set it off against what I owe you.

Commissioner: The point I am concerned about is that you are bypassing the public control of the Consolidated Fund."

Mr Wendell Lawrence, Financial Secretary, indicated in his evidence that no directions were given over the period 1989 to 1995 from the Ministry of Finance with respect to establishment of a Reserve Fund or expenditure from a Reserve Fund. However, he added, in his view, the surpluses of the Port ought to have been kept by the Port for expansion purposes and not paid to the Consolidated Fund, although that was not what the law required. With respect to contribution to government projects he said as follows:- [Vol. 3, pg 722]

"Witness: I am aware that some government departments have quite often gone to the Port directly and have solicited assistance. I am not aware of the nature of all such assistance and I am aware that once you see the accounts Contribution to Government you would make an assumption that that relates to that type of assistance."

Further he continued [Pg. 728].

"Witness: When I say the Minister did not give a direction let me explain the procedure in respect of the Port. The formal procedure is that they would make a request to the Ministry of Finance and I would expect to be involved through some written communication in that process and I could say that there is no written, there is nothing on the file indicating that the government has given any directions in that regard.

Mr Astaphan: And you would expect that if any direction was given under (i) (section 22 para (i) it would be a written directive?

Witness: Well I would expect so."

The Financial Secretary was finally of the opinion that failure to pay the authority's surpluses to the credit of the Consolidated Fund created a significant risk of abuse of the authority's funds. He said: [Vol 3, pg. 729]

"Witness: If they had proceeded to pay a sum into government as an allocation of surplus to the government, it would have gone into the Consolidated Revenue and then to take it from the Consolidated Revenue there would have been a procedure because it would have had to be covered by an Appropriation Act for it to get out of the Consolidated Revenue Fund and it would have had to be a part of the annual estimates exercise and so the procedure and then it would have had to go through the various controls of the Treasury. It would have had to have all the supporting documents in support of the expenditure and some people complain the process is long but it certainly would have been different.

Mr Astaphan: And therefore it is true that to use the direct method of payment for so-called government projects from the Port's funds rather than going through the vigorous accounting system subjects the Port's funds to abuse. It increases the use of abuse.

Mr Astaphan: Would you agree with the word highly?

Witness: Significantly.

Mr Astaphan: And therefore would you not accept that it ought not to be done?

Witness: In retrospect I would prefer that it is not done at all."

An item of expenditure "Contribution to Government Projects" was included in the annual budget of expenditure of the authority, and this was approved by the board of the authority but the board appears to have had no control over the actual expenditure incurred or about the beneficiaries of that expenditure. In 1994 the budgeted figure was $750,000 but the actual turned out to be just under $4.0 million ($3.964 million). This figure included $2.9 for electrification project and $1.00 million for other projects. [Vol 6, pg 1360]. Mr William Kelsick a member of the authority from its inception said:-

"Witness: In the budget they had put an amount for contribution to government I have always argued that they should follow what the law says and let the government take what it wants in the general revenue and let the government implement the law and let the government then do its own disbursement, take the money in the general revenue in accordance to the law of the Port Authority.

Mr Moore: Alright. Well now if the Port were making a contribution to the government which it is entitled to make, I am not disputing that. How would you expect that contribution to be made?

Witness: I would expect that the cheque would be paid to the Accountant General.

Mr Moore: Now during the time you had been a Director on the Port Authority Board do you recall the Board's giving any blanket authority to pay to the Chairman to fulfill certain obligations?

Witness: No. I don't remember any such minute, any such thing. All I know is that it was put in the budget year after year. The budget was approved and expenditure against the budget and accounts would then say but we didn't get any details and it is just that so much has been expended because normally monthly or quarterly accounts wouldn't go into that detail they would just show the total expenditure against budget." [Page 67, Vol, 1.]

Over the period March 1991 to December 1993, payments to the chairman of the authority classified as 'Contributions to Government projects' totalled over $169,000. Mr Heyliger explained these payments were reimbursements for expenditure incurred by him. He said: [Vol 7, pgs 44-45.]

"Witness: Yes, because I was asked to purchase them and so I was reimbursed.

Commissioner: From whom such a request would have come?

Witness: Different agencies. Clubs and different agencies.

Commissioner: Oh I see. It did not come from the government?

Witness: No, no no.

Commissioner: How did it arise?

Witness: Because they are asking the government to make a contribution.

Commissioner: I am trying to understand how it arose.

Witness: Persons saw me with more than one eye.

Commissioner: You are the super Minister?

Witness: Not the super. Just the little one, and so because of certain positions I discuss with the management at the Port and they tell me okay go ahead get them, but there are some companies without an order they are not going to give you. But at all times the receipts was sent there.

Commissioner: Sent to the Port?

Witness: Oh yes.

Dr Browne: At all times what?

Witness: The receipts were supposed to be there. In the case of Juliet Warner she sent a letter thanking the authority.....

Commissioner: Let me be quite clear of the system. A person or school approaches you and ask you for a gift or something and you think it is a good one and you go to the Port and ask the Port prepare that order and the person gets the thing and it is charged to contribution to government projects?

Witness: Because this is where they are trying to get it. As I said sometimes they came to you at the eleventh hour. They have something urgent, how to get this thing done. You call you say look some of them are things sometimes you gave on a regular basis. So they come in, you call and Ms Morris or Mr Brazier says well they can't deal with it now, can you get it and then send the receipts to us and that was done."

Like contribution to government projects, items (ii) Donations, (iii) Overseas Travel and (iv) Advances to Government (Electrification Project) include expenditure not directly related to the business of the authority and, to that extent, are not properly chargeable to the income of the authority. These items of expenditure are expressly included in the terms of reference of the Commission of Inquiry and are discussed in other sections of this report.

6 (b) Mal-administrative and mismanagement practices

Evidence was adduced in the course of the inquiry about a number of administrative structures and management practices which affect the efficient management of the authority. In this section some of these issues are discussed.

Effectiveness of the Directorate

The effectiveness of the highest administrative unit of any organisation has a considerable influence on its effectiveness, control and well being. The availability and reliability of information to the board of directors is a pre-condition for effective planning, decision making and control. Mr William Kelsick an experienced businessman and a member of the Board for many years had this to say: [Vol 3, pgs. 748-753]

"Witness: The Board can't go - If it is not fed the information by the officers of the Company, how is it to know certain things.

Commissioner: Otherwise information is filtered from one source?

Witness: Yes.

Commissioner: What is your experience in business about the composition of companies? Don't you have Internal Directors and External Directors?

Witness: We have Directors in business who are executives and we have Directors who are non-executive. Any Board has to have both.

Commissioner: What is the purpose you think of having this mixed composition?

Witness: The non-executives suppose to be able to ask . . .

Commissioner: Discerning questions?

Witness: That's right, they are suppose to and I mean the present Companies Act which we all have to re-register to says that every Public Company must have at least two non-executive Directors.

Commissioner: Two non-executives?

Witness: Yes Sir. And it is always you have a number of executives working in the business and the non-executive Directors but you have to feed them information, I mean if you have a budget you ought to have monthly accounts, they have to be able to see and ask pertinent questions. You have to feed them information.

Commissioner: Without information the outside Directors are in the dark?

Witness: Exactly that's what I am saying Sir. You have a budget, you pass the budget but the monthly operating accounts against budget were always far in arrears, so we don't know.

Commissioner: As a result, they cannot exercise effective control. Can they?

Witness: That is the position Sir, if you do not get the information in a timely fashion the normal information is fed to the non-executive Directors and to the executives, the executives have to get that information because they don't know, otherwise they may let delay get to their operations but if they don't get that information in a timely fashion mistakes can be made and problems can arise and you can't correct them on time.

Commissioner: Do you think a composition of a Board which had Directors from internal as well as external Directors who were appointed not by the Chairman but by the Minister of Finance?

Witness: All of us are appointed by law by the Minister of Finance.

Commissioner: That's right. Directors are appointed by the Minister of Finance.

Witness: But the General Manager sits on the Board so he attends Board meetings.

Commissioner: By invitation?

Witness: No, well he sits in.

Commissioner: Well he is not a member of the Board?

Witness: He is not a member of the Board. In my opinion he should be a member of the Board and the Financial Controller should be a member of the Board.

Commissioner: Excellent. Tell me something, if there had been a Director of Finance at the Port Authority sitting on the Board, in your view, do you think the administrative controls, the financial controls would have been far better?

Witness: It would have been Sir but the person in that position has to be strong.

Commissioner: Well he would have the support of the external auditors, he would have the support of people like yourself, he would have the support of the Minister of Finance who would appoint him.

Witness: That's the point. If the Financial Controller was not an employee of the Authority but was appointed on the Board, yes it is an employee to draw the salary but was appointed as a Director as well as Financial Controller by the Minister of Finance . . .

Commissioner: He is Financial Controller by virtue of his post but he is a Director by virtue of appointment by the Minister of Finance so that he is independent of the chairman in that respect.

Witness: And independent of the Chairman, he can be asked questions, you can ask him questions, direct questions.

Commissioner: You see the question in my mind, who can ask questions of the Chairman?

Witness: Nobody.

Commissioner: When he signs a requisition, he signs a cheque and he says this is a cheque . . .

Witness: Well you don't know.

Commissioner: You see what is the effectiveness of having two signatories to a cheque when one is of such a powerful relationship relative to the other. The power relationship within the organisation is such that there's no control.

Witness: No control. But there should be in any organisation. You should not sign a cheque payable to yourself. I will not do it.

Commissioner: You would not do what?

Witness: Sign a cheque where we have several signatories in the Company. But if a cheque is payable to me I will not sign it. I will not authorise it, somebody else has to do it.

Commissioner: The question of course arises - Can I find somebody else?

Witness: Well if the organisation is not set up that way, that is the problem.

Commissioner: Well the argument is you see, all the people are busy, they are only part timers, they come in for a couple, and I can't find anybody else, so I must sign. You see this is why I am saying you need to consider the structure of the Board Directors.

Witness: I thoroughly agree with you. This is something, it would have been the Minister of Finance, it's his responsibility but I think that is something that should be considered where you can have proper internal controls.

Commissioner: Without internal controls there is no accountability. Thank you very much Sir."

Control of Expenditure

The evidence indicated that control of expenditure was an area of management which was very deficient. Expenditure which had no relation to the business of the authority was charged against its income. Charging such expenditure against the income of the authority was contrary to section 22 of the Act and unlawful.

The misuse of the authority's funds was facilitated by the misuse or abuse of positions. Expenditure in some cases was initiated by the chairman unsupported by independent evidence. He would then approve the requisition that a cheque be issued in his favour and he would also be one of the signatories to the cheque.

Mr Heyliger was not only chairman of the authority, he was a government minister with extensive portfolio responsibility. The power relationship between the chairman and the members of the management team was such that there was no countervailing power to insist on proper management control of expenditure. The evidence of Miss Denise Morris who was the chief financial officer of the authority illustrates how little control the management team had over expenditure. [Vol 1, pg. 248]

"Mr Astaphan: Can you tell us Ms Morris why you would have approved the requisition to pay that statement invoice for work done for Hugh Heyliger? Why you would have approved payment from the Port for that?

Witness: Well I assume that whatever it was it was ordered through the Ministry.

Mr Astaphan: You assumed so. You would not have had independent documentation corroboration for that assumption. Would you? So in other words you would not have had anything other than an assumption to base that on?

Witness: No.

Commissioner: When you made those contributions to Government, for example, contribution to the Ministry of Agriculture by the Port Authority, is the Port Authority ever reimbursed for those amounts?

Witness: No. It wasn't.

Mr Astaphan: That payment was not anything to do with the benefit of the Port?

Witness: No.

Mr Astaphan: Didn't you question that statement invoice Miss Morris when you saw the stated purpose on it 'rental of bulldozer to clean around Ms Mitcham' dwelling. You didn't question that?

Witness: No Mr Astaphan. I didn't.

Mr Astaphan: Can I ask you why? Why didn't it occur to you to ask a question about that?

Witness: It was presented to me for payment from the Minister through the General Manager so by the time it got to me it was just a matter of ....

Mr Astaphan: You carrying out procedure?

Witness: Correct.

Mr Astaphan: Would it have been indicated to you by whosoever presented it to you that it came from the Minister?

Witness: Yes.

Mr Astaphan: The Chairman of the Port?

Witness: Yes.

Commissioner: It came to you through the General Manager you said?

Witness: Yes. It would have.

Mr Astaphan: Who would have been your General Manager in November '94? Can you recall?

Witness: In '94 it would have been Mr Sydney Osborne.

Commissioner: So at the time it came to you, you had no authority to question any more?

Witness: Basically Yes!"

The evidence of Mr Marvin Edwards who was a board member and one of the authorised signatories to the authority's bank account indicates that he did not need supporting documents in all instances. [Vol 1, pg 111]

"Commissioner: When you sign cheques what documentation did you need before you signed a cheque, normally?

Witness: Normally there would be a cheque requisition or authorisation from and in some instances there would have been other supporting documentation.

Commissioner: In some instances, not in all?

Witness: I don't think in every case there would have been supporting documentation.

Commissioner: So you can't from where you stand today say that that particular cheque and requisition form came to you for signature with any supporting documentation, you can't be sure of that?

Witness: I can't say that.

Commissioner: Are you saying the main thing you wanted was a cheque requisition form approval?

Witness: Certainly Sir."

The failure to require persons to render an account for funds provided to cover travel expenses overseas was another source of weakness in the control of expenditure. As a result there was no systematic review of the duration, destination, and purpose of overseas trips. This topic is discussed under paragraph 6 (f) of the terms of reference.

Another area in which there appears to have been a lack of control was the management of construction contracts. Evidence indicates that construction contracts were entered into without a competitive bidding process and were executed without effective supervision. In the case of one contractor for which evidence is available, between 1991 and 1995 construction completed and paid for by the Port amounted to over EC$3.4 million. Construction work was undertaken not only on properties and facilities of the authority but also on other facilities and properties and in the latter case it was charged under the heading 'contribution to government projects.'

Construction contracts involving significant sums were entered into with little documentation and formality without competitive bidding and contained no provisions protective of the authority, for example there was no retention for defective work.

The following examples illustrate that construction work was undertaken on the initiative of the chairman without technical assessment or consultation and payment was approved by the chairman. In January 1995 a bill amounting to $7,850.00 for tiling 2,900 square feet of flooring at the Basseterre High School Compound was submitted to the chairman by the contractor. In his evidence before the commission the contractor explained how he was engaged to do that work: [Vol 6, pg. 1462]

"Mr Astaphan: How did you get the job to do the work?

Witness: I was asked by Mr Heyliger who I addressed this (the bill) to.

Mr Astaphan: Mr Heyliger asked you to do some work at Basseterre High School?

Witness: No he asked me to go up to Basseterre High School and ask for the person in charge of the Home Economics Centre and they will show me what they need done.

Mr Astaphan: And you went there?

Witness: Yes.

Mr Astaphan: And you asked for that person?

Witness: Yes.

Mr Astaphan: And that person showed you what they needed?

Witness: Yes.

Mr Astaphan: What did they need?

Witness: Tiling the entire Home Economics area.

Mr Astaphan: After they told you what they needed what did you do?

Witness: I reported back to him.

Mr Astaphan: To him who?

Witness: Mr Heyliger.

Mr Astaphan: And?

Witness: And tell him they need the whole area tiled.

Mr Astaphan: And what did he say to you?

Witness: Go ahead."

Similarly the bill for work done on the Warner Park pavilion was explained thus: [Vol 6, pg. 1464.]

"Mr Astaphan: How did you get the job?

Witness: I was asked to meet at Warner Park.

Mr Astaphan: Who asked you to meet at Warner Park?

Witness: Mr Heyliger. I met Mr Heyliger there and 2 other gentlemen from the Warner Park Committee and we had a discussion and he said these gentlemen will explain to me what they need.

Mr Astaphan: And they did?

Witness: Yes.

Mr Astaphan: And as a result of what was pointed out as their needs you did this work?

Witness: Yes and I billed for work carried out at Warner Park.

Mr Astaphan: And again you billed for materials as well?

Witness: Yes.

Mr Astaphan: And again you did not supply any backup documentation to verify the cost of materials or quantities. Correct?

Witness: No.

Mr Astaphan: And you were paid?

Witness: Yes.

Commissioner: How much is that bill?

Mr Astaphan: That bill is a $22,133.90 and it is dated January 24. 1995."

Although the spontaneity of the decision making and the responsiveness to perceived needs may appear attractive, it should be borne in mind (1) that the bills were not being paid from private funds. (2) there was no evidence that the authority had delegated power to the chairman to spend, (3) the authority, in any case, had no power to undertake expenditure outside its own business. Further, the informal method of awarding construction contracts did not provide an opportunity for other contractors to offer their services and there was no technical supervision of the construction work. There was as a result a significant risk of abuse of the authority's funds.

The circumstances touching and concerning the disbursements of money belonging to the Port Authority as donations without there being any or any proper record and/or accounting of or for the same

Over the period 1983 to 1995 expenditure incurred by the Port and classified as donations rose from $1,000.00 in 1983, reached a peak $108,399.00 in 1993, before falling to $83,242.00 and $50,777. 00 in 1994 and 1995 respectively.

These figures tend to understate the extent of expenditure on donations since donations to churches, schools, sports bodies and community groups were also included under "contributions to government projects" The comments concerning the misuse and abuse of Port property which were made previously in connection with contribution to government projects apply equally to expenditure classified as donations.

The legislature in enacting Act No 9 of 1993 did not expressly include donations as a permitted expenditure within the powers of the authority. Support of or donations to social groups may be a proper charge to the revenue of the authority bearing in mind the increased importance of business donations to charities under the umbrella of social responsibility of business. However, such expenditure by the authority would require the concurrence of the Minister of Finance pursuant to paragraph (i) of section 22 of the Act.

There was a marked increase in expenditure on donations in 1988 compared with the figure in 1987, $6,472. in 1987 and $44,683. in 1988. The auditor, commenting on the 1988 accounts, considered expenditure on donations in that year as "abnormal." He observed as follows:

"We noted that donations have increased substantially over the previous year. We recommend that abnormal expenses be approved by the Board and that expenses of this or similar nature be minimised." Vol 2 pg 498. Evidence of Mr Walter Simmonds.

However, the advice of the auditor was unheeded. Between 1988 and 1995 expenditure on donations averaged $52,344.00 per annum. This amount does not include expenditure of a similar nature charged under "contribution to government projects."

There is no evidence that the Minister of Finance approved such expenditure as Section 22 paragraph (i) of the Act appears to require. Nor was there any evidence that the minister's concurrence was ever requested. Without such concurrence the expenditure was unlawfully incurred. The observation was made earlier that the authority was designed as a contributor to the general revenue of the State. The legislature did not devolve on the authority unfettered power to spend its income.

There is evidence that the estimates of expenditure of the authority included an item for donations and this was normally approved by the Board. However, there were no guidelines from the Board as to the potential beneficiaries or as to the limits of expenditure to any beneficiary. The evidence of Mr O'Neil Rogers a member of the Board from 1989 to 1995 and who was also for a time a member of a finance sub-committee which dealt with minor projects financed in the budget is as follows: [Vol 5, pg 1110]

"Commissioner: Did you have a list of Charities that you supported, the Board supported?

Witness: I didn't have a list Sir.

Commissioner: The Board?

Witness: They may have had a list but I can't say for sure if I know the list or how much is on the list or who are not on the list Sir.

Commissioner: So that anybody, any church, any school, anybody could come and say they want some money?

Witness: It seems that that's the way it went Sir."

Further the witness continues:

"Witness: Items of this nature they don't meet them every day but hardly any opposition or denial was surfaced relating to request for these organisations or institutions.

Commissioner: I am trying to find out what is the limit one could go. The Sandy Point Football gets $6,500.00, the Hope Chapel Methodist gets $2,000.00, the Cayon Community gets $5,000.00. What is limited. Is there any principle? Anybody wants $10,000 you get it, what is the principle you had about charitable donations? Did you have a principle at all?

Witness: No sir I don't recall any particular guideline related to limits and that sort of thing.

Commissioner: So any amount, it was just arbitrary?

Witness: It was discussed and if found necessary it was adopted.

Mr Astaphan: Mr Rogers let me ask you this. The Board would approve an annual budget for contributions, donations?

Witness: I think so, there would be a pool....

Mr Astaphan: There would be a global figure for donations?

Witness: I think so.

Mr Astaphan: When you say you think so Sir, you mean was that the case or was it not the case?

Witness: It is more likely to be the case Sir.

Mr Astaphan: Did you attend any meeting at which the Board approved vote for donations Mr Rogers in your many years as a member?

Witness: Certainly, certainly.

Mr Astaphan: When the item was approved was it a global figure or was it a list of specific items approved in the annual budget?

Witness: I don't recall any specific figure.

Mr Astaphan: It was a global sum and out of the global sum from time to time requests for contribution would arise?

Witness: That would have been the case.

Mr Astaphan: That would have been the practice throughout your tenure on the Board?

Witness: Yes.

Mr Astaphan: And there was as you said to the Commissioner no limit as to what any one requesting party could get?

Witness: That is correct.

Mr Astaphan: And you never questioned or reduced in your time on the Board any figure proposed by the Chairman Mr Heyliger? Did you ever refuse or reduce any figure proposed as a donation to a group?

Witness: I don't recall doing that." [Vol 5, pgs 1112-1113.]

The evidence of Mr Junior Fraites also indicates the lack of control of or accounting for expenditure on donations by the authority. He was showed a cheque for $5,000.00 from the authority payable to him on the 31st March 1994:

"Mr Moore: Then the cheque stub says what?

Witness: Sandy Point Community Project.

Mr Moore: If you stop right there you can tell the Commissioner what that is?

Witness: I was asked by I can't remember exactly who, but somebody form the Port if they could put a cheque in my name for a group in Sandy Point who was doing community work down there. It is Sandy Point and I am a Sandy Pointer. I had no problem with that.

Mr Moore: So you are now telling the Commissioner that that cheque is not for any work?

Witness: Sir.

Mr Moore: That the Port wanted to make a payment to a Sandy Point Group?

Witness: Yes.

Mr Moore: And they asked you to be allowed to use your name?

Witness: Yes.

Mr Moore: Well do you remember who it was, who asked you that?

Witness: It was either the Chairman or the General Manager I don't remember.

Mr Moore: Look at the requisition form see if you see who authorised it. Mr Fraites you begin to see the difficulty?

Witness: Yes.

Mr Moore: Nobody is accusing anybody of anything here. But it is other people's money and that money went to you. Now when I say went to you let us be fair to you. Look at the back of the cheque and see what happened to it. What happened to it?

Witness: I see my signature.

Mr Moore: Anybody else?

Witness: No and then the stamp with the money of how I collected the money.

Mr Moore: You collected cash again?

Witness: Yes.

Mr Moore: That is unhappy. How was the cash made out?

Witness: 10 $50's, 50 $1's, 60 $5's, 20 $10's 53 $20's, 20 $100's.

Mr Moore: Mr Fraites help me I am not trying to put you in any difficulty. You see how the money is broken down?

Witness: Yes.

Mr Moore: It looks like money required for paying out. Doesn't it?

Witness: Yes.

Mr Moore: 1's and 5's and 10's and so on. Looks like money required for paying out. Now can you remember then if you paid it out to different individuals?

Witness: No. What happened is I changed the money as I have indicated here and I handed it over to Mr Heyliger who was dealing with it." [Vol 4, pgs 1016 -1017.]

Further he was asked: [Pg 1018]

"Commissioner: Do you know whether that money ever went to the groups they were talking about?

Witness: I don't know I just handed it over and that was it."

When the evidence of Mr Fraites was put to Mr Heyliger he denied receiving any money from Mr Fraites. He said:

"Witness: I didn't send nobody to no bank.

Dr Browne: Mr Fraites said so.

Witness: Well he say so.

Dr Browne: He said he gave you the money.

Witness: I reject that.

Commissioner: You received the money from him?

Witness: No.

Commissioner: You didn't receive the money?

Witness: I reject that." [Vol 7, pg 58]

Mr Heyliger relied on the evidence of Rhonda Frazier who was employed by the authority as manager of finance and statistics. She said that before authorising the cheque for $5000.00 to Mr Fraites she had seen a letter from the Sandy Point Community Group requesting a donation. Although it was the practice to write a cheque in favour of the person requesting the donation in this case she was instructed by the Financial Controller Miss Morris to write the cheque in favour of Mr Fraites. [Vol 5, pg. 1189] Miss Morris however denied giving any such instruction. She said "that is not something that I would have instructed her to do to put it into somebody's name and pay the cash to somebody else - no I would not have done that."

Mr Heyliger has denied the allegation that in making donations of the Port funds he was partial towards the town of Sandy Point of which he is the parliamentary representative and that he acted from political motives. In fact, he said, donations were made to organisations in other towns. There is evidence however, that the recipients of the donations did not always distinguish Mr Heyliger in his personal or political capacity from his role as chairman of the authority. Thus, having received $1000.00 from Mr Heyliger which was used to purchase Christmas presents for the children at the Sandy Point Day Care Centre, the supervisor of the Centre entered in the logbook kept at the centre as follows:

"On Thursday the 12th December 1991 a party was held for the children of the Nursery. The party was funded by the Honourable Hugh Heyliger who donated the sum of $1000.00. We the members of the staff thank him for his generous contribution."

Mr Heyliger explained the transaction as follows: [Vol 7 pg. 48]

"Witness: I am explaining the thing. A morning she came to my office. What she indicated, look somebody is going off to Puerto Rico at 10 o'clock, 11 o'clock or somewhere like that. They have to get these toys and so she told me give her the money and when she comes back, present the things and I will be reimbursed. Because it was something that she wanted to go off because some of these children without them some of them would not have a toy if not for that.

Commissioner: You see that type of example and others will come too, gives the impression that your personal interest could be in conflict with the interest of the Corporation. You are in other words using the money apparently from your pocket and people believe it is your generosity, whereas it is government money."

The interchange continued further: [Page 55]

Commissioner: You see Mr Heyliger I am making an analysis of the cheques paid to you. The total over the period I have studied is about $431,877.59, in many cases you requisition it, you approved the requisition, you signed the cheque and then it was paid to your account though it was meant to be for donations, or for government contribution or for something. You follow what I am trying to say. It gives the impression you are mixing up your own private business, your own private money with the money of the Corporation for the Corporation's purposes. And there is no receipt at the end to say who received the money. You follow what I am trying to tell you? I am not saying you took the money yourself and do whatever you want with it. But there is no receipt saying look I received from Mr Heyliger the sum of so and so. There is no such document, all we can trace is that the money went into your bank account. As I am saying some of course was for travel, some was for donations, some was for contribution to Government Projects and I have an analysis of about five (5) of them. I will show you the analysis when I am finished. You see the question arises. Was the money spent for the Port's business?

Witness: It was.

Commissioner: All we see is your word, but there is no control. There is no check. It looks as conflict.

Dr Browne: It looks bad and you have to accept that it looks bad. Now in retrospect what is your position.

Witness: I told you already if I had known it would have come to all this kind of thing I would not have been there.

Commissioner: All you had to do is to make sure that first of all you listen to what the external auditors said, because they have been complaining all the time."

The circumstances touching and concerning the advance of funds for travelling and other overseas expenses to certain past officers of the Saint Christopher Air and Sea Ports Authority without any or any proper accounting for the said advances.

Expenditure by the authority on overseas travel averaged $65,583.00 over the five (5) years, 1987 to 1991. Over the four (4) years 1992 to 1995 the average expenditure on overseas travel was $111,600.00. In 1994 in particular the figure was $246,784.00, more than twice the average over the four year period from 1992 to 1995. These figures tend to understate the expenditure borne by the authority on overseas travel as that expenditure in some instances was charged as "contribution to governments projects."

Evidence was given before the Commission that some of the expenditure charged in respect of overseas travel was not directly related to Port Authority business. Miss Denise Morris head of the finance department of the authority from 1985 to 1996 explained an additional expenditure of $5,400.00 in connection with a trip by the Chairman to St. Marten in December 1991 as follows: [Vol 1, pg 233]

"Mr Astaphan: So basically then would it be fair to say that the requisition of 17th December 1991 was expenditure over and above the actual cost of the trip?

Witness: Yes it was.

Mr Astaphan: Was that the first time in your tenure something like this occurred? In relation to Mr Heyliger?

Witness: I don't believe so. I know on occasion he - say for example he may have gone on a seminar or some trip with respect to Port business and he would have been asked by the Minister of Finance to attend another Government meeting in which case he would have brought back whatever expenses associated with that meeting for the Port to pay.

Mr Astaphan: So some other non-Port Authority meeting?

Witness: That is correct. Yes.

Mr Astaphan: Which would have been charged to the expenditure of the Port Authority?

Witness: Yes.

Mr Astaphan: Upon whose authorisation would that have been done?

Witness: Mr Heyliger's.

Mr Astaphan: So Mr Heyliger himself would have authorised an additional . . .

Witness: He would indicate that the Prime Minister would have asked him to have done this and that the Port was to pay for it.

Mr Astaphan: And you would have followed the indication?

Witness: Yes I would have.

Mr Astaphan: Without question?

Witness: Yes."

Evidence to the same effect was also provided by Mr Carl Brazier who was General Manager of the Port authority from 1981 to 1983. [Vol 1, pg. 173-176]

The extent of expenditure on overseas travel borne by the authority but not incurred on the authority's business is not ascertainable. The charging of such expenditure against the income of the authority is inconsistent with Section 22 of the Act and is an improper use of the authority's funds.

The charging of overseas travel expenditure which is unrelated to the authority's business against its funds is evidence of the lack of control and improper accounting of such expenses. Directors and employees of the authority travelling overseas were not required to account for their expenditure. The evidence of Marvin Edwards a member of the Board of the Authority from 1983 to 1995 is as follows: [Vol. 1 pg 116]

"Mr Astaphan: Do you recall that at any Board meeting any expenditures in relation to for overseas travel being brought to the Board for approval?

Witness: Overseas travel in terms of expenses - no because in relation to expenses at the Port, again the system which was employed is that an expense statement was made up and that expense statement had a breakdown and it would indicate what charges were there. Some of the charges were fixed charges. So in actual fact one was not given at the Port a lump sum of money in terms of travel. You were given a specific amount of money which related to the breakdown for your travel expenses. It covered the actual amounts in relation to your travel. The policy was further, in that if you went over the expenses, if you exceed the expenses that were allocated to you, then you would have to make a submission and put your supporting documents to get a refund for that. But you were given an actual amount and not a lump sum. That was the policy.

Mr Astaphan: An actual amount and not a lump sum.

Witness: The actual amount and not a lump sum. The amount covered your expenses.

Commissioner: Just a moment - you had a pre-estimate of the expenses to be incurred on that trip?

Witness: Certainly. All expenses were - where you are travelling you will have all the breakdown information with respect to your hotel accommodation, then per diem expenses, your travelling in terms of inland travelling, your subsistence, everything would be worked on before you travel and so you had that actual amount. For instance, if you wanted to have a meal and the meal cost more that what was allocated to you then you had to take it out of your pocket and deal with it after.

Commissioner: And you claimed when you came back?

Mr Astaphan: Mr Edwards in relation to the cheque which you had the advance expenses claimed there and paid $9,000 - the actual expenses came to exactly that?

Witness: The breakdown would have indicated that. I can't tell you offhand that information.

Mr Astaphan: But you are saying the general position was you had a breakdown of expenses incurred or to be incurred and those actual figures were what the cheques would have been based on.

Commissioner: Just a minute. When the person comes back from his travel, when the officer returned from his travel, was he required to give an account of the expenditure?

Witness: There was no requirement because you already had an Expense Statement which cover your actual expenses. As I indicated, if you spend more then you put your case up, and I assume the people who dealt with finances at the Port would give merit to whatever case was put up. You have to supply the supporting documents."

The report to management on the 1990 financial statements by the auditors Simmonds and Associates supports the evidence given by Mr Marvin Edwards on the lack of supporting documents in some instances. After referring to the increase in overseas travel in 1990 over 1989, the figure rising from $22,703. to $87, 568.00. The auditor pointed out:

"In most instances we saw no records to substantiate the expenditure."

The auditor continued, recommending:

"That management insist that officers travelling overseas return such records as ticket stubs, hotel bills, and cost invoices."

Similarly the 1994 report to management by the auditors Pannell Kerr Forster included the following: [Vol 3 pg 567]

"Investigations revealed that amounts advanced to directors and members of staff for overseas travel and training were not properly accounted for by the recipients of these funds. These advances were immediately charged to the expense account, and there was no system in place to ensure that proper expense reports with external supporting documentation were completed and submitted to the accounting department to facilitate correct accounting allocation of the advances given by the authority."

With regard to the chairman, Mr Hugh Heyliger, who travelled frequently, although he claimed that the necessary documents supporting travel expenditure were always submitted, the evidence of the Financial Controller Ms Morris is that in the earlier years, that is about 1985, Mr Heyliger would submit stubs and tickets, later he did not bring those things because they were not required. [Vol 6, pgs 1342-1343]

It was alleged that since he was not required to submit vouchers to the Port in support of his travel expenses the chairman obtained travel funds from two sources, from the Port and from the government. Since the government required vouchers in support of claims, he submitted the vouchers to the government treasury and obtained payment from two sources for the same overseas trip. Mr Heyliger denied that he did any double billing.

"Commissioner: So you are saying specifically there is no instance that you were travelling on Port business, got money from the Port to travel used the vouchers for the same period to claim from government?

Witness: No, no"

In support of the allegation of double billing Inspector Sydney Bloxom of the Royal Canadian Mounted Police, on secondment as an investigator to the Commission of Inquiry gave evidence that he had undertaken a comparison of payments to Mr Heyliger made on account of overseas travel or training by the authority and by the government treasury. In particular he compared dates of cheques from the authority against dates for which claims for subsistence and travel expenses were made to the treasury. (Exhibits S.G.V.B/1, S.G.V.B/2 and exhibits S.G.V.B/3)

In a number of cases there appeared to be close proximity in the dates of the cheques paid to Mr Heyliger from the authority for travel or training overseas and the dates for which he claimed subsistence and travel expenses from the Treasury. [Vol. 5, pgs 1198-1156 & Vol. 6 pgs 1257-1268.]

The evidence in respect of three (3) cases is outlined below. (a) Cheque number 470372 dated 19th August 1988 from the Port for $11,000 in favour of Mr Heyliger.

The interchange was as follows. [Vol. 5, pg 1218 ]

"Witness: Yes. The next one is August 19th, 1988, the cheque number was 470372 written to Mr Heyliger in the amount of $11,000.00, the cash disbursement ledger indicated overseas and I believe that was posted to Accounts Posted, it wasn't posted to travel expenses. Now August 19th was a Friday of that year, the Government claim item number 27 on my own spreadsheet was submitted S-267 for the period August 22nd - 27th 1988. Now that was a Monday to a Saturday. That Monday would immediately follow the Friday that he had received the cheque from the Port. The amount on the claim was $7,152.27 and the amount was spent in New York and Washington, and the government claim was submitted December 11th, 1990 and there are hotel receipts etc for the certification from Mr Hugh Heyliger.

Commissioner: This is quite close.

Witness: In my view this one concerns me quite a lot.

Dr Browne: Why?

Witness: From the perspective that he received a cheque on a Friday for $11,000.00 which indicated to me that it was written for travel, and then he travelled August 22nd to the 27th, we know that's a Monday to Saturday because it's given in the voucher those dates, and he was reimbursed by the government $7,152.27, that's my opinion that this could be an example of a double billing.

Commissioner: What you are saying is that he got an advance from the Port for the amount of $11,000.00 on a Friday, he travelled, he was in Washington from the 22nd, he got no advance from the Government, he claimed on the government 2 years later in 1990 for those expenses.

Witness: That's correct.

Commissioner: He claimed for those expenses and of course he has given no account to the Port Authority. What do we find at the Port Authority. No travel documents claim?

Dr Browne: None.

Commissioner: No Port's travel claim documents. So we have no vouchers from the Port to explain the $11,000.00?

Witness: None whatsoever that could be located.

Dr Browne: Did you find any evidence that any money was repaid to the Port?

Witness: No."

(b) Cheque number 74541 dated November 21st, 1989 in the amount of $17,544.00 to Mr Hugh Heyliger from the Port. [Pg. 1239]

"Witness: . . . . .the cheque disbursement ledger indicated posted to Accounts Posted Column, we could not locate the cheques stub or requisition form. There were no supporting documents for this payment located at the Port. In terms of the Government vouchers under item number 35, voucher S-285 indicated two amounts spent while in Miami, November 27th to December 2nd, 1989. In my comparison here the cheque that was written from the Port, November 21st, 1989, that was a Tuesday. They travelled on the government voucher for November 27th to December 2nd, 1989 was from Monday to Saturday. The total amount of the claim was $7,234.74 and the voucher claim was stamped and dated December 17th, 1990 and there are receipts that were submitted with the voucher."

The witness continued. [Pg. 1240]

"Witness: I would like to point out that he submitted his claim and certified it on 21st November 1990, and the catch that he used was the visit of Honourable Hugh Heyliger to Miami, November 27th to December 2nd 1989. Now what's significant here is the second government voucher in the same time frame.

Dr Browne: Look at item number 30 please. Mr Commissioner in your resource book...

Commissioner: . . . No. 30 yes. What is that? 22nd to the 23rd he was in St. Lucia.

Witness: That's correct. And that was a Wednesday and a Thursday. Now he received his cheque from the Port on Tuesday the 21st, so we can establish that he was travelling from the 22nd to the 23rd and then again from the 27th to December 2nd 1989 on voucher S-285. So both these claims were made in that period of time.

Dr Browne: Did he make any claim on the government for the St. Lucia trip?

Witness: Voucher S-273 was advanced 162/89 in the amount of $2,000.00. Amount spent while in St. Lucia, November 22nd to 23rd 1989 which was a Wednesday and a Thursday, the total of the claim was $1,147.93. I have written here returned $852.07 that claim was submitted December 12th, 1990.

Commissioner: Let's go back again. He received the cheque from the Port on the 21st November for $17,544.00 which you assume is for travel because you said it is written to Accounts Posted.

Witness: That's correct.

Commissioner: It didn't say here it is written for travel.

Witness: No.

Commissioner: However, on the 22nd he was in St. Lucia that is the next day, until the 23rd for which he claimed against government.

Witness: That's correct.

Commissioner: On the 24th to the 27th he is in Miami for which he claimed against the Government, but we have no accounting for the $17,544.00 from the Port. Is that the issue Sir?

Dr Browne: Which he got on the 21st. . . .

[Pg 1242]

Dr Browne: Could I have a look please, $17,544.00 21st November 1989, see if you see that cheque there 74541. Show it to Inspector Bloxom for me please. Sorry to break your trend but something is agitating my mind.

Witness: It appears that there is a cheque requisition, I missed it on my spreadsheet but the travel that's indicated. No, there is no cheque stub description, no cheque requisition but it indicated overseas training.

Commissioner: Overseas training?

Dr Browne: What does L908 mean? That's a ledger?

Witness: Yes."

[Pg 1244]


Commissioner: An account code. Let's check that with Ms Morris when she comes. L908 might very well stand for Overseas Training. So just taking that as it is, he got $17,544.00 for overseas training on that date. Travel to St. Lucia the next day and then to Washington and Miami in the following week. Claim on government for those expenses but we have no evidence of the accounting for the $17,544.00 to the Port.

Ms Morris confirmed that code L908 stands for overseas travel and training. [Vol 6, pg. 1345.]

(c) The third example is in respect of a cheque number 101806 dated April 20th, in the amount of $3,500.00 paid by the Port to Mr Heyliger. The cheque disbursement ledger indicated travel and posted to Accounts Posted Column. [Pg 1248]

"Witness: . . . . . . . In this particular case there's a cheque stub indicates travel costs to Washington DC, talks on down town pier, item number 23 of Government claims was submitted and its voucher S-252 and it indicates amounts spent while on government from April 23rd to the 28th 1990 which was Monday to Saturday. He received his Port's cheque on the preceding Friday which was April the 20th. Advance Warrant number 48/90 was given $6,000.00. The total of his claim was $7,704.73, also significant here is that the government documents indicate travel was Washington and New York and it was submitted December 10th, 1990. There are no travel documents or receipts located from the Port.

Commissioner: Let's get that. He was travelling on government business at least he claimed from Government on the 23rd.

Dr Browne: 23rd April to 28th April 1990 Sir,. The 23rd April was a Monday but that travel he claimed a total of $7,704.73. He submitted that claim on the 12th October 1990 and he got a cheque from the Port on the Friday before which was the 20th April 1990. Friday he got the cheque from the Port, he travelled on the Monday, claimed from the government, submitted the government voucher was paid but no documentation in relation to the amount he got from the Port.

Commissioner: The cheque stub said he was travelling to Washington.

Dr Browne: The cheque stub said he was travelling to Washington and he got $3,500.00 for that. The Government claim says he was travelling to Washington and New York and for that he got $7,704.73.

Commissioner: He had got an advance of $6,000.00 from Government?

Dr Browne: Yes please Sir, but his total claim amounted to $7,704.73, so he would have received the difference in that way, having had the $6,000 already.

Commissioner: And again there is no explaining the $3,500.00.

Dr Browne: No please Sir.

Commissioner: No supporting documents.

Dr Browne: No please Sir. . .

Commissioner: That requires an explanation?

Dr Browne: Oh yes."

Mr Heyliger in his prepared statement said "Much has been said at this Commission about proximity of claims made to government and money issued to me by the Port Authority for travel and possible overlapping. Although some dates on cheques may be close to dates when I travelled for government it was necessary to point out that at times the travel for the Port took place at different times. There were occasions when travel for one institution immediately followed travel for another. On these occasions I secured the necessary allowances ahead of time. There were occasions when meetings were postponed and rescheduled, as occurred in May, 1990."

The circumstances touching and concerning the expenditure of $7,289,363.06 as at 31 December 1995 by the former officials of the St. Christopher Air and Sea Ports Authority under the head "Advances to Government" without there been any or any proper record and/or accounting of such expenditure

The figure of $7,289,363 is referred to in the management letter of the auditors Pannell Kerr Forster for the year ended 31st December 1994. It is referred to as advances by the Saint Christopher Air and Sea Ports Authority to the Government.

As at 31st December 1993 an amount of $5,359,767.00 appeared for the first time in the draft financial statement for the year ended December 1993 where it was classified as a deferred asset. The notes to the accounts indicate that "the deferred asset" referred to was the accumulated amount as at December 31st 1993 which the authority had invested in the Government's Electrification Project. It said that "government intends to form a public utility corporation to own and manage the electricity system. The Saint Christopher Air and Sea Ports Authority is expected to have an investment in the public utility corporation."

In 1994 the balance of $5,359,787. was carried forward and was reduced by $2,415,851. which with a small addition $12,456. left a balance of $2,956,372. This balance was written-off to the accumulated surplus at the end of December 1994 as recommended by the auditors Pannell Kerr Forster. So that item of expenditure no longer appeared as an asset in the 1995 draft financial statements.

Further evidence of the electrification project was provided by Ms Denise Morris Financial Controller to the authority up to 1995. In describing the various items of expenditure which were classified as 'contributions to government projects she said: [Vol 2, pg 282]

"Witness: The Government embarked upon an electrification project between the Government, Port and Crown Agents, loans were negotiated. Even though the Port did not benefit from certain part of the work the Port undertook to finance the loan.

Mr Astaphan: The electrification of the Port?

Witness: Not specifically the Port. There was an area in Basseterre that was done.

Mr Astaphan: What about in relation to the Port itself? Was there an electrification project undertaken in conjunction with the Port or . . . .

Witness: Yes there was something with the Port, the Sea and Air Ports.

Commissioner: You're saying electrification of a part of the town was paid for by the Port Authority?

Witness: Correct.

Commissioner: As contribution to Government?

Witness: Yes."

Footnote

Mr Hugh Heyliger after the close of the hearings made available a copy of instructions dated 12th January 1993 to Barclays Bank PLC, Trade Finance Unit, Fenchurch Street London for payment in respect of (a) Angus Water Tenders for a Massey Ferguson Tractor and (b) Electricity Mains Cable or installation services. The instructions were signed by "Hugh C. Heyliger for and on behalf of the Government of St. Kitts and Nevis by and through the St. Kitts and Nevis Port Authority" and by "Asyll Warner for and on behalf of the Government of St. Kitts and Nevis by and through the Ministry of Communications, Works and Public Utilities." Reference is made to a contract dated 30th December 1992.


FRIGATE BAY DEVELOPMENT CORPORATION

A report of the Commission of Inquiry
appointed by His Excellency the Governor General
Sir Cuthbert Montraville Sebastian GCMG, OBE, MD, CM
by Letters Patent dated 28th July 1997

Randolph Williams Ph.D, FCCA, Attorney at Law
Commissioner

FRIGATE BAY DEVELOPMENT CORPORATION
OUTLINE OF THE REPORT

Introduction

With respect to the Frigate Bay Development Corporation the report consists of (1) an outline of the Frigate Bay Development Act, (Act No 13 of 1972) which governs the operations of the corporation and (2) five (5) sections in which the evidence concerning the matters specified in paragraph 7 (a -e) of the documents outlining the terms of reference of the commission is discussed. References to volume and page numbers are to the volumes of the verbatim notes of evidence.

Summary of findings

(a) The circumstances touching and concerning the sale of the Royal St. Kitts hotel

  1. The autonomy of the Frigate Bay Development Corporation is limited. The decisions of the corporation are in many matters subject to the approval of the responsible minister.
  2. Although the hotel was vested in the corporation it played a minimal role in the decision to sell the hotel and in determining the terms of the sale agreement.
  3. The terms of sale were influenced by the needs of and the circumstances confronting the government in 1983. In particular the main section of the hotel had been destroyed by fire in February 1983 and there was a urgent need to provide hotel accommodation for independence celebrations which were due in September 1983.
  4. Viewed from the perspective of the 1990s the terms of sale appear generous to the purchaser - including a moratorium of two years and payment by instalments over ten years without interest and without penalties for late payment.
  5. Further concessions were made to the purchaser including extension of the moratorium by two years, sale of additional lands at a price at the lower end of the price range, and the write-off of over EC$1/2 million from the purchase price of EC$20 million.
  6. Viewed from the standpoint of the corporation the sale of the hotel was not a good deal. However, benefits which are not reflected in the accounts of the corporation but which are important for national development are factors which must be considered in a full evaluation of the decision to sell the hotel and the associated transactions. Among these factors were the ability of the purchaser to increase the capacity of the hotel, the effect of increased capacity on tourism and direct flights to the island and other "external" economies.

(b) The purchasing of corporation lands by the then officials of the corporation giving rise to the abuse of their position.

  1. The Act provides that the business of the corporation shall be carried on without the purpose of gain for its members. The members consist of the chairman, vice chairman and seven (7) other members including the managing director. The members constitute the board of directors of the corporation.
  2. Residential lots were sold to directors of the corporation at a price lower than that prevailing at the time of sale, thus creating a potential for capital gains to the directors.
  3. Sale of land at concessionary rates to directors would appear to be inconsistent with the regulation that the business is to be carried on without the purpose of gain to members.
  4. Evidence which became available after the close of public hearings of the Commission indicates that the decision to sell residential lots to directors at concessionary rates was taken in 1979 by the Minister of Tourism, the late Paul Southwell. The minister is empowered by the Act to dispose of any profit or other accretions to the corporation in such manner as he may approve. Given that the decision was made by the minister, the sale of lots to directors at concessionary rates can be seen as a disposal of corporation profits to members. However I make no finding on this issue because I have given no weight to this new information. It was not given under oath and it was not tested by cross examination. Also there was no contemporaneous record eg. minute or resolution in support. Further, this new information is inconsistent with sworn testimony previously given by the informant.
  5. The evidence is that the decision applied only to members at that time and remains in effect only to that extent.
  6. It is recommended that the Act should be amended to provide explicitly for compensation to directors and that there should be disclosure of such compensation in the financial statements of the corporation.

(c) Administrative and management practices

Two administrative and management practices which are inconsistent with the provisions of the Act are identified and discussed. These are: (a) the failure of the corporation to render a report of its affairs and (b) the failure of the corporation to keep minutes of its meetings in proper form and to submit copies of confirmed minutes to the minister. The failure to comply with the legal requirements had a negative effect on the management of the corporation.

(d) The misuse and abuse of corporation's positions and property by persons involved in its administration and/or daily operations

The evidence indicates that the corporation rented its equipment to directors at rates 50% less than the standard rental. The findings and comments made under paragraph 7 (b) apply equally to such rentals to directors. Further, in the case of rentals the decision was made by the board of directors and not by the responsible minister. To that extent it cannot be explained as a disposal of profit. The practice carries the risk of conflict between the fiduciary duty of a director to the corporation and his own self interest. Such concessions made to a director should be disclosed in the financial statements of the corporation.

(e) Financial mismanagement of the corporation's funds

Using the rate of return on assets employed as a measure of performance, the corporation has performed poorly over the 1990s for which information is available. A rate of return of less than 2.5% from 1990 to 1993 is less than could be obtained in a bank savings account. In 1994 however there was a marked increase to 6.2%. These figures should be read with caution since the financial statements although audited were in draft only.

A number of areas of weakness in management were identified and are discussed in the report. One of these areas of weakness amounts to mismanagement in my opinion. The management of the corporation failed to pursue a policy of obtaining the best returns for its cash resources. Further, there was a potential conflict of interest in that the managing director, the chief executive officer of the corporation, was at the same time chairman of the bank in which the corporation had its bank accounts.

THE FRIGATE BAY DEVELOPMENT CORPORATION

Incorporation

The Frigate Bay Development Corporation was incorporated by Act 13 of 1972 which came into force on the 24th April 1973.

The Act vested in the corporation all the land situated at Frigate Bay and described in the schedule to the Act and referred to as the development area. The land was previously held by the Crown. The corporation is vested with the same estate and interest and to the same extent as the Crown had in those lands. Also vested in the corporation is all personal property belonging to the government and used by the government in connection with the development area.

The Act makes the corporation responsible for all liabilities incurred by the government prior to the commencement of the Act for the improvement or the development of the development area. In particular the corporation is made responsible for a loan of $2.4 million raised under the authority of the Frigate Bay Development Loan Act for financing development work in connection with the development of the area and defraying incidental expenses. Further, interest at the rate of 8% per annum on sums expended on development work from the loan is to be added to the capital cost of the development works. The corporation is required to make payments to the Accountant General in respect of sinking fund and interest on the loan and on the liabilities mentioned earlier.

Membership

The corporation consists of a chairman, vice chairman and not more than seven other members, appointed by the minister responsible for administration of the Act. Over the period the subject of this inquiry the relevant minister has been the minister responsible for tourism.

The minister is empowered to designate the chairman and vice chairman from among the members. The members hold office at the pleasure of the minister but for a period not exceeding three years in the case of the chairman and two years in the case of the other members. The members are eligible for reappointment on the expiry of their term of office.

The Act however provides that the minister may, with the approval of the Cabinet, perform the duties and functions of the chairman of the corporation for such period or periods as he may in the public interest deem to be necessary.

Objects, functions and powers

The main object of the corporation is the development of lands known as Frigate Bay Estate defined as the development area. It is the duty of the corporation to undertake and encourage the development of the area together with all necessary ancillary facilities. All those things are to be done generally in accordance with the plans and drawings approved by the Cabinet either before or after the commencement of the Act or in accordance with regulations.

For the purpose of carrying out the objects of the Act the corporation is empowered with the approval of the minister to purchase and otherwise acquire or hold personal property and any interest in real property including any lease, mortgage etc. and to sell, alienate, assign, dispose or deal with any of the property, real or personal, both present and future, held by or vested in the corporation. The corporation is empowered to borrow and invest but the exercise of these powers is subject to the approval of the Minister of Finance.

The corporation is empowered subject to the approval of the minister to impose special rates for services to properties within the development area and the minister is empowered to make regulations for this purpose.

Board of Directors

The chairman, vice chairman and members of the corporation for the time being constitute a board of directors who are responsible for the management and control of the affairs of the corporation. Meetings of the board may be held at such times as may be necessary for the transaction of the corporation's business and at such place and time as the board may determine. A quorum consists of five members. Certified copies of confirmed minutes of meetings of the Board of Directors are to be forwarded to the minister.

Profits and gains

The Act declares that the business of the corporation shall be carried on without the purpose of gain for the members and any profits or other gains shall be disposed of in such manner as may be approved by the minister.

Management

The minister is empowered to appoint on such terms and conditions as he may determine, a fit and proper person to be the managing director of the corporation. In determining the total membership of the corporation (which shall not be more than nine) the managing director is included ex officio. The managing director is the chief executive officer of the corporation and with respect to the development area he has all the powers and performs all the duties as may be conferred or imposed upon him by the Act or by any regulation made under the Act or by the board.

Without limiting the generality of his powers the managing director shall in particular be responsible for the day to day administration of the corporation's affairs and promoting the objects of the corporation. With the approval of the minister the corporation may appoint and employ on such terms and conditions as it may determine a secretary, accountant, clerks and other officers as may be necessary and proper for the efficient carrying out of the functions and powers of the corporation.

Policy directions

The Minister may after consultation with the chairman or managing director of the corporation give to the Board directions of a general character as to the policy to be followed in the exercise and discharge of its functions in relation to matters appearing to him to concern the public interest, including the disposal of profits. The Board must give effect to any such direction.

Exemptions

The corporation is exempt from income tax, stamp duties in respect of transfers and stamp duties in respect of instruments executed by or on behalf of the corporation. The Companies Act does not apply to the corporation nor does any Act or any other law from time to time in force relating to the lay out and maintenance of roads, subdivisions or to the erection and construction of buildings, etc. The Aliens Land Holding Regulations do not apply to an alien or an alien company in relation to land comprised in the development area and transferred to such alien or alien company by the corporation. However, an alien shall not hold any land in the development area as owner, tenant or mortgagee unless in addition to the stamp duties payable in respect of any transaction with which he is concerned, he pays the further stamp duty of $50.00 otherwise payable in accordance with the provisions of section 18 of the Stamp Act or any section passed in substitution or amendment thereof.

Annual Report

The corporation is required to make an annual report to the minister. Such report shall contain a financial statement certified by the auditor and auditors appointed under the Act and such other matters relating to the work of the corporation as may appear to be of public interest.

Summary

It is noteworthy that although the Act gives extensive duties and powers to the corporation and declares that the managing director is the chief executive officer of the corporation, the exercise of these duties and powers is circumscribed. For example the power to sell, convey, dispose of or otherwise deal with any of the property vested in the corporation is exercisable only with the approval of the minister.

In effect the corporation did not have unfettered discretion to sell or deal in its own trading stock. Every agreement to sell a lot of land required the approval of the minister. There was a dual track decision making process. The control of the corporation by the minister (and ultimately the Cabinet) was throughout the period covered by this inquiry reinforced not only by the fact that the minister appointed all the members but also by the fact that he was chairman of the board of directors. It is against this background that the matters contained in paragraph 7 of the terms of reference must be seen.

7 (a) The circumstances touching and concerning the sale of the Royal St Kitts Hotel

By an agreement dated 27th of April 1983 the Frigate Bay Development Corporation and the government agreed to sell (a) eight acres of land (approximately) including hotel buildings and burnt site formerly known as the Royal St Kitts Hotel and (b) approximately 14 acres of land fronting the beach together with cabana to Trans America Invest Incorporated, a company registered in the Cayman Islands. The sale price was EC twenty million dollars (EC$20 million), 'including interest'. The agreement also included undertakings by the government to grant a licence to the purchaser to operate a casino for 10 years and a 15-year tax holiday in respect of operations of the hotel and casino. The agreement was signed on behalf of the corporation by Mr Michael Powell, "Chairman, Minister of Tourism" and his signature was witnessed by the Attorney General.

The evidence before the Commission indicates that the board of directors of the Frigate Bay Development Corporation had little, if any, say about the agreement to sell the hotel and 14 acres land or the terms of the agreement. The evidence of Mr Liburd, managing director of the corporation at the time is to this effect: [Vol 2, pg. 349]

"Mr Moore: There was an agreement for the sale of the hotel?

Witness: I presume so. I have never officially seen one and to the best of my knowledge the auditor had never seen one either.

Mr Moore: You are saying you never saw that officially?

Witness: I am saying I have never officially seen one. The corporation in terms of the management has never had one in its possession.

Commissioner: When you say officially what you mean, unofficially you had seen one?

Witness: I have friends and I have seen it.

Commissioner: Because you were Managing Director from 81.

Mr Moore: And this is an 83 document.

Witness: I think the auditor has said in some of his earlier statements that he has never seen it."

Mr Samuel Nathaniel who was member of the board of directors of the Frigate Bay Development Corporation for well over 17 years and was vice chairman of the board of directors did not recollect the process leading to the sale of the hotel . He was asked: [Vol 3, pg. 449]

"Mr Moore: ...... as a member of the Board do you have a recollection of the process?

Witness: Not quite Sir. I must confess that the matter was mainly handled as a matter for the Government.

Mr Moore: That is the very reason in the context of what we have heard before. But let me ask you this then. From your perception the asset was an asset belonging to who?

Witness: I always saw it as an asset belonging to the government.

Mr Moore: Not the Corporation?

Witness: If you consider the terms, the Corporation borrowed money from the Government, large sums. And for years was unable to make a slightest repayment.

Mr Moore: So from your point of view the government was perfectly within its competence and right to be able to dispose of that asset?

Witness: I would not have regarded it as such.

Commissioner: It was like a lender foreclosing on a debt.

Witness: In a sense the tenant is totally unable to deal with the matter, therefore the lender have permission to go ahead and deal with the matter. It was quite a lot of relief as far as I was concerned to the Board.

Mr Moore: So it is of no concern to you that the government make the decision but did not communicate them to the Board to ratify?

Witness: It is of concern to me but there was very little we could have done at the time.

Mr Moore:You would have preferred the Board to have ratified it?

Witness: Yes Sir.

Mr Moore: Do you recall whether the Board did actually ratify it?

Witness: I can't recall a formal ratification given, but by consent if you will.

Commissioner: Do I understand you to say the price, the negotiations for the sale was not discussed at the Board?

Witness: It would have been discussed. But at what stage I can't recall.

Mr Moore: From your recollection, and I heard you just now, the Board would have discussed the price and the terms of the sale. But do you know whether the Board discussed them before they were actually finalised?

Witness: That was not the case if that answers the question. "

Mr Michael Powell who had signed the agreement for sale in his dual capacity as chairman of the board of directors and Minister of Tourism had this to say: [Vol 3, pg. 396].

"Mr Moore: ... Now Mr Powell if you recall who authorised the sale of the hotel?

Witness: Cabinet.

Mr Moore: As a result of Cabinet's decision did you convey something to the Board?

Witness: The Board was made aware of the sale.

Mr Moore: Did you seek the concurrence or approval of the Board? I know you say Cabinet decided it. But do you accept that the land and hotel was the Frigate Bay Development Corporation asset?

Witness: Yes I do.

Mr Moore: And that only the Corporation could dispose of its assets?

Witness: Well if that is what the statute says.

Mr Moore: You accept that?

Witness: If that is what the statute says.

Mr Moore: Well it does.

Commissioner: Show him the Statute. Section 9 subsection 2.

Mr Moore: It says that with the approval of the Minister for the purpose of carrying out the objectives of this Act, the Corporation shall have power with the approval of the Minister. And then you go down to "c" to sell etc. So you accept that the initiative for disposing of Corporation property should have been with the Corporation?

Witness: The Corporation discussed the matter. The Board discussed the matter.

Mr Moore: The Board discussed it and put it to the cabinet - you see I don't want to ask you cabinet business. You say the cabinet decided. Did the Board after that take its own decision?

Witness: The Board concurred with the cabinet.

Mr Moore: And so since you signed the agreement can I take it that the Board authorised you to sign?

Witness: Well as Chairman of the Board I was the one along with the Attorney General who is also a Cabinet Minister took all the discussions..."

There had been a fire which destroyed the main section of the hotel in February 1983. With independence of St. Kitts and Nevis scheduled for September 1983 it seemed the government had no option but to enter into an agreement to sell the hotel to the incumbent lessee. Mr Liburd's view was that:

"There was no choice because of the short period of time between when the fire happened and the celebration of independence unless they were going to postpone independence."

The agreement provided that the method of payment of the purchase price of EC$20 million was as follows:- (a) an initial deposit of EC$6 million, (b) a moratorium on payment of two years, (c) the balance of EC$14 million to be paid in ten equal annual instalments following the moratorium.

The agreement further provided that the insurance monies recoverable in respect of the fire would be assigned to the purchaser and the balance of EC$14 million would be secured by a promissory note from the purchaser and a first mortgage on the 14 acre parcel of beach land. No provision was made for interest on the $14 million dollars or in the event late payment; interest being included in the capital sum of EC$20 million. Mr Powell explained the absence of a competitive bidding process before entering into the sale agreement and the failure to provide for any interest or penalty for late payment as follow: [Vol 3, pg 400]

"Witness: We were in a situation at the time, as far as I am concerned it was an emergency situation. And everything was being done to try and get that hotel rebuilt, reopened in time for Independence in September. That was basically the modus operandi that the entire Government was operating in at the time."

The terms of the agreement were subsequently varied to provide further concessions to the purchaser. The moratorium was extended from two years to four years, that is up to the 27th April 1987; the rental of the hotel for the period from June 1982 up to the fire was reduced from US$400,000.00 to US$300,000.00 per annum, a balance of EC$550,000.00 required to complete the initial down payment was written off. Further an additional 11.9 acres of beach front land was sold to the purchaser at a price of US$35,000.00 when the asking price for such land was at the time about US$50,000.00.

Mr Powell explained these further concessions as follows: [Vol 3, pg 413]

"Witness: Yes. And like I said concessions were given, he will say well look I could add some more rooms if you all give me a break and that sort of situation.

Mr Moore: But when you give him the break because remember I know a little bit about Government too. So you give him the break to get him to add the rooms, but a year, two years and he don't add any rooms and he done get the break already ......

Witness: He did add the rooms. I have said that it was two times that rooms were added. When he took it over it was one hundred and thirty eight (138) rooms and he took it up to almost three hundred and there were two major installments of additions. It ran into millions of dollars."

As regards the sale of the 11.9 acres of beach front land at US$35,000 per acre Mr Powell explained: [Vol 3, Pg 408]

"Witness: He indicated to the government that he was in a position if a quantity of land was available to build an additional 800 to 1000 rooms. He provided a model of the project. He invited the entire cabinet one Friday after Cabinet meeting, all of us went into the conference room and he unveiled the model. Every single person in the cabinet was impressed and was excited because it was felt the additional rooms will get us over the hump of what the airlines called critical mass in terms of getting direct airline schedule services into the country. And that was the purpose of that land. It was agreed that he will be given the additional amount of land to cover that project."

The 1994 draft accounts indicate that an amount of EC$2.25 million was still outstanding on the purchase price of the hotel and the 14 acres of beach front land at the end of that year.

7 (b) The purchasing of corporation lands by the then officials of the corporation giving rise to the abuse of their position

Evidence by the auditor Ms Rublin Audain showed that land was sold at a price of $0.68 per square foot to some persons when the going price for such land was $4.00 per square foot. Mr Samuel Nathaniel already referred to, indicated that there was a special arrangement from 1982 or 1983 for sale of land to directors. He explained that for many years the corporation was in financial straits and did not pay its directors. However when business improved the decision was taken to give some recognition to directors by letting them purchase one lot of residential land not at current prices but at the price which prevailed at an earlier date.

He was asked whether the concession was still available. He replied: [Vol 3, page 464]

"Witness: No Sir. It operated then, only then. Not available now. It was only to those directors at the time because of what had happened. The concession was offered to the then directors not as an open ended offer.

Commissioner: When you say the then Directors up to what time?

Witness: At the time when the offer was given, I think it was 82, somewhere around 82, 83. That was about eighteen (18) years ago."

Mr Liburd, referred to previously, gave evidence to similar effect. [Vol 2, pg 97-102]. He referred to a 1979 resolution as the authority for the concession although he said he had not seen it. The explanation by Messrs Liburd and Nathaniel raises the question whether the concession to directors was consistent with the Act which states: [Section 3 (6)]

"The Corporation shall be carried on without the purpose of gain for its members and any profit or other accretions to the Corporation shall be disposed of in such manner as may be approved by the Minister."

Subsequently Mr Nathaniel wrote that the proposal to allow directors to purchase one lot of land at a concessionary rate was made by the then chairman C.A. Paul Southwell and was adopted by the board of directors. It came into effect before 1980. Mr Southwell now deceased, was Minister responsible for Tourism. (Letter to the Commissioner dated 14th December 1999)

7 (c) Administrative and management practices

Failure to report on affairs

A remarkable feature of the management of the Frigate Bay Development Corporation over the period covered by this inquiry was the failure to disclose its affairs to the public as required by law. The Act provides: [Section 24]

(1) "The Corporation shall make a report annually to the Minister and such report shall contain a financial statement certified by the auditor or auditors appointed under section 23 and such other matters relating to the work of the Corporation as may appear to be of public interest.

(2) A copy of the report shall be laid before the House and Assembly."

The evidence before the commission indicates that the annual report to the Minister was not submitted over a period of more than 10 years. Mr Liburd gave evidence as follows: [Vol 2, page 82]

"Mr Moore: Do you know whether the Corporation submitted to the Minister annually a report on the affairs of the corporation.

Witness: The Corporation did not submit a report annually to the Minister I think basically because the Minister virtually formed an integral part of the Corporation.

Mr Moore: I understand you but the law here says that an annual report have to be submitted that anybody could come now and pick up the annual report and look at it."

Further he was asked: [Vol 2, pg. 83]

"Mr Moore: In fact throughout the period you were there Mr Liburd there were no certified reports by the auditors.

Witness: I cannot say for the whole period but I know there were several years when the accounts were not approved by the Board and therefore were not certified."

Further: [Vol 2 pg. 94]

"Mr Moore: Here is a Crown Corporation that is not doing at all what the law says it needs to do for a period of ten years and I am saying we may look through the accounts of the Corporation and we may find that over the year it made a lot of money. A Corporation like that is expected to. It is land it is selling. Land just make money, so it is expected to make money. But how do we know that it should not have more money. How do we know it shouldn't have less money? We don't know, that is what the certified accounts are about. That is why the Board should meet and approve the account. Isn't it. I am simply saying that the law made certain demands, those demands were not kept and therefore for a period of ten years or more the audited statements, let me be clear, they were audited statement but the audited statements were not considered by the Board, your words, because they were not considered they could not be approved, the auditors never finalise them, never certify them and accordingly no reports to the Minister or to parliament. And that is what we are saying and that created in my opinion a major audit problem. I understand it may not be a financial problem, but it creates a major audit problem. Right or wrong?

Witness: I think it created a problem for the auditors yes, in that they are unable to completely tie off their work.

Commissioner: You say it creates a problem for the auditors but doesn't it create a problem for you? You are an agent of the Government or the people you have to give an account, you have to disclose. How are you going to rebut the allegation that something is wrong, you want to hide something.

Witness: I am not sure again and I am not playing with words, may be just your way of putting it over. Because remember I am answerable to a Board and to a Minister. When you use 'you', I am not sure in what context you are using 'you'.

Commissioner: Managing Director.

Witness: But as I said earlier the management each year took steps to ensure that the audit was done and I do not recall having had any qualified accounts nor have I seen anything in any of these things which suggest that the accounts were qualified."

Similar questions were put to Mr Powell, the Minister of Tourism at the time: [Vol 3, pg 247]

"Mr Moore: First of all forget yourself as Chairman for the time being as Minister did you ever receive this annual report?

Witness: Not that I recall.

Mr Moore: Mr Powell did you ever ask for it? The law says that you should have it.

Witness: I don't know that I did.

Mr Moore: Maybe that is not so terrible up to there. Let us look at what it should contain. It should contain the financial statements of the corporation certified by the auditors. Did you ever get that?

Witness: Not that I recall.

Mr Moore: Here is what appears to be an even more telling question. Do you know that throughout a ten (10) year period there was no certified audit statements of the Corporation? Do you know that?

Witness: I can't say that I do.

Mr Moore: And I read to Section 24, subsection 2, the report to be laid before the Parliament. The truth is none was ever laid

Witness: That's correct.

Mr Powell continued that on the Board of the Frigate Bay Development Corporation there were some very experienced and eminent persons and he relied on these persons for advice and assistance. He said: [Vol. 2, pg 417]

"Witness: I have said that and I maintain that. Very eminent people on the Board Sir. I believe I was the only person on the Board who didn't have the privilege of higher education so to speak.

Commissioner: Yes Mr Powell you have indicated your opinion on the quality of the Board and there was a sense of responsibility. I am wondering whether you have an explanation, an opinion, why is it the Board allowed the business of the corporation to be conducted in the way it was, such that you had no reporting. You had no approval of accounts, no reporting to Parliament because the structure of the Act, as you say the Cabinet gives you directions, you take those directions to Board meeting, you get it approved, a decision is taken but then the Act requires those decisions ought to be reflected in the report which are then sent to the Minister and put to Parliament. In light of your views about the eminence of the Board, the responsibility of the Board how do you explain that failure?

Witness: I am not sure I can explain it at all Sir.

Commissioner: It is an unexplainable abnormal event?

Witness: In hindsight when I look at all of these things they do not paint a pretty picture. It is true they do not paint a pretty picture. How it happened Sir I really can't even explain it at this stage. I cannot. I was chairman of the Board at SSMC, and the record will show that the same things didn't happen there.

Commissioner: One consequence of this of course is that all those things we are now talking about which would have been in the public domain, the public discussion was not there. One consequence of not having this disclosure is that all these matters that we are now discussing, all these apparent concessions for good reasons as you say didn't form part of the public discussion. You see what I mean?

Witness: Yes.

Commissioner: It takes a Commission of Inquiry to bring them out in the public domain. The law provides they ought to have been in the public domain from year to year so that the public would be aware. You see we are doing it for the public. We are not doing things for ourselves.

Witness: I understand Sir.

Commissioner: The Act specifically says that the Corporation shall be carried on without the purpose of gain for its members. In other words it is a Public Enterprise, a Public Corporation for the public good. But these matters which would have been for the public discussion were not disclosed. Was kept quiet. And that is the mischief of the failure of the Board to obey the Act. You follow what I am trying to say?

Witness: Yes I follow Sir."

The non-disclosure of the affairs of the corporation was raised with Mr Nathaniel who was for 17 years a member of the Board and continues to be a member of the board under the new administration and who is a Fellow of an international accounting body: [Vol 2, pg. 434]

"Dr Browne: Now as an accountant of some years standing what is the significance of the annual audits.

Witness: The significance really is to give credibility to the accounts. That is basic. They must be creditable.

Commissioner: What is the purpose of the financial statements?

Witness: The purpose of the financial statements is to show the state of affairs of the Corporation.

Commissioner: To whom?

Witness: First to the Boards of Directors. But then of course to the Minister who is responsible to the Government for the running of the organisation.

Dr Browne: And you are aware that these audited accounts ought to have been laid before Parliament annually?

Witness: Oh yes I am.

Commissioner: So they are significant part of the work of the Corporation. Don't you think?

Witness: Very much a significant part of the work of the Corporation and the responsibility of the Board of Directors."

Mr Nathaniel indicated that the work of the board of directors had improved. There was easier communication. The chairman was not the minister. He was asked: [Vol 3, pg 469]

"Commissioner: Now that you have mentioned that, I have canvassed this point with a number of persons but now that you are a continuing director perhaps you are the best person to canvass it with. I have been suggesting that maybe what should be done to cover this lapse in reporting is that those accounts over the years where they have not been presented, ten (10) years I think it was, ought to be finalised, approved by the current Board and submitted to the Minister, who would then do what he has to do.

Witness: Thanks for the suggestion Sir. I will pass it on when we meet next time.

Commissioner: You think it has any merit?

Witness: Yes it does for completeness.

Commissioner: For completeness and to satisfy the law.

Witness: You are quite right.

Commissioner: Because it is the avenue, the instrument by which the public takes part in the discussion. Isn't that so?

Witness: That is quite right.

Commissioner: That is the way the public is aware of what is going on in the board or what is the success or failure.

Witness: In fact the trend in a Corporation from state of stagnation to one of viability would have been obvious to all if these accounts were ready.

Commissioner: In fact this commission of inquiry with this term of reference would not have been necessary.

Witness: Perhaps not. I should note though that minutes are regularly kept at every meeting at present. It has been so for sometime now."

Minutes of meetings of the Board of Directors

The minutes of meetings of the board of directors constitute an authoritative record of the decisions of the board, including the rationale for such decisions. They constitute a source of authority for officers and employees. Without such a record one is reduced to relying on the memory of those who were present with the resulting uncertainty and inconsistency. Section 7 (3) of the Act provides that :

"Minutes of each meeting in proper form shall be kept and they shall be confirmed by the chairman of the next succeeding meeting. Certified copies of such minutes when so confirmed shall be forwarded to the Minister."

Evidence before the commission was that minutes were not kept in one location in a minute book. Instead minutes that were found were in different locations and the completeness of the information was uncertain. For a period of five years between 1985 and 1989 no minutes were found. (Report of the review by the forensic accountants, Kalesnikoff and Martens, August 1997. [Pg. 7]

The external auditors Simmonds and Associates in the 1991 report to management had observed that no minutes had been prepared for several years. Mr William Liburd who was managing director and secretary to the board of directors from 1981 to 1995 was asked to explain the absence of minutes and he replied as follows: [Vol 2, pg 71]

"Mr Moore: Tell the commissioner how the minutes of the meeting were kept?

Witness: The minutes were typed and then photocopied and circulated at board meetings.

Witness: They were kept in a file similar to this in a cabinet.

Witness: There were no hard bound books with minutes.

Witness: Yes they were kept in a way that were easily retrievable.

Witness: They were kept consistently together. As a file became cumbersome a new one was prepared and the date when that one started would be noted and sequentially.

Commissioner: Who kept the minutes? You had a secretary?

Witness: I kept the minutes. I was the secretary to the Board.

Commissioner: Oh you were managing director and secretary?

Witness: To the Board yes.

Commissioner: Would you have copies anywhere even now

Witness: No I would not have copies because seeing that I was the managing director they were kept on site. Certain members of the Board probably would have their copies.

Commissioner: Each meeting what would happen to the minutes?

Witness: Most meetings the minutes were approved. There were occasions when the minutes were deferred until the subsequent meeting.

Commissioner: Who signed the minutes?

Witness: The Board. They would have been signed by the Secretary and the Chairman. When I say secretary, the secretary to the Board.

Commissioner: That is you?

Witness: Yes"

Mr Powell who was chairman of the board during the relevant period confirms the evidence of Mr Liburd that minutes were produced and confirmed although on some occasions they were not available but deficiencies were made up subsequently. [Vol 3, pg. 246]

Mr Samuel Nathaniel who was vice chairman of the board for over 17 years however had a different recollection of the availability of minutes. His evidence was as follows: [ Vol 3, pg. 427]

"Dr Browne: Were minutes taken of those meetings.

Witness: Not always.

Witness: Minutes were not presented at all meetings.

Commissioner: Sorry let me get that clear. Minutes were not presented at all meetings. In the sense that they were deferred?

Witness: They were just not presented.

Commissioner: So there was no record of the decisions or activities of the Board of those meetings?

Witness: None was presented. I don't know whether there were records but none were confirmed."

He was asked further:

"Dr Browne: Now did you consider or do you now consider the lapse of such a requirement by the Act. What is your comment on that if any?

Witness: The absence of minutes?

Dr Browne: Yes.

Witness: I think it was a grave omission. A serious one.

Commissioner: Were you agreeing that there were no minutes over that extended period?

Witness: As I said Sir it is difficult for me to recall in detail as we have here just from memory. But it seems to me to fit the pattern that is on my mind.

Commissioner: An extended period you got no minutes?

Witness: Oh yes for a very long period.

Commissioner: Although you might have had a meeting or two?

Witness: Yes we did have meetings and there were notes taken of the previous meeting to which reference was made. So it was possible to pick up the threads as it were, but there was no formal minutes for confirmation.

Commissioner: Were these notes presented for confirmation?

Witness: No Sir. They were used at the previous meeting to sort of pick up the threads as we go along."

He continued:

"Witness: Oh yes as I said the Managing Director always kept notes. There was no question of that. So there was the ability of the Board to keep a sustained picture.

Commissioner: Were those notes made available to you?

Witness: No they were not. They were only presented at the succeeding meeting.

Commissioner: They were kept for his personal use?

Witness: Well I would have assumed that they were kept for the presentation of minutes. But I don't know whether he just did not get around to doing it on time or what, but the notes were available.

Commissioner: But you say somebody made promises? Minutes were promised.

Witness: That would have been the Managing Director because he was officially the secretary of the Board.

Commissioner: If you wanted to check up on some previous decision of the Board, what did you rely on?

Witness: Two things. I would rely on my memory of what took place and confirm it with a question to him.

Commissioner: To depend on his memory or on his notes?

Witness: My memory, confirmed by his notes.

Commissioner: Which you did not have access to?

Witness: Well if I asked a question he would answer. I just could not go and take away his notes.

Commissioner: How did you think of that arrangement of recording the business of the Board? What was your reaction to that?

Witness: It is proper to make notes to enable you to write minutes. I have no problem with that. But it is improper not to write the minutes and present them for confirmation.

Commissioner: And to what did you account this impropriety? Did you think it was a lack of keeping his promises, or difficulty in keeping his promises or what?

Witness: At one time I felt it was not high enough on the priority of the Managing Director's day to day business. Perhaps he put it off to do something else, put it off to do something else, put it off to do something else and another meeting came on him. That is my view.

Commissioner: But the law required it.

Witness: That is why I say it was a grave omission, because it is in violation of the law."

7 (d) The misuse and abuse of corporation position and property by persons involved in its administration and/or daily operations

The purchase of a plot of residential land by directors at a concessionary price was discussed under paragraph 7 (b). From the information available the policy was initiated by the chairman/minister Paul Southwell sometime before 1980. The rationale given was that directors were not paid. However the concession was extended to staff members. There is also evidence that land sold at the concessionary price was resold with a resulting capital gain (Griffin, Vol 1, pg. 207]. The evidence from Mr Liburd on this issue is as follows: [Vol 2, pg 180]

"Witness: Again I would want to make a point here that Directors were not paid. Because sometimes what is aired here gives people out there an impression. The directors were not paid.

Commissioner: Payment in kind is just as good as payment in money.

Witness: That is the point I am making. In lieu of payment.

Commissioner: I don't know the value of the benefit but if you can buy land at $0.68 which is being sold on the market for $4.00 and then having entered this agreement you can assign it to somebody at $4.00 or $5.00 per square foot. That is not a bad compensation.

Witness: Mr Commissioner I know you are talking about directors . . .

Commissioner: Staff members too?

Witness: Staff members had the privilege but lots of other people did that. Lots of people made money off the Corporation and I noted that prior to 1980 very few persons made use of the concession. Maybe they didn't have any confidence in the Corporation that they themselves were supposed to be running.

Commissioner: They didn't buy land?

Witness: Not many.

Commissioner: They could only get one lot?

Witness: One.

Commissioner: They couldn't repeat it every year?

Witness: No."

Concessionary rates to directors and staff did not apply only to the sale of land but also to the rental of equipment. The corporation rented out its bulldozers and backhoes and heavy equipment and there was a 50% concession when these were rented to directors or staff members. Mr Eugene Griffin who was employed in an accounting capacity from 1982 to 1989 indicated that part of his tasks involved the keeping of records for hired equipment. He was asked:- [Vol 1 pg. 197]

"Dr Browne: And everybody paid that standard fee, Board members, everybody?

Witness: I think there was some kind of provision for Board members.

Commissioner: And they were able to hire plant at a cheaper rate?

Witness: When it was for Board members I think Mr Liburd gave them concessions.

Commissioner: At the cheaper rate or nothing at all?

Witness: It all depends on him and how friendly he is with them.

Commissioner: It all depends on how friendly he is with them?

Witness: Or they can have the plant hired and pay nothing at all and he doesn't force payment that's why you have these kinds of C here. I use to send out letters of reminders and he stopped me doing it.

Commissioner: He stopped you doing what?

Witness: You see I use to send out letters demanding payment.

Commissioner: From whom?

Witness: From everybody here and he stopped me doing it and said he will do it himself and that is why this get so big because he never did it.

Witness: Well I put the amount there and later on he will just say write it off.

Commissioner: That was for Directors or anybody else?

Witness: It depends on who the person is. There are some people who he would make sure that they pay it and others he doesn't care whether they pay or not."

Mr Liburd was invited to comment on Mr Griffin's statement and some of his remarks was as follows: [Vol 2, pg. 112].

"Witness: Some of what Mr Griffin said was so - some of them don't even make any sense, they incoherent, they stop in mid sentence and things like that so I won't really bother with those things.

Commissioner: What about the discount? You recall the discount for directors?

Witness: That is why I asked Mr Moore if he wanted me to respond. As you said we are dealing with three (3) different matters in that statement. One, the price at which directors were sold land which was a policy made since 1979. Then he started dealing with concessions to directors in terms of rental of equipment which came in about somewhere in the 80's and again that was a Board decision, not Mr Liburd's decision. A board decision. Even with the staff concessions because it was not directors alone who had concessions on buying land."

7 (e) Financial mismanagement of the Corporation's funds

Financial management of the corporation involves the sourcing of funds and the use of those funds with the aim of maximising the value of the corporation. This implies minimising the cost of funds and maximising the return from the assets in which the funds are invested.

Because of the need to finance transactions as they arise and also because of the uncertainty of timing, a portion of funds must be kept in a liquid or easily accessible form. Such funds yield little or no returns to the corporation. To maximise the return of the corporation the remaining funds must be invested in more specialised, high-yielding assets.

Uses and Sources of Funds

Table 2 shows the main categories of assets in which the funds of the corporation were invested between 1990 and 1994 as well as the sources of funds. The figures are provisional only since the financial statements from which they are extracted are only in draft form and they are not approved by the board of directors. However, the figures give an indication of the trends and the financial policies of the corporation over the relevant period.

Table 2 - The use and sources of funds 1990-1994

Use of Funds ($`000) 1994 1993 1992 1991 1990
Current Assets 13,213 10,184 9,198 8,848 9,675
Account receivable after 1 year 2,800 4,200 5,600 7,000 8,400
Fixed Assets 13,735 13,754 12,704 12,060 9,976
Total 29,748 28,138 27,502 27,908 28,051
Source of Funds ($`000)
Retained Earnings 14,266 11,111 8,745 6,900 5,058
Loans 12,465 12,565 12,661 13,493 13,543
Deferred credit 2,251 3,552 5,454 6,932 9,006
Current Liabilities 766 910 642 583 444
Total 29,748 28,138 27,502 27,908 28,051

Source: Annual Financial Statements (draft)

Over the period 1990 to 1994 more than 50% of the funds of the corporation were held in low-yield, liquid and short term assets. In particular the item "account receivable after one year" is the amount outstanding on the sale of the Royal St. Kitts hotel and 14 acres of beach front land in 1983, and is non-interest bearing.

The fixed assets include buildings, equipment, land (including golf course) as well as expenditure on infrastructure including roads, electricity, sewage installations etc. The figures shown for fixed assets are the balances after deducting (a) depreciation of depreciable assets, and (b) cost of infrastructure included in the cost of lots sold. The return on those assets is reflected in the profit of the corporation for each year and is not ascertainable separately. The source of funds indicate the increased importance of profits in financing the assets and the continued reliance on government loans.

The consequence of the high proportion of funds invested in current assets is a low rate of return on assets employed. Table 3 shows that between 1990 and 1993 the rate was less than 2.5% and only reached 6.2% in 1994.

Table 3 Rate of return on assets employed 1990-94

1994 1993 1992 1991 1990
Profit for year ($000's) 1,853 678 619 (275) 281
Assets employed ($000's) 29,748 28,138 27,502 27,908 28,051
Rate of Return on Assets (%) 6.2 2.41 2.25 1.0 1.0

Source: Annual Financial Statements (draft)

The table tends to overstate the rate of return because fixed assets are measured net of depreciation and at historical prices but profits are measured in current prices.

Cash Management

An analysis of the composition of current assets for the period 1990 to 1994 shows that cash at bank and in hand accounted for 34% in 1990 rising to 60% in 1993 and reaching 70% in 1994.

Table 4 Composition of Current Assets 1990-1994 ($`000's)

1994 1993 1992 1991 1990
Cash at bank and in hand 9219 (70%) 6074 (60%) 3,569 (40%) 3,304 (37%) 3,315 (34%)
Accounts Receivable 1,158 1,273 2,664 3,168 4,195
Prepayments & Accrued Interest 46 39 35 37 49
Stocks (Lots & other inventories) 2,789 2,799 2,930 2,339 2,118
Total 13,213 10,184 9,198 8,848 9,675

Source: Annual Financial Statements (draft)

It is remarkable that a real estate development company held more than 50% of its funds in current assets and of these 70% was in cash in 1994.

A special audit conducted by Audain and Associates reported that the corporation carried large balances in current, non-interest bearing accounts. More than US$3/4 million and more than EC$1/4 million were held on current accounts at the end of July 1995. The auditors were of the opinion that bearing in mind "the level of activity of the corporation or the frequency of paying out," the large amounts held in non-interest bearing accounts were not warranted. [Vol 2, pg 52]

Funds held on fixed deposits earned between 3% and 6% per annum.

Mr William Liburd managing director over the relevant period sought to explain the large cash holdings of the corporation by saying that there were three large infrastructural contracts pending, and provision was being made to finance them. However, it appears from Table 7 (c) that the cash holdings were relatively high and increasing over many years. Further two of the contracts were under EC$817,000. in total and the third was under US$290,000.00. (Audain Vol 2, pg 43).

The cash holdings of the Frigate Bay Development Corporation provided its banker with a source of funds that was both inexpensive and reliable. The corporation management did not pursue a policy of maximising the return on the cash holdings. The following interchange with Mr Liburd is revealing:- [Vol 2, pg 59]

"Commissioner: I must confess cash management is not an area of great strength.

Mr Liburd: In terms of getting a higher rate probably that was not normal in terms of a Government Corporation because what really happened is that the bank tried to set-off so to speak, not in a legal way because I don't think it was strictly legal but Government, the central government and Government Corporations owes the bank a lot of money and in looking at what Government owes and what the Corporation owe and that is why you will find that most of the Corporations, the statutory corporation monies were held in National Bank because the bank was trying to establish that there were complementary monies to try to balance off the debts of Government.

Commissioner: So you are saying the Corporation's money was being used as a guarantee for central government . . . .

Mr Liburd: Not in a strictly legal sense but defacto.

Commissioner: But you are losing money in the meantime."

Further Mr Liburd continued: [Vol 2, pg. 203]

"Witness: ...... that this is a wholly owned government corporation and it could not move all its monies at the whims and fancies of the management.

Commissioner: I was not even talking about moving it to other banks, but at least trying to get higher rates of interest.

Witness: We are not a private investor. We could not negotiate in the same way as a private investor for the same reasons I just outlined."

Mr Liburd was, while being managing director of the Frigate Bay Development Corporation, chairman of the bank at which the corporation kept its accounts and he was asked whether he saw a conflict of interest between those two positions: [Vol 2 pg. 203]

"Commissioner: Was there a conflict in your mind between the interest of the bank of which you were chairman and the interest of the corporation of which you were managing director?

Witness: There was no conflict in my mind because as I said it was more or less common practice for government corporations to keep their monies at that bank because it was needed to enable essential government Corporations which were not doing as well as this corporation to access funds and also to assist in other developmental priorities that government might have had in mind.

Commissioner: I really wanted to get from you whether you saw a conflict between your job . . . .

Witness: The bank was the bank to the Government and to the Corporation and I think that is still the case."

The opinion of Mr Powell, chairman of the corporation and Minister of Tourism at the relevant time was obtained on the question of a potential conflict of interest between the two positions held by the managing director. [Vol 3, pg 266]

"Commissioner: There is an area which concerns me a bit and it is an area where I would like your opinion. One of the areas the auditors reported on is the question of excessive liquidity. Cash of the Corporation. We have heard from different persons that the Board gets funds from golf, from sales, so they have money. That money was kept at the bank sometimes on current account, no rates, in fact three quarter million US dollars was kept on current account at this particular time. Now we don't have the evidence whether it was there for a long time, but we found at the same time that the Chief Executive Officer of that Corporation is Chairman of the Bank. I am concerned whether there is a potential conflict of interest. The bank wants liquidity, it is in the banks interest to have liquid money and the Board has that money. I am saying there is a potential conflict of interest. Whose interest am I looking after. Do you have any awareness of that?

Witness: It goes right back to the point which I believe I have been laboring a bit too much. Politics again. His appointment as Chairman of the bank is politics. That is the problem. That is the heart of the problem.

Commissioner: Let us not go into the appointment. Let us look at the operation. He is Chairman ...

Witness: But it is going to affect it Sir. Once the politics put him in a particular position that is going to have an influence over behavior and thinking and the rest of it. It will always happen Sir, it is a natural.

Commissioner: Let me say again the evidence we have is for a particular date and we don't know that the account had been there for long. But it certainly struck the auditor that an organisation had so much money tied up at no rates of interest.

Witness: Again Sir probably the same person should not have been Chief Executive Officer there and Chairman of the bank board where the money is being kept. Again probably that should not have happened.

Commissioner: Particularly when from what you are saying there is a very little control over supervision. From what you are saying the Managing Director ran the show.

Witness: Yes he did."

Accounts Receivable

The accounts receivable is made up of instalments in respect of sales of residential and commercial lots due and unpaid at the end of the year, interest due on outstanding instalments, advances to employees and unpaid rental of equipment. The largest component in accounts receivable was interest on outstanding instalments which amounted to over $3/4 million in 1994.

The auditors who gave evidence before the commission were all critical of the management of credit by the corporation. In their view more attention should have been given to the collection of debts and cancelling contracts in many cases. As a result they were of the view that the accounts receivable was over valued and more provisions should be made for the bad and doubtful debts.

However, the figures in table 7 (c) indicate that over the period 1990-1994 accounts receivable was declining both absolutely and as a proportion of total current assets. Accounts receivable accounted for 9% of current assets in 1994 compared between 30% and 40% in the early 1990's.

Mr Liburd's view was that there was no risk to the corporation in the outstanding accounts receivable. The corporation still had title to the land and the rate of interest earned on accounts receivable was greater than the rate of interest available at the bank. He said: [Vol 2, pg 160]

"Witness: Any auditor when you have amounts outstanding would probably want to see especially if they might not, I say might not understand the system. For instance as I keep saying where the land is not alienated it is not a problem. In discussing the amount of monies that the Corporation had it was indicated that the highest rate we were getting is 4.5%. On all outstanding balances at the Corporation we were getting 10%. And I specifically, in terms of commercial land recommended to my Board where there was no shortage of land it will not be prudent in my view to prematurely terminate the contract and repossess lands if you are getting 10% interest as opposed to 3% or 4% from the bank and you still have the land.

Commissioner: You had a buyers' market for land? It was a buyers' market, there were not many buyers?

Witness: You had buyers, but you had adequate stocks of land at that time. So it was not that there was a scarcity and you needed to repossess to satisfy demand.

Commissioner: Buyers were in a strong bargaining position?

Witness: You might be surprised because there was land and there was no bargaining position in terms of residential land."

While Mr Liburd's view may be plausible in respect to land sales it does not apply to debtors in respect of rental of equipment which amounted to over $1/4 million in 1994.

Inventories

Inventories consist of stocks of lots for sale and other inventories - including spare parts, electrical supplies, pipes etc. Lots are valued at the original cost. Other inventories which made up the bulk of the inventory figure accounted for $1.5 million in 1990 and $2.25 million in 1994. The large investment of funds in inventories accounting for between 20% and 25% of current assets over the period 1990 to 1994 has attracted the attention of the auditors. The Audain report identified this as an area of great concern. Some of the items were found to be obsolete, others slow moving. For many years there had not been adequate control of inventories. The following is an extract from the Audain report. [Vol 2, pg 46]

"Witness: In our view for the size of the operation the inventory was considerably high. The value it carried in the inventory appeared to be high in some areas. And what you found was that in our view a lot of the inventory appear to be obsolete. What you found is that nobody seemed to monitor the level of inventory so that items would be bought when items were in stock, and items on the whole were very very slow moving. In some instances the packaging had disappeared so it was difficult to even determine. The storekeeper could not even identify what some of the items were."

Mr Liburd managing director indicated that to some extent the criticisms were valid particularly with respect to large items like pipes which were stored in the yard. However, he indicated that in terms of parts that can be moved a store-room had been installed from 1989. In his view "the type of spare parts that could be easily moved were properly taken care of in terms of a physical structure and in terms of having a storekeeper."

THE CENTRAL MARKETING CORPORATION

A report of the Commission of Inquiry
appointed by His Excellency the Governor General
Sir Cuthbert Montraville Sebastian GCMG, OBE, MD, CM
by Letters Patent dated 28th July 1997

Randolph Williams Ph.D, FCCA, Attorney at Law
Commissioner

OUTLINE OF THE REPORT

The Central Marketing Corporation was incorporated by Act No 19 of 1973 and is required to develop and carry out a coordinated programme to secure the most favourable arrangements for marketing agricultural produce and to carry out other activities necessary or advantageous or incidental to achieve that aim.

Following the outline of the main provisions of the Act, the evidence collected in the course of the inquiry is discussed under two (2) main sections:- (a) the misuse and abuse of positions, property and funds by persons involved in the administration and/or daily operation and (b) administrative and management practices. References to volume and page numbers are to the volume of the verbatim notes of evidence. The main findings of the inquiry are as follows:-

A. The misuse and abuse of CEMACO's positions, property and funds.

Misuse and abuse of positions

The Act empowers the minister to appoint a chairman and deputy chairman from among the nine (9) members of the corporation. The corporation is empowered to appoint such staff including a manager, secretary and accountant as may be necessary for the due and efficient administration and management of its functions. The appointment of the manager or secretary requires the approval of the minister. The Act does not expressly designate a chief executive officer of the corporation. I find that the involvement of the chairman of the corporation in the day to day decision making tended to reduce the effectiveness of management control, in particular in the areas of staff discipline, initiating and control of expenditure and control of property.

It is recommended that the chief executive officer of the corporation should be expressly designated in the Act.

Misuse and abuse of property and funds

I find that over the period covered by the inquiry there was laxity in control of the corporation's property and funds resulting in misuse and abuse in some cases.

(a) In particular, I find the chairman's use of a lawn mower, the property of the corporation, tantamount to abuse of its property. It reflected an attitude that the corporation's property was available for the public good as defined by him.

(b) I find the making of small loans to members of staff to meet urgent needs does not constitute misuse or abuse of the corporation's funds. However, the size of such loans should be related to the salary or wages of the staff member and should be for short periods. Loans extending beyond one year should bear interest and at a rate determined by the board of directors.

I accept the evidence that the amount shown in the books of the account as a loan to the chairman was not in the nature of a personal loan and in the circumstances the writing off of the loan did not constitute an abuse of the corporation's funds.

(c) I find that the making of small donations in kind or in money to schools, clubs and other charitable associations does not constitute an abuse of the corporation's property or funds. I accept the evidence that such donations may result in enhanced goodwill for the corporation but the amount spent on donations should be kept under review. In fact the amount spent on donations has declined significantly since 1989. However, the practice of making relatively large donations to prominent individuals, often in public life, for sports or community associations is prone to abuse. Donations if any, should be made only to associations recognised by the corporation and to recognised officers of such associations and the receipt of such donation should be acknowledged to the corporation by the associations themselves.

In particular the payment to the chairman of sums of money purportedly for sports or charitable organisations without his accounting to the corporation for the disposal of such funds constitutes an abuse of corporation's funds.

I find that an amount of $5,000.00 was paid to Mr Hugh Heyliger in August 1991 for the Sandy Point Football Association. Mr Heyliger was at that time Minister of Agriculture with ministerial responsibility for the corporation. I find his failure to account to the corporation for the disposal of the $5,000.00 constituted an abuse of corporation's funds.

There was no evidence that the monies paid to some individuals prominent in public life for purposes of sports or community associations (see Table 5) were disposed of for the intended purposes. I find that the failure to ensure that the funds were spent for the intended purposes gives rise to the possibility of misuse or abuse of the corporation's funds.

(d) I find that the practice of not requiring employees and directors who travel on corporation's business, to account for funds provided by the corporation to meet expenses of travel overseas to be prone to abuse. The practice tends to result in overstating estimates of the cost of overseas trips and increased frequency of such trips.

I support and repeat the recommendation made in 1992 by Mr Joseph Hughes that the directors of the corporation should control this area of expenditure with the utmost care.

B. Administrative and Management practices

The main management practices discussed in the course of the inquiry and the implications and consequences of these practices are listed in Table 5 (b).

In respect of two (2) of those management practices I recommend:

  1. A signatory to the corporation's bank account should not be permitted to sign a cheque in which he is the payee. The practice creates a conflict of interest and reduces the effectiveness of control of expenditure.
  2. Efforts should be made to provide segmented financial statements of the activities of the corporation. In particular the results of the main statutory function of the corporation (agricultural products) should be disclosed. At least the segmented information should be included in the management information system of the corporation.

Effectiveness of the Corporation

It is generally accepted that the corporation has not achieved its primary function. Even in its existing mode the future of the corporation as a going concern is uncertain. This section of the report contains the opinion of witnesses on management strategies and structures which may increase the effectiveness of CEMACO as an agricultural marketing corporation.

THE CENTRAL MARKETING CORPORATION (CEMACO)

Incorporation

The Central Marketing Corporation (CEMACO) was incorporated by Act No. 19 of 1973. The constitution is set out in the schedule to the Act. The Corporation consists of nine members appointed by the Minister of Agriculture for such period not exceeding two years, as the minister may direct at the time of the appointment. Members are eligible for reappointment. Of the nine members, two must be representatives of farmers engaged in the cultivation of small agricultural farms or holdings, one must be a representative of the business community who is a wholesaler or retailer of produce, three members must be civil servants. Of the three civil servants, one (preferably an economist) must be from the Ministry of Agriculture, another from the Ministry of Finance, nominated by the Minister of Finance and the third from the Ministry of Health nominated by the Minister of Health. Of the remaining three members one is to be nominated by the Nevis local government council, and another selected by the Minister of Agriculture to represent the sugar estates. A chairman and a deputy chairman are appointed by the Minister from the membership of the corporation.

Staff

The corporation is empowered to employ a manager, secretary, accountant and such officers and employees as may be necessary and proper for the due and efficient administration, management and performance by the corporation of its functions under the Act. The appointment of the manager and secretary is subject to the prior approval of the minister.

Meetings

Meetings of the corporation shall be held at such times as may be necessary or expedient for the transaction of its business, and such meetings shall be held at such places and times and on such days as the corporation may determine. The chairman or deputy chairman, or where both are absent, the person appointed by the Minister to preside over the meeting and four other members constitute a quorum. Minutes in proper form must be kept by the Secretary and confirmed by the chairman as soon as practicable at a subsequent meeting. Certified copies of conferred minutes are to be sent to the minister within the prescribed period.

Functions and Powers

The Act imposes a number of duties on the corporation. Its main duties are; to stimulate, facilitate and improve the production, marketing and processing of produce particularly for the benefit of the producer. To this end the corporation is required to develop and carry out a coordinated programme with the view of securing the most favourable arrangements for the purchase, handling, distribution, transportation, storage, processing and sale of produce, whether in the island or outside; and to operate and maintain services necessary or incidental to achieve those aims. Included among its functions is the supply of the necessary means of production, such as seeds fertilizers and insecticides to producers.

For the purpose of the Act, produce is defined as fruits, vegetables and any farm produce or foodstuff and includes livestock, poultry, fish and animal products. However sugar and cotton are not included in the definition of produce.

Although its main duty is the marketing of agricultural produce and the sale of agricultural inputs the corporation is empowered to carry on all activities the carrying on of which appears to it to be necessary, advantageous or convenient for or in connection with the proper discharge of its duties under the Act

Sources and Application of Funds

The funds of the corporation consist of grants by the minister from funds approved for the purpose by the House of Assembly, profits from its operations, loans, advances, investment income, etc. These funds shall be applied towards meeting the obligations and discharging the functions of the corporation under the Act and any incidental matters and the creation of a reserve fund of such an amount as the corporation may deem appropriate or expedient.

Accounts and Records

The corporation is required to keep proper accounts and other records in relation to its business and to prepare annually a statement of accounts in a form satisfactory to the minister, being a form which conforms with established accounting principles. The accounts of the corporation must be audited by an auditor or auditors appointed annually by the corporation and approved by the minister.

Annual Report

The corporation is required within three (3) months after the end of each financial year to prepare and present to the minister an annual report dealing with the activities of the corporation during the last preceding year, containing such information relating to its proceedings and policy as opinion can be made public without detriment to its interest and including an audited statement of its accounts. The Minister shall cause a copy of the report together with the annual statement of accounts and the auditors report to be laid on the table of the House of Assembly. Copies of the report with the audited statement of accounts shall be published in such manner as the minister may direct.

Policy Directions

The minister is empowered after consultation with the chairman to give the corporation directions of a general character as to the policy to be followed in the exercise or discharge of its functions in relation to matters appearing to him to concern the public interest and the corporation is required to give effect to any such direction.

Exemptions

The corporation is exempt from all customs duty on all plant machinery, equipment and materials of every kind imported by the corporation for the purpose of carrying out its functions. The income of the corporation is wholly exempt from income tax.

The misuse and abuse of CEMACO positions, property and funds by persons involved in its administration and/or daily operation

First we discuss the evidence relating to misuse and abuse of positions.

Misuse and abuse of positions

An issue before the Commission was the role of the chairman vis a vis that of the manager. Mr Maurice Browne manager from 1983 to 1989 and secretary to the board of directors put the issue this way. [Vol 2, pg. 115]

"Somewhere along the line it seemed that the chairman started assuming executive powers even though the Act is very clear that only the Board can make such decisions, and in my time it was never done by the Board. Nonetheless, the chairman seemed to be assuming more and more executive powers."

He continued, giving examples of the problems that arose from the involvement of the chairman in day to day matters:

"Witness: Well we could not discipline the staff as we saw fit without interference. We had very little say in who was to be hired and fired. Or even the remuneration of staff. Sometimes people got increases by Manager or a member of the staff being told to give them an increase. And there was one particular case that I had not been told that a worker was to be granted an increase, neither by the Chairman or members of staff. When the salary pay roll came up for my signature I realised that the salary stage was different from the previous month, and I inquired about it and was told the Chairman directed somebody to get an increase.

Dr Browne: And the person get the increase?

Witness: No they didn't get the increase. We had a little problem there. Because I decided that can't work so. Something like this somebody should have told me before. And if an employee is to get an increase it is important enough if the Chairman cannot contact me, he put it in writing because he was not around at the time."

When asked whether the chairman could grant salary increases without approval of the Board, he replied: [Vol 2, pg.118].

"Witness: Well I am not in a position to say because even though the Board might not have met. I don't know what transpired. In addition to that, all he had to do when he come into meeting, if he took an action and then wants the Board to approve it, he would say the Prime Minister say or the Minister and around four (4) people vote and five (5) have nothing to say. So that was the actual position.

Commissioner: He would say he had authority from the Minister or the Prime Minister?

Witness: He would say the Prime Minister say this must happen whether this is so or not no one can tell. That is how I look at that. But he would preface what he is going to do by saying that. . . . .

Commissioner: And call upon the authority of the Minister?

Witness: Invoke, and make the Board feel or the other members feel that this thing has Ministerial permission. This could be so or not so."

The conflict between the role of the chairman and that of the manager tended to affect discipline and control of the staff. The witness said: [Vol 2, pg. 116]

"Witness: Well at some point it developed into a problem. Because the major - if anyone is going to manage an organisation he must have control of the people under them. Because that is what you are really managing. You're managing people's behaviour to obtain a certain result and if you cannot manage the people, you would not be managing anything.

Commissioner: And you are saying the problem arose because of interference and what?

Witness: Well the manager was not allowed to discipline staff as he saw fit without an interference from him. Sometimes he bluntly refused to see that there is need to reprimand people.

Commissioner: So when you attempted to discipline somebody, the person would appeal to the Chairman. Is that what happened?

Witness: That happens too. Sometimes they go even before - they know that something has happened so they reach the Chairman before you.

Commissioner: and the Chairman would deal with it?

Witness: Even before I can make a report to him he comes to me on a matter that I have not reported to him.

Commissioner: And tell you that something has gone wrong?

Witness: Or he wants to know what has happened. So that creates problem."

Further he said: [Vol 2, pg. 129]

"Witness: Some employees seem to have a closeness with the powers that be which make them different from others. So they work for the organisation but they are outside the control of the Manager. Even though they should be.

Dr Browne: Look to the confidentially page 2. Read that into the record.

Witness: Nothing is being kept confidential. Too much of the Corporation's business is heard on the street. Some members of staff claim they could go to their favourite board member and get the information they need. And it is because of this that many times staff members do not wish to point out many of existing problems. Customers matters are being heard on the street."

Mr Marvin Edwards chairman of the corporation from 1984 to 1995 did not see any conflict in the performance of his role as chairman and that of the manager. The following is an extract of his evidence. [Vol 6, pg. 655-657]

"Commissioner: . . . . . What I am trying to say is that a problem which I seem to have identified is the relationship between the Management team and the Board of Directors in particular the Chairman. What is your reaction to this, how do you see it, how did you think it affected the operation of the Corporation?

Witness: Mr Commissioner, I don't think it had to do with anything of anybody trying to be an executive chairman. The Board had a responsibility and certain persons wanted to operate above the regulations and do as they please and whenever the Board had to discipline them they came to certain conclusions. If you take my presence here this morning. I am here as the Chairman of the Corporation. What transpired up there the responsibility is being thrown on me. It is not a question that Mr Browne is here defending the name of the Corporation or the Board. He is entitled to make any statement that he wants. I can tell you that I knew Mr Browne very well Sir. . . . . ."

Commissioner: Alright. We don't want to go into - Let's keep it within some ambit. What I am really trying to get from you is not a repetition except a general denial but the question of the relationship. Do you see that as a source of conflict? Do you see there ought to be some norms of the relationship between the Directors and the Management? Obviously if the management is misbehaving, if the management has cause to be dismissed then clearly there has to be action and you as Chairman must take a leading role there. But there has to be a situation where the Management has some initiative to get the job done, otherwise they lose control, they lose respect, everything breaks down as it appears here.

Witness: I disagree. We gave the management of the Corporation all the flexibility in the world Sir in terms of the operation. There was consultations between myself and the Manager and I don't know where these statements are coming from I find it really nonsensical that people could come and make these statements and they are not true. We gave them all the flexibility, we gave them all the support in terms of the discipline in the staff and so on. We arranged seminars, we had lectures, we got the staff to have get together, we had sports days, they would go on beachnics and so on, in an effort to develop the relationship. We did a lot of things in relation to raising the level of what was transpiring at the Corporation. I did lectures, Mr Hector did lectures, we brought in people from the Peace Corps to do lectures, we had consultants doing lecture. We did a lot of things and we tried to cement a relationship and a bonding between staff. I would say that CEMACO is no different in terms of the behaviour of some people in other organisations. I would say they are a little bit more uncultured and a little more aggressive. The same thing that transpires up there is the same thing that transpires in any normal business place. We recognise there was a problem and we did several things in an effort to deal with that problem. To say that somebody got an increase and they were on probation, I mean that stuns me because that is a matter for the Manager. Anything with probation he would make recommendations about the person. Nobody could give anybody anything and they are on probation, that is silly.

Commissioner: So you are saying in fact there ought to be a distinction between the governance and the management team and you are denying some of the . . .

Witness: Oh yes I am denying it and I would say that we strive to develop that relationship. . . . . . . . .

Mr Edwards defined the management team of the corporation as consisting of the manager, assistant manager and the accountant and he distinguished his function from that of the management team: [Vol 6, pg 693]

"Mr Merchant: When you say Management does that mean you?

Witness: No. The Management of the Corporation would be the Manager, the Assistant Manager and the Accountant. When I referred to Management, I refer to that particular team of persons.

Mr Merchant: What part did you play here?

Witness: Well that was not a duty for me. The difficulty I have with the questions you are asking me - At time it is being suggested that I was too much involved in the business of the Corporation, if I had taken on that particular posture it means that I would be running the Corporation, that is the difficulty. Some persons would come and make accusations and statements they want it one way, and they want it the other way. I could not involve myself in that because that was not the function of a Chairman. If a matter came up related to it or we weren't satisfied that something was being done about it at Board level then we would have discussed it and we would have made recommendations to the Management."

However, Mr Auckland Hector a member of the Board of CEMACO for six years up to 1995 gave evidence on the involvement of the chairman in day to day operations of the corporation. He said he had interactions with three managers during his term of office on the board of directors and he had on occasions raised the issue. [Vol 2 pg 175]

"Commissioner: What issues particularly?

Witness: The issue of ensuring that the day to day operations of the organisation is being managed by the Chief Executive Officer and not through the Chairman.

Commissioner: Why did you have to raise issues like these?

Witness: Well because I was aware of the fact that there were a lot of problems with staff which were being dealt with primarily by the Chairman of the Board rather than internally by the Chief Executive Officer as the case may be and I felt that those issues should be dealt with. Like I said I am a Chief Executive Officer myself, and one of the things that I really hate is for people to be going to the Chairman of my Board on matters that could be dealt with by myself.

Commissioner: And the Chairman entertains them?

Witness: Yes.

Dr Browne: But wouldn't that be a breach of the chain of command?

Witness: As I said I really don't like it and it's certainly something that undermines authority."

Mrs Juliette Liburd, a secretary at CEMACO for 11 years up to 1995, observed that there was an organisation chart and employees "would have to go to their immediate supervisors before they go to the manager. They just can't go straight to the manager like that, they have to go through their supervisors." However, in practice, she observed, the formal lines of communication and authority were not always followed. She said. [Vol 2, pg 165]

"Witness: You find some will go to their supervisor, some will go to the Chairman, or some may have gone to a member of the Board.

Commissioner: So there was no clear line of authority, the Manager wasn't sure what he could do. Am I putting words in your mouth?

Witness: No, no you are not putting any words in my mouth, but if I were in his position I would be not clear as to what my position was."

Misuse and Abuse of property and funds

Misuse and abuse of positions creates uncertainty within a corporation about the exercise of authority and reduces the effectiveness of control. Ineffective control tends to facilitate the misuse and abuse of the resources of the corporation.

Mr Austin Weekes who was assistant manager from 1991 to 1994 described the state of in-discipline at the corporation over that period. He said: [Vol 4, pg 359]

"Witness: Discipline extremely low, morale very, very low. I would say there was almost no respect for staff. There was noise in the Corporation, in the office area, the Auditors' Report alluded to that on occasions. A lot of pilfering from employees, the employees paid scan regard to the Corporation and its running. The lack of interest. It is a dire state of affairs, as far as I am concerned."

Government property is everyone's property

In Mr Edward's view the indiscipline, pilferage and uncaring approach to the corporation's property was related to the fact that CEMACO was a government supermarket as opposed to a family operated business. He said: [Vol 6. Pg 709]

"Witness: What I am trying to say to you is that because it is Government there is an attitude that I can do anything and get away with it.

Mr Merchant: And that's what you did?

Witness: But he must not ask me that.

Commissioner: I think it is a significant question. You have said because it's a Government supermarket - He is asking you whether because it is a Government supermarket you were lax in your control and management that's what he is asking.

Witness: Well if he is asking that question, and he did not ask me that question - If he had asked me that question I would say because of that very fact I tried desperately hard to make certain that in relation to the Management the abuse and so on that I attempted to stop some of that same abuse. That is what I would say."

The attitude towards government or public property identified by Mr Edwards is probably reflected in the anecdote about a lawn mower, the property of CEMACO. Mr Weekes, already referred to, said: [Vol 4, pg 359]

"Witness: . . . . . .a lawn mower was had by the Corporation to clean the surroundings at least to help with the cleanliness, and within a couple weeks of the use of the new lawn mower, I observed it wasn't on the Corporation. I was told by the storekeeper that Mr Edwards borrowed it, and very strange, I mean almost on a monthly basis he had access to this lawn mower. He took it for whatever purpose I don't know, whether his personal home or whatever. Incidentally, the lawn mower never did return to the Corporation it got messed up or whatever, the last time I was told it was in some shop somewhere under repairs. ......

Commissioner: The lawn mower never came back?

Witness: The last we were told of it, it was in a shop some place I don't know where. A mechanic shop for repairs."

For his part Mr Edwards explained the problem of the lawn in this way: [Vol 6, pg 719]

"Witness: Mr Commissioner, I live in a rural community, the village of Conaree and over the years I have been associated with sporting and community activity in the village of Conaree. I have played cricket, football, I have done other community work, I was in charge of the disaster committee et cetera in the area. There is a play field at Conaree. What has happened over the years is that we had difficulty in maintaining that play field, we got assistance at times from the Public Works Department, there were times we got assistance from the airport, but we had a lot of difficulty keeping the grass down. I assisted the community with the use of the lawn mower from the Central Marketing Corporation. In addition to that the grass verge in front of the village that was also being maintained as part of a community effort. I've heard certain allegations being made and certain statements, certain things have been said in public here about this particular lawn mower incident, and since I need to go and make my business public I am going to state for your records, I have 2 lawn mowers.

Commissioner: What happened to the lawn mower, did you have it?

Witness: Mr Weekes knows about it.

Commissioner: You returned it to Mr Weekes?

Witness: He said in here that he was searching for it, I suppose he knows where it is.

Commissioner: Sorry, you said you borrowed it?

Witness: Whenever the lawn mower was borrowed it was taken back."

Loans to staff members - Interest free

In an attempt to stop the pilferage and the abuse of the corporation's property, a policy of granting loans to staff was introduced. Mr Edwards explained it this way: [Vol 6, pg 633]

"Witness: . . . . . . We were having serious problems at the Corporation with respect to leakages, leakages could be theft, pilferage and that sort of thing. We were having an extremely high turnover of staff as well in certain areas, the cashiers, shop assistants, porters and that sort of thing. We did several studies as to what can be done to stop those leakages and one of the recommendations we came up with was that we found that most of the employees at the Corporation were female, we found that a lot of them were single parents, they were making the minimum wage and they were under a lot of outside influences hence problems developed and we came up with a policy: 1. that we would grant loans for emergencies, 2. that we would assist employees in achieving things like consumer items because we believe that some of them being single parents they were having difficulty because we did some investigations, and we were told "When we go to the bank, we tried to get some money we are told that our wage levels are not good enough" And so we put in place a system where an employee could apply to the Corporation for a loan to obtain for instance a consumer item. I should add at this point that at that particular time the Hire Purchase system which is very prevalent today was not like it is now and one could not really walk into a place and get things like that and so that is the basis under which we came up with the idea of assisting employees with loans."

In his evidence Mr Omax Gardner, resident partner of the Pannell Kerr Forster, said that balance owing on loans to staff members at the end of July 1995 totalled $8,023.00 with the largest being $2,705.00. Of the remainder the balances due ranged from a low of $20.00 to a high of $700.00. However because of high turn over of staff, loans were sometimes unpaid although there was some recourse to holiday pay and any other benefits that may be due to the staff member. The loans were non-interest bearing.

The books of account of the corporation at the end of 1994 showed a balance of $5,000.00 was owed by the chairman, Mr Edwards. The transaction originated in 1989, (cheque dated 25th February 1989 payable to Marvin Edwards admitted in evidence exhibit VH1.) However, Mr Edwards denied the transaction was a loan to him. He explained he went on a sponsored trip to Miami on the corporation's business, the expenses of the trip were to be paid by a sponsoring agency. Prior to his departure the funds had not arrived and the agency asked the corporation to make the necessary advances and it would be reimbursed. However the reimbursement was never made. In 1995 on the recommendation of the auditors the balance of $5,000.00 was written off. The evidence of Mr Simmonds, the auditor, was to similar effect. He said: [Vol 5, pg 429]

"Witness: Well it was on the books. The amount was on the books and I think when we questioned it, the Chairman said it was some amount to be sponsored by some organisation which did not come up with the sponsorship. Probably for a trip or something. And then subsequently it had to be written off. After we saw it could not have been received. Written off as doubtful.

Donations

The corporation's accounts revealed that expenditure on donations and subscriptions over the period 1989 to 1994 averaged about $23,500.00 per annum; from a high of about $44,000.00 in 1989 the expenditure declined to about $11,000.00 in 1994. The figures include a large number of small donations of money and food items to schools and community groups but also include a number of relatively large donations to individuals for sport and community activities.

The evidence indicates that the annual estimates of expenditure of the corporation included a provision for donations. The decision about the beneficiaries or the amount of a donation to a beneficiary was taken by the manager in the case of small donations. The following is an extract from the evidence of Mr Griffin who was employed at CEMACO from 1981 and was acting manager from 1989. [Vol 3, pg 197]

"Dr Browne: Did you have a specific allocation for say donations?

Witness: Sure we did have. We had a separate head.

Dr Browne: Who determines to whom donations are made?

Witness: Most donations were to schools, so in a case like that I would have an in-put in that. I am saying that in most cases these donations are to the school and I would have input into them.

Commissioner: You would have an input into what?

Witness: Granting a donation based on what they were asking for.

Commissioner: An application would come to you in writing?

Witness: They would send a letter to say that they are having a school meet etc and asking if we can donate `X' amount. Sometimes it is money, sometimes its goods. And I would determine in most cases if we could grant that.

Commissioner: That was within your sole decision?

Witness: Depending on the amount.

Commissioner: If it was more than what amount?

Witness: Anything over $500.00 to $1,000.00, I would seek the advice of my Chairman."

Further he said: [Vol 3, pg 204]

"Witness: A school may come and ask you for a few items for a sport meet or something like that. You will have them go and pick up the amount not in excess of what you agreed on. That is passed through the cash register, so at the end of the day you have to take all those slips and make a cheque payable back to the Corporation or the Senior Cashier, so that you could account for the money."

In Mr Edward's view donations were part of the corporation's marketing strategy. He said: [Vol 6, pg. 638].

"Mr Merchant: Could you explain Mr Edwards what was the policy of the Corporation on donations?

Witness: With respect to that we had defined a particular sales strategy and our sales strategy involves trying to have a very good relationship with certain institutions. For instance we did a lot of business with schools, churches, other charitable organizations and in an effort to develop the trade we sort of had a policy where we gave some incentives to these organizations with respect to donations. Let me elaborate a little bit. We had to capture a particular segment of the market in St Kitts. Schools they have fairs, sports day, dances, they have a lot of activities and we developed that relationship in order to get the business. Similarly in terms of churches and other charitable organizations we developed that relationship in order to capture that particular part of the market, so that it was part of our marketing strategy. Now, donations today in similar businesses is referred to as cash back they give you something back I mean even the ordinary customer when you go into a supermarket now you could be given a coupon, we dealt with it then under the basis of a donation, you apply to us and we could give you something but we generated a lot of business because of that particular sales strategy and that is how we were able to build some of the profit margins that we had."

In addition to the relatively small donations to schools etc. there were larger donations ranging in amount from $1,000.00 up to $5,000.00 given to a number of prominent individuals. In these cases there appeared to be no direct link between CEMACO, the donor, and the intended beneficiary. The donation, generally given in money, was paid to an individual, frequently a well known public or political figure. There was no evidence that the intended beneficiaries received the money or there was any acknowledgment that the donation came from CEMACO.

The report of the forensic accountants Kalesnikoff/Martens on Central Marketing Corporation of November 1997 observed that there was "no supporting documentation for any donations, most of the donations had no description in the disbursement ledger as to their nature or purpose. Many payments were made to individuals and recorded as donations." Table 5 shows donations of $1,000.00 and more paid to some prominent individuals.

Table 5 - Donations paid to individuals

Date Cheque # Amount Payee
89/06/21 70265 2500.00 Marvin Edwards
90/12/06 205041 4000.00 Marvin Edwards
89/06/15 210002 2000.00 Franklyn Daniels
90/08/31 238878 1900.00 Sam Franks
91/01/26 235789 2500.00 Donna Manchester
92/01/29 419893 1000.00 Eugene Hamilton
92/02/07 419953 2500.00 Junior Fraites
93/05/14 572821 1000.00 Roosevelt Caines

Source: Kalesnikoff Martens - Central Marketing Corporation,
Forensic Accounting Review, 1997 (Pg. 3)

For example, Mr Edwards explained a payment of $2,500.00 to him in June 1989 as follows: [Vol 6, pg 683]

"Commissioner: Let me understand it. A sports organization would approach you or approach the company for donations?

Witness: They would write a letter.

Commissioner: A cheque would be prepared, it would be made payable to you and you would endorse it to an employee of yours who collected the money and gave it to you and then you would give it to the sports organization?

Witness: Yes.

Commissioner: Why won't you then endorse it to the sports organization?

Witness: Because a lot of these organizations would say that they don't have - You see there is not a legal requirement in this country for sporting organization to have registered officers and bank accounts and that sort of thing and they simply ask for accommodation.

Commissioner: I am not saying you don't have a reasonable, a plausible explanation but on the face of it, it looks questionable. And the question is - Why is it if you have a cheque for the benefit of a sports organization, you say look here is the cheque, you endorse it and go and cash it, but you go through the arrangement of having your employee go and cash it and get the cheque and so on. So you are saying this is a case of a sports organization, you remember clearly?

Witness: Certainly Sir."

Further he was asked: [Pg. 725]

"Commissioner: You see there were a number of cheques which were paid by the company to a number of persons; Mr Edwards admitted one was $2,500.00 a donation, it was endorsed by him to somebody and so forth. He said it was a donation he received the cash and paid it. My concern about that was which sport or charity organization got that $2,500.00?

Witness: That would have been 3 organizations.

Commissioner: And you don't get receipts from those people?

Witness: They would have sent letters of acknowledgment.

Commissioner: Which would serve as a receipt?

Witness: Yes it would indicate that they received the money and what it was for.

Commissioner: And you are saying those documents are lost?

Witness: I think they should be at the Corporation.

Commissioner: This is the problem I have with the position you take. You have received money from the Corporation to give to persons, you don't give any account of what happened to those moneys, a cheque was signed by you, paid to you, endorsed by you to somebody who brings back the money to you, and then you don't tell the Corporation, you don't provide some system of accounting for that matter. That is my problem.

Similarly in August 1991 a donation of $5,000.00 intended for Sandy Point Football Association was received by Mr Hugh Heyliger who was then Minister of Agriculture with responsibility for CEMACO and parliamentary representative for Sandy Point constituency. The evidence of Mr Austin Weekes is as follows: [Vol 4, pg 350]

"Witness: The Chairman had telephoned and said that he would like a donation to be made to the Sandy Point Football Association. Mr Heyliger requested a donation to be made to the Sandy Point Football Association and he asked that the Central Marketing Corporation prepare a cheque for $5000.00 towards that donation. A cheque was made up payable to the Sandy Point Football Association and I can't recall what morning it was but the Minister came in himself, Mr Heyliger, I handed him the cheque, he signed the voucher form, but then he requested $5000.00 in cash, instead of the cheque.

Commissioner: He signed the voucher?

Witness: As receiving, yes. . . . ."

He continued, explaining why the cheque of $5,000.00 was shown as a receipt in the corporation's books:- [Pg. 352]:

"Witness: Why this would happen, because as I said the Minister requested he gets cash instead of the cheque, he wanted raw cash in his hands. So the cheque was then turned over to the senior cashier who was at the time counting the road sales and the cheque was exchanged there for $5000.00 cash and the cheque would have been lodged with the road sales for that specific time. The $5000.00 cash was given to the Minister."

The chairman, Mr Edwards, denied any knowledge of the transaction. However, Mr Heyliger acknowledged his signature but could not recall receiving any money. There was no receipt or acknowledgment from the association.

In a letter of 27th January 2000 in response to a notice of intention to make an adverse comment in relation to this transaction, Mr Hugh Heyliger has written as follows:-

"I wish to state categorically that the funds for the Sandy Point Football Association, which I was asked to collect on their behalf was received by the Association. The request was initiated by that Association with no input from me. They approached the Corporation and I was merely asked to collect it on their behalf. The donation was received by the Association. I was only acceding to a request. I am of the view and verily believe that the Association did acknowledge receipt of the donation. It was not for me to account to the corporation for the donation. The donation was not for me, it was for the Association and it was the Association's responsibility to acknowledge receipt of the donation, which I believe they did."

Overseas travel expenses

Overseas travel expenses rose from $19,000.00 in 1989 to $43,000.00 in 1994. The average over the six (6) year period was $42,000.00 per annum. No accounting was required for funds provided in advance to meet the expenses of overseas travel. The evidence of Mr Maurice Browne, manager of the corporation from 1982 to 1989, was as follows: [Vol 2 pg. 140]

"Witness: Initially we were given an advance for which you accounted for the cash . . .

Dr Browne: When you say accounted what do you mean?

Witness: You could spend over and above what you got for which you would be given additional money. Or you could spend under in which case you would be expected to return the difference. However, some time later that was changed and we got what you call a per diem. So it was a blanket arrangement. You got US$300.00 per day if you go to St. Marten or you go to St Croix and you spend.

Dr Browne: And you spend and when you come back you don't have to account?

Witness: That was how that worked."

Mr. Maxwell Griffin who was manager from 1989 to 1995 gave evidence to the same effect. [Vol. 3 pg. 221]

"Commissioner: A number of cheques are for travel. Staff travel. One is endorsed to someone else. How are you sure that somebody travels if you don't have any accounting for the expenditure? You as Manager how are you sure that somebody has travelled on your business?

Witness: Normally they would indicate to us, probably sometimes we get the stub of the ticket. I am saying it is strange that these things are not found.

Commissioner: But you are saying they returned nothing at all. They make no accounting.

Witness: We at the Corporation didn't have to do that. But on cases where my Chairman travelled he would have produced receipts at time."

Commissioner: So you are saying that the Board members, the Chairman in particular had to account for their advances?

Witness: I don't know if he had to. But there was occasion when he did.

Commissioner: On occasions?

Witness: Yes Sir.

Commissioner: Not always?

Witness: I can't say every time he travelled but I know he did return.

Commissioner: But employees didn't have to account?

Witness: No Sir. That is the system I met and we just followed it."

Mr Austin Weekes, assistant manager of the corporation from 1991 to 1994 attempted to reinstate a system of accounting for overseas travel expenses but was unsuccessful. He said: [Vol 4, pg. 328]

"Commissioner: . . . .. What are you saying about those visits?

Witness: One of my concerns was the frequent visits made by the Manager overseas. I recall during a 3 month period I think he had travelled possibly twenty something days to attend Food Fairs. Basic purpose was to see whatever supplies, commodities CEMACO could order from these fairs and on rare occasions we benefitted from any of these visits. I could recall one visit to Santo Domingo where he spent 10 days and the Corporation did not even - not even a box of match from Santo Domingo."

Dr Browne: Was any accounting done in terms of the expenses overseas?

Witness: When I got there no accounting was done but I put a form in place just for that purpose.

Dr Browne: Was the plan you put in place ever adhered to?

Witness: No it was never adhered to. I was privileged to attend just one Food Fair in St Croix and when I came back I had that form prepared, I submitted my statements, presented it to the Manager and no one took it on at all. Previous overseas trips and no accounting was done at all."

A report dated 7th of April 1992 addressed to the Chairman of CEMACO and copied to the Minister of Agriculture by Joseph Hughes emphasized the need to control overseas travel expenses. Mr Hughes is described as an accountant and internal auditor who had worked in the central marketing organisation in the neighbouring island of Antigua. He wrote: [Vol 4, pg. 372]

"Witness: Advances - Travelling Overseas. At various times during this year Overseas trips have been undertaken to Nevis, St. Croix , Santo Domingo, Puerto Rico, Jamaica, Miami and Cash Advances to the Manager have not been accounted in each case via the prescribed form set down by the Board of Management through the medium of an outlined Subsistence Allowance format. . . . .

The Accountant continues to charge the amounts direct to the Expenditure Account instead of Advances - "John Jones" in the first place and then debiting the Vote Account after the accountability has been established. The Board is advised to look at this area of expenditure with fervent caution. (Emphasis in original)

Mr Edwards the chairman admitted he knew of this report but no action was taken on the recommendation. He explained Mr Hughes did not have an official appointment and he did not like the way the report was done. [Vol 6 pg. 724]

The failure to require an accounting for funds provided for travel overseas provided the opportunity to the traveller to overstate the estimated cost of the visit and also tended to increase the frequency of such visits. Mr Edwards indicated that during his 11 year tenure of the chairmanship of CEMACO he travelled maybe 6 or 7 times at the most. [Vol 6, pg. 639]. However the following table from a report by the firm of auditors Pannell Kerr Forster indicates that over the 15 months from July 1993 to October 1994 Mr Edwards travelled overseas at least five times and for which he was paid just under $15,000.00. The auditors found no expense reports for these payments.

Table 6 - Payments to Chairman - Overseas Travel

Cheque Voucher Amount ($) Date Account
9806 1887 3790.76 July 21st 1993 Travelling
3341 2246 989.00 September 1st 1993 Travelling
5366 2786 3493.93 October 23rd 1993 Travelling
9979 1786 2603.60 June 1st 1994 Travelling
9986 2529 3811.27 October 3rd 1994 Travelling

Source: Report on the Effectiveness of the Corporation's Internal Controls and The Financial Reporting Systems, by Pannell Kerr Forster, (undated), circa 1995, page 2.

Administrative and management practices

This section is outlined as follows: First, reference is made to four (4) reports which discussed the administrative and management practices of the corporation. Secondly, management practices of the corporation are identified. The consequences or implications of those practices are briefly outlined. Thirdly, the effectiveness of the corporation as an agricultural marketing organisation will be discussed.

Reports of management practices

A number of reports on the management practices of CEMACO were referred to in the course of this inquiry. They are:-

  1. The annual reports of the auditors, Simmonds & Associates, to the management of the corporation for the years 1983 to 1994.
  2. The report of Joseph Hughes to the Chairman, Central Marketing Corporation, dated 7th April 1992.
  3. The report on the effectiveness of the corporation's internal controls and financial reporting systems by Pannell Kerr Forster (undated) circa 1995.
  4. The Central Marketing Corporation, Forensic Accounting Review by Kalesnikoff/Martens, November 1997.

Management practices of the corporation

The following is a list of 5 management practices discussed before the commission of inquiry and an outline of some consequences.

Table 7 - Some Management practices of CEMACO

Management Practices Comments - consequences
Persons travelling overseas on corporations' business not required to account for advances. Tendency to overstate estimates of travel expenses, increased frequency of trips, risk of abuse.
Payments to third persons on behalf of charities. Conflict between interest of third persons and interest of the corporation.
Involvement of board members (in particular chairman) in day to day decision making. Loss of authority of management team, in-effective control of staff and property of the corporation.
Signatory of cheque also the payee Conflict of interest, reduction of control of expenditure.
Non-segmented financial statements Contribution of different segments (agricultural products, groceries etc.) to the corporation's profit/loss is not disclosed in management information system.

The effectiveness of the Corporation

CEMACO was conceived and structured as an agricultural marketing organisation, to sell agricultural produce, to supply agricultural inputs to farmers and to perform ancillary services to agriculture. For many years however, agricultural produce has accounted for a small proportion of its turn over. Mr Maurice Browne manager from 1982 to 1989 observed that although the Act stipulated that the corporation should be marketing agricultural produce and doing things to promote more agricultural products being grown, the board of directors on his appointment "made it clear to me that my job was to make the present operation profitable otherwise they would have to close down the place." [Vol 2, pg 112].

He observed further that at that time 90% of the business of the corporation was really a supermarket business. He was asked as follows: [Vol 2 pg 113].

"Commissioner: When you say supermarket business, what you mean?

Witness: Retailing foodstuff, grocery items.

Commissioner: Agricultural products?

Witness: Well that was minimal. Fresh produce, imports like seeds, we did all of those things.

Commissioner: But what were you selling?

Witness: The business was really supermarket. Retailing foodstuff. That was the hardcore of the operation.

Commissioner: Retailing imported tinned stuff?

Witness: Grocery items, household items and beauty aids."

The operation of the supermarket has become the major line of business of CEMACO with agricultural produce accounting for about 4 - 6% of its turn-over in recent years. The future of the corporation does not appear, however, to be at all secure. Its net worth declined from $1.8 million in 1992 to $635,000 in 1993 and was $366,000 1994. If CEMACO is to become an effective agricultural marketing organisation the management of its relationship with the farmers must be a matter of the utmost concern. In the course of this inquiry the opinion of witnesses was sought on the future of CEMACO as an agricultural marketing organisation the interchange in this regard completes this section of the report. The following extract is taken from the evidence of Mr Maurice Browne who was Manager from 1982 to 1989: [Vol 2, pg 151.]

"Dr Browne: In your time and your experience were farmers anxious to sell you their local produce?

Witness: When they couldn't get anybody else to buy them.

Dr Browne: Why?

Witness: What farmers really wanted us to do was to buy their losses. Because the top quality stuff, there isn't a problem of them disposing of that. There is no problem of farmers disposing of top quality produce around here. But they seem to feel that they must sell everything that is grown and produce. They don't intend for certain, how to put it, the second class to go to waste. They are not prepared for that, they want somebody to buy it from them too, and buy it at a high price.

Dr Browne: And they normally sell their top quality produce to whom?

Witness: The hotels, the supermarkets and they go to the side of the road.

Dr Browne: And then they come to you? Maybe your price is not sufficiently competitive.

Witness: No, no. It is the psychology you have to look at.

Dr Browne: Tell me about that.

Witness: He is saying that he can't get what he wants from us. But he wants us to buy for what he is selling at the side of the road for. That is an impossible situation. If he is getting $4.00 at the road side, how can he sell me for $4.00. When the other people are selling for $4.00. I cannot buy for $4.00 when the selling price is $4.00. The retail price at the side of the road."

Mr Auckland Hector a banker and member of the Board of CEMACO for more than 6 years expressed the following views: [Vol 2, pg. 182]

"Commissioner: . . . . . What do you see as the prospects for an organisation like CEMACO, and the marketing of agricultural products in St. Kitts? . . . . . . We had a number of issues raised about the viability of the financial success, the economics of, problems of that sort. What is your observation over six years on the Board, you must have formed some opinion of that?

Witness: Well what has happened over the years is that, the institution really has not really fulfilled its mandate in that it is a marketing corporation and rather than getting heavily involved in the marketing aspect of agricultural products it has gone more into the buying and selling of retail items, the supermarket end of it. Sometime back there was a study done by a guy out of Guyana I think it was, he did a marketing survey and the idea at that point in time was to not give up the supermarket part of it, because it was in fact at that point in time the majority of the income for the Corporation and it was felt that they should move gradually into strengthening the marketing arm of the Corporation. I believe on my way here this morning I heard Mr Browne speaking about the problems in marketing the agricultural produce here on St. Kitts as a result of the farmers themselves not trying to utilize the organisation to its fullest. Because what is happening, the farmers are prepared to get the best price that they can get rather than thinking of trying to ensure that they have a market provided for by the Marketing Corporation that they will get regular income once they produce and produce at a certain standard, so that the Corporation itself can market their produce. But what has been happening is that farmers are really taking a second rate produce to the Corporation and trying to get higher prices outside. I believe that there is a need for a farmer's organisation where once that has been established you know you will have the standards of produce will be at a certain level and that you can market these produce not only locally but within the region. I think that, that is the way the Corporation has to move towards the marketing end of it, and move away from the supermarket aspect of its operation at the moment.

Commissioner: The farmer is being rational. Isn't he? Looking after his own business. Isn't he. By looking for the best price he can get for his produce. He is doing what he thinks he ought to do.

Witness: Yes but he has to spend time selling his own produce, where as if you have an organisation that is being set up, and you can take your stuff there and have a guaranteed price, you don't have any problems in trying to get your produce sold here and there. You know that the Corporation says that we want so much onions, we have an export market. We are not only looking at the local market because many a time there are situations where farmers have produced, had their produce rot in the fields because they don't have a market.

Commissioner: Yes.

Witness: And they have refused to take their stuff to the Central Marketing Corporation because of price.

Commissioner: Yes, because perhaps the cost of transportation will not be covered by the price being offered. You know someone once had experience of this type of thing, because the Central Marketing Board is an organisation, a monopoly, it tends to offer prices which are lower than what can be obtained on the best market. So the farmer looking after himself, goes to the best market, sells to the hotels, the restaurants directly and sells the best product.

Witness: Yes, but you have to recognise the situation where there is a glut. What happens to his produce?

Commissioner: When there is a glut then he will rush to CEMACO. That is natural. Isn't it? Won't you do the same?

Witness: Well, yes. I probably would.

Commissioner: You will do the same.

Witness: But I don't think it's the best thing for the country

Commissioner: Until the Corporation can offer a real service to the farmer such that it makes sense for him to be a regular supplier, he will not see it in his best economic interest to supply CEMACO. Why should he not get the best where he can get it? Isn't that so?

Witness: That's reasonable, yes.

Commissioner: . . . . . for example, if CEMACO can offer bulk purchase save him transport, save the farmer transport, save the cost of running around to sell, save him the risk because there is a risk.

Witness: All of that would be involved. The Corporation should really be the collecting the produce at the farm, they should be collecting the stuff there, transporting it to their own storage facilities and then selling it to the best market.

Commissioner: But that can only arise if the operating costs of CEMACO are low. You follow what I am saying?

Witness: Yes.

Commissioner: If CEMACO has an inflated cost because of bad management, confusion, stealing etc, etc. it can't work.

Witness: Point taken.

Commissioner: It can only do that if it is a lean organisation that is running effectively. You see why the problems we are discussing are relevant to the issue because if it is not operating properly, the morale is bad, people are stealing there, people not working, it can't operate.

Witness: I agree.

Commissioner: Alright I don't know whether you can help us further. You think there is a future for such an organisation in St. Kitts?

Witness: I think so. I certainly think that there is a future for the organisation. Of course, there have to be a lot of changes made in the organisation itself, addressing all those issues that you have just raised. Because in my case we are dealing with a lot of farmers. We are lending to farmers and we run into those situations where the farmers produce lie in their farm and they are not in a position to meet their monthly payments to our Institutions and we certainly would like to see a strong Marketing Corporation established here on the island and I think that there is room for an organisation such as what was envisaged the Central Marketing Corporation not necessarily what it is now."

Dr Jerome Thomas, Director of Agriculture, discussed the marketing of agricultural products in St. Kitts. He was asked: [Vol 4, pg. 294]

"Commissioner: Do you see a role for a marketing entity such as CEMACO?

Witness: It could be. CEMACO is one option. But there is need clearly for a marketing entity to market agricultural produce. CEMACO is one option.

Commissioner: And you have not looked closely at the CEMACO function yourself?

Witness: No."

Discussing the problems of distributing agricultural products, he continued: [Vol 4, pg 295]

"Witness: . . . . . But even where there is surplus, the timeliness of delivery is a problem. Very often supermarkets would complain that they cannot get the produce when they want it. So the timeliness is a problem. Often too the quality is a problem. You may get the stuff but because we restrict the local market, or restrict importations into, sometimes one may get a range of quality from grade A right down to the bottom being sold because the supermarkets you have to take it or leave it. And so that there are opportunities, that is the word I prefer to use, for an entity to be able to collect and market to the hotels and the supermarkets agricultural produce. So there is such a need.

Dr Browne: And you are inclined to the view that CEMACO could be one such entity?

Witness: One such entity.

Dr Browne: It should be under your regime. Don't you think?

Witness: I think you should give it the resources. One of my preferred option is private enterprise.

Dr Browne: As opposed to a state-owned corporation?

Witness: Correct.

Commissioner: Why do you have that option?

Witness: Because if you are in private enterprise and you don't make money you go out of business. When you are working for the Government or any State Company whether you make money or not you get paid.

Commissioner: It is interesting to hear you say that, but you are employed not in a private enterprise.

Witness: It is a fact what I just said. I interact with these people every day. With us, including me whether I work or don't work I get paid."

Further he was asked how could CEMACO help in distribution. He replied: [Vol 4, pg. 296]

"Witness: Well a marketing entity can attempt to arrange with the farmers - well first of all they would need to have the storage in place and then can arrange with the farmers to purchase the produce from the farmers. One option can be a contractual arrangement. One can have a contractual arrangement with the farmers where one may even advance some inputs and the farmers are contracted in some way to sell to whatever the Marketing Entity is the produce from the field on the assumption that the Marketing Entity is satisfied with the price and also the farmer. So that is a possibility."

Dr Thomas was of the view that the farmers had little regard for CEMACO. He said: [Vol 4, pg. 299]

"Witness: I think people generally ignored them. Farmers complain endlessly about CEMACO. The confidence level farmers have in CEMACO is almost nil or was. There has been an improvement. Farmers complain endlessly, you go to CEMACO with 50 pounds of cucumbers and they say they don't need them and before you reach home the phone ring they say you could bring them back. People get fed up of it.

Commissioner: That has been your experience?

Witness: Farmers. We are not personally involved. But there has been some improvement. What I should say is that occasionally CEMACO has attempted to market some agricultural produce. A couple of years ago they attempted to get involved in marketing onions. But I think a number of the infrastructure that would be required, you need to be able to store.

Commissioner: But you have it?

Witness: We have some. But you need to be able to, I don't think even now we are in position with physical capabilities to store a significant amount of agricultural produce for an extended period of time. . . ."

The reaction of Mr Marvin Edwards was invited about the reorganisation of CEMACO. The interchange went as follows. [Vol 6, pg. 657]

"Commissioner: . . . One of the problems which struck me as I went along is the relationship between the farmers and the Corporation. We do have some representations from farmers but how do you link the farmers to the Corporation not merely as a marketing device but to have a say, an input, a stake in the future of the Corporation if it is to survive. How do you motivate the farmers to sell good products to the Corporation?. . . . Is it conceivable a way of keeping the farmers with you, of having a company in which the farmers have shares, and in which they will have an interest in the outcome of the Corporation, so that instead of having a State Corporation which is a bureaucratic body, with a management, with a board you have an integral relationship between the farmers and the Corporation so that they know they will sell the product although the price is a bit less they have an interest in the outcome. What is your reaction to that?

Witness: I think it is a good idea but I think there are a lot of problems associated with that one. There is a problem in terms of the farmers. We tried to organise the farmers to have meetings with them in an effort to define policy in relationship between CEMACO and the Corporation. It was difficult having them put that relationship in place. There is no farmer organisation in St.. Kitts. There are other related problems. . . . . I believe that you would have to come with an entirely new arrangement in order to assist the farmers. I believe also that whatever the arrangement be you need to have a smaller outfit. . . . And that this unit align itself with the Department of Agriculture, so you can have a greater input from the people at the Agriculture Department.

Commissioner: Let me say that I do not deny that there are problems, there are immense hurdles, but then he question is, as you said - is there a need for an agricultural marketing organisation?

Witness: There is a need for an Agricultural Marketing Organisation.

Commissioner: If there is a need, how should it be structured so that you motivate some farmers to produce and sell through this organisation to maintain a certain volume because the figures we have the agricultural part of the activities is minuscule you know a 4% sometimes very minuscule and that is in recent times when there has been an increase. When you said, when you took over there was hardly any so it became another supermarket. Now the objective of the Act is to have an Agricultural Marketing Organisation.. It could very well be that just to have a Bureaucratic State corporation relating to the farmers is somewhat traditional and probably out of date now. It may very well be that we need some organic system where the farmers are part of the management, part of the governance of this thing and they have an interest, a financial interest because I don't think it is merely a question of patriotism and onus. There has to be a financial interest, an economic interest, to relate the farmers to the output, to the profitability . . .

Witness: I tend to agree with what you're saying sir, but I believe you have to have complete re-education policy with respect to farmers. Involve them yes in the management of whatever new institution you are going to put in place let them have an involvement because if they have that investment then the inclination would be that they would come to you first and not last."