Mr. Andrew Rosindell, M.P.
Chairman of the All Party Parliamentary Group on British Overseas Territories
Dear Sir,
INTRODUCTION:
Thank you for visiting our lovely Island of Bermuda recently. We sincerely hope that you found
your visit both enjoyable and helpful to you in your role.
The singular purpose of this submission is to ask for your intervention into what many here see
as an endemic problem with the current Administration, i.e. the PLP. That problem is one of
corruption, misuse of power and highly questionable use of public funds.
As you may well be aware from your visit and the discussions you held, for some years now,
there has been serious disquiet throughout much of the island as to the behaviour of certain
members of the ruling political party, and whether that behaviour is (at worst) criminal or (at
best) unethical.
We are aware of the comments you made to the media whilst visiting our shores regarding
corruption, but seriously question whether you have been made aware of the key issues here
with regards to the behaviour of the Government and our last Premier (Dr. Brown) in particular;
hence our submission.
Inevitably perhaps, it is of course difficult for us to always point you towards hard fact as to
much of the wrong doing. That said, we suspect that that is not a dissimilar position to the one
which faced the Turks & Caicos Islanders at some stage, and the corrupt activities of Michael
Misick and others; a situation we know you are familiar with.
Indeed, part of our concerns regarding corruption in Bermuda, stems from the fact that Mr.
Misick (T&C) is a good friend of Dr. Ewart F. Brown. In addition, people such as John Kerwin
(who are under suspicion for corruption in TCI) have been significantly involved with the PLP
Government here. On October 13th, 2010 the TCI Journal published the following comment:
"In our sister Overseas Territory of Bermuda we find some of the same personalities and developers who
helped fund Michael Misick’s extravagant lifestyle also appearing in controversial situations and resort
developments involving Dr. Ewart Brown, the Premier of Bermuda. Is it any wonder that Dr. Brown has
constantly come out in support of Michael Misick and continues to do so to this day in the face of
overwhelming evidence of massive and undeniable corruption by Misick?"
Here is a link to that comment:
http://www.tcijournal.com/index.php?openwinPid=1&id=8&idsub=3301
The parallels with the Turks & Caicos Islands are important. We quote from an article by Henry
Jolson by way of illustration:
“Unlike the old days of conquest, imperialism and slavery, the TCI suffers from a form of
conquest and abuse meted by duly elected members of the TCI Government. There is certainly
a paradigm shift and routinely islanders are denied rights, jobs, opportunities by the elected
government of the day.
Yet owing to a decided vesting of powers and policy control in the
elected Government, there is nothing the British Government can do to stop this runaway
Government unless it removes the Government”.
For many years, Bermuda has been seen as the "jewel" in the OT Crown, and rightly so. Until
1998, the island's economy and growth was managed extremely well by the current Opposition
(the UBP) and, whilst recognising that not all Bermudians shared in that growth, nonetheless it
provided a significantly superior life style for the vast majority in comparison to many other
OT's, some of which are to the south of us.
In 1998, the political landscape changed with the election success of the PLP after some 35
years in the political wilderness. To be fair to the PLP, it appears that the first few years were
essentially free of any wrong doing. Many here have no issue with the fact that the PLP forms
the Government of the day; others obviously will.
On a small island such as this, whatever the political party in power, there is always a hope that
whichever political party is in power, they will not shut out any particular body/group and
indeed be guided by the concept of doing what is right for Bermuda and all of its citizens, and
not simply following a party line. That said, there are a myriad of concerns as to the way the
PLP run the country that concern us, not least of which is the management of the economy; a
situation you made reference to whilst you were here when referring to the issue of debt. Debt
incidentally, which as at 31 March 2004 stood at $119,000,000. Today, just under 7 years later
after Premier Ewart Brown, has risen to $1,157,000,000.
We have chosen, however, not to confuse this submission to you with matters other than those
of possible corruption and abuse of power.
Central to our concerns is the last Premier of Bermuda, Dr. Ewart F. Brown who relinquished
office voluntarily in late 2010 after completing a term of four years in that role, prior to which
he was Deputy Premier. He held responsibility for various Ministries in his time including, as
Deputy Premier, Tourism and Transport. We believe that he held onto these two Ministries in
particular on his appointment to Premier, in order to provide him with significant opportunities
for corrupt behaviour.
By way of background, Dr. Brown left Bermuda in his early years and, via Jamaica, moved
eventually to the USA to continue his education at Howard University and subsequently to work
as a primary care physician in California. Dr. Brown has always been politically active, both at
University and subsequent to that.
Dr. Brown returned to Bermuda in 1992, after 28 years mainly in the United States. On his
return, he vowed to take back his Country, warning he had "scores to settle" and "accounts to
pull even".
At some stage in his career, he tried to obtain a licence to practice medicine here in Bermuda.
For whatever reasons, he failed in his attempt. We believe that this was the starting point for
what can only be termed his revenge on the peoples of this island and the lining of his own
pocket.
There is no question that Dr. Brown is academically bright. Arguably, he has tunnel vision with
regards to what he sets out to achieve, and he has the tenacity to see it through if he can. He
has a worldliness that is not typical Bermudian and which, in the right pair of hands, should
have been an asset to this island both politically and economically. Regretfully, his worldliness
was not an asset; indeed, it turned out to be very much the reverse, as a liability for us all.
To say that the four years Dr. Brown was Premier have been truly disconcerting, is to
significantly underplay the effect he has had on both the public purse and the psyche of the
island.
Wherever you look, whatever issue you look at, during his four years in office as Premier and
the years prior as Deputy Premier to Premier Alex Scott, it is difficult to conclude that he played
many of them straight. It is also difficult to conclude that whether for personal gain or
otherwise, he did what he did with the interests of the average Bermudian at heart. You will be
aware of what is termed locally as the “Uighur” issue; a situation that caused significant
disquiet with the UK Government, whereby Dr. Brown unilaterally decided to take 4 Uighurs
from Guantanamo Bay and bring them to Bermuda.
He consciously chose to not advise his Cabinet of what he intended to do. He consciously chose
to breach the Constitution of Bermuda by not referring the matter to the Governor of Bermuda.
He consciously chose to embarrass Bermudians across the island through his actions and also
the UK Government on the international stage.
This behaviour speaks to the heart of the man. It demonstrates the “low” he can go to achieve
his aims. It speaks to the utter disregard and contempt with which he holds the peoples of this
island, whether black or white, and it speaks to the contempt with which he holds the
Constitution and the UK Government.
Hopefully, the points so far will paint a general picture and be useful to you, as we now move
forward to key aspects of our concerns.
To understand why we have the concerns we have with regards to Dr. Brown, we ask you to
consider the following which sit at the extremes of Dr. Brown’s political tenure here in
Bermuda:
First, prior to one of the first scandals in which he was involved, known as the Bermuda
Housing Corporation (BHC) scandal, it is our understanding that Dr. Brown was facing financial
difficulties with his business. We know this from the Police Report into the BHC affair. The
information was released initially by a man calling himself “Son of the Soil”. That man
subsequently “went public” and his real name is Harold Darrell. Mr. Darrell took it upon himself
to release the information which had been entrusted to him, in order to expose Dr. Brown and
his activities.
Secondly, we are led to understand that by the end of Dr. Brown’s term as both Deputy Premier
and Premier, i.e. by the end of 2010, he had managed to acquire a number of properties. First
of all he had a house built in Bermuda with an initial construction cost of $1.455m; a cost that
increased by a further $422,000 which was funded by the tax payer, i.e. the Bermuda Housing
Corporation.
He has acquired another property in order to pursue a stem cell business, known as the Brown-
Darrell Clinic on South Shore. Thirdly, we understand he owns an apartment in New York, and
last of all, it is our belief that he purchased a property in Martha’s Vineyard at an approximate
cost of around $2.5m. At the time of the purchase of the Martha’s Vineyard property, the media
locally were advised that it had been purchased by his wife (Wanda Henton Brown), who is an
American citizen. We also understand that Dr. Brown has a property in the Turks & Caicos
islands. It is our view that whilst his wife has worked previously, we find it difficult to believe
that she was in a position financially to fund the purchase of the Martha’s Vineyard property.
He also posted a $4m bail, for one of his sons. Kevin Antario Brown was charged with sexual
battery and exploiting his position as a doctor in incidents involving a female patient and a
female undercover police officer posing as a patient. After Police appeals to the public, Dr. Kevin
Brown was finally charged with 19 felony counts, including a lewd act on a 15-year-old child,
rape, sexual battery by fraud and sexual exploitation. He wassubsequently found guilty of those charges.
In a preliminary hearing, Dr. Kevin Brown was ordered to be held in jail on $4-million bail. The
court commissioner noted that Brown was also being investigated in a multimillion-dollar
healthcare fraud probe by the state.
It is our contention, that Dr. Brown could not have funded the properties or provided the $4m
bail, by way of his legitimate business, his salary or his wife’s earnings.
So, with those two extremes in mind, we ask you take a look at the activities that we consider
amount either to corruption from which Dr. Brown has benefited, or are activities that have
benefited friends of Dr. Brown (and Dr. Brown perhaps indirectly) at the expense of the
taxpayer, or has abused his position.
In short, we set out to demonstrate that Dr. Brown has used his position for his personal
benefit and for the benefit of friends and family.
BERMUDA HOUSING CORPORATION - (1):
Dr. Brown owned property in Flatts Village. He submitted an application to the Department of
Planning to subdivide this property; the application was rejected because it left the residents of
the property nowhere to park. The Minister of Planning at the time, a Mr. Arthur Hodgson, later
overturned the Planning Board's ruling and approved the subdivision of Dr. Brown's property.
Dr. Brown sold the property that facilitated the parking for his Flatts property guest and
residence, to the Bermuda Government Parks Department for $200,000.00 to be used as a
public parking lot.
The documents indicate that via his real estate agent, Dr. Brown pressured the Bermuda
Housing Corporation's then Manager Mr. Raymond Dill to purchase his Flatts property for the
sum of $500,000.00; Mr. Dill refused because it did not fall within the ambit of the Bermuda
Housing Corporation's policy. Mr. Dill was invited to lunch by Dr. Brown at the Newstead hotel,
and tried to pressure him into signing a Sales Agreement to purchase his Flatts property. Mr.
Dill refused to sign.
Some time later, the now deceased Nelson Bascombe (then the Minister in charge of Bermuda
Housing Corporation), the BHC architect, and Dr. Brown met with Mr. Dill in the Senate to try
and persuade him to buy the Flatts property, Mr. Dill once again refused. Mr. Nelson Bascombe
subsequently called Mr. Dill and instructed him to put Dr. Brown's Flatts property into the BHC's
rental housing stock.
Following Minister Bascome's instructions to proceed, and without entering into a contract for
repayment with Dr. Brown, Mr. Dill had the Bermuda Housing Corporation renovate Dr. Brown's
Flatts property for the sum of $157,000.00. Mr. Dill, after the completed renovation, made
moves to purchase the Flatts property for the sum of $450,000.00 from Dr. Brown, in order to
recover the cost of renovation.
Before this sale was completed, realtor Dale Young (whose husband earned approximately
$800,000 per year from government painting contracts which was also investigated) contacted
Dill and told him that the property was being repossessed by the bank. So as not to lose the
funds the BHC had invested in renovating Dr. Brown's property, Dill felt ‘forced’ to purchase the
property from Dr. Brown for $500,000, the extra money going to pay off missed mortgage
payments. A subsequent investigation after the completed sale showed that the property was
not being repossessed after all; indeed there was at no time during the events any mortgage on
the property.
BERMUDA HOUSING CORPORATION - (2):
Allegations were made that Bermuda Housing Corporation funds were used to part-pay for the
construction of Premier Ewart Brown's private residence. These allegations were subsequently
supported by the release of copies of bank statements and copies of cheques, and given to the
Mid-Ocean News (a print media which no longer exists today). The documents reveal that the
BHC made a $422,000 payment to Bermuda Composite Construction (BCC) - the firm hired to
build Dr. Brown's home in 2000 - after the Premier refused to pay for any cost over runs. The
final cost of the project was $1.877m. The BHC funds were used to pay off vendors and sub-
contractors owed money following the completion of Dr. Brown's house.
BCC bank statements revealed that the company, which was part-owned and managed by
Progressive Labour Party candidate Zane DeSilva (currently Minister of Health), was only paid
$1.455 million by the Premier, i.e. the cost of the original contract for his residence on AP Owen
Road, even though the cost of construction rose by an additional $422,000 due to overruns.
The documents also reveal that BCC was expecting to show a $434,000 overrun on a BHC
contract it had secured at Southside to convert 20 buildings on the US base into homes.
According to former BHC general manager Raymond Dill, the reason for the overrun was
because expenses incurred through the construction of the Premier's residence were tacked
onto the BHC contract.
Mr. Dill made the allegations during an August 2002 interview with detectives investigating
widespread corruption at the Government-funded quango, which is believed to have cost
taxpayers around $8 million through inflated payments to contractors; a separate issue not
associated with Dr. Brown. BCC was incorporated in May 2000 by Mr. DeSilva and former PLP
MP Arthur Pitcher, along with business partners Kevin Bean-Walls and Leon Williams.
Copies of the documentation are attached.
As you may know, Dr. Brown went to great pains to silence the local Media, arguing that he had
a right to do so as the files had been stolen. The legal process subsequently ended up with the
Privy Council, who concluded fairly rapidly that the Press were entitled to publish.
The acting DPP at the time, Kulandra Ratneser, stopped the investigation claiming there was
insufficient evidence despite claims from police officers that there were cartons of material that
he had not reviewed. When contacted by the local press Mr. Ratnesser, by then a consultant to
government, stated that "if there had been evidence...". We find it difficult to understand how
he could claim there was no evidence if, as claimed by the police, he hadn't even reviewed the
material provided to him'.
TRANSPORT CONTROL DEPARTMENT (TCD):
This whole issue was the subject of an investigation by the Auditor General, who produced a
report entitled “TCD Special Report, October 2010” which can be accessed on line at
http://www.statistics.gov.bm/portal/server.pt?open=512&objID=235&&activetab=TabCTRL_DropDownTabsGovernment1&mode=2&in_hi_userid=2&cached=true
under Publications.
This was a Government Capital project. The key points with regards to this issue are firstly, that
the original budget for the development of the Motor Vehicle Safety & Emissions Testing
Programme was $5.3m. The final cost to the taxpayer was $15.23m, i.e. almost 3 times the
budgeted cost.
Secondly, and of particular importance, is that under normal circumstances, the management of
this type of project would fall to the Ministry of Works & Engineering. On this occasion,
however, management of the project was vested in TCD, a Department under the Ministry of
Transport of which Dr. Brown was the Minister.
The Government waived their requirements for tendering and awarded the contract to Bermuda
Emission Control Ltd (BECL) which, in turn, entered into contracts with Correia Construction
Company Ltd (CCCL) to build 3 facilities, none of which were tendered. BECL was also awarded
the contract to operate the facilities at an annual cost of $2.4m. CCCL is related to BECL as
both are 30% owned by the same individual, i.e. Dennis Correia, a man closely linked to Dr.
Brown. Dr. Brown's cousin Donal Smith owns 40 percent of BECL.
The Auditor General concluded that there were serious internal control deficiencies throughout
the process and in particular, that there was insufficient documentation to support increases in
the budget from $8.6m to $14.25m.
On October 26th, Sir Richard Gozney urged people with information on any criminal activity
attached to the development of the new TCD building and the emissions centres to contact
Police. Sir Richard in a press release said: “The Auditor General briefed me carefully on the
contents of the report and has my strong support in her decision to put the story in full, and
publicly, to the Legislature. I shall be interested to see how Bermuda's Legislature receives the
report, and to hear what recommendations the parliamentarians may make. “
He expressed concern over any project which suggested “poor governance and poor
accountability of large sums of public funds”. “The Auditor General's report paints a picture of
sloppy mismanagement and a lack of adequate controls. Any contract which is allowed to treble
in cost over four or five years cannot be well-managed.”
Sir Richard continued: “If anyone, inside or outside of Government, has evidence to
substantiate allegations of criminality, I urge that person to give it, as soon as possible, to the
Auditor General or to the Police. The Police would not hesitate to investigate such evidence and,
if upheld, to put forward a case for prosecution”. We await the further development of this
issue, but to be frank, we will not be holding our breath. Such is the way of things in Bermuda.
GLOBALHUE:
Another issue that was the subject of a report by the Auditor General.
This US based multi-cultural ad agency, is owned by Don Coleman, a friend of Dr. Brown.
Again, the Government ignored its own open tendering requirements, and awarded Global Hue
with contracts totalling some $28m in order to handle tourism advertising for Bermuda. As with
the TCD project, this too was the subject of a special report by the Auditor General here in
Bermuda. Specifically, the Auditor said that he had “misgivings about the appropriateness of
some payments to GlobalHue” and that the Department of Tourism may have paid $1.8 million
too much to the company.
GlobalHue buys time for their client through many outlets but one, Cornerstone Media, caught
the eye of the Auditor General. GlobalHue pre-bills the Bermuda for the placements. The
problem is that this practice is not allowed under the government’s financial rules. Plus,
Cornerstone Media has allegedly not provided invoices for placements, and as a media buyer,
charged commissions up to 181%. The report shows that Cornerstone’s average commission is
51%, and that the norm in the industry is 15%.
The Auditor General also states that Bermuda did not receive refunds on cancelled placements.
DOCKYARD:
A Government Capital project that sits as uncomfortably with many here, as the TCD project.
Again, a good friend of Dr. Brown (Dennis Correia) was awarded the contract to build an
extension to the pier at Dockyard; deemed necessary to enable Bermuda to attract the larger
cruise ships. Announced in February 2007, the Government stated that it was going ahead with
the pier at a cost of $35 million. In February 2008 Government announced that the readjusted
cost would be in excess of $50m - an increase of some 40%. The final cost was around $60m.
In response to questions, Dennis Correia stated that the price of the job went from $39 million
to $60 million because of design changes, additions, dolphin protection etc.
One item in particular that was highlighted in the media was the issue of crane hire. The
original rental fee of $8,000 a month for a Linkbelt Crawler Crane was detailed in a draft copy
of the contract drawn up between Correia and US subcontractor Norwalk Marine International
(NMI). The contract was made public by way of the Royal Gazette by NMI boss Louis (Skip)
Gardella.
When asked about the crane rental, Mr. Cardella told the media "We said the crane rent was
$8,000 a month but he (Mr. Correia) came back and said, 'No, we want you to charge us
$10,000 a week". It is also alleged that Mr. Correia sent an email to Mr. Gardella, in which he
said, “We are going to make tons of money and we can sit back and watch under a palm tree”.
FINAL SECTION
ABUSE OF OFFICE & HIGHLY QUESTIONABLE USE OF PUBLIC FUNDS:
BERMUDA CEMENT COMPANY:
The manufacture of cement in Bermuda (at Dockyard) was successfully carried out by the
Bermuda Cement Company for a period of around 40 years. The business was owned by Jim
Butterfield and six other shareholders.
The manufacturing facility was on leased land, and the landlord is the West End Development
Company (WEDCO); WEDCO is a Government quango.
In 2007, WEDCO placed two requirements on BCC; firstly that it demolishes its silo’s and
relocate to another part of the Dockyard area on the premise that the area was to be re-
developed, and secondly that 20% of the company’s shares should be made available to the
public. Jim Butterfield and fellow Directors concluded that it would not make economic sense to
demolish and then rebuild, and decided to sell the business.
What then happened amounts to a clear indication that the intention all along was to remove
Jim Butterfield and install a new owner; indeed Dr. Brown’s friend Dennis Correia. After what
was criticised locally as a bidding farce, WEDCO chose MAXCEM Ltd to operate the
manufacturing facility. MAXCEM’s major shareholder is Dennis Correia of whom we have made
mention earlier. To add injury to insult, the requirements originally placed on Jim Butterfield to
(a) demolish the silos and rebuild on another site, and (b) the requirement to make 20% of the
shares public, were removed as requirements for MAXCEM Ltd. The reason given for the
removal of these requirements was that the price of cement had fallen.
The reality is that the price of cement actually went up.
This whole process was a sordid, blatant publicly aired annihilation of an established
businessman in order to ensure that the supply of cement was transferred into the hands of one
of Dr. Brown’s friends. The process attracted significant anger locally, in particular from Black
business owners associated with construction, who argued that the bidding process was a sham
and, further, a foregone conclusion that the contract would go to Dennis Correia.
Essentially, the Government used its powers to determine who may succeed in the local
market, and to punish those it chose to dislike. We doubt you will be surprised to learn, that
cement continues to be manufactured in exactly the same place it has been for over 40 years
and without the changes required of Jim Butterfield.
BERKELEY INSTITUTE SENIOR SCHOOL:
This Government Capital project was the subject of a Special Report by the Auditor General.
In June 2001, the contract to build the Berkeley Institute Senior School was awarded to a
company called Pro-Active. The budgeted value of the project was in excess of $68.2m.
Cabinet’s decision to award the contract to Pro-Active was in direct opposition to the
recommendations of the Ministry of Works & Engineering, who concluded that Pro-Active had
neither the experience of large scale capital projects nor the financial track record to
successfully complete what was essentially the islands biggest capital project. The Ministry
concluded that Pro-Active was a “high risk” company.
For projects of this size, it is a mandatory requirement that contractors provide Performance
Bonds for 10% of the tender total, i.e. $6.8m. The Bond was eventually issued by Union Asset
Holdings (UAH). The owner of the 12,000 shares of UAH was the Bermuda Industrial Union
(BIU).
A payment of $700,000 to Pro-Active was authorised by the Government for the fee it had
(allegedly) paid for the Bond, although there was no evidence that Pro-Active had paid the
Surety the fee. There was also no evidence on file that UAH had the financial resources to meet
the $6.8m if called upon to do so; in itself, another failure.
UAH had been paid $700,000 by Government to buy the bond.
In the fullness of time, the Government terminated Pro-Active in 2004 for failure to perform
after delays in completing the secondary school which eventually came in three years late and
more than $55 million over budget.
After what was described by Dr. Brown, as several months and through numerous meetings
both formal and informal, he personally, along with colleagues, had “devoted considerable
energy” to the recovery of the sums owed by Union Asset Holdings. Dr. Brown stated,
“ultimately, Cabinet has decided it is in the best national interest of Bermuda to release Union
Asset Holding, and by extension the Bermuda Industrial Union, of its burden in the $6.8 million
dollar performance bond.”
In essence, here is a case where the Cabinet decided not to accept the advice of its own
Ministry, and chose to award a contract to a “high-risk” unknown company. The company failed
to perform.
The taxpayer has met the bill for both the $700,000 and the $6.8m. It is not sufficient to say
“they made a bad decision”. The Auditor General’s report suggests that UAH, and its owner the
BIU, were clearly never in a position to honour the bond if it was called upon. indeed, had they
been able to do so, then arguably the protracted discussions between the Government and the
BIU would not been concluded differently.
The project came in at $55m over budget, added to which is the $700,000 and the $6.8m
PLAYBOY MANSION/SON’S CHARITY:
In May 2008, Kevin Brown (a Los Angeles Doctor and one of Dr. Brown’s four sons) organised a
celebrity poker tournament at the Playboy Mansion in Los Angeles on behalf of the Urban Health
Institute. The Bermuda Ministry of Tourism donated free vacations as prizes for the winning
gamblers.
Premier Brown attended the May 17 party. The Premier later insisted that the tourism prizes
paid for by the taxpayer were part of a marketing campaign to promote the island to celebrity
clientele.
Serious doubts have also been raised with regards to the charity UHI. The Bermuda Sun asked
one of California's top experts in charity tax issues to analyse a financial document submitted to
the IRS by Kevin Brown's charity. Marcus Owens, who was an investigator at the IRS for 25
years and the head of the organization's charitable division for a decade, said that the 990 tax
return form shows a huge sum spent on office space, and yet presents "no kind of indications
that an office was being maintained" for the charity.
He said that the forms declare no fundraising staff, no assets such as computers or furniture
that you would expect to see in an office, and only very small sums spent on telephone bills and
utilities. "Not much was spent on electricity - in fact, zero was spent on utilities for fundraising
purposes," he said "No-one turned the lights on in that office..."
Mr. Owens said: "Looking at these figures... there are certainly red flags" [as to whether the
rental payments are genuine]... "warning signs that could prompt an IRS investigation. There
are these huge occupancy [rental] payments with no other indications of activity in an office."
A clear misuse of taxpayer funds and, if nothing else, a reminder that “charity begins at home”
not in Los Angeles off the back of Bermuda taxpayers.
STONINGTON BEACH HOTEL:
This also was the subject of a Special Report by the Auditor General.
The Stonington Beach Hotel is owned by the Bermuda College. From 1980 onwards, it was
owned by Stonington Beach Hotel Ltd, a wholly owned subsidiary of the college. The hotel
provides accommodation for tourists and on the job training for students in the hospitality
industry.
As the hotel made significant losses over the years and became a drain on the college
financially, it was decided to lease the hotel to a private sector operator but retain the right for
students to continue to be trained for the hospitality industry.
A selection committee was formed to determine who would be awarded the lease.
The Auditor General’s concern was that the lease that was finally executed was so materially
different to the Heads of Terms that formed the basis for the bidders, that process was
effectively compromised.
In December 2002, the lease was awarded to Coco Reef Resorts Limited owned by John Jeffries.
Mr. Jeffries is a known contributor of monies to the PLP Government. The lease took effect from
May 2003.
The lease agreement was substantially different in many important respects to the Heads of
Terms as follows:
• The property leased includes 1.9 acres of oceanfront land with two cottages located thereon
plus approximately two acres of woodland reserve. These were not included in the Heads of
Terms.
• The Heads of Terms call for a 21 year lease, whereas the actual lease is for 50 years. In
addition, Coco Reef has assurance in writing that an extension beyond 50 years will be
considered, and Coco Reef has first right of refusal should Government decide to sell the
property. These were not included in the Heads of Terms.
• The Heads of Terms define the uses for which the Hotel property can be used (hotel and
ancillary purposes).
The lease extends these by adding development and sale of
condominiums.
• The Heads of Terms stipulate an annual base rent of $600,000 for the first five years,
together with a turnover rent of 10% of “gross annual turnover”. The lease calls for no base
rent for the first five years, only an annual rent of 20% of “gross annual profits”.
• The frequency of rent reviews and the bases for calculating rents for years 6 through 21 are
very different in the lease than are called for in the Heads of Terms. And of course the Heads
of Terms do not address rents for years 22 through 50.
• One consideration for substantially reducing the base rents was that Coco Reefs undertook to
carry out a $12.9m upgrade of the hotel. However, this upgrade was part of Coco Reefs
original tender, so it is very unclear as to what additional benefit this gave the taxpayer.
More importantly perhaps, $9.9m of the upgrade cost was to be spent on 30 villa suites;
suites that can be converted to condominiums and sold.
Whilst certain differences between the original Heads of Terms and the final lease might be
expected, the differences here are numerous, financially significant and are significantly
different from the Heads of Terms.
In the interests of space and readability, we have listed only a few of the main concerns with
this process. There are more and are available as a publication on the Auditor General’s
website.
PAY-TO-PLAY:
MDL was one of a number of new fund managers recommended by Bermuda's pension fund
consultant Tina Poitevien in 2001. Ms. Poitevien, who has described Cabinet Minister Dr. Ewart
Brown's wife Wanda Henton Brown as a close friend and mentor, was appointed as consultant
to the Bermuda Public Funds Investment Committee (PFIC) in 2000.
MDL invested some $70 million in US fixed income funds for the PFIC between 2001 and 2004,
but they were replaced around year-end 2004 for poor performance. The company had been
paid $557,924.48 for its services over that period.
But even as MDL's performance for the PFIC started to slide, Mark Lay continued to scratch Dr.
Brown's back while he scratched Lay's. Dr. Brown, reported by the Pittsburgh Post-Gazette to
have attended the opening of Mr. Lay's new offices in that city in 2003, declined to answer
questions asking if he attended the event, if Mr. Lay was a friend, and whether Mr. Lay was
invited to attend the Washington fund-raising lunch in honour of Dr. Brown, held in Washington
in March 2002, when invitees (investment managers) were asked to contribute $2,500 to Dr.
Brown. He also refused to answer a series of questions about his political fund-raising.
Dr. Brown wrote: "My lawyers have advised me to make no comment to the media regarding
this matter." Tina Poitevien, CEO of the Philadelphia-based FIS Group] told the press that the
lunch was attended "by approximately nine persons, all of whom had close personal
relationships with Dr. Brown or his wife, Wanda Henton Brown”.
Subsequently, a US jury found Mark Lay had lost $216 million in state investment funds as part
of a wide reaching scandal involving the Ohio Bureau of Workers' Compensation, and convicted
him of fraud.
As Deputy Premier at the time, Dr. Brown had no responsibility for the islands Government
Pensions. It is our understanding that the cheques were made payable directly to Dr. Brown
personally. One must ask the question, "why" was he involved in an area that was outside of
his mandate as Deputy Premier.
FAITH BASED TOURISM:
This was the subject of a report by the Auditor General.
In April 2007, the Department of Tourism (DOT) signed an agreement with Harvest Investment
Holding Limited, trading as Faith-Based Tourism (FBT), for a 12 month period for the sum of
$400,000 FBT was contracted to produce a minimum of ten faith-based events and deliver a
minimum total of 2,200 visitors for Bermuda.
The contract was never put out to tender. The Department of Tourism claimed the FBT
initiative was a sponsored event and therefore not subject to the Government rules of
tendering. The Auditor General didn't agree.
Cabinet approved the project on April 10, 2007. According to the Auditor General, they went
along with a recommendation that the contract not be put out to tender because of "the
tremendous success of faith-based events during 2006, and the desire to capitalise on the
obvious strength of the proprietor of FBT".
This decision puts the lie to the claim the $400,000 was event sponsorship.
The written contract - which was vetted by the Attorney General's Chambers, as it should have
been - did not, according to the Auditor General, adequately cover accountability, fiduciary and
custodial responsibilities. "All payments under the $400,000 contract, except for the final
payment of $20,000, were to be made only on the provision of written expectations and
intentions, well before the delivery of the contracted services", the Auditor General reported.
"This", he added, "is contrary to the responsibility of civil servants to protect public assets".
Cabinet approved the contract on April 10, 2007, but an initial payment of $25,000 was made
on April 4, 2007 - six days earlier. An authorised purchase order was subsequently drawn to
support and facilitate payment, but the fact is that a $25,000 advance was made without the
requisite authorisation i.e. Cabinet approval.
"This", the Auditor General opined, "is a breakdown in the Ministry's control system."
A condition for making the first payment of $191,000 was proof of an insurance policy and a
detailed listing of ten events, dates, venues, and targeted visitors for each event. The Auditor
General in his review found that this condition was not met. There was no evidence of receipt of
any insurance policy, no evidence of a forecast of targeted visitors, and the overview only
accounted for eight of the ten events. Nonetheless, the $25,000 payment was made on April 4
followed by a further payment of $166,000 on April 13, 2007.
The Auditor General never found any clear evidence that FBT produced ten faith-based events
and 2,200 visitors to Bermuda.
The contract had called for a report upon completion of the ten events showing:
• the targeted number of visitors was achieved;
• a financial statement detailing monies generated and expenses incurred;
• a summary of the benefits generated for Bermuda; and
• copies of media coverage, locally and abroad.
But, reported the Auditor General: "No such report was received".
The House of Assembly was told that a total of $345,200 had been paid to fund the faith-based
tourism initiative for the financial year 2007/2008. We were given a list of 15 events which had
received funding, which totalled $208,089.02 along with a $29,250 payment to the Bermuda
Hotel Association "(Rent for Harvest Investments)". That still left over $100,000 for which there
was no formal accounting or explanation.
The total number of visitors the events brought in was 482.
The Auditor General was also interested in knowing where the money went. He was able to
obtain a copy of the April 2007 bank statement for Harvest Investment Holdings Ltd. Of the
$191,000 that had been advanced, he found what he regarded as the following "questionable
account transfers":
$38,089 worth of payments to Andre Curtis
$11,906 applied to an Andre Curtis credit card.
a $20,264 payment to Vision Construction; and,
a $30,000 payment to the Emerald Financial group.
The Auditor General concluded his review by recommending a police investigation for what he
regarded on its face as "a questionable use of funds". He thought too that there had been "an
inexcusable lack of care" by the Department of Tourism in the oversight and administration of
this particular contract and called on the Head of the Civil Service to take appropriate action as
well.
Despite the fact that this was matter was raised in the House of Assembly, Dr. Brown showed
no signs of wishing to investigate what was clearly a payment for anything other than Faith
Based Tourism. He finally issued a statement when the Police were asked to investigate,
indicating that The Ministry of Tourism would co-operate with the investigation.
CLOSING REMARKS:
First of all, we thank you for taking the time to read through our submission. We appreciate it
may have seemed a lengthy tome, but we have to tell you that there are many other issues
that we could have included. We made reference earlier to the Auditor General and the Special
Reports that were produced. You can find them online here at:
http://www.statistics.gov.bm/portal/server.pt?open=512&objID=235&&activetab=TabCTRL_DropDownTabsGovernment1&mode=2&in_hi_userid=2&cached=true
We appreciate that it is tempting perhaps to say..."well, there has been a change in Premier".
We appreciate that one could say “it’s time to move on”. We also appreciate that there are
significant costs associated with a Royal Commission. BUT - against that background, we urge
you to give the peoples of Bermuda the same opportunity as the peoples of the Turks & Caicos
Islands.
We have to slay this ghost once and for all. The truth about the dealings of Dr. Brown need to
formally come out into the sunshine once and for all, and we are asking for your support in
achieving that.
Our thanks to you, once again, for reading our submission.
The Concerned Citizens of Bermuda
CC:
His Excellency Sir Richard Gozney - Governor and Commander-In-Chief
