Published Thursday October 1st  2009

It might seem impossible, but we have been pushed into greater confusion by the events of the fortnight since the last Property Matters appeared.

Despite a fresh round of confusing denials, UDeCOTT are reported to have maintained their legal action to challenge the Uff Commission.   That challenge includes claims as to the alleged bias of the Commissioners.  UDeCOTT continues to deny that the purpose of these legal challenges is to de-rail the Uff Commission.  If those actions were to be sustained and to eventually succeed, the Uff Commission would be de-railed.  Some attorneys have pointed out to me that there have been no studied statements as to whether an Enquiry with a reduced number of Commissioners is still effective under the law.  Even so, justice must not only be done, it must appear to be done.  Point being, even if the Enquiry with a reduced number of Commissioners is lawful, it will hardly be able to command any moral authority.  It is my view that a successful legal challenge from UDeCOTT would have the effect of killing the Uff Commission entirely.

I am reliably informed that the hearings for this UDeCOTT challenge could take at least one year.

Some of the major highlights in the swarm of contradictory comments were –

·      Conrad Enill’s opaque statement on the State paying UDeCOTT’s legal fees.  The PNM Chairman referred the question to the Minister of Planning, Housing and the Environment, Dr. Emily Gaynor-Dick-Forde.

·      Attorney General John Jeremie made strong, stirring statements on his no-nonsense approach to white-collar crime.  Mr. Jeremie was adamant that all the necessary steps would be taken to ensure the proper completion of the Enquiry.

·      Minister Gaynor-Dick-Forde is reported to have given a telephone interview to affirm that ‘UDECOTT is right’ in making its legal challenge. [link] That incredible assertion can only dilute the limited authority of this Minister, who took prompt action to dismiss the entire HDC board of Directors earlier this year.  The Minister’s explanation was that there was a ‘governance crisis’ at the HDC.  If this behaviour by UDeCOTT does not count as a ‘governance crisis’ of the first order, we have to wonder about the quality of this Minister’s judgment.  Dr. Gaynor-Dick-Forde went so far as to say that the AG and UDeCOTT were saying ‘one and the same thing’.  This Minister is a highly-lettered scholarship winner and has affirmed herself to be a Christian with a ‘big C’.

·      Independent Senator and UDeCOTT Board member Michael Annisette, gave a strong defence to UDeCOTT in his contribution to the budget debate.  More on this later.

UDeCOTT also made a public statement to compare their legal challenge to Dr. Keith Rowley’s action vs. The Integrity Commission, when he was a member of the Cabinet.  That comparison is baseless and misleading, as are so many other statements in this sorry affair.  Just to list three important differences –

1.    Firstly, Rowley paid his own legal fees while UDeCOTT is using taxpayers’ money to defy the government.

2.    Secondly, Rowley sued in his private capacity – i.e. to preserve his reputation – while it is clear that UDeCOTT is suing as a body corporate.

3.    Thirdly, the Rowley lawsuit was against an independent Constitutional Commission, appointed by the President.  In contrast, UDeCOTT is challenging the acts of an Enquiry whose members have been selected and terms specified by the Cabinet.  The President issued the documents for the appointment of the Commission, but the entire Enquiry is a creature of the government’s creation.  For a State Agency to challenge such an Enquiry is utterly unprecedented and scandalous behaviour.

The original Cleaver Heights allegations have been discredited and the attempt to introduce fresh material on that project was compromised with the surprise appearance of Mr. Carl Khan as a witness on the CH allegations.  The last hearings of the Enquiry had the potential to reveal the extent of the waste and corruption which all citizens know to be a reality.

It is clear for all to see that this important Enquiry is being willfully undermined.  The damage to the credibility of the members of the Cabinet is immense.  Even docile and obedient party members are now asking ‘Who really in charge here?’.

Further legal and reasoned justifications will only deepen the loss of faith.  UDeCOTT Board members are acting in defiance of stated government policy.  Or are they in fact following a policy of concealment?  A Board which was acting in defiance of the PM would have been dismissed already.

Only swift, direct and unambiguous action by the PM can retrieve this fiasco.  The confusing antics by the others are fooling less and less people.

Is Udecott insolvent?

Amidst all the scandal and name-calling, I am reminding readers that Udecott has filed no accounts for 2007 or 2008. We are entitled to wonder why. To continue from last week, I have been involved in a series of e-mail enquiries on this question with Minister in the Ministry of Finance Mariano Browne. His replies have advised that all the remaining issues on this audit have been resolved, but that there are non-technical reasons why PriceWaterhouseCoopers cannot issue the accounts. He has not advised what those “non-technical issues” were. This Property Matters series on Udecott has been running for more than 2 years and it is useful to step back from the details and return to first principles.

Udecott is a state enterprise which lists value for money, professionalism and accountability among its core values. Udecott has been carrying out a large-scale construction programme and has borrowed most of the funds for that. While the projects were under construction Udecott’s accountants calculated their value by adding the estimated value of the sites (as if they were vacant) to the cost of the completed works (that is called value in the quantity surveying/engineering parts of the construction profession). That method is an acceptable one. The problem is that upon completion, those projects have to be put onto the balance sheet at market value. That means that the properties have to be valued at the estimated price they would fetch in the open market. Those are the requirements of international accounting standards. We have repeatedly said that not one of these projects represents value for money. Not one. The largely vacant International Waterfront Complex was financed via a 15-year bond which, by my calculations, would now be requiring a monthly payment of the order of $14 million. That project is Udecott’s flagship and, as such, it formed a key part of the executive chairman’s report in 2006.

The phrase was: “project financing on competitive terms without the requirement of a government guarantee or government letter of comfort.” In the absence of either of those, how is Udecott paying the financiers for this project? More to the point, how is the carrying cost of the largely vacant complex being shown in the accounts. The terms of finance secured by Udecott were very competitive. The rental value of the complex, if it were occupied, would barely cover the debt service. How is the high cost of maintenance to be factored into the property valuation and, consequently, the accounts? One of the recurring themes in this series on Udecott has been the fact that the true break-even rent of these projects are, in fact, unachievable in a market flooded by the very same space. The plain meaning of that is they are all now liabilities in terms of market value, since their rent is insufficient to cover the real cost of land plus the building. All these issues are present across the entire portfolio of projects many of which are now completing, post-2006. If I am right, the accounting effect of all this will be a sudden decline in asset values and a simultaneous leap in debt-servicing/maintenance requirements.

Independent Senator and Udecott board member Michael Annisette made recent comments on the indebtedness and accounts of state enterprises: [link]. “If regulation is not followed through on a timely basis government must clamp down on those entities. “I agree that monitoring must be exercised in a timely fashion. There must be oversight and superintending of the accounts in a sustainable and fundamental way, that’s the only way you can have checks and balances on these institutions. “There are cases where action starts after the fact and not before. The action must be preventative and not reactive. People who are given responsibility are not always accountable. Accountability demands a responsibility if you don’t account you pay the price. There must be a deterrent mechanism in place. The state enterprises are simply ignoring these regulations and no one is following up to ensure compliance,” said Michael Annisette.

Afra Raymond is Managing Director of Raymond & Pierre Limited. Comments can be sent to afra@raymondandpierre.com