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Friday, 24 September 2010

“So Shall It Be In The End”

“So Shall It Be In The End”

On Friday July 30th, 2010 the Anguillian carried an article based on a press conference held by the Chief Minister, Hon. Hubert B. Hughes and his son the Parliamentary Secretary, Haydn Hughes. The actual press conference was actually held on Tuesday July 28th and as a consequence the news had already been circulated on the various broadcast media that Viceroy Resort was sold to an investment group, Starwood Capital Group (SCG); an MOU was signed; the new buyer would be paying US$ 40 million in taxes, and; the Government would be receiving 9% Alien Land Holding Licence fees on every villa sold.

Understanding the long process of negotiations associated with such deals many persons were stunned by this announcement. And especially so when the Parliamentary Secretary, Haydn Hughes stated: “Last week the property was up for sale this week it has been sold.” The Chief Minister for his part went on to say that Viceroy had been under “serious stress and so Citibank, which financed it at US$ 412 million, has not been paid and moved in to sell the note to Starwood Capital. He further stated that the Parliamentary Secretary was given the task to redeem some of the taxes lost under the previous MOA. We have more or less quashed the MOA and have formulated an MOU.”

What was most ironic about this press statement is that whereas the AUM politicos in the recent election campaign had been accusing the former Government of conducting their negotiations in secret here are they now presenting an MOU negotiated by HAYDN alone! In fact after this press statement a number of Ministers of the Government denied having any knowledge of the transaction and in particular the MOU. Transparency Indeed!

The past AUF Government had a very organized system for dealing with the negotiation of Memorandum of Agreements. A first draft would be produced by senior technical officials on a committee called the Tourism Investment Committee (TIC); followed by a presentation by that committee to Ministers of Government; then the preparation of a negotiating stance to be agreed in Executive Council. Once the first negotiating stance has been agreed more discussions with the investor takes place and that process is repeated several times until a final document is ready to be presented to Executive Council for final approval before signature.

This process could take considerable time if there are significant points of difference between the Government and the Developer. And very often the Government would hire consultants from the United States or elsewhere to provide advice in cases where there are legal and commercial issues/practices not familiar to our jurisdiction. In fact the methodology for negotiating with foreign investors during the past AUF Administration was considered to be a best practice in the OECS region.

I will take this opportunity to commend the members of the TIC for the thorough job they did. There were times when the pressure to conclude critical agreements would have led to fiery confrontations between senior technical officers and Ministers of Government but it was always in an atmosphere of the utmost respect. At the end of the day it was a constant struggle to arrive at a place where both the interests of the people of Anguilla and those of the developer/investor were equitably addressed.

I said in my column last week that the Chief Minister and his colleagues strongly believed that the rules are for everyone but them. It is the kind of behaviour strongly associated with persons who have sociopathic tendencies. And I say this in the context of the arrogance of the Chief Minister after so strongly accusing the past Government of closed negotiations to be boasting in his press conference that he had appointed his son to “redeem some of the taxes lost under the previous MOA.” He did not appoint the trained economist, Deputy Chief Minister, Hon. Edison Baird nor a committee of Senior Technical Officials seized of the intellectual memory to deal with the Viceroy MOA; --- he appointed his son. I will come back to the issue of these lost taxes later!

There are many AUM supporters who have been led to believe that to bring an MOU to the House of Assembly constitutes public consultation. In fact, I have had to disabuse a senior news reporter of this view. The same Chief Minister and his colleagues who allow the most junior members of the House of Assembly to negotiate MOU’s, by themselves on Government’s behalf would have us believe that they are actually exercising good governance and transparency simply by bringing it to the House after it has already been signed off.

You may ask why am I speaking about the Viceroy MOU? After HAYDN had boasted in his press conference that a MOU was signed with the new buyers for Viceroy Resort --- the Leader of the Opposition, during the debate on the Cap Juluca MOU, pressured him to explain how could he have signed an MOU before bringing it to the House of Assembly or to Executive Council --- given his Government’s pledge to bring all MOU’s to the House? His response was extremely evasive.

In doing my research I have discovered what I suggest could account for the Parliamentary Secretary’s evasiveness. The extremely effective presentations by the Members of the Opposition in the House on the Cap Juluca MOU debates pointed to the naivety and inexperience of the Parliamentary Secretary and the Elected Member from Sandy Hill in negotiating such documents. The Parliamentary Secretary must have therefore been reluctant to admit that there was in fact an MOU signed with the Starwood Capital Group. Other Ministers in the Government refused to allow that MOU to go to Executive Council.

It is now being said at the time of writing (Tuesday Sep 21) that the Government is hoping to take a Memorandum of Understanding agreed with Starwood Capital Group to the House of Assembly on Thursday September 23, 2010 for debate. Again up to the time of writing the Members of the Opposition have not received copies of that MOU. However, it appears that this MOU now has the benefit of the revitalized Tourism Investment Committee’s (TIC) expertise and experience and for this I commend the Chief Minister for in effect acknowledging that the United Front Government system of negotiations is indeed a best practice that his Government should follow. I also applaud his wise decision to take this very serious undertaking out of the hands of veritable amateurs.

But hold on!! Here is the most serious part of this drama. Many of us believed that MOU that they purported to have signed was an innocuous document. However, we later discovered that the MOU was actually signed on July 27, 2010 on Starwood Capital letterhead by the Chief Minister and witnessed by a Senior Government Official. We are privileged to have the signed copies of that document. That is, the same MOU in which the Chief Minister instructed the Parliamentary Secretary to redeem supposedly “lost taxes” and giveaways by the past government. HAYDN actually did quite the opposite as follows:

• He fixed the value of the real estate for the purposes of calculation of the various stamp duty and alien land holding license fees as not to exceed US$105 million. My comment: Revenue will be lost if the value exceeds US$105. Even if that were considered to be unlikely, given the circumstances of the sale it would have been a better deal to set a minimum rather than a maximum.

• He increased the number of exemptions for refurbishment to six times in twenty years rather than four times as in the original MOA. My comment: Is this how we redeem lost revenue from taxes?

• He removed the payment of the Resort Resident Asset Levy in most cases. This is an ongoing stream of revenue established in the original MOA for the life of the project that in time would exceed all up front payments. My Comment: He has sacrificed revenue for future generations for upfront windfalls. Obviously, simply to make the Government look good in the short term.

• He removed the section dealing with increases every five years of the annual levies payable by condominium owners and fixed the rate at no more than US$ 6.50. My comment: Again! Is they how we redeem lost revenue from taxes?

What the Parliamentary Secretary did by having the Chief Minister sign this seriously flawed MOU had to impact the efforts of the TIC in eventually negotiating the MOU now being proposed to be presented to the House in a few days. The fact is that even though the document did not go to EXCO or the House it could have been argued to be legally binding given the fact that it contained the Chief Minister’s signature witnessed by a senior civil servant. This reality may have taken away a considerable amount of the TIC’s leverage in negotiating a more favourable agreement. While I am confident that what they have worked on will be a considerable improvement on the travesty that the Parl. Sec. negotiated --- they will not be fully satisfied with the outcome.

I believe that I have established so far that the press announcements made regarding the sale of the Viceroy Resort have been shrouded in misleading statements, deliberate inaccuracies and downright lies. In fact as I speak and probably in this very issue of the Anguillian there are even stronger views being promulgated against the Parliamentary Secretary in the handling of this matter. The good governance, transparency and accountability to which the Chief Minister refers ad nauseam as the motto of his government comes into serious question. And there are damaging documents being circulated which reinforces my view that the Parliamentary Secretary and his father continue to believe that the rules only apply to other people.

In dealing with the Viceroy issue the Chief Minister and his son have caused a number of investors to waste their resources by giving them assurances that they subsequently reneged upon. One investor has produced facts and figures that suggest that there may be grounds for an investigation into the transparency of the decision to enter into an exclusive MOU with Starwood capital. In fact strong supporters of the AUM government have become very vocal in their opposition to the manner in which Haydn has dealt with this entire matter. Words like truth, integrity, transparency, honesty, and good governance pervade their correspondence to the Parliamentary Secretary in an extremely accusatory manner.

I will allow those who have been aggrieved by the manner in which the Parliamentary Secretary has dealt with these issues get the facts out to you the people of Anguilla. You will then have an opportunity to hear them first hand rather than rely on my commentary. It is refreshing to hear someone else address the “selective transparency” which I have been writing about for the past seven months.

But what does one expect? This Government came to office on the basis of lies; it continues to consolidate its support on the basis of lies; it justifies its campaign of victimization on the basis of lies; and; it seems intent on governing on the basis of lies. Nothing has changed! What can I say? As it was in the beginning ---so shall it be in the end!

Victor F. Banks
Sachasses Estate
September 21, 2010

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