Bermuda Housing Corporation (BHC) fraudster Terrence Smith has pleaded guilty to reduced charges to avoid a retrial but a suspended sentence means he's avoided further jail time.

Smith was originally convicted in March 2006 on 42 charges of defrauding the corporation of $1.2 million. He was alleged to have abused his former position of Property Officer there to authorise fraudulent overpayments to a contractor, who passed the profits back to him.

Smith was said to have spent the funds he obtained from the BHC which provides housing for those in need on his own lavish house in Tee Street, Devonshire.

However, his conviction was quashed by the Court of Appeal the following year and a retrial ordered. The court ruled that the foreman of the jury which convicted him, businessman Gerald Simons, was potentially biased due to being the half-brother of former BHC chairwoman Valerie Dill.

The original 19-day trial cost the taxpayer an estimated $500,000. Smith completed around two-and-a-half years of the eight-year jail sentence meted out to him before his conviction was quashed and he was released on bail.

A retrial on the same charges was scheduled to begin yesterday, but late on Friday an agreement was reached between Smith's legal team and the Crown.

Around 4 p.m., Smith appeared before Puisne Justice Charles-Etta Simmons and entered guilty pleas to the two largest charges amounting to $210,360 of fraudulently-obtained public money.

Crown counsel Robert Welling told the judge: "It is our submission that notwithstanding the mitigating factor of a guilty plea in this case, offenders convicted of crimes of this nature should expect to receive a custodial sentence."

He noted that a sentence of imprisonment would deter those in a similar position of trust from committing like offences. However, he added that Smith's guilty plea and previously clean record should be taken into account, as well as distress he is suffering because his wife is seriously ill.

Mr. Welling added that since Smith has already spent more than two years in prison, the Crown accepted that he should not be required to go back to jail on Friday. He asked that Smith be handed a three-year sentence "suspended owing to the exceptional circumstances".

Mrs. Justice Simmons opted to impose a two-and-a-half year jail sentence suspended for two-and-a-half years after hearing further mitigation from Smith's lawyer Llewellyn Peniston. This means no more time in custody for Smith, unless he gets into trouble again during that period.

He is the only person ever convicted over the BHC affair, which is rumoured to have cost the taxpayer $8 million. According to extracts from leaked Police files relating to the scandal published by the Mid-Ocean News in 2007, Premier Ewart Brown, former Premier Jennifer Smith, former Tourism Minister Renee Webb, construction boss and current MP Zane DeSilva and others, were investigated by Police looking into allegations of corruption at the quango.

When the probe concluded in 2004, then acting Director of Public Prosecutions Kulandra Ratneser said many of those investigated could only be accused of bad ethics. Mr. Ratneser also said some of those investigated escaped prosecution due to Bermuda's antiquated corruption laws.

Opposition Senator Michael Dunkley, who triggered the original Police investigation into the BHC by remarks made in Parliament, said of the latest development: "I'm very disappointed in the outcome of the BHC affair because it appears that Mr. Smith is a scapegoat for all the wrongdoings that took place in the housing corporation at that time in spite of all the allegations and the investigation that took many months to complete."

Reflecting on Mr. Ratneser's comments about antiquated laws, Sen. Dunkley added: "The powers-that-be have really done nothing to change that. The PLP Government had a direct hand in what went on through lack of controls and financial accountability and poor oversight. And despite the fact that the taxpayer suffered for it, nothing has been done to address it."

After Smith's original conviction in 2006, Chief Justice Richard Ground made an order giving Capital G bank possession of his Tee Street house in order to recover the mortgage money it loaned him.

The property was sold in 2007 for $2.25 million, with the bank holding the balance of the funds until Proceeds of Crime hearings are held possibly later this month. The hearings will determine how those left out-of-pocket by Smith's fraud should be recompensed.