Time for an act of contrition

March 10, 2010

This is an open letter to Robert Mulderig, chairman of the Board of The Bank of Butterfield and a director since 1996, via The Editor of The Royal Gazette.

Dear Mr. Mulderig,

In the past month, since you announced the bail out of the Bank by the gang of four, we have heard:

-- Mr. Kopp state: “This is a very good bank that made one mistake”, adding that he “feels the pain of shareholders” and that “the people responsible no longer work there”, presumably meaning – draw a line under this and move on;

-- You state in the Annual Report: “The Board is aware that many of our shareholders are disappointed that they were not given the opportunity to approve the capital raising transaction through a vote.” Indeed, beyond muttered rumours, we were not even aware that this exercise was underway. We had been led to believe things were improving after the Preference Share issue (also highly dilutive to dividends).

-- You state that Alan Thompson “retired” from the Bank as CEO and as a Director. We know that Mr. Ferrett “retired” late last year as CFO. In the light of Mr. Kopp’s remarks set out above, we can take “retired” to be a euphemism for “fired”.

-- Your apologist states in a letter to the Editor dated March 8, 2010 that you “should be praised” for doing the” job of cleaning up other people’s [sic] past wrong doings…” and that you “would be seen as culpable for mistakes made not on (your) watch.” But, the Bank’s website points out that you have been a non-executive Director since 1996 and that a small number of the other longer term directors have also been there since before 2006/7, presumably the years in which the major change in investment strategy was put forward by “those responsible”, since “retired”, and, presumably, approved by the board of directors. Presumably the “one mistake” referred to by Mr.Kopp. On your watch …

-- Michael Collins, newly appointed senior executive vice president, Bermuda for the Bank, states that “he would be focused on making Butterfield the best bank on the Island”- all good stuff. Strong hands at the helm … but what does it mean for the minority?

In addition:

--We note that Mr. Brian Duperreault (after only one year in the position) and Mr. Bob Stewart retired in February, 2008, presumably about the time things started to “hit the fan”. Others have followed in the interim. Hmmmm?

-- In the last three Annual Report it was stated somewhere buried in the Notes that Directors and Executive Officers held:

-- 1,441,125 shares the end of 2007- see page 101 of the AR for 2007;

-- 571,713 shares at the end of 2008- see page 80 of the AR for 2008; and

-- 424,315 shares at the end of 2009 – see page 102 of the AR for 2009.

Just over 1 million shares sold by Directors and Officers in the past two years, two-thirds of those held.

Frankly, if I had known that all of this was going on in the background, I would have sold my shares in 2007 too. But I didn’t know any of this beyond the muttered rumours. Seems my naivete and trust in Bermuda’s oldest bank and its solid and boring performance and steady dividend payments have been rewarded with the financial collapse of my investment and a substantial part of my “pension fund”.

-- We note that there is no clear statement as to how Directors and Officers are rewarded, beyond a brief statement that “The Bank’s Non-Executive Directors received their annual retainer compensation in the form of fully vested and unrestricted Bank’s shares.” Executive Directors and Officers’ compensation is buried in the expense figures – almost zero transparency.

What you have not said:

-- From the new management team or the “old Board” … or even the “new Board” – “stick with us and we’ll try to pull you out of the hole that the last lot got you into before we sell and that we do not intend to buy you out at a discounted price should the share price slip lower or as and when it suits” (you obviously anticipate this happening by lowering the par value of the shares to 1¢);

-- Why the Board wants the power to convert ordinary voting common shares into ordinary non-voting common shares at its sole discretion;

-- What your dividend policy will be once the Bank is returned to profit (having raised that issue, the former shareholders are so diluted that a return of dividend payments is unlikely to produce much income);

-- At what value did you issue the shares to the Directors as part of their compensation, when serving as Chairman of the Compensation Committee;

-- Which Directors and Officers - executive or non-executive- disposed of their shares in the past three years – we can see it has happened but don’t know who sold out in the knowledge of what was to come;

-- The terms of the “retirement” of Mr. Thompson and Mr. Ferrett; and

-- Above all, we have not heard Mr. Mulderig say, on behalf of himself and his fellow Directors from the time of the “one mistake”: “We are sorry for what has happened to the Shareholders.”

If the head of Toyota can say it to the victims of their technological failures, you can say the same to the victims of this recklessness too … Mr. Mulderig.

And if and your fellow Directors then choose to “fall on your swords” I am certain that we can find plenty of swords around to facilitate such an act of contrition – it happened on your watch, however you paint it, whatever you did to rescue the situation – face up to it.

MICHAEL SPURLING

Shareholder

St. George’s

It just goes to show

March 1, 2010

Dear Sir

The title of this year's budget (the "Road to Recovery") neatly encapsulates all that is wrong with a PLP Government which firmly believes taxpayers should continue to fund a self-indulgent, intellectually spent cadre who have yet again proven they lack even the most basic understanding of sound economic principles. When times are tough the last thing any Government should do is raise taxes; especially one with a track record of incompetence, obfuscation, cost overruns and egotistical excesses. As is now abundantly clear, the 2009/10 Revenue & Expenditure Budget prepared last year was woefully inaccurate as evidenced by the $46 million upward adjustment to the revised borrowing figure which is on top of a $61 million dollar adjustment the year before.

In two short years the PLP borrowed $107 million more than they budgeted for (on top of what they had already anticipated borrowing) which means we, the taxpayer, will now have to dig deeper into our pockets ($77 million if you go by Government's payroll tax estimate for the coming fiscal year) to fund their excessive and unnecessary expenditures on vanity projects like the Love Festival and boondoggles to India, China and beyond.

In addition to this 21 percent increase in payroll taxes Government would appear to have also doubled (yet again) the Foreign Currency Purchase Tax from 50 to 100 basis points. That means every single purchase made overseas (whether it be personal or commercial) will now cost 100 percent more to transact. Struggling families will therefore have to pay even more for basic household necessities food, electricity and clothing. This is not a road to recovery for the taxpayer, it's a road to recovery for the Government at our expense.

Instead of budgeting for lower expenditures for the 2009/2010 fiscal year, the PLP oversaw a swing in the current account balance from an estimated surplus of $2 million to a deficit of $53 million. A difference of $55 million dollars (or in real terms the cost to send 1,000 students to the UK for a four year university degree). So much for the Minister of Finance's dictum to reduce costs across the board by 10.75 percent they actually went up instead of down. In reviewing 2010/11 expenditure estimates, these worrying trends continue. The Cabinet Office, Ministries of Finance and Tourism & Transport estimates are 13 percent, 61 percent and nine percent higher than the previous fiscal year equating to a total of $88 million more being spent from the public purse.

Education, which is perhaps the single most important Government department (although you wouldn't know it given the revolving door of PLP Ministers responsible for same and graduation rate declines over the last decade) is actually budgeted to spend $6 million less than in the prior period. It just goes to show where the PLP's priorities are if the Premier and Minister of Finance allocate more for themselves and less for our youth. On top of all this doom and gloom the Government is again looking to increase the statutory ceiling for long term borrowing. In a repeat of last year's abysmal performance, Government is asking for a further $250 million increase, resulting in an all-time high limit of $1.25 billion!

Last year the throwaway explanation for this short sightedness was that Government needed a "financial cushion" and this year the new term is "additional buffer." Why would any rational and fiscally conscious person endorse a plan to dig us further into debt? We don't need a cushion or a buffer. We need a scalpel to cut away the fat and excesses which 12 years of PLP governments have burdened us with. Unfortunately we already know who will be footing the bill for all of this: you, me, our children and grandchildren. It would seem everyone but the PLP is aware that we're in the middle of a protracted and depressed economic cycle that started more than two years ago and reducing expenditures is a far better solution for an economy our size (where we can't print our own money) than increasing the burden on taxpayers who are more far more efficient spenders of their own resources than Government will ever be.

In the ensuing year when the PLP apologists and blind faithful scratch their heads wondering why they don't have any money left before their next pay cheque arrives give the Minister of Finance and Premier a call and ask them if it really was/is such a good idea to spend hundreds of millions of taxpayer dollars on contract overages, overseas consultants, no bid contracts, first class travel and fleets of GP cars instead of taking less from the pockets of hardworking Bermudian families.

KEG

Smith's

Standing up to Govt.

March 17, 2010

Dear Sir,

Congratulations to Mayor Charles Gosling for standing up to a Government that has put this Island deep into debt and at the same time has failed to collect millions of dollars in unpaid parking tickets in the City of Hamilton for almost ten years.

W.A. BLACK

Paget

A compromise solution

March 11, 2010.

Dear Sir,

The Causeway. It would be nice to have a new modern crossing but at this point Bermuda cannot afford what is not essential. Before we wake up to find that our Government has committed us and our grandchildren to more debt let us look at a compromise. There are two sections at each end which have a lower road level and no allowance for the passage of water under it. These sections washed out in Fabian and are still vulnerable. If we replace these two areas with mutable short span bridges with an elevated road level we could get by for many years if necessary.

When Castle Harbour water level rises from South East hurricane winds and waves, much more water would be able to escape and keep the water level down. The Causeway will be safer and the air terminal much less likely to flood. The cost of this project will be only 20 to 25 percent of the cost of an entire scheme. It would also be nice to replace the opening bridge if anyone can find the eleven million given to us by the United States, but we can live with the way it is at present.

MILES E. H. OUTERBRIDGE

St. David's

Time for an act of contrition

March 10, 2010

This is an open letter to Robert Mulderig, chairman of the Board of The Bank of Butterfield and a director since 1996, via The Editor of The Royal Gazette.

Dear Mr. Mulderig,

In the past month, since you announced the bail out of the Bank by the gang of four, we have heard:

¦ Mr. Kopp state: "This is a very good bank that made one mistake", adding that he "feels the pain of shareholders" and that "the people responsible no longer work there", presumably meaning – draw a line under this and move on;

¦ You state in the Annual Report: "The Board is aware that many of our shareholders are disappointed that they were not given the opportunity to approve the capital raising transaction through a vote." Indeed, beyond muttered rumours, we were not even aware that this exercise was underway. We had been led to believe things were improving after the Preference Share issue (also highly dilutive to dividends).

¦ You state that Alan Thompson "retired" from the Bank as CEO and as a Director. We know that Mr. Ferrett "retired" late last year as CFO. In the light of Mr. Kopp's remarks set out above, we can take "retired" to be a euphemism for "fired".

¦ Your apologist states in a letter to the Editor dated March 8, 2010 that you "should be praised" for doing the "job of cleaning up other people's [sic] past wrong doings…" and that you "would be seen as culpable for mistakes made not on (your) watch". But, the Bank's website points out that you have been a non-executive Director since 1996 and that a small number of the other longer term directors have also been there since before 2006/7, presumably the years in which the major change in investment strategy was put forward by "those responsible", since "retired", and, presumably, approved by the board of directors. Presumably the "one mistake" referred to by Mr. Kopp. On your watch …

¦ Michael Collins, newly appointed senior executive vice president, Bermuda for the Bank, states that "he would be focused on making Butterfield the best bank on the Island" — all good stuff. Strong hands at the helm … but what does it mean for the minority?

In addition:

?We note that Mr. Brian Duperreault (after only one year in the position) and Mr. Bob Stewart retired in February, 2008, presumably about the time things started to "hit the fan". Others have followed in the interim. Hmmmm?

?In the last three Annual Report it was stated somewhere buried in the Notes that Directors and Executive Officers held:

?1,441,125 shares the end of 2007- see page 101 of the AR for 2007;

?571,713 shares at the end of 2008- see page 80 of the AR for 2008; and

4 424,315 shares at the end of 2009 – see page 102 of the AR for 2009.

Just over 1 million shares sold by Directors and Officers in the past two years, two-thirds of those held.

Frankly, if I had known that all of this was going on in the background, I would have sold my shares in 2007 too. But I didn't know any of this beyond the muttered rumours. Seems my naivete and trust in Bermuda's oldest bank and its solid and boring performance and steady dividend payments have been rewarded with the financial collapse of my investment and a substantial part of my "pension fund".

?We note that there is no clear statement as to how Directors and Officers are rewarded, beyond a brief statement that "The Bank's Non-Executive Directors received their annual retainer compensation in the form of fully vested and unrestricted Bank's shares." Executive Directors and Officers' compensation is buried in the expense figures – almost zero transparency.

What you have not said:

• From the new management team or the "old Board" … or even the "new Board" – "stick with us and we'll try to pull you out of the hole that the last lot got you into before we sell and that we do not intend to buy you out at a discounted price should the share price slip lower or as and when it suits" (you obviously anticipate this happening by lowering the par value of the shares to 1¢);

• Why the Board wants the power to convert ordinary voting common shares into ordinary non-voting common shares at its sole discretion;

• What your dividend policy will be once the Bank is returned to profit (having raised that issue, the former shareholders are so diluted that a return of dividend payments is unlikely to produce much income);

• At what value did you issue the shares to the Directors as part of their compensation, when serving as Chairman of the Compensation Committee;

l Which Directors and Officers — executive or non-executive- disposed of their shares in the past three years – we can see it has happened but don't know who sold out in the knowledge of what was to come;

l The terms of the "retirement" of Mr. Thompson and Mr. Ferrett; and

• Above all, we have not heard Mr. Mulderig say, on behalf of himself and his fellow Directors from the time of the "one mistake": "We are sorry for what has happened to the Shareholders."

If the head of Toyota can say it to the victims of their technological failures, you can say the same to the victims of this recklessness too … Mr. Mulderig. And if you and your fellow Directors then choose to "fall on your swords", I am certain that we can find plenty of swords around to facilitate such an act of contrition – it happened on your watch, however you paint it, whatever you did to rescue the situation – face up to it.

MICHAEL SPURLING

Shareholder

St. George's

The right thing to do

March 23, 2010

Dear Sir,

I read with great scepticism on March 18 the letter from a lady who had (illegally) parked her car in the exit lane of XL's parking garage while running in to collect her takeout food and unfortunately, her son and nephew sitting in the back seat of her vehicle subsequently encountered the verbal wrath of another driver trying to exit the garage.

In her effort to deplore the other driver's actions, this mother went on to state "You always see in the news these days about these rude obnoxious children who are causing trouble. Did we ever think that this behaviour they are exhibiting, is just the behaviour of the adults?" Now, Mr. Editor, two wrongs don't make a right, but I wonder did this lady ever stopped to consider and reflect that she herself is exactly part of the problem she is referring to in modern day Bermuda in her statement! We all witness on a daily basis the all-too-common disregard for the rules of the road; from speeding to ignoring stop signs, running red traffic lights and yes, Mr. Editor, the all too common occurrence of double-parking or illegal parking! All of these actions are usually done at the expense and inconvenience of other road users.

Madam, your very actions are demonstrating to your son and nephew that it is OK to flout the laws of Bermuda's road and ignore a double-yellow line which incidentally, also has painted in bold yellow lettering "NO PARKING" in front of it just in case someone did not know what a double yellow line means. The correct thing to have done would have been to drive around until you found an available parking spot (even if it happened to be a block or two from the restaurant) or, you could have dropped your son and nephew off with cash to collect the food while you circled around the block. Either of those actions would have inconvenienced no one; except perhaps yourself but it would have been the right thing to do. On a separate but related note, Mr. Editor, perhaps in next year's budget instead of increasing the payroll tax for every working resident or Bermudian, the Government can consider $250 double-parking / illegal parking "on the spot" fines. All the Police or Traffic Wardens would need to do is have someone constantly patrolling on foot walking up and down Queen Street and I am confident the revenue would pour into Government's coffers!

NOT LIVING IN A GLASS HOUSE

Paget

Respect the law

March 23, 2010.

Dear Sir,

This letter is in response to Donna Watson's letter of March 6, and published on March 18.

I am sad having to write this response to Donna. As an ex-runner I know how good an athlete she has been and more importantly Donna is a long time server and promoter of running in Bermuda and of the BFTA. Also as a smart person, I am surprised Donna expected to find a legal parking spot on Friday evening on Bermudiana Road. If you order food from Portofino at that time, then expect a walk. I am also a little concerned that my response to her illegal parking would have been one of annoyance, although not as harsh as the man's reaction described in the letter.

The point I am trying to make is if you break reasonable law you should not expect to be treated with respect and equanimity by society. Personally I find the bad driving habits in Bermuda are in many ways a reflection of the apathy in Bermuda. If a driver double parks, pulls out, goes through a red light and carries out a manoeuvre with no thought or signal (a few examples of habits that just seem acceptable), there seems genuine surprise from the driver at fault if I use the car's horn, (for its proper purpose), or resort to something more verbal. Maybe I am alone in never having come to terms with the increasing mediocrity that characterises driving here.

The connection with the apathy in Bermuda is quite clear. Other than through certain sections of the media, like the RG, and restricted time in the Houses of Assembly for the Opposition parties, Government abuse of power and our money, deterioration in education standards and general indiscipline, to name a few problems, just seem to be shrugged off. Maybe it is long stretch to relate intentional law breaking, albeit minor, with other problems we face, but I think it is symptomatic.

If I had been Ms Watson, I would have reflected on the fact I was wrong, rather than write a letter to the paper. To try and make a case for the consequences of illegal parking seems strange. It is respect for the law and society, plus the need to focus on education, that parents and others need to instill in the young from an early age. Finishing on a positive note, I wish Donna all the best in her efforts to organise running events and provide opportunities for young athletes. I hope all runners will take the time to thank Donna for her dedication.

SIMON MOORE

Hamilton Parish