We pay $30k so Brown and Burgess can get $4m
Auditor General Heather Jacobs Matthews' recommendations in her report on the use of public cash to fund Ewart Brown's and Minister Derrick Burgess' personal legal battle:
1) Government financial support for the private legal action on behalf of the former Premier and the current Deputy Premier should be terminated immediately and the Auditor General
should be advised when this is done.
2) Appropriate steps should be taken to recover monies already paid to the firm with respect to the action. If necessary, the surcharging mechanisms provided for in the Public Treasury (Administration and Payments) Act 1969 should be applied to hold the Accounting Officer accountable for the payment of monies out of the public purse. In addition, the offending individual should be required to appear before the Public Accounts Committee.
3) Senior Government Officers and Ministers of Government should be educated on Financial Instructions and on the proper use of Government funds. Additionally, Senior Government Officers and Ministers need to understand the role of the Auditor General and the legislative requirement for access to all Government information.
If successful, former Premier Ewart Brown and Deputy Premier Derrick Burgess' personal battle for damages over the false cheques affair stands to yield them $4million.
But it's taxpayers who've footed a bill of more than $30,000 in lawyers' fees pursuing Dr Brown's and Mr Burgess' personal claim.
In another withering report released yesterday, Auditor General Heather Jacobs Matthews condemned Government for using public money for personal expenses, contrary to Financial Instructions rules.
She said Government hired a Canadian law firm in 2010 so that Dr Brown and Mr Burgess could sue architects Sam Spagnuolo and Lawrence Brady alleging defamation following the false cheques incident of December 2008.
“The details of the action, contained in the Statement of Claim, list the names of the former Premier and the current Minister of Public Works as parties to the legal action,” wrote Mrs Matthews in her report.
“Government is not named as a party to the action despite the fact that the Agreement specified that the firm would act on behalf of Government.
“The key issue here is that public funds were used to initiate a private legal action which is inappropriate and a direct violation of Financial Instructions.
“Financial Instruction 3.5 provides that ‘Government funds or property should only be used for Government purposes and must not be used for personal reasons'.
“Further, Financial Instructions 10.4 places the onus and the responsibility on the Accounting Officer to ‘ensure that Government funds are not used for personal gain or profit'.”
Mrs Matthews added that while their private action demanded $4 million plus costs, those costs were in fact already being funded out of the public purse.
Premier and Finance Minister Paula Cox last night argued the cheques impugned the integrity of the Government and engaging the law firm was a legitimate course of action.
Nevertheless, after the Auditor General stepped in, Government terminated the agreement in September 2011, with Dr Brown and Mr Burgess starting to fund their bid themselves.
Mrs Matthews is calling for Government to recover the cash it spent on the matter.
In December 2008, two cheques, seemingly made out to Dr Brown and Mr Burgess by contractors working on the police and court building construction project, were discovered in Works and Engineering files.
It later emerged the cheques were forged; Dr Brown and Mr Burgess claim it was an attempt to make it look like they were receiving kickbacks.
They accuse Mr Spagnuolo, lead architect with Canadian firm Carruthers, Shaw and Partners, of creating and disseminating false cheques, then tipping off the press to create a political scandal. They say he should pay damages for conspiracy and defamation.
They accuse Mr Brady, Chief Architect of Works, of conspiracy by receiving the false cheques from Mr Spagnuolo.
The civil legal action was filed by the law firm in the Superior Court of Justice, Ontario, on January 31 last year; Mrs Matthews noted this was three months after Dr Brown stepped down as Premier.
She said invoices show taxpayers paid a total of $31,287 for the period ending June 30, 2011.
According to her report, one payment is described as “legal services required on an urgent basis” and was approved by the Public Works Permanent Secretary.
The agreement with the law firm was approved by Cabinet with the full knowledge that Dr Brown or his designate was the only person authorised to instruct the firm, said Mrs Matthews.
She remarked: “It has not been explained why the Attorney General's Chambers supported the latter stipulation allowing the Premier to instruct the firm even though the Premier had a vested interest in the outcome.
“However, this highly irregular and inappropriate arrangement took effect in June 2010 and continued well beyond October 2010 when the Premier stepped down.”
Mrs Matthews said her team tried to further investigate how public funds had come to be used for a personal matter, but were denied access to key information by the Attorney General's Chambers.
She added that legal advice told her there is “no statutory provision for the underwriting by Government of the legal cost of a Minister, servant or agent suing in a private civil action”.
The Auditor said: “We, therefore, considered any such expenditure to be improper and unjustified.”
Noting an absence of information from the Attorney General, Ministry of Finance and Ministry of Public Works, she continued: “It is not clear why Government has funded legal action in which Government itself has not been named.
“It is clear, however, that this personal matter has already consumed significant time and energy at the most senior levels of Government and at significant public expense.”
Mrs Matthews' report included this explanation provided to her by the Ministry of Justice, which was repeated verbatim by Ms Cox last night: “The funding of the Ontario Action by Government was, in the judgment of the Government, an appropriate course to follow in the interest of the Government, the Country and Bermuda's international reputation and in this regard, we considered the funding of this action to be for a Government purpose in that the personal action was the only means by which the Government could take action against those responsible for essentially attacking the Government via its Ministers.
“These very serious allegations of corruption made against the serving Premier of Bermuda as well as a present senior Minister, went to the heart of Government and therefore the funding of this action was justified as being for a Government purpose.
“Government subsequently took the decision to terminate its retainer agreement with the Canadian law firm Lax O'Sullivan LLP on or about the 6 September, 2011.
“The judgment to fund this matter was a judgment made by the Government in good faith.”
Mrs Matthews said such a response causes her grave concern and shows “complete disregard for the concept of good stewardship of public money”.
She said: “I cannot comprehend how a personal legal matter could be justified by the Government and its legal adviser (the Attorney General) as a legitimate Government matter to be funded out of the public purse.
“Information related to this legal matter which was deemed by the Government to be an appropriate course to follow in the interest of the Country was denied the scrutiny of the Auditor General. This legal matter bore all the elements of a private action.”
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