Public Accounts Committee told of BLDC ‘disarray’

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  • Meeting of the Public Accounts Commitee on the 'Special Report of the Auditor General on the Misuse of Funds' - Former Chairman of the BLDC Edward Saunders (Photo by Mark Tatem)

    Meeting of the Public Accounts Commitee on the 'Special Report of the Auditor General on the Misuse of Funds' - Former Chairman of the BLDC Edward Saunders (Photo by Mark Tatem)

  • Meeting of the Public Accounts Commitee on the 'Special Report of the Auditor General on the Misuse of Funds' - Auditor General Heather Jacobs Matthews. (Photo by Mark Tatem)

    Meeting of the Public Accounts Commitee on the 'Special Report of the Auditor General on the Misuse of Funds' - Auditor General Heather Jacobs Matthews. (Photo by Mark Tatem)

  • Meeting of the Public Accounts Commitee on the 'Special Report of the Auditor General on the Misuse of Funds' (Photo by Mark Tatem)

    Meeting of the Public Accounts Commitee on the 'Special Report of the Auditor General on the Misuse of Funds' (Photo by Mark Tatem)

Government owned Bermuda Land Development Company was in complete chaos before its Chairman and Deputy Chairman stepped in to put things in order, a parliamentary sub committee heard yesterday.

Senior staff members, including its CEO, were often absent from work and the company was run like it was their private business, according to its former chairman.

Ed Saunders and Leroy Bean, former BLDC Chairman and Deputy Chairman respectively, were grilled by the Public Accounts Committee investigating the Auditor General’s special report on the misuse of public funds.

The PAC focused on paid consultancy work done by the pair for the BLDC which netted them about $160,000, an arrangement which the Auditor General’s report described as a “fundamental conflict of interest”.

The Auditor General’s report also noted that the Finance Minister, a shareholder of the company, had not been notified of the arrangement with the directors as required by law.

The pair insisted yesterday that they had done nothing wrong and that their actions were directed by the Public Works Minister.

They said that the question of payment for the work only came up sometime after the work had started and its scope became clearer, and it was suggested by the company’s CEO.

Mr Saunders was the first to be questioned by the PAC.

Deputy Premier Derrick Burgess in his capacity as Public Works Minister, a statutory shareholder of the BLDC, had instructed the pair to do a review of the company’s operations, Mr Saunders told the PAC.

“Because of the great concerns as to what was happening at the BLDC — how the company was being run — the arrears and the accounts receivable, we were asked to look at the company and to make whatever corrections were necessary to be made,” Mr Saunders said.

He testified that the request was made orally initially, but later put in writing.

Asked why the Board did not request that a civil servant be seconded to perform the work, as enabled by the legislation, he said: “The Minister requested us directly to do this.”

Under further questioning, Mr Saunders said he did not have a copy of written instructions from the Minister.

But the Auditor General, Heather Matthews, noted that the only written evidence her office could find was a letter written by the Permanent Secretary in early 2011, and the work had started in 2010.

Mr Saunders said that there was no expectation that he and his deputy would be compensated when the work started.

He told the PAC that the CEO had recommended the amount to be paid.

“When you realised the depth of the problem why was there not a decision made to pull back and to put in place people who would actually do the work and report back to yourselves?” asked PAC member Terry Lister.

“The company was in such disarray,” said Mr Saunders. “There were employees there who were treating the company like it was their own private business.”

The CEO, and other staff members would often be absent and couldn’t be found when needed, he added.

“Those types of abuses were going on in the company. They were treating it as if it was their own mom and pop business.”

Two senior persons were asked to resign as a result, he said. One was in charge of the accounts but “really didn’t know what he was doing”.

“The other was carrying out other businesses at the BLDC,” he said. “You could never find them. You could never find anyone you needed down there.”

He said: “We were paying over $200,000 to two persons and not getting $10,000 worth of work.”

The CEO was put on probation, he informed the PAC.

The review took longer than expected, Mr Saunders told the PAC, partly because of the CEO’s absences.

But the PAC then honed into a decision made by the board that should the work go beyond March 2010, that consultants would be brought in.

And Mr Lister questioned why they continued to do paid work after that date, according to evidence dug up by the Auditor General.

Mr Saunders said that the work had been completed in April but the Minister had continued to ask them to do additional work.

“The CEO was off quite a bit of time. There was no CFO, there was no facilities person there. There wasn’t an office manager there,” he explained.

Asked by PAC Chairman Bob Richards whether he did not think it unusual that the directives from the Minister were not given in writing, and that he had been micromanaging the company, Mr Saunders said that he did not think the Minister had been micromanaging given the state of the company.

“The main titular heads of the company were not there,” he said.

“We were implementing the findings and to just give a report and have someone else implement it wouldn’t have been effective and it would have been more costly.”

But asked if any attempt had been made to replace the personnel, he said that they had been told that there was to be no hiring.

Mr Saunders said he did not consider that taking on a paid consultancy while directors of the company was a conflict of interest, because the company bylaws allowed it.

Mr Richards said that the Companies Act, 1981, required that interests in material contracts must be disclosed by directors of a company.

“It’s not something that you can just opt out of,” he said.

“You did have a contract with BLDC, but you were also chairman. That’s where the conflict comes in.”

Mr Saunders responded by saying that he had sought legal opinion on the matter which had indicated that the law had not been contravened.

Mr Richards noted that the Auditor General had received a different legal opinion.

“You were wearing two hats. You were wearing your own hat and you were wearing the hat as Chairman of this company,” Mr Richards said.

Pastor Bean supported much of Mr Saunders’ testimony when he addressed the PAC.

Asked if he knew that the Finance Minister, the second major shareholder, Premier Paula Cox, had not been made aware of the consultancy arrangements.

But he said that the Works Minister had told him that he had been advising the Finance Minister. He disagreed that he should repay the consultancy money because he did not believe he had done anything wrong.

And Pastor Bean ended his appearance by saying that the whole affair had been “politicised”.

“When her (the Auditor General’s) opinion starts to override bylaws I think that she needs to be brought checks and balances.”

About 30 people packed the gallery of the Senate Chamber where the hearing was held — representing what PAC Chairman Bob Richards said was an unprecedented level of public interest in the work of his committee.

PAC member, and former BLDC board member, Walter Lister was absent from the proceedings, having recused himself.

Mr Richards told The Royal Gazette following yesterday’s proceedings that it was clear to him that Mr Saunders and Pastor Bean did not understand the meaning of conflict of interest.

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Published Apr 27, 2012 at 8:35 am (Updated Apr 27, 2012 at 8:34 am)

Public Accounts Committee told of BLDC ‘disarray’

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