Public Accounts Committee Special Report
Minister ordered payments – House committee finds
‘I was hung out to dry’, Bean
The Bermuda Land Development Company broke the rules and wasted Government funds, according to the Public Accounts Committee, when Deputy Chairman Leroy Bean ordered for a signed contract to be scrapped.
Contacted last night, Mr Bean, who is overseas attending an anti-gang conference, said that his side of the story had been left out in the PAC report, which “hung him out to dry”.
According to the report, Mr Bean ordered for the painting contract to be given instead to a company run by the son of BLDC Chairman Edward Saunders.
Because of the switch, a 2010 job initially set at $24,897.50 ended up costing $47,730 — after the BLDC was forced to settle out of court with the original contract holder.
The job’s final cost ended up 92 percent higher than what had originally been settled for.
The incident broke with “Financial Instructions, the tenets of fairness and good governance”, the PAC report said, adding that it was “a clear misuse of taxpayers’ money”.
The Royal Gazette understands that Saunders General Maintenance was given the contract even after the BLDC CEO “refused on principle” to terminate the original, as instructed by Mr Bean.
The report said the CEO was “overruled and the switch was consummated”.
It continues: “The subsequent contract with the Chairman’s son’s company was for $31,630, and there was an additional request to apply another finish coat at a cost of $6,600, for a total of $38,230.”
Meanwhile, the report says, a law suit filed by the originally assigned contractor was settled out of court in June, 2011 — to the tune of $9,500, plus $1,000 in legal costs.
Mr Bean was unveiled earlier this month as the Progressive Labour Party candidate for constituency four.
Asked for comment, he said the original contract had been signed off in violation of BLDC by-laws — since that contractor already had two relatives of his own working in the company.
“Giving him the job was against BLDC code of conduct and a fundamental conflict of interest.”
Saunders Maintenance had meanwhile been “asked to do an emergency job by the assistant facilities manager”, he said.
Mr Bean said he had tried to make amends to the original contractor, by giving him another job at a different facility.
However, he said, the disgruntled party proceeded with a law suit, and the matter had to be settled out of court.
Former Public Works Minister Derrick Burgess was wrong to direct the BLDC to pay consultancy fees to its board members, the Public Accounts Committee has found.
Such a move should never have been made without the consent of the Finance Minister, the committee stated in a report released in the House of Assembly.
The findings follow a report into conflicts of interest within the Bermuda Land Development Company released earlier this year by Auditor General Heather Jacobs-Matthews.
She found the BLDC paid more than $160,000 in consultancy fees to board Chairman Edward Saunders and his deputy, Pastor Leroy Bean.
Shadow Finance Minister Bob Richards told the House of Assembly on Friday that Mr Saunders and Pastor Bean told the PAC that nothing in the BLDC by-laws prevented them from serving as consultants.
Mr Richards, PAC chairman, pointed out that the BLDC is regulated by the Baselands Development Act 1996 which demands that board members put the company’s interests first.
“We thought at the very least one could say that this consultancy represented a profound conflict of interest between their own interests and the company’s interests, which was the same conclusion arrived at by the Auditor General,” he said.
Mr Burgess was able to give the BLDC directives under its governing regulations, but only with the prior consent of the Minister of Finance, the Opposition MP stated.
Such directives must be issued in writing and accompany the company’s financial statements which must be laid before the House of Assembly.
Mr Burgess said he issued directions orally on more than one occasion, in his testimony before the PAC two weeks ago. The Deputy Premier said he believed it was within his remit to give operational directives.
Said Mr Richards: “He also said you can’t take the law literally, particularly if it’s inconvenient.”
He continued: “A Minister of the government cannot decide which laws to abide by and which ones to flout at his discretion. As members of Cabinet, Ministers, more than ordinary citizens, must abide by the law.”
It was the committee’s findings that neither Mr Saunders nor Pastor Bean should have been considered as consultants to BLDC, Mr Richards stated.
“To make a long story short on that one, Mr Speaker, having determined the backgrounds of the chairman and the deputy chairman via their own testimony, it does not appear that either separately or together they would have classified as management consultants for an undertaking of this nature.
“While both had considerable real-world experience in their respective fields, neither had any real experience in analysis or reporting of management structures and solutions.
“Moreover, the rates they charged the company were comparable to consulting management professionals, which they were not.”
Mr Richards said that because the BLDC had been without a chief financial officer for many years, many things weren’t done as they should have been.
“I think most of the committee thought it might be a better idea for them to have hired a CFO than to do what they did,” he said.
“All the players involved, except for one director, completely ignored the key distinction between personal interest and the company’s interest.
“The issue is made more egregious by the managing director’s refusing to acknowledge this mistake, instead conveniently making repeated references to the company’s by-laws, and failing to look up the authority ladder to the Act, which makes clear references to conflicts of interest.”
He said the committee found that Government must make Ministers and those appointed as directors of quangos aware of their legal duties and responsibilities, particularly in the field of conflicts of interest.
“Given that the Minister’s directives were invalid, it was their duty to know that,” he said.
“We found that the Minister must know the conditions under which the law grants him power. The Minister must also know his role is not to micromanage assets or enterprises under his charge.
“While the chairman and deputy cannot be absolved of their responsibilities in this matter, the root cause is the manner in which the Minister executed his responsibilities relative to the company, a manner which encouraged this inappropriate behaviour.”
Mr Richards said that the committee also agreed with the findings of the Auditor General that those responsible for the breaches in fiduciary responsibility should be held accountable, and that the funds paid to the consultancy should be reimbursed.
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