The Public Accounts Committee has called for changes to financial instructions after a report from the Auditor-General about the handling of a forged cheque.

The report stemmed from an incident in which false cheques — intended to unjustly implicate former Premier Ewart Brown and former minister Derrick Burgess — were placed in government files.

After the discovery, Cabinet approved the use of government funds for a defamation suit against former government chief architect Lawrence Brady and Canadian architect Sam Spagnuolo in an Ontario court.

A Canadian law firm was brought in to bring defamation charges and ran up legal bills of more than $30,000, which were paid by the taxpayer.

However, in a special report Auditor-General Heather Jacobs Matthews found that the Bermuda Government had breached financial instructions as it appeared the ministers rather than the public would have benefited financially had the lawsuit been successful.

The PAC subsequently launched its own investigation, convening nine meetings on the subject and summoning numerous civil servants to testify.

In the House of Assembly on Friday, David Burt, the chairman of the PAC, said the committee agreed that, based on the strict letter of the law, a lawsuit in private names could be viewed as a violation of financial instructions. However, he added: “Given the unusual circumstances of this case, PAC acknowledged the Government’s position, that it considered this action to be for government purpose, and thus in line to the financial instructions.

“The PAC takes note of the Auditor-General’s recommendation that the surcharge funds be paid back, but it does not support the recommendation, as the committee accepts the explanation that the Cabinet approved the funds, and that it was the view of the Cabinet that the funds were for government purpose.”

Mr Burt said the PAC recommended that the Government consider amending financial instructions to allow Cabinet to support a civil action taken on behalf of a minister against anyone who “defames and damages the reputation or credibility of the minister” while they are carrying out their duties. The PAC also recommended that in such cases, it should be clear that the proceeds of any such action would revert to the Government.

However, speaking as Shadow Minister of Finance, Mr Burt added: “It is my view that this entire saga was an extreme waste of money from beginning to end. It was a very sad day in our history.”

Bob Richards, the Minister of Finance, noted the frustration of PAC members in trying to resolve the matter, saying a core issue was a lack of accountability in the Civil Service.

Mr Richards added that he believed, but could not prove, that millions of dollars of government money had been potentially wasted due to this issue.

“I’m working to do something about the culture of non-accountability but I know we are a long way from par here because it goes back a long, long time,” he said.

“When was the last time heads rolled in the Government? Ministers’ heads roll all the time, but who else’s does?”

Michael Scott, who was Attorney-General at the time of the controversy, said a special report had been “entirely inappropriate” to get to the bottom of the matter.

“No wonder some members of the PAC of the day regarded this as a frustrating fool’s errand,” he said. “I’m sorry that the matter isn’t resolved.

“Hopefully, in some small way, the opportunity to thrash this out in this chamber refreshes the public memory of what is at stake here.”