The way businessman John Jefferis was selected to manage and operate the Government-owned Stonington Beach Hotel was "sound and fair," Tourism Minister Renee Webb said yesterday.

She said yesterday's Royal Gazetterevelation that Mr. Jefferis was able to negotiate a substantial rent reduction which will save him millions of dollars, an extended lease and an extra plot of land after he was selected was "politicking" by the newspaper on behalf of the United Bermuda Party.

The allegation was strongly denied yesterday by Royal Gazette editor Bill Zuill, who said the newspaper was politically neutral and was only doing its job of bringing accurate information on issues of public interest to Bermudians.

Ms Webb said there were a number of "unknown liabilities" at Stonington, which a civil service committee - subsequently approved by Cabinet - has given Mr. Jefferis a 50-year lease to manage rather than the 21-year lease originally agreed upon.

Mr. Jefferis will save millions of dollars in base rent after renegotiating the agreement after his company Coco Reef Resorts was selected, including a five-year rent free period. The rent he will pay the College is also substantially less than that he proposed when he was selected.

Bermudian Mr. Jefferis also obtained a 1.9 acre plot of oceanfront land with two cottages which the College had earmarked for halls of residence after he was selected - which was also not on offer when the businessman won the contract.

Mr. Jefferis was selected last December ahead of Bermuda Resort Hotels (BRH), which also made the short-list.

BRH was originally selected to run the hotel last February when the College made the selection. The hotel is used to train Bermudians in the hospitality industry and Mr. Jefferis' company will have to continue providing training.

But the hotel was then transferred from the Ministry of Education to the Ministry of Tourism and the tendering process began again to avoid the impression of a conflict of interest.

The president of BRH is Billy Griffith, who sat on the College Board of Governors.

Ms Webb did not question the accuracy of The Royal Gazette report, but she said the five-year rent free period which Mr. Jefferis negotiated - and which was not in his plans when he was selected - "makes allowance of Coco Reef's commitment to complete $10 million worth of extensive redevelopment of the hotel at their expense.

"I must add that this is a hotel which has been operating at a substantial net loss over the years.

"Moreover, it is also contingent on Coco Reef assuming all of the liabilities of the hotel, save and except for accounts payable and an overdraft facility. There are a number of unknown liabilities at the hotel. This Government is committed to growing the economy of Bermuda and an integral part is Tourism.

"We are excited that a Bermudian hotelier of distinction, Mr. Jefferis, has taken such a positive approach to the tourism product.

"The selection process in Mr. Jefferis' case was sound and fair. The committee charged with the responsibility in this area is of the highest integrity and conducted their affairs in a manner that was a credit to the organisations they represent."

Bermuda College president Michael Orenduff said in yesterday's Royal Gazette that he was "very concerned" about the lease given to Mr. Jefferis and that his chief financial officer believed the College faced an immediate liability of $1.25 million as a result.

Neither Dr. Orenduff nor his chief financial officer saw the lease before it was signed and the President has asked the College's lawyers to look at it. Ms Webb said yesterday that college lawyers had looked at the lease already and that the institution was kept informed through Permanent Education Secretary Michelle Khaldun and chairman of the Board of Governors Raymond Tannock.

And Mr. Jefferis said the $1.25 million Dr. Orenduff complained of was actually money the College owed his company as the new operator of the hotel for advanced bookings. Ms Webb said: "It is unfortunate that the President of the College has chosen to air his misgivings publicly.

"There is already a process for handling any of these matters that require further clarification and there is an ongoing dialogue on these issues. I am encouraged by the fact that after a lengthy exercise in due diligence and painstaking consideration, a Bermudian is given the opportunity to participate in the revival of our tourism industry. Like any major initiative, all matters were conducted carefully and with due regard to all relevant known facts.

"I am pleased with the overall conduct of the team that was involved in this process and I have every confidence that the ongoing discussions will get to the root of any matters that require further study or clarification."

Chairman of the College board Mr. Tannock said the board would be talking to Dr. Orenduff about the story, but not until he recovers from his current illness. Mr. Jefferis, who attended a Press conference with Ms Webb at Stonington yesterday, said there were big differences between his original proposals and what came to light after he was selected.

"The number one thing Government was insistent on, which was not brought out until later, was there would be no redundancies and they would not be responsible for redundancies," he said.

"My company would be responsible for that and we committed to that and that would be a considerable cost. But we have agreed categorically there will be no redundancies. We have taken responsibility for all the insurance claims and it could be a substantial amount of money.

"What the College was trying to do during quite oppressive negotiations was to get rid of all possible liabilities. They wanted to get out of subsidising the hotel in the future.

"The beach is falling into the ocean and this year there was a large sink hole discovered. My understanding is that there are other sink holes and I couldn't get the College to agree to this. I can't do it for nothing. I have to get something back."

He would also have to spend money improving sewage and electricity, and he said the wiring had not been improved for 20 years.

"All this put together and I don't think it's a great deal for me financially but it will be most entertaining, and that's why I'm doing it." When asked how the lease had been extended beyond the original 21 years to 50 years, Mr. Jefferis said: "I don't think anyone understood the complexities of what the Companies Act allowed. My understanding was the people negotiating thought 21 years was the maximum."

And Ms Webb said a lease of more than 21 years did not have to be ratified by the House of Assembly. Under the Companies Act, only leases of more than 50 years needed House approval, she said.

On the $1.25 million which Dr. Orenduff says the College will be out of pocket, Mr. Jefferis said it is "money the College owes the hotel". "Money they collected for advance deposits, money for bookings to the hotel and they won't pay it. Dr. Orenduff won't pay the money over."

Ms Webb admitted she had stayed at Mr. Jefferis' hotel in Tobago, the Coco Reef Resort, but she had paid her own way. And she said: "I didn't even know Mr. Jefferis (then)."

She had also stayed at Shadow Tourism Minister David Dodwell's hotel in Nevis. Mr. Jefferis said he had handed The Royal Gazette story to his lawyer who would be "looking over every single sentence".

Shadow Tourism Minister David Dodwell said he was "very concerned" about the deal and the UBP would review it if it won the election. "I was very disturbed to learn of what was written today. We think more investigation needs to be done by Government, the College and the Auditor General."