In a massive U-turn, Government has let Union Asset Holdings (UAH) Ltd. off the hook for all of the $6.8 million owed under a bond due when the Berkeley school project failed.

In return, the Bermuda Industrial Union (BIU), the sole owner of UAH, has agreed to a cooling-off period of up to 72 hours before taking industrial action.

At a joint press conference with the BIU yesterday, Premier Ewart Brown said money would have been lost pursuing the case through the courts, and a strong union was vital for a healthy Bermuda.

It contrasts with his stance less than two months ago where he attacked the Auditor General Larry Dennis for suggesting Government was not serious about getting its money back as it risked breaking the union.

Shadow Finance Minister Bob Richards last night complained nobody was being held accountable for the disappearance of another $6.8 million taxpayers' money.

Mr. Richards said of the Berkeley Project: "This has been the largest waste of public money in the history of Bermuda. I'm hoping this is the final chapter, but there always seems to be another piece of bad news."

UAH had been paid $700,000 by Government to buy the bond <\!m> which acts as insurance if a project fails <\!m> for original contractors ProActive.

It was collateralised by the BIU, which owns several buildings in Hamilton.

But ProActive was sacked in 2004 after delays in completing the secondary school, which eventually came in three years late and more than $55 million over budget.

Arbitration found ProActive owed Government more than $15 million.

Asked about the U-turn, Dr. Brown said:<\p>"If you close your eyes and use your imagination this happens in the real world everyday. The people may look a little different.

"But in the real world, the business world, this happens every day where in the beginning of negotiation an organisation has on its books, apparently, the ability to service a loan or cover a debt."

He said efforts to collect the cash would not have resulted in payment, but would cost additional legal bills.

"We determined it wasn't worth it, that happens all the time."

Asked why UAH was not willing to pay the money owed under the bond, BIU president Chris Furbert said the company had not been given its statutory right to put in its own team when ProActive were removed.

On the cooling-off period he said: "Let's say an issue comes up tomorrow, the membership has agreed that unless the issue is of urgent importance where a supervisor came in and broke somebody's leg, somebody's arm and put them in hospital, you want that dealt with immediately, but under normal circumstances or a normal grievance the Premier is saying let's follow the normal recourse.

"The membership has said to me, we will give your office, as well as the executive board, 48 to 72 hours to deal with those sort of things."

Mr. Furbert added:"His (Dr. Brown's) point is well taken that dropping tools over everything and anything has to change and that's what we put to the membership."

Dr Brown added:"The rights of the worker are worth more than $6.8 million, this is not a buyout or a pay-off."

Probed on why UAH wasn't going to pay the bill Mr. Furbert said: "Under the performance bond there were certain rights the surety would have been entitled to.

"The surety has the right to come in and take over the project and finish it to protect the $6.8 million posted back in 2001."

Dr. Brown summarised the history of the issue as follows: "The Government of Bermuda terminated Proactive Management Systems after it mismanaged the Berkeley Institute construction project.

"ProActive sued for wrongful termination and ultimately the issue went before an arbitration tribunal.

"The tribunal ruled in favour of the Government five years after the original performance bond was enacted.

"By that time ProActive was defunct and could not pay its $6.8 million performance bond obligation.

In October of 2008, Cabinet agreed that our next legal recourse was to pursue UAH a subsidiary of the BIU, said Dr. Brown. "We pursued aggressively through legal channels in an effort to recoup the performance bond."

He said over several months and through numerous meetings both formal and informal, he personally, along with colleagues, had "devoted considerable energy" to the recovery of the sums owed by UAH.

But he added: "Faced with the prospect of another lengthy legal battle, the costs of which could easily have reached hundreds of thousands of dollars, Cabinet determined that the taxpayers of this Country could not afford the dogged pursuit of this debt in what would have become a fight of pure legal principle and not good economic sense.

"Ultimately, Cabinet has decided it is in the best national interest of Bermuda to release Union Asset Holdings, and by extension the Bermuda Industrial Union, of its burden in the $6.8 million dollar performance bond."

He said the main reasons were:

* To continue legal pursuit of the performance bond could mean a new multimillion dollar, multiyear legal challenge with no guaranteed result for either side; Dr. Brown said Government had already spent millions on the Proactive legal fight

* UAH contributed $9 million to Proactive during the Berkeley project when the contractor was short on cash; UAH can never recoup that money

* Even if the Government won its case, the BIU and its 4,000 workers would be a damaged organisation, unable to stand up for workers' rights as it has done since 1947.

"In essence we could win the case, but lose the Country's largest union," added the Premier.

The Premier said he believed "we can use this agreement to turn a page and further strengthen our relationship with organised labour as it relates to work performance and labour action; there is certainly room for improvement in that area".

And the Premier added: "You will recall that not long ago, Cabinet made the unprecedented decision to guarantee $200 million in preferred shares for Butterfield Bank.

"The message in that instance was clear and concise it is critically important to ensure our banks are strong and can withstand the stress of a further worsening of the economic climate. Banks are the lifeblood of our economy.

"Similarly, we believe unions are the lifeblood of our community. They too must be strong and stable.

"I am firmly confident that this decision reinforces the strength and stability of the BIU and protects our economy from a further threat.

"This Government is a government elected by the people to make decisions. There may be some who do not like this decision but a decimated and weak union does not benefit any Country.

"However, the taxpayers of Bermuda have a very simple demand in all of this.

"They want to know that they can rely on the members of the BIU to deliver the services they have been hired to carry out.

"They want to know that bus drivers will pick up their children, that garbage crews will haul their waste and that engineering crews will fix their streets. That is all taxpayers want confidence in government services.

"If our two organisations can come to a joint resolution on this matter, one of the most complex we have ever contemplated… then surely we can fix whatever issue has upset you in your workplace.

"If you have a problem, let's talk like grown-ups before downing tools like something less than adults. Why not come to the table before rushing to a picket line?

"Whatever the problem in your workplace let's find a resolution together before we inconvenience the public. That is what taxpayers want. And I hasten to add, it is at least what taxpayers deserve."

Asked if the deal, which means the taxpayers don't get a cent of what's owed, had set a precedent for others to get away without paying obligations Dr. Brown said "I could never say to you that this could not happen.

"But it has happened before and there are all kinds of precedents where parties have determined that it is not economically feasible, or feasible for other reasons to pursue any further.

"We came to that decision, we don't think that this binds us in any other situation. This is an isolated situation."

Asked how the public would react to the decision the Premier said they would view it similarly to help given to the Bank of Butterfield.

He added: "A significant institution in the Country had its economic viability threatened and the Government came forward to take the step to make sure it didn't happen. In the long run Bermudians will say the union was worth saving."