Bermuda Housing Corporation bought a property from Transport Minister Dr. Ewart Brown without first getting the cost independently appraised and without the Government MP declaring his interests, The Royal Gazette has learned.

Auditor General Larry Dennis raised serious concerns about a number of occasions where BHC purchased homes without first obtaining an outside appraisal on the value - and Dr. Brown's was one of them.

The secret report on the mismanagement of BHC states that in November 2000, the corporation began major renovations on two apartments owned by a Minister, which The Royal Gazette knows to be Dr. Brown.

Mr. Dennis said the apparent intention - although no written agreement can be located - was for the corporation to manage the renovated properties in Flatts on behalf of Dr. Brown and use the excess of the rental income, once the lease and maintenance costs had been accounted for, to pay off the cost of the renovations.

This, the Auditor General said, was a normal arrangement for agreements of this nature.

However, the apartments were not suitable for However the apartments were not suitable fo rent, so BHC hired a construction and maintenance company to carry out a substantial refit - on the understanding that it would be later compensated for the financial outlay.

"Then in early 2001, after $152,000 had been spent on renovations, the general manager (Raymonde Dill) agreed with the Minister to purchase the property for the corporation," said Mr. Dennis.

"The total cost to the corporation, including the renovations and other incidental costs, was $610,000."

The Royal Gazette believes that BHC spent $152,000 on the major revamp of the apartments on North Shore Road, including replacing windows and doors, removing and fixing the floors, putting in a new bathroom and kitchen, and upgrading electrical equipment, and then spent a further $440,000 on buying the roadside property from Dr. Brown.

"Despite this purchase being a transaction between two Government-related parties, no independent appraisal or similar evidence was obtained to demonstrate that the acquisition cost was reasonable," said Mr. Dennis.

"Furthermore, although a director signed the purchase documents, there are no minutes or other evidence that the Board of Directors approved this purchase, as required by corporation policy.

"The Government's Code of Conduct calls for disclosure of actual or apparent conflicts of interest situations.

"While the Code does not define all potential conflicts of interest, it would seem to encompass situations where Members of the House or senior Government officials have significant business transactions with Government organisations."

Mr. Dennis said in his view, documentation should be available to demonstrate, as a minimum, that non-arms length business was transacted at reasonable commercial prices.

And he said that as the Code of Conduct directed, these situations should... "be resolved in favour of the public interest, rather than your own."

The auditor added: "It is not inappropriate for Members of the House and Government officials to transact business with Government.

"When property sales like these are negotiated, however, as the Code of Conduct infers, the documentary evidence retained should demonstrate that the prices and arrangements arrived at are beyond question and reproach."

But yesterday, Dr. Brown denied any wrongdoing, before hanging the telephone up on The Royal Gazette.

He said: "This is a matter that has been reviewed, I understand, by the the Auditor General and I have nothing additional to add to what his determination was."

But asked what that determination was, Dr. Brown said he did not know.

He added: "I know that there was nothing untoward with respect to that transaction and I cannot assist anyone who is attempting to carry out their own agenda."

The Minister then hung up the telephone.

But the Auditor General also raised questions about two other specific cases involving the managing and sale of properties.

He said, in a similar case, a senior Government employee sold two apartments to the corporation for $285,000, after which the corporation spent a further $200,000 renovating them.

"Here again, despite the related party nature of the transaction, no appraisal or similar evidence was obtained to demonstrate that the acquisition cost was reasonable," said Mr. Dennis.

"And, as well, although a director signed the purchase documents, there are no minutes or other evidence that the Board of Directors approved the purchase."

And in the third case cited by the auditor, Government backbench MP Arthur Hodgson was also involved in business dealings with BHC, and again, these were never disclosed.

As the Bermuda Sun previously reported, in November 2000, when Mr. Hodgson was still Environment Minister, he placed two rental apartment blocks into the hands of BHC to manage. Mr. Dill claimed in that newspaper story that BHC took them under duress.

The corporation refurbished two units and received rent for all of the apartments involved. And the deal was that Mr. Hodgson received a fixed $11,000 a month in rent, regardless of what BHC charged.

As with the usual agreement, the intention was to then recoup the money spent on the refurbishment from the excess rents given to BHC.

However, Mr. Dennis said it did not quite work that way.

He said: "The corporation refurbished the properties for $73,000 and charged the cost to an interest free loan account in the Member's name.

"Under a still unsigned agreement, the excess of rents collected over the lease payments to the Member, less any maintenance costs, are used to pay off the loan. However, the excess is proving insufficient to cover the maintenance costs and the loan account is increasing, instead of decreasing.

"This is one of the loans referred to (elsewhere in the report) that is beyond the authority contained in the Bermuda Housing Act.

"It is not secured by a first mortgage, some of the properties are not dwellings, and it was not approved by the Minister.

"In addition, it does not satisfy the disclosure and conduct standards."

Mr. Dennis said not only did management not ensure that documentation was available to demonstrate that the agreement represented arms-length values and arrangements, but the general manager did not bring it to the attention of either the Audit Committee or the Board of Directors.

The auditor said these were not the only instances where properties were purchased without first obtaining an independently appraised value.

He said an appraisal was obtained for only one of the 12 properties purchased during a two-year period by BHC.