Minister for Works and Engineering Alex Scott last night denied any irregularity in the controversial $700,000 paid to the general contractors of the Berkeley site.

Mr. Scott said his department had conducted itself entirely appropriately after The Royal Gazette was told by three different lawyers that a fraud investigation could ensue if the receipt for the payment is not found. Mr. Scott said yesterday that he was not aware of whether or not the receipt had so far been located and given to the Auditor General, as that was a matter for his technical staff. However, he said he was confident that if the receipt was not retrieved, there would be no fall-out for his department.

“The Auditor General does not correspond directly with me. It goes through the technical officers, so it's not for me to say (about the receipt),” said Mr. Scott.

“But there is absolutely no irregularity involved. We have conducted ourselves properly. We are quite satisfied with the way we have managed it.”

Auditor General Larry Dennis raised serious concerns over the $700,000 given to general contractor Pro-Active Management Systems Ltd., which was supposed to be a reimbursement of cash it had already paid out. However, the auditor said technical staff at the Ministry had voiced concern because the Ministry was reimbursing Pro-Active, despite having no evidence that the $700,000 had been paid out by the company in the first place.

In order to win the contract, Pro-Active had to have a performance bond in place, which was a guarantee that, should the company be unable to finish the massive $68 million new school project, all costs would be met.

It safeguards the owner of the site - in this case is the Education Ministry - against additional costs and serious delays.

Pro-Active was unable to find a company to cover the bond, so the Bermuda Industrial Union (BIU) set up a subsidiary company, Union Asset Holdings (UAH), for the sole purpose of putting the bond in place.

In order to get the bond set up, Pro-Active first had to pay UAH a $700,000 premium.

But when Mr. Dennis did a recent audit on the site, he found no evidence to prove that Pro-Active had paid the money, although Government had readily reimbursed it.

In his report, Mr. Dennis said the lack of evidence gave him grave concerns. He added that, if the money had not been paid by Pro-Active, it could, at best, be described as an “interest free cash advance”.

And he said his concerns were grave enough that he did not think he should be coy.

Mr. Dennis said: “If the $700,000 surety fee has not been paid, Pro-Active has received a $700,000 interest-free injection of public funds for which Government has received no value.

“Most charitably, I might describe it for now as an interest-free cash advance to help with cash flow problems that was received under false pretences.”

As a result, Mr. Dennis said he was awaiting evidence to prove that Pro-Active paid the $700,000, along with a copy of the original performance bond and an assessment of UAH's capabilities to meet claims of up to $6.89 million - ten percent of the overall cost of the project. As of last night, they had not materialised.

Mr. Dennis also raised concerns over the fact that the bond was signed 11 days before UAH was officially created, leading him to question whether or not the bond was enforceable.

The Royal Gazette understands that if Mr. Dennis is unable to obtain the receipts, he will report to Governor Sir John Vereker.

And if the receipt still does not materialise, the file could be passed to Police for a fraud investigation to begin.

Lawyer Mark Pettingill said he believed because there were questions, it should be investigated by the Police.

He said: “I would say this should be investigated for fraudulent activity. There clearly are issues that have to be investigated fully. This was public funds.”

But Mr. Scott questioned the legal advice given to The Royal Gazette, and said he had heard no such thing.

“I would not go to those lawyers for advice, if I was you,” he said. “You can talk to four different lawyers and get four different kinds of advice.

“I have talked to lawyers and they have said nothing about fraud. No one is concerned about the payment between Pro-Active and their insurance company. From what I can understand, both parties are totally satisfied.

“We have a copy of the bona fide bond and we can call on it if we need to. Don't put yourself in the hands of those lawyers.”