Opposition leader Grant Gibbons has claimed the Bermuda College board were kept in the dark over the controversial deal to let Coco Reef take over Stonington Beach Hotel.

He said it was signed by College chairman Raymond Tannock and one other board member and then revealed as a done deal to the rest of the board in June 2003. He said the lease could be now be invalid because the normal process was not followed.

“The board did not approve the lease before it was signed. My understanding was that it was not even reviewed by the college's law firm. The Auditor General makes a very good point this proposal should have been put out to re-tender.”

Last night Senator Tannock could not be reached for comment. Bermuda College Board member Cris Valdez-Dapena said: “To the best of my knowledge all of the board was made aware.”

But she refused to say whether the board had been given a chance to vote on the proposal.

The deal saddled the College a more expensive insurance package, $1.2 million of debt and ended its entitlement to rent for five years said Dr. Gibbons. The College also lost two acres of prime waterfront property as well as woodland reserve he said, adding: “There is a real question mark over who was looking out for the college.”

He attacked then Education Minister Paula Cox for acquiescing in an act of privateering which had not been in the best interests of parents and students.

Tourism Minister Renee Webb defended the deal yesterday which had been the subject of a critical report by Auditor General Larry Dennis.

Mr. Dennis said the deal should have been re-tendered after Coco Reef owner John Jefferis negotiated a cut price deal after winning the contract.

The new deal doubled the lease, slashed rent, added oceanfront land and two cottages and allowed condominiums to be built and sold.

She said Coco Reef's had been by far the most attractive bid of the eight hopefuls, including three local bidders. Bermudians will get training here and at the sister hotel in Tobago. Ms Webb said the selection committee of private and public sector people made the best decision.

“Ministry of Tourism was not a party to the lease. That was between the between Bermuda College and Coco Reef. The Bermuda College owns the property.”

She said it was possible the lease would be extended to 99 years, similar to the deals at Club Med and Daniels Head.

She said the Auditor General's report said that up until the moment the successful bidder was selected the tendering process appeared to have been in accordance with Government policy.

“The integrity of the tendering and selection process is not in question. However, the lease negotiating process apparently is.

‘The terms of the Coco Reef lease had to be negotiated given the magnitude of the project. Everyone involved was aware of this. The negotiation of contracts, once a selection has been made, is not an uncommon practice.

“This has been the case, and is, with the Club Med site, Daniel's Head site and now Coco Reef. All of these properties are owned by the Government.”

She said Coco Reef, a prime South Shore facility formerly known as the Stonington Beach Hotel, had not seen any capital investment for at least 15 years.

“In 1998, this Government inherited a property that was not only losing money, but desperately needed to be transformed.

She highlighted problems including:

The Hotel had been losing money since 1991

Staff were being paid to train non-existent Bermudian trainees

The hotel owed millions of dollars to its creditors

Accounts payable was inordinately high

There was an accrued staff vacation liability

The hotel had an overdraft facility of $500,000

The accounts receivable was also high and virtually uncollectible; and

The facility was in dire need of renovation.

She said Coco Beach owner John Jefferis had proven expertise in the hotel industry and operated the award-winning Coco Reef Resort in Tobago, which was voted the Best Resort in the Caribbean in the 2002 World Travel Awards.

Coco Reef Resorts Limited was paying for extensive renovation and expansion to the hotel, she said, including a dramatic new lobby, additional luxury villa suites and refurbishment of all guest and public rooms while a new bistro type restaurant and beach restaurant will be added.

“To date Coco Reef has invested almost $6 million on the improvements to the Hotel.”

“The five year rent free period reflected a commitment by Coco Reef to complete $10 million worth of extensive redevelopment of the hotel.

“With the exception of the accounts payable and an overdraft as at May 1st, 2003, the lease negotiated was also contingent on Coco Reef assuming all of the liabilities of the hotel.”

She said the agreement to include the use of the woodland reserve preserved the separation between the College and the Hotel, and was added to the lease to ensure security and safety for hotel guests occupying rooms on the northern side of the hotel.

“This land is not intended for Coco Reef to develop” said Ms Webb.

“Negotiations were initially predicated on the basis that a 21-year lease was the maximum permitted by law.

“However, when it was realised that 50 years was allowed under the Companies Act, and in the interest of tourism and our tourism product, it was determined to offer the Coco Reef a 50-year lease.”

Ms Webb said although in negotiations the rent free period had increased from three years to five after that Government gets rent as well as 20 percent of the gross profits.