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BIU boss was incorrect on Global House purchase

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Union leader Chris Furbert’s claim that Global House was purchased by raiding the civil servant’s pension fund is incorrect,

The Royal Gazette can confirm.

Mr Furbert, President of the Bermuda Industrial Union, made the claim during an interview with

The Royal Gazette on Tuesday, in support of his contention that the former United Bermuda Party Government had mismanaged the pension fund.

He had earlier made the same claim on a television talk show.

The claim drew an immediate denial from Sir John Swan who was Premier during the 1980s when the Global House purchase was made.

Mr Furbert’s office promised that he would be making a further statement on the matter and substantiate his claims on Wednesday. But by press time last night he had not done so.

“His statement is false, blatantly false,” said Mansfield (Jim) Brock who served as Financial Secretary from 1982 until the end of 1987.

“The money for the purchase of Global House came from investment income produced by the Bermuda Monetary Authority,” he told

The Royal Gazette.

“Never, ever was any money taken from any pension fund other than for what was provided for by the law.”

Mr Furbert claimed that the pension fund was raided to the tune of $38 million in 1987.

The Royal Gazette has examined the audited financial statements for the PSSF for the years 198⅜4, 1984/85, 198⅝6, and 1986/87.

The Fund’s surplus grew from about $19.5 million to more than $75.5 million from 1983 to 1987. Government made four capital contributions of $2.2 million each over the period. There is no record in the statements of any extraordinary payments to Government.

The Fund was established in 1978 and Government and its employees made matching contributions since inception.

Pension payments were made out of the Consolidated Fund until April 1, 1986 when the benefits started to come out of the pension fund.

This newspaper could find no documentary evidence which detailed actuarial advice given to the Government concerning the Fund. Mr Furbert’s additional claim was that actuaries had advised the Government to wait for 20 years before paying out of the Fund.

Mr Brock’s recollection of actuarial advice given with respect to the Fund contradicts Mr Furbert’s version.

“That is news to me,” he said of Mr Furbert’s claim. “The first time I ever heard of that policy was from Chris Furbert.”

Mr Brock said that there were two actuaries advising Government, one from the UK Government and a local.

“What I recall the actuaries saying is that if the Fund gets to the point where it is 75 percent fully funded and provided the investment return is three percent more than the rate of increase in future compensation levels, then it would be fully funded over the years,” Mr Brock said.

“As it turns out the rate of return on the investments was around five percent more than the rate of increase in the compensation level. So for many years it outperformed.”

An amendment to the Public Service Superannuation Act required that the pensions be paid out of the Fund effective April 1, 1986, according to a note in the audited Financial Statements for the year ending March 31, 1987.

In his Budget Statement for fiscal year 198⅞8, then Finance Minister Clarence James explained to the Island that a revenue windfall justified the Global House purchase at that time.

“There has been a very substantial improvement in revenue forecasts for the year,” he said.

“I would say now that to a certain extent the money is fortuitous, and is not likely to recur on the same scale in future years.

“As a result, rather than allowing that money to be used for expansion of current account programmes, it has been earmarked for essential capital works, such as the airport, and in particular the purchase of the Global House building.

“I regard this purchase as an investment which will both generate immediate rental income and produce savings in future rent payments.”

He explained that the revenue projections had been revised upwards by $15.1 million.

“Over half of this overshoot is attributable to the exceptional level of profits achieved by the Bermuda Monetary Authority, the result of sound investment strategies at a time of great uncertainty and turbulence in the financial markets and on the foreign exchanges.”

The Bermuda Monetary Authority was required to turn over some of its net earnings to the Consolidated Fund.

The BMA’s 1986 report shows net earnings of $12,061,446 for that year and $4,690,689 for 1985. It also shows that it transferred to the Consolidated Fund $7,354,831 in 1986 and $4,953,396 in 1985, for a total of $12,308,227 in transfers for those two years.

“Investment income from all sources rose 122 percent to $13.8 million for the year ending 1986 from $6.2 million for the previous year,” the report states.

And the Budget Estimates for 198⅞8 reported that Government’s original estimate of revenue from the BMA of $3 million for 1986/87 was revised upwards to $11 million and that another $4.25 million was expected from the BMA in 198⅞8.

The 1987 deal to purchase Global House for $10.75 million was approved after much debate in the House of Assembly with the then Opposition parties, the Progressive Labour Party and the National Liberal Party questioning whether Government was being wise with taxpayers’ money.

PLP leader at the time, L Frederick Wade, also appeared to question the motives behind the deal and demanded to know who initiated the purchase, the identity of the shareholders and the reasons for doing the deal on a cash basis instead of by instalments, according to this newspaper’s report of the debate.

Dr James told parliament that Government had an annual rent bill of $335,000 for space at Global House and had already spent $1 million in rent.

He said the money came from two years of unusually successful investing by the Bermuda Monetary Authority, mostly in bond markets.

No mention was made in the House debate of the civil servant’s pension fund. Nor was there any mention of it when the deal was debated by Senators two weeks later.

BIU boss Chris Furbert

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Published March 12, 2012 at 2:00 am (Updated March 12, 2012 at 10:03 am)

BIU boss was incorrect on Global House purchase

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