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Government secretly settled lawsuit with debt collection company

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Gina Stableford, owner of OARRS Inc (Photograph from Facebook)

The Government has secretly settled a lawsuit brought against it by a company it allowed to collect taxes on its behalf without a licence.

Oarrs Inc filed the civil writ against the Office of the Tax Commissioner in July last year, alleging it was owed almost $2 million for tax collection services it provided under a contract it had with the Government.

The local firm said in its statement of claim that the OTC’s “unlawful and unjust conduct” led directly to it exhausting its available funds and having to dismiss its three Bermudian employees.

The OTC fought back, alleging in its defence to the lawsuit that the company committed a crime by collecting the tax without a licence so its contract was terminated.

But Oarrs founder and president Gina Stableford insisted in an affidavit that the Tax Commissioner told her a licence was not needed and that the contract termination was being considered because of the amount of money owed to the company.

Oarrs discontinued its legal action in May this year. Any settlement amount paid to it by taxpayers remains under wraps after the Government stonewalled questions this week.

The Government has not made public how much it paid Oarrs Inc to settle a civil lawsuit seeking close to $2 million in damages.

The Supreme Court file concerning the case only reveals that the company was given leave by Puisne Judge Larry Mussenden on May 15 to discontinue its action.

But any payout would come from the public purse so taxpayers might expect David Burt, the Premier and Minister of Finance, to share the amount.

The disclosure could come in a ministerial statement or in response to parliamentary questions in the House of Assembly; it has not been shared in response to a query from the Gazette.

Although the Office of the Tax Commissioner was represented by a private law firm, Trott & Duncan, it is a public authority and there will be publicly held records detailing the terms of the settlement agreement.

The Public Access to Information Act may not apply to the documents if they were “obtained or created” by the Attorney-General’s Chambers, as per section 4 of the legislation.

The Royal Gazette applied under Pati in April last year for all records on the contract held by Oarrs with the OTC and any reports it had provided to the Government under the contract.

Tax commissioner Derek Rawlins disclosed that $12,717,099 was recovered by the company between September 2020 and April 2021 and that the company had been paid "$99,826.61 to date“.

He said his office received monthly collections reports, summary data collections reports and monthly performance reports – although in its defence to the lawsuit, the OTC claimed Oarrs “failed to provide any or any adequate reports” in breach of its contract.

Mr Rawlins did not provide the actual records and reports requested by the Gazette so we appealed his decision to the permanent secretary at the Ministry of Finance.

She said last October that the records were exempt while the civil court case was active, adding: “Once the matter is fully adjudicated, the ministry will appropriately address the request.”

The Gazette appealed her response to the Information Commissioner’s Office and has now asked the PS again for the records.

Former finance minister Curtis Dickinson also cited the lawsuit as a reason not to answer a question in Parliament in February about how much Oarrs had recovered and how much it was due.

The company, founded and led by Gina Stableford, alleged in its statement of claim that the OTC refused to pay its invoices, despite it collecting $13.5 million in unpaid land tax for the Government between September 2020 and June 2021.

The Office of the Tax Commissioner, in a defence filed with the Supreme Court by Trott & Duncan law firm, claimed the contract it had with Oarrs could not be enforced because the firm carried out the debt collection service without a licence and therefore “committed a criminal offence”.

The defence said: “The contract was terminated because it became known that the plaintiff was not licensed … and was performing the contract in a manner that was both prohibited and criminal …”

Ms Stableford countered in an affidavit that it was established during calls and e-mails with the Tax Commissioner in December 2019 and February 2020 that “Oarrs would act as agent to the Tax Commissioner and, on that basis … Oarrs did not require a licence …”

Tax Commissioner Derek Rawlins (Photograph from LinkedIn)

She said the Tax Commissioner confirmed again in summer 2020 that “no licence was required” under the Debt Collection Act 2018.

Ms Stableford said government officials had made public statements “confirming that Oarrs did not require a licence … for work performed for and on behalf of the Tax Commissioner”.

Government senators Lindsay Simmons and Ernest Peets both told the Upper Chamber last July that Oarrs was not a debt collection company.

Their comments contradict the OTC defence, filed last September, which claimed Oarrs was “at all material times a debt collection business”.

The court file viewed by the Gazette shows the civil dispute was resolved on May 16 this year but does not reveal why or how it was settled.

The Government and Ms Stableford did not respond to questions from the newspaper.

Walkers law firm, which represented the plaintiff, said yesterday it would not be commenting.

The Royal Gazette first revealed on April 7, 2021 that Oarrs was carrying out the recovery of million of dollars of unpaid land tax for the Government without a debt collection licence and without the contract having been tendered.

The Debt Collection Act 2018 had come into force at the start of the previous year, requiring those engaged in the debt collection business to be licensed.

The Government would not initially comment on the potential breach of its own Act by a company to whom it had given a contract.

But on April 26 last year, a spokeswoman admitted: “The Ministry of Finance is currently reviewing this contract, and the matter is being investigated by Consumer Affairs, as the authority responsible for debt collection.”

There was no response to a request by the Gazette for an update on that investigation in July last year.

Oarrs filed its lawsuit the same month, asking for damages arising from the OTC’s alleged breach of contract.

The contract Oarrs had with the Government stated it would receive 15 per cent of all land tax arrears recovered.

The statement of claim said the company had received only $99,829 of more than $2 million it was owed.

“Despite numerous demands and many months of delays, the defendant has refused to pay the plaintiff’s invoices,” the writ claimed.

“The basis for the defendant’s refusal to pay is unclear and, in any event, inexplicable and inexcusable.”

Ms Stableford said in her affidavit that Oarrs was a “small company that exhausted its available funds completing the work under the contract without pay and in funding the first stages of this proceeding.

“Oarrs’s financial difficulties are the direct result of the defendant’s refusal to pay the amounts owed under the contract.”

In March this year, the Government refused to give the Gazette an update on its review of the contract, its investigation into the licence issue, or on the Oarrs lawsuit, stating that the latter was “currently before the courts”.

Ms Stableford is not believed to have been charged with any offences in relation to the licence issue.

And today the police confirmed that they had not received a criminal complaint.

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Published July 08, 2022 at 8:14 am (Updated July 09, 2022 at 8:10 am)

Government secretly settled lawsuit with debt collection company

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