Boatswain’s ruling next week

Police expect to decide by next week on whether to order a full investigation into debt financing arrangements for the Boatswain’s Beach/Cayman Turtle Farm project.

Royal Cayman Islands Police Commissioner Stuart Kernohan said Wednesday that officers are still reviewing the recent report of the Auditor General and said that review should be completed within seven days.

‘We will look at the facts, we will look at the evidence, and make our own professional judgment,’ Mr. Kernohan said.

Political pressure following the release of the Auditor General’s report has been intense. Both the AG and Leader of Government Business Kurt Tibbetts have urged the RCIPS Financial Crimes Unit to review the matter.

The auditor’s report said as much as US$1.65 million of the US$2.8 million spent to arrange financing for the Turtle Farm expansion had little or no value to Cayman Islands residents.

Opposition Leader McKeeva Bush, who chaired the board that approved that agreement, said calls for a police investigation are unfounded because there is no evidence of any criminal activity revealed in the Auditor General’s report. Mr. Bush also called for the resignation of Tourism Minister Charles Clifford, who was also on the Turtle Farm board as then-permanent secretary of the Ministry of Tourism.

Mr. Clifford previously said he has no reason to resign.

Commissioner Kernohan said the RCIPS would not be caught up in the political back and forth over the issue.

‘I certainly will not be swayed either way by any political or other commentary that you would see in the media as to whether actions should or should not be taken,’ he said on Wednesday.

The Auditor General’s report on the Turtle Farm financing deal did not point to any specific areas where further investigation would be warranted. However, Mr. Duguay said in a previous interview with the Caymanian Compass that certain ‘red flags’ were raised.

The report noted several concerns with the first proposed financing arrangement which was signed with a company named GC Ventures Corp. in May 2003. That deal was never completed due to requests of ‘government officials representing the shareholders of the Turtle Farm.’ Those shareholders included then-Chief Secretary James Ryan, and former Financial Secretary George McCarthy.

After negotiating a separate arrangement, the Turtle Farm eventually borrowed US$46.6 million through a direct bond placement with William Blair and Company in March 2004.

According to Mr. Duguay, the ‘prime motivation’ for the first failed financing arrangement appeared to be aimed at keeping the debt of the Boatswain’s Beach project off the Turtle Farm’s balance sheet and by extension, off the Cayman Islands Government balance sheet.

Mr. Duguay said the final decision in November 2003 not to go through with the original financing arrangement was a good one.

However, because the first agreement had been signed, GC Ventures and other companies it was associated with – Prospect Ventures Inc., QuadCapital Advisors, Live Oaks Captial Ltd. – were paid fees and expenses of nearly US $1.4 million.

Some of those payments were made directly to Live Oaks Capital, which Mr. Duguay said was not party to any agreement signed by the Turtle Farm. He said $333,000 in direct fees and $51,895 in expenses should not have been paid directly from the Turtle Farm to Live Oaks.

A final US$110,000 payment to Live Oaks for a general release was also slammed by Mr. Duguay.

‘Live Oaks had no contractual obligation with the Turtle Farm,’ he said.

Mr. Duguay characterised fees paid to GC Ventures as ‘grossly excessive’ after revealing documents from a former director of that company who implied in a memo that hours billed for the project may have been overstated.

The original proposal for the failed financing deal came from Prospect Ventures, which was represented during a presentation to the Turtle Farm board by two men; Suresh Prasad and David Berry. Mr. Clifford has previously described Mr. Prasad as a close acquaintance of Mr. Bush, and has said Mr. Berry was a business associate of Mr. Bush.

Mr. Bush has previously acknowledged Mr. Berry was an employee of Mr. Bush’s real estate company, and that Mr. Suresh was a long-time acquaintance. However, Mr. Bush has said he had nothing to do with the two men making the proposal.

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