CAL faces another investigation

The Office of the Complaints Commissioner has begun a second probe into Cayman Airways which will look into, among other issues, a contractual arrangement made between the airline and a local newspaper.

That arrangement, according to the government minister responsible for Cayman Airways, allowed the Cayman Net News to accrue a shipping debt interest-free over an unknown number of months. The latest version of that arrangement, according to a recently published article in the Net News, allowed for weekly payments to the airline of US $4,000.

Cayman Airways officials have refused to comment on the specifics of the business arrangement. Tourism Minister Charles Clifford said last month that the shipping debt was around $50,000. Net News has reported the debt was much less, some $6,352.74, according to a 1 October article in the paper.

‘It’s not unusual for businesses to enter into arrangements where interest is not charged on amounts due for 30 days and perhaps 60 days,’ said Complaints Commissioner John Epp. ‘However, a longer period of interest-free debt is a matter for the discretion of the manager of the business.’

Mr. Clifford said central government would not have any involvement in the decisions about such a contract.

In an earlier interview with its own publisher, Desmond Seales, the Net News stated that the debt first accumulated in the difficult days following Hurricane Ivan. Mr. Seales said in that article that a barter agreement was entered into on 4 November, 2004 to trade advertising with CAL in exchange for the airline continuing to ship copies of the newspaper.

Previously published reports in the Net News have indicated the paper’s shipping arrangements with CAL was worth $300,000 per year to the airline.

Mr. Seales has said CAL did not keep that arrangement, and that the debt increased. CAL has also not commented on that claim.

It’s unclear whether the 2004 barter arrangement referenced by Mr. Seales was ever formally approved by members of government, or by the CAL board of directors. The board issued a statement on 20 September which said the Net News publisher ‘has a contractual arrangement with Cayman Airways and the consequences of not meeting its obligations are known to him.’

That statement is believed to refer to a separate 9 July, 2007 agreement which allowed interest-free payments on the remainder of the Net News’ shipping debt.

Mr. Epp said the contractual arrangements would be ‘a collateral issue’ in the complaints commissioner’s investigation. He said his office has appointed a forensic accounting firm to review relevant documents from CAL and the Net News.

The complaints commissioner’s second investigation into the airline began after Mr. Seales filed an OCC complaint which Mr. Epp said included an allegation of abuse of power by the Minister of Tourism, Mr. Clifford, and CAL’s Chief Executive, Patrick Strasburger.

Among the claims in the complaint, the publisher accuses the two men of trying to prevent the delivery of the newspaper because of certain ‘unflattering news reports.’

Mr. Epp said he interviewed Mr. Clifford last week ‘on the question of whether he used his office to influence a decision by the board of directors of CAL regarding business operations and particularly business with Cayman Net News.’

As Tourism Minister Mr. Clifford has responsibility for Cayman Airways, but he does not sit on the airline’s board and does not get a vote in its decisions.

‘It isn’t appropriate for me to comment on the complaints commissioner’s review before he completes his report,’ Mr. Clifford said. ‘I am surprised that he has done so.’

The investigation into the complaint made by Mr. Seales is separate from another OCC probe reported in the Caymanian Compass (28 September). In that case, the complaints commissioner is reviewing whether people who evacuated the island ahead of Hurricane Dean on Cayman Airways flights were overcharged for their tickets.

Mr. Epp said he began that investigation on his own initiative following ‘the sheer number of media reports’ concerning allegations of price-gouging in the wake of the evacuation.