Premier McKeeva Bush defended
overriding a Central Tenders Committee recommendation to secure a US$185
million loan for the government, insisting that the tender bid process had failed
and that he had acted lawfully.
Mr. Bush, speaking at the
Legislative Assembly on Wednesday, said the tender, which was reissued on 26
August, asked for bids in respect to the US$185 million loan, as well as
liability management solutions for the government’s debt of approximately half
a billion dollars and financing for statutory authorities and government-owned
companies.
However, the public tender
invitation, still available on the Central Tenders Committee website, for the
US$185 million loan contains no mention of financing for statutory authority or
government-owned companies nor liability management of government debt of half
a billion dollars. Neither does it mention financing of $19 million for Cayman
Airways – one of the key reasons Mr. Bush said he chose New York firm Cohen and
Company Securities LLC, which he said offered $19 million in financing for the
national airline.
The premier said that “one of the
critical reasons that led to the choice of Cohen and Company providing
financing to Government, was the fact that Cohen definitively said it would be
willing to provide financing for Cayman Airways’ historical shareholder
deficiency; none of the other bidders made such a categorical commitment to us
for Cayman Airways, even though they were asked to do so in the papers and by
personal contact.”
Mr. Bush said a joint bid by two
locally operating banks that was recommended by the Central Tenders Committee
failed to offer financing for the airline.
“Adverts were placed in the
Caymanian Compass on 26 August and 3 September, 2010, which asked for bids in
respect of: (a) the terms of the provision of CI$155 million or US$185 million
of financing to government; (b) liability management solutions for government’s
debt of approximately half a billion Cayman Islands dollars; and (c) financing
for statutory authorities and government-owned companies, to be submitted by 9
September,” he told the Legislative Assembly.
A review of the ads in the
Caymanian Compass on those dates refer only to the borrowing of US$185 million
of long-term finance.
There were two bid invitations
issued by the Treasury Department. The first was terminated, Mr. Bush said,
because it contained no mention of government refinancing, as agreed with the
UK’s Foreign and Commonwealth Office. The request for proposals was reissued
and the Central Tenders Committee chose a winning bid which was then ignored.
Seven financial institutions
submitted bids by 9 September and were evaluated by the Treasury Department’s
technical committee, consisting of Financial Secretary Kenneth Jefferson,
Gloria Myles and Debra Welcome, Mr. Bush said. The committee recommended the
second lowest bid – the joint bid by two banks. The lowest bid offered a 3.5
per cent interest rate, but that bidder pulled out after stating it was unable
to meet a 29 September deadline to provide some of the funds.
“On 25 September, 2010, I indicated
to the Financial Secretary after discussion with my fellow ministers, that the
second lowest cost bid did not represent good value for money, nor was it
offering the historical deficiency refinancing of Cayman Airways, which was mentioned
in the request for proposals…,” Mr. Bush said. He told legislators that, at
that point, he determined that the bid process had failed and considered it
“abandoned”.
“As the minister of finance, it is
my ministry that asked the CTC through the [Financial Secretary] to undertake
the process, so I considered I had that authority. In other words, if I had the
authority to start the process, I had the authority to stop it if it wasn’t
being adhered to,” said Mr. Bush.
Mr. Bush has said that he
telephoned Cohen and Company while in New York to determine whether it could
provide funding for the government-owned airline. “[None] of the other bidders
were so positive and supportive of our national airline, unless they got the
government to give them the entire government loan at a very high interest
rate,” he said.
Leader of the Opposition Kurt
Tibbetts, in a public address Monday, accused the premier of acting unlawfully
and contravening the law and established bidding practices to obtain the US$185
million loan.
Mr. Bush insisted that under
Section 34 of the Public Management and Finance Law, and according to a legal
opinion from constitutional expert Jeffrey Jowell, he could legitimately chose
a bidder other than the one recommended by the CTC.
When asked by People’s Progressive
Movement MLA Alden McLaughlin if he would make that legal opinion available to
the Legislative Assembly, Mr. Bush responded: “The legal opinion is mine. I
know what was provided to me.”
Mr. McLaughlin also quizzed the
premier on allegations that United Democratic Party treasurer Peter Young was
involved with the financial arrangement with Cohen and Company, by introducing
them or representing them with the financial proposal that went before the CTC.
Mr. Bush replied: “I don’t know what Mr. Young did or did not do. I can say he
is a member of the party. I know certainly he made no such representations to
me… and nor did Cohen and Company say anything to me about him.”
The premier had noted earlier in
his speech that Mr. Young was a member of the UDP’s General Council to which
Mr. Bush had reported information related to the government loan arrangements
and acknowledged that he had asked Mr. Young “how the bond worked”.
Also in response to one of Mr.
McLaughlin’s questions, Mr. Bush refused to reveal what fees were associated
with the financial arrangement made with Cohen and Company. He said he would
also not reveal the interest rate of the deal until the loan arrangement was
finalised.
“I have stated absolutely clearly
that I am not going to get into the actual rates and what was charged until the
whole process is complete,” adding that the criticism levelled by the
Opposition on the deal would have a “negative effect on the bond rate” and
could lose Cayman “millions of dollars in interest”.
In his statement, the premier also
said he had asked the Auditor General to carry out a review of the tendering
process.
“My government took a very grave,
but legal, decision to disagree with a process which gives a sense of safety.
The matter has revealed to me that the Central Tenders process cannot be a
one-size-fits-all methodology for capital works, service contracts and
financing,” he said.
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