Loan deal: Law wasn’t broken, only the regulations

Cayman Islands Auditor General Alastair Swarbrick said Wednesday that the country’s Premier did not break the law in arranging a US$185 million loan to finance government operations during the last 
budget year.  

However, Premier McKeeva Bush’s decision to disregard the established bidding process for the loan and choose a New York financing firm based on the advice of his political party members was in violation of the financial regulations attached to Cayman’s Public Management and Finance Law.  

Sections 33 and 34 of the Public Management and Finance Law allow the country’s minister of finance – Mr. Bush – to arrange loans on behalf of the Cayman Islands government. In Mr. Swarbrick’s view, the law itself would supercede the regulations.  

So, in effect, Mr. Bush – while contravening the regulations in awarding the loan financing contract to Cohen & Company – did not violate the law itself. Mr. Swarbrick admits it’s a bit of an odd situation.  

“There’s a slight conflict between the law and the financial 
regulations,” he said. “In any case, I would still expect [the Premier] would follow the appropriate process.”  

The findings of the auditor general’s report reported in the Caymanian Compass on Wednesday, revealed that Mr. Bush’s decision to choose the Cohen firm over a joint venture of two locally-operating banks for the financing eventually cost the Cayman Islands government an extra $450,000 in temporary loan costs.  

Had the government proceeded with Cohen & Company to finance its long-term debt requirements, Mr. Swarbrick said fees associated with that arrangement would have cost government an additional $850,000 – compared to an earlier long-term financing arrangement with Royal Bank of Canada and FirstCaribbean.  

In the end, the long-term financing arrangement that was finally agreed did represent good value for money, the auditor general said. However, the previous processes used to get there were less than ideal, he said.  

“While the government ended up with a good loan at a reasonable rate, with reasonable fees, at the end of the day the intervention by the minister of finance ended up costing government more than $450,000 just for arranging the interim financing portion of the loan facilities,” Mr. Swarbrick said.  

Opposition Leader Alden McLaughlin said he disagreed with Mr. Swarbrick’s interpretation of the financial regulations and financial management law.  

“The sections [33 and 34] mentioned give the minister of finance the authority to enter into loan agreement, certainly,” Mr. McLaughlin said. “But that authority is subject to the financial regulations. I’m not sure how he can say that and come to the conclusion that [the Premier] is not breaking the law.”  

Premier Bush, in a statement issued by his office on Wednesday, said government’s pursuit of the “national good” led to costs of CI$854,775 stated in the auditor general’s report.  

“The government firmly maintains that efforts to minimise costs – which are for the good of the Cayman Islands – represent good-value efforts,” Mr. Bush’s statement read.  


Financing Cost 

Premier McKeeva Bush’s office provided a specific breakdown of the costs related to the temporary financing loan and said the full $854,000 reference in the auditor general’s  

Not all of the cash was provided to Cohen & Company, Mr. Bush said.  

“The amount of CI$854,775 referred to in the auditor general’s report….is made up as follows:  

*Arrangement fee paid to Scotiabank – CI$191,937 

*Arrangement fee paid to Banque Havilland – CI$75,600 

*Arrangement fee paid to Cohen & Company – CI$149,400 

*Arrangement fee paid to Scotiabank for extending its initial temporary loan – CI$116,203 

*Legal and miscellaneous fees – CI$321,635 

Mr. Bush’s office said the Premier would be making a full statement on the auditor general’s report in the Legislative Assembly.  


Short term deal  

Details of that short-term financing arrangement, made public fully for the first time in the auditor general’s report, are curious.  

The first temporary loan arranged by Cohen & Company was for $US92.5 million through Scotiabank in October 2010. However, a second tranche of funding was obtained through an entity called Banque Havilland for approximately US$36 million.  

Audit Manager Martin Ruben said the additional temporary loan was needed because government had begun to run out of money in December 2010 and needed additional bridge financing to make it through the end of the budget year.  

“The additional loan was required because of cash shortages and the inability to put long-term financing in place,” the auditor general’s report stated. Mr. Swarbrick also noted that no one in the ministry of finance had any control over the temporary loans that were obtained by Cohen & Company, acting as the financier.  

But the decision to go with Banque Havilland – a European private financing operation that had opened in September 2009 – was considered unusual by auditors.  

“The bank is owned by the Rowland family of Great Britain,” Mr. Swarbrick wrote in his report. “From our review of worldwide financial institutions, it is not a top-tier bank or lending institution. We expected that the government would deal exclusively with top tier banks and financial institutions.”  


Jazz Fest   

Although the auditor general’s office believed Premier Bush was in the clear with regard to actual law-breaking in organising the Cohen & Company loan financing deal, his office was not as sure about the 2009 Cayman Islands Jazz Fest contract.  

In October 2009, the Cayman Islands Department of Tourism awarded a $1.25 million contract to Black Entertainment Television’s Event Productions to coordinate the production of the Cayman Jazz Fest – which was held in December 2009.  

The department did not go out to tender for this contract that year.  

“The requirement for a contractor to produce Jazz Fest 2009 should have been subjected to not only a public tendering process, but oversight by the Central Tenders Committee,” Mr. Swarbrick said. “This was not done.”  

The auditor general declined to state whether what had occurred with the Jazz Fest contract was in fact worse that what happened with the temporary loan arrangement.  

“They’re probably on equal par,” he said. 


Mr. Swarbrick


  1. As the Auditor-General does not seem sure on the point,may we have urgently the Attorney-General’s interpretation of whether not following Regulations made under a Law amounts to breaking, or not complying with, that Law? If the AG cannot offer a binding interpretation, then whoever else is competent under the Constitution to interpret and rule upon what a Law means or does not mean- a Judicial Review?.
    Who made these Regulations under this Law? Were they passed by the LA? or made by a Minister?

  2. Whether or not you call it a shovel or a spade, its the same thing. Where theres smoke theres fire and Mr. Bush seems to be constantly surrounded by smoke. He is a loose canon and until he is brought under control, he will do as he pleases and dont get in his way.

    Mr. Auditor General, be careful as to what you say or you will be the next victim of the wrath of Bush.

    I guess that explains the vagueness of the Auditor General’s comments. He knows that history repeats itself.

  3. Need I remind everyone that if the Auditor General who reports to the governor alone; is scared to call a spade a spade such as The Premier Broke The Law in the manner in which he handled making the loan application; then we are really in trouble. It means the governor is weak and that he too is afraid of Big Mac. I guess the only reason the Governor divulged that there was an investigation ongoing into the Premier was because he was forced to do so by the opposition leader Mr. McLaughlin and the Independent member from Northside Mr. Miller.
    I don’t gamble, not do I make bets, but I wouldn’t bet with anyone that he won’t be exonerated from the investigation. Comissioner is to deliver ‘NO CLOSURE to the people of the Cayman Islands regardless If it is a serious the crime or not. The governor’s announcement of the Investigation could be only a SHAM to renew the silence, and I mean a Big Sham Too. He is probably scared of Big Mac as well. This is a really nasty situation.
    Opposition Members, my advice to you is for you to use your trump cards if you want to win this political game. You can’t beat city Hall!
    You need dirt on somebody, and I mean some real dirt.

  4. Dirt as in Hire an overseas detective to follow some of these politician frequent flyers around. We need to see what they’re doing. I want to know where the Unclaimed funds in our bank accounts went. Have they touched that as yet?

  5. If they were ethical and above board, they would never qualify to do business with this UDP leader.
    God help us. If the governor does not step in and force this man to step down then the public will have to act quickly. We can not afford to take a chance with him at the wheel for a whopping 2 years more! no no no.

  6. Mr. Swarbrick, thanks for all the work you have done to date to highlight the many issues. However, I hang my head in shame and hope that one day soon the Cayman Islands will return to the rule of law, with good administrators. Clearly something is wrong at more than the local Cabinet level.

    However, I disagree when you say that a breach of a Regulation does not constitute a breach of the Law. That is simply wrong, terribly wrong sir, because according to the section 2 of the Interpretation Law (1995 Revision): Law means any Law and any regulations made thereunder, and any prerogative Order of the Sovereign in Council applicable exclusively to the Islands, whether enacted before or after the commencement of this Law.

  7. Vietnam, Just curious as to what you are suggesting by the public stepping in an acting quickly? Are you suggesting that the public remove bush from office. If so you are suggesting a coup, do you think that will put Cayman in a better place and if this is done who would you say should be put in control ?

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