Airport boss in conflicts row

The chairman of Cayman Islands Airports Authority Board Richard Arch may have used his position to try to prevent a potential competitor of his ground-handling firm from expanding its business at the airport, minutes from the board’s meetings reveal. 

In a 2010 memo, Mr. Arch, who at the time was a board director, argued against the granting of a permit to Cayman Dispatch Services to provide “unrestricted ground handling services” at the Owen Roberts International Airport. 

Mr. Arch, who along with his wife owns Air Agencies Ltd, said in the memo that it was “government policy” that only Air Agencies and Cayman Airways would be responsible for unrestricted ground handling services at the airport. 

The memo indicates that the CEO of the airports authority should dismiss the application and be “instructed” to advise Cayman Dispatch Services to “cease and desist” with ground handling activities. 

The Airports Authority Law states that any director with a financial interest in proposed 
contracts or licenses under discussion is required to declare that interest and not to take part in discussions or votes on the matter. 

Mr. Arch insisted this week that he had simply been drawing attention to a ministerial policy directive, which guided the CEO on the appropriate way to deal with the issue. 

Minutes to the July 2010 meeting indicate that Mr. Arch did declare a conflict of interest and eventually left the meeting, but not before making a statement against the application. 

The minutes to the agenda item titled Cayman Dispatch Services Ground Handling Permit note: “Mr. Arch declared that he is the owner with Air Agencies and a recommendation was made to have this item deleted from the agenda. Mr. Arch read a letter that he had prepared dated 6 July, 2010. Mr. Arch excused himself from the meeting.” 

In a letter dated 6 July, obtained by the Compass, Mr. Arch argued that American Airlines and Cayman Dispatch Services were already overstepping their authority as licensed baggage handlers by providing full “unrestricted ground handling services”. 

He said this had resulted in financial losses to Air Agencies and Cayman Airways and argued the application for a permit should be denied and the company should be forced to abide by the terms of its current permit, for baggage handling only. 

Ground handling can involve any services an airline requires between landing and take-off, including aircraft towing, re-fuelling and cabin cleaning.  

The letter notes: “The application as indicated as agenda item number nine for today’s meeting of the CIAA should be deleted from the agenda and the CEO instructed that directions are already in his possession that enables the proper handling of the application; and that he should ensure Cayman Dispatch Services should be so advised and that they should cease and desist their operation immediately, except for baggage handling which they are approved to provide.” 

The letter also points out that by providing ground handling services without a permit, CDS was exposing government to potential lawsuits. In the minutes to the meeting of September, 2010, then-CEO Mr. Jackson points out that he was unable to find records of any ground handling licenses at all that were issued by the authority, other than for Island Air, which services smaller private planes.  

Mr. Arch continued to insist this week that he had not acted inappropriately. 

He told the Compass, “The minutes will confirm that I simply referred to the fact that the board was already in possession of ministerial policy directives as allowed by law and that the application was a matter to be actioned by the CEO.  

“It was not a matter for the board as the application had been refused on numerous occasions going back many years before I was appointed. I have no intention of being brought into any sensational dialogue until the entire procedure is complete.” 

Frank Flowers, another board director, who owns Flowers Air Dispatch Services, also made a submission on the CDS permit issue, despite declaring an interest. 

The July, 2010 minutes note: “Mr. Flowers declared his interests and provided the board with an email from the premier (then McKeeva Bush) stating the government’s position that no more handlers are needed at ORIA, after which Mr. Flowers excused himself from the meeting.” 

Mr. Flowers declined to comment this week. 

Minutes for board meetings from 2010 and 2011 further suggest that Mr. Arch and Mr. Flowers declared interests and excused themselves from meetings on some occasions when issues relating to ground handling were discussed, but on others they did not. 

An ongoing matter of discussion over that time period was the need for ground handling policies and regulations to be introduced, a point raised by then CEO Jeremy Jackson in May, 2010. 

Mr. Jackson appears to have provided a draft policy to the directors, which went through several revisions.  

The February 2011 minutes note that Mr. Arch and Mr. Flowers excused themselves from the discussions on airport fees and ground handling operations. 

A decision is then taken to have Mr. Arch, along with Mr. Jackson, review the policy and work on a revised draft. 

The minutes to the March, 2011, meeting note that their changes to the policy are approved by the board. There is no note of either Mr. Arch or Mr. Flowers having recused themselves from the vote. 

The board directors appear to have been reminded of their duties in relation to conflicts of interests in the May 2011 meeting. 

The minutes note that directors were reminded of section 12 of the Airports Authority Law and outline their responsibilities under the law, to disclose their interests and excuse themselves from discussions on matters relating to those interests. 

In response Mr. Arch and Mr. Flowers said they had declared their interests on several occasions and pointed out that their business connections were well known to Cabinet ministers before their appointment. 

Mr. Arch, who by that time had become chairman of the board, also seems to have pointed out that every other member of the board had conflicts of interest because, as Caymanians, they technically have a stake in Cayman Airways. 

“Members were reminded by the chairman that every member of the board is a small (approximately 1/60,000th) shareholder in the national carrier which could considered as prejudicial at times,” the minutes note. 

Mr. Arch has stated several times that he has never used his position to help his private business. He has insisted that he has retired from any operational role. 

In an interview with the Compass earlier this month he claimed: “Our board members, including myself, have never participated in any discussions or considerations of any applications in which they may have benefitted.” 

He was speaking in response to concerns of the Auditor General that the board’s decisions ran the risk of being “conflicted” or “corrupt”. 

In a letter to the board, released to the Compass under the Freedom of Information Law, Alastair Swarbrick warned that it had overstepped its powers, He highlighted a series of concerns including regulations requiring board approval for all applications for business to operate at the airports. 

He also warned that potential conflicts of interest of board members, including details of their own contracts with the airport, were not properly recorded in the CIAA’s financial statements. 

Laying out how the board should be operating, the auditor writes: 

“Beyond approving the operational policies for the organization, the hiring of the chief executive officer and setting out its expectations for performance, the development of a strategic direction and the approval of an annual operational plan, the board should
only be receiving reports and making decisions that are the purview of its mandate 

“The separation of these key responsibilities between the board and management ensures what is known as a good corporate governance framework.” 

CaymanAirwaysBaggageHandling

CDS had applied for a licence to move from baggage handling into unrestricted ground handling. – PHOTO: File
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5 COMMENTS

  1. Goes to show how the rich got rich and remained rich! Why wasn’t it possible for CDS to get a piece of the pie and feed their families too? Politics in cayman stinks because no one overseas these guys.

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  2. These things that are happening now with board members and their conflict of interest is nothing new to Cayman. You should have been around about 40 – 50 years ago.
    Same old same old thing was happening; only it was even worse back then. If you check out the parents and grand parents of some of these men and women your eyes would roll in your head to know what poor Caymanians had to put up with under the hands of the so-called rich and famous of this Country. Caymanians were treated as slaves by their own people back then. They may not want to hear this but it is true. Only certain people could get a decent job, or get a good education; only certain people could get to eat meat or drink fresh milk; and the same old generation curse is here in the 3 4 generation. We are our biggest enemies.

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  3. As long as you have airport directors who are also airport contractors, you are going to have this kind of problem. Does anyone really think that declaring interests and leaving the room during contract discussions are effective solutions to the problem? The smarter ones don’t leave a paper trail.

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  4. If the Cayman Islands had an antitrust or competition law, then this case could have been taken up by a competition authority, as abuse of a dominant position in one market to exclude a competitor in a downstream market. In small economies, where there is inevitably a high concentration of capital in the hands of a few, competition law is a very important tool for ensuring that new entrants are not blocked by powerful incumbents, and that through fair competition, consumers welfare is protected.

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