PAC Discusses Auditor General’s Special Report

July 13, 2012

[Updated] The Public Accounts Committee [PAC] Enquiry into the Special Report of the Auditor General on the Misuse of Public Funds got underway at 3:10pm yesterday [July 12] with ex-Minister Derrick Burgess called to answer questions. This part of the enquiry was into the financial affairs and financial management of the Bermuda Land Development Company Limited [BLDC].

In January 2012, Auditor General Heather Jacobs Matthews issued a Special Report on the “Misuse of Public Funds,” which revealed that former Chairman [Ed Saunders] and Deputy Chairman [Pastor Leroy Bean] of the Board of Directors of the BLDC entered into a consultancy arrangement with the Company while they served on the Company’s Board.

This arrangement resulted in them being paid $160,000 in consultancy fees, which the Auditor General called a “fundamental conflict of interest.”

During the two-hour long session, the PAC learned that in some cases rents from lessees were as much as two years behind; that one lessee was able to quickly pay of $150,000 on its $500,000 rental arrears and soon after settle the rest; that BLDC accounts receivable had reached $2,400,000; that BLDC had been functioning without a Chief Financial Officer for some years; that the Chief Executive Officer had been off sick for a long period of time; and that there were disagreements amongst members of the Board of Directors about the $160,230 paid to the Chairman and Deputy Chairman.

The BLDC is responsible for the care, maintenance, and development of all the ‘baselands’ taken over the by the Bermuda Government after the USA, in 1993, had unilaterally ended its 99 year lease agreement that had been signed in 1940. The BLDC manages more than 300 acres of Bermuda’s land mass. The BLDC is owned by the Ministry of Finance which is often referred to as the shareholder.

Mr Burgess faced questioning by OBA MP Bob Richards in his role as PAC Chairman, and PAC members Cole Simons [OBA], Patricia Gordon-Pamplin [OBA], Lovita Foggo [PLP], and Terry Lister [PLP]. Walter Lister [PLP] and Ashfield Devent [PLP] are also members of the committee, but were absent. Clark Somner serves as Committee Clerk.

Answering the first questions by Chairman Bob Richards, Mr Burgess said that as Minister he was responsible to see that BLDC performed according to its byelaws; and that gave directives which were operational and within his remit as a Minister.

Asked if he put everything in writing in accordance with the specific instructions in the BLDC legislation as passed by Parliament in 1995, Mr Burgess said that he did not, as everything that he deal with could not be put into writing. He said that some matters were too small and that if he dealt with major assets, he would put that in writing.

Mr Richards said that the BLDC Act placed severe encumbrances on the Minister and the legislation specifically stated that “every directive shall be in writing”; that “every directive that has been issued must accompany the Financial Statements”; and that the Minister must get prior permissions from the other shareholder.

However Mr Burgess maintained that “no CEO for any operation gives all directions in writing”. He said: “I’ve run a few hotels. I’ve run a Union. I don’t expect to give every direction in writing.”

Continuing to supply answers, Mr Burgess said that he took over the BLDC in 2007, admitted that he didn’t know the BLDC Act like the “back-of-my-hand” but that he knew what he had to do.

Mr Richards said that in previous testimony from the BLDC Chairman and Deputy Chairman, both had said that they had been asked by Mr Burgess to perform the special investigation. Mr Burgess did not refute this. He said: “I asked them to carry out an investigation.”

Asked if he had agreed to pay them, Mr Burgess said that: “…no permission came from me to do the investigation.” Mr Burgess said that he found out about the consultancy agreement from the Premier.

Mr Richards, pressing the question: “The issue is whether they should get paid over and above their Board fees. They essentially hired themselves. They told us that you gave permission.”

Mr Burgess replied that the Trott & Duncan and KPMG reports had both stated that the payments to the Chairman and Deputy Chairman were within the rules as set out in the BLDC bye-laws and within the rules of the existing Companies Act.

Mr Richards said that the BLDC legislation was specific to the BLDC and was senior to both the BLDC bye-laws and the Companies Act.

Ms Patricia Gordon-Pamplin said that the Chairman and Deputy Chairman had both given evidence that the “Minister had verbally given us direction to investigate.” She asked Mr Burgess, why then, did you need to give permission?

Mr Burgess replied that he found $2.4m in receivables and this was rising; rental agreements were not up-to-date; bonuses were still being paid even as the country was going through hard times. He said: “I stopped that.”

Ms Gordon-Pamplin asked if he’d set any Terms of Reference. Mr Burgess said: “No. They all knew that I was annoyed at $2.4m in receivables and rising.” He said: “I needed to get an investigation underway before I could let anyone go.”

Answering Mr Richards, Mr Burgess recounted how he had found one account owing $500,000. He told Mr Richards that he had told the person: “…You give $150,000 to BLDC within six weeks and then work something out with BLDC.” Mr Burgess said that this was the only account that he was involved with.

Update: The second witness to appear before the PAC was one-time BLDC employee Mr Stuart Minors. Asked what his job was at BLDC. Mr Minors said that he had been hired by BLDC in 1997 as an Accounts Systems Manager ,and that monitoring Accounts Receivables was one of his duties. He also told the PAC that he was not responsible for collecting Receivables.

He said that this task fell to the Vice-President of Leasing and when he was employed there, that was Mr Richard Calderon. Mr Minors told the PAC that he had resigned in the third week of February 2010 and was not employed at BLDC during the period that is under investigation.

Ms Gordon-Pamplin asked “when did systems go wrong?” Mr Minors said that things began going wrong when the Chief Financial Officer’s [CFO] post became vacant and remained so. He said that with no one in the CFO post, he had no one to report to. Mr Minors said that the CFO post had been vacant between 2007 and his resignation in February 2010.

Mr Terry Lister asked: “With no CFO and a sick CEO, how was BLDC being run?” Mr Minors said: “As best it could. On the day I resigned, the VP for Leasing also resigned.”

Mr Lister said: “Thank you for that. We now have testimony that we have not had before. What led to the dual resignations?” Mr Minors said that he was not aware that Mr Calderon had also resigned until the day after.

Mr Cole Simons asked: “What protocols were there to pay consultants?” Mr Minors: “First there had to be a written contract. Then a Purchase Order would need to be generated and signed by two people one of whom would have to be the CEO.”

Given the opportunity to make a personal statement, Mr Minors said he wanted to deal with two matters. First, that he had not gotten a 10% discount on the purchase of his home. He said that statement is “full fallacious”. Second was the rumour that he had gotten a BLDC home because of his spouse [Minister Patrice Minors] and her political connections. Mr Minors said “I got the house before I even began dating my spouse.”

The third and final witness at yesterday’s hearing was BLDC Board member Mr Leroy Robinson who said that he was an Electrical Technologist and was self-employed.

Mr Robinson, answering first questions about the hiring of the Chairman and Deputy Chairman as consultants, said that he felt that they shouldn’t be paid both as members of the Board of Directors and as Consultants to the Company. He said, however, that he had no concern as the services that they were supposed to provide.

Mr Terry Lister asked: “Didn’t you regard them as consultants?” Mr Robinson said that he was concerned about high receivables and why some rents were as much as two years in arrears. He said that it was deemed necessary to bring in outsiders. Mr Lister said that this was a good answer, but was not an answer to the question that he had asked.

Mr Robinson went on: “BLDC was in a mess.” Ms Gordon-Pamplin asked: “Can you explain mess?” Mr Robinson came back with: “Timekeeping was a mess. Executives were driving in at 10:00am and 11:00am every day. The company is called the Bermuda Land Development Company but they have not developed anything for years. They’re just collecting rents.”

Mr Cole Simons asked when Mr Robinson had become aware that the Chairman and Deputy Chairman were to be taken on as consultants? Mr Robinson said that he had found that whole discussion to be: “…Embarrassing. Very embarrassing.”

Ms Gordon-Pamplin asked if it would not have made more sense to take on a full-time qualified CFO than hire two people at $110 an hour each to investigate what had gone wrong? Mr Robinson said that he thought that given the hiring freeze that had been ordered, seconding a person from the Ministry of Finance would have been better.

Allowed to make his closing remarks, Mr Robinson said that he thought the whole situation was unfortunate. He said that BLDC has over 300 acres and that not one acre is a garden. He said that BLDC could use buildings differently and that using modern techniques, space could be allocated to commercial agriculture.

Having begun at 3:10pm, the PAC ended the session at 5:00pm.

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  1. Rockfish #2 says:

    Burgess--"I've run a few hotels"

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  2. Argosy says:

    Which hotel did he "run"?

    Another jest from the Deputy Jester!

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  3. Da plumber says:

    MP.Burgess sounds shady keep digging ?

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    • Family Man says:

      "Run a few hotels"? I think he misread his notes. He must need a little extra light in his office. I know where you can gt a good deal on some lightly used LEDs.

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  4. The Defender says:

    Mr. Burgess clearly has no respect for the rules governing the operations of an organization. He showed in his answer to Mr. Richards he is not accountable. His answer to Mr. Richards clearly implicates himself in mismanaging this organization. Running a hotel and a union is a much different kettle of fish than directing a quango. I agree with Da plumber, keep digging[.] I think in Bermuda there needs to be a greater respect for the rule of law over the fear of retribution.

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  5. Verbal Kint says:

    Two important points need to be addressed here. Burgess was never CEO of BLDC, so he had no remit to act as CEO. Second, when were KPMG and Duncan & Trott asked for their opinions on the legality of the hiring of the consultants. Burgess makes it appear that was done after the controversy came to light. It should have been done before it was agreed to pay the consultants. Both firms have a stake in giving an opinion favorable to Government, and their opinion is not law.

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  6. Reverend Pastor says:

    Unethical but not illegal. PLP will get away by the skin of its teeth once again. And the blind and stupid will vote them in yet again.

    Here endeth the lesson. Bermuda is headed for an abyss.

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    • LaVerne Furbert says:

      It's remarks like this that will stop some people from voting for the OBA - "the blind and the stupid will vote them in yet again".

      The PLP will be voted in again, and some of the voters will be blind (through no fault of their own) but wouldn't classify PLP voters as stupid.

      It's also remarks like this that stops from people from particpating on this site.

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    • pepper says:

      Reverend Pastor, why are they so stupid and blind ?

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  7. Bullseye says:

    Unethical behaviour should not be tolerated. How can you be on the board then hire yourself as a consultant? Maybe it is the hours every morning in front of the mirror trying to keep a straight face as you laugh all the way to the bank.

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  8. LaVerne Furbert says:

    Brother Derrick was president of the Bermuda Industrial Union, the island’s largest trade union for eight years, from 1998 until March 2006. Prior being elected as President, Brother Derrick served as 1st Vice President and President of the Hotel Division. Like his predecessor, Brother Ottie, Brother Derrick was a leader in labour issues in the Caribbean and other international labour organizations. He has skillfully taken the wealth of experience in handling human affairs to the political arena.

    Brother Derrick continued to further his education after graduating from Robert Crawford. He is the recipient of a Diploma in Hotel Managerment from Lewis Hotel School in Washington D.C. a and has also studied at the University of New Hampshire, the University of Maryland and City College of Chicago and Bermuda College.

    Prior to taking up the position as President of Bermuda Industrial Union, Brother Derrick was Personnel Director of Grotto Bay Hotel In a career marked by achievement, Derrick Burgess was the Personnel Director at Grotto Bay Hotel and the General House Manager at the former Coral Island Hotel/Palmetto Bay Hotel. Those who have worked under him have always respected him as a leader who has never lost sight of the goals and aspirations of the workers in Bermuda.

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    • squids rule says:

      derrick burgess is your BROTHER???? no WAY!!!! who knew??!!! or maybe you just mean his committed to a particular catholic group....

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    • squids rule says:

      wait wait - i found something you said that i agree with - "he has skillfully taken the wealth." yes, he has. ok yeah yeah, it's out of context, but it was hard to resist, you spout such rubbish all the time.....

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    • Mad Dawg says:

      So he never has run hotels. You're confirming that he lied. Thanks LaVerne, that confirms what many were thinking.

      I wonder what else he lied about?

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    • The nitty gritty says:

      Gosh attended 4 colleges?
      One for each year of a bachelor's degree?

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    • Triangle Drifter says:

      Sooo...did he actually GRADUATE with a degree from any of them or did he just ATTEND them, perhaps picking up a worthless 'honourary' degree later.

      Sooner or later the BS will catch up with you.

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  9. Misspelled says:

    Just because the laws were enacted before Burgess was in office, doesn't mean that he is not a subject to the law. Does that mean I don't have to abide by the laws of the land? If that's the case, where do I sign ip to become an MP? This is ridiculous! These MPs need to come down to earth because in the end, they are ordinary citizens just like us.

    Just to let you know, 'by-law' is misspelled throughout this entire article. Take away the 'e' and it will be perfect.

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  10. Pastor Syl Hayward says:

    Is it me, or is it the report? Does it seem as if Mr. Burgess contradicted himself? Mr

    "Burgess did not refute this. He said: “I asked them to carry out an investigation.”
    Asked if he had agreed to pay them, Mr Burgess said that: “…no permission came from me to do the investigation.”"

    So he asked them to carry out an investigation but he didn't give them permission to do the investigation?

    Moving on, the BLDC Act " specifically stated that “every directive shall be in writing”" but Mr. Burgess apparently feels that because of his previous experience, or perhaps because he is a member of government, the law doesn't apply to him.

    Entitlement, arrogance,feeling untouchable. Sounds too much like the gangsters we're dealing with. Wonder which came first, the chicken or the egg?

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    • LaVerne Furbert says:

      It's you and the report. Mr. Richards kept asking Mr. Burgess about hiring consultants and Mr. Burgess made the point that he did not hire "consultants".

      I was there, so I know what I'm talking about.

      Maybe you should have been there and then you could have seen and heard for yourself the questions and the answers.

      Maybe you can tell us which came first, the chicken or the egg?

      To compare Mr. Burgess to "the gangsters that we're dealing with" is a bit over the top isn't it?

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  11. Serious says:

    Personnel Director and House Manager does not translate into I ran several hotels

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    • LaVerne Furbert says:

      I don't think Mr. Burgess ever said he ran several hotels. According to the report above Mr. Burgess said "He said: “I’ve run a few hotels. I’ve run a Union."

      How does a few equate to several? You're just nitpicking!!

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      • squids rule says:

        you are right laverne. it should have said NO hotels. talk about nitpicking........sheesh.....

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      • Funny but I don't remember a single hotel ... says:

        I'm not going to argue about tha but can you name one hotel, just ONE, that he's run? Or is his mouth running off again ...

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      • Serious says:

        YAWN What are the few?

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      • pepper says:

        So Lavern ,why would he end up being a doorman at the Hamilton Princess ?if he had the wealth of experience of running a few hotels ?

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      • Finally left! says:

        Determiner
        a few
        A small number of

        sev·er·al/ˈsev(ə)rəl/
        Adjective:

        More than two but not many:

        errr they seem to be close enough to me lavvy!!!! lol next argument?

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      • Mad Dawg says:

        Give us a list of the 'few hotels' he has run then LaVerne.

        While you're at it, explain the distinction between the word 'few' and the word 'several', in this context. To most people, saying that you have done something a few times means you have done it several times. It's the same thing.

        He said he ran a few hotels. He lied. Simple.

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    • pepper says:

      Derrick is worse than Brown, so people be aware of Derrick.....and his @#$% ^&*(

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  12. I hear the lies says:

    I am sure that my dog knows better than to vote for the PLP ever again everytime i see a PLP mp i taste vomit !!!

    DOWN WITH THE PLP WHO HAVE ABANDONED US ON THE PLANTATION AND LEFT WITH THE LITTLE THE SLAVE MASTER GAVE US AND NOW WE HAVE NOTHING

    SIGNED YOUNG BLACK MALE BERMUDIAN

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  13. Truth is killin' me... says:

    Laverne...it's 5pm on a Friday and the work day is finished. Punch your clock and stop with the comments. Go home...kick your feet up...have a smoke, down a chivas and RELAX! Your party hasn't lost the election......YET! But they are doing quite a good job at it to date.

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  14. Really says:

    Several and a few are the same bull crap a bad apple is a bad apple just throw it out ! And replace,it move on

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  15. Better believe it says:

    Stay strong for Bermudians folks ! Dont worry enjoy the island empty and all to ourselves ,give them more time to finish payments on the timeshares mortgages etc and let them enjoy more trips but we struggle on now and after make no mistake hard times are ahead for us when the clowns leave the circus and we wake up from the Alice in wonderland dream!

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  16. Stuart Minors says:

    It seems, some of what I said has been "smooshed together.

    item1)

    Update: The second witness ... Mr Minors said that he had been hired by BLDC in 1997 as an Accounts Systems Manager ,and that monitoring Accounts Receivables was one of his duties. He also told the PAC that he was not responsible for collecting Receivables.
    The above is not completely what I said. As written, it contradicts what any accountant is supposed to do "Monitor, report and collect the receivables" What I said was "to cover accounts department backsides in our efforts to collect receivables we established system generated historical notes of 1st, 2nd, 3rd, and "put you to debt collection letters, phone calls, repayment agreements etc.. I did say I wasn't responsible for vetting/Approving) the initial leases.

    item2)

    Mr Cole Simons asked: “What protocols were there to pay consultants[up and until the time of your resignation]?” Mr Minors: “First there had to be a written contract. Then a Purchase Order would need to be generated and signed by two people one of whom would have to be the CEO.”

    The quoted reply is not accurate and contradicts itself. I said," "Consultancy contracts, project contracts or contracts for services were prepared with standard form AIA contracts.[AIA contracts are industry standard contracts that are widely used.] Small level contracts $8,000 to $10,000 could be by Purchase Order. The Purchase Order would be signed by BLDC and the person to whom the PO is being issued, The PO is more detailed as to delivery, payment terms, etc.[Most lay persons are unaware that a PO is a type of contract. A contract is binding only on the person(s) who signed it. That's why BLDC required the [Vendors] second signature on the Purchase Order.]

    I was then asked who would sign the contracts. I replied the Project Manager and the CEO.

    The remainder is smooshed too, but the general thrust of what I said is close enough. :-)

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  17. allison conyers says:

    what part of "all in writing" would someone not understand? And what part of being on the board..and not being active in the running of the company..would one not understand? What happened to moral values..and knowing right from wrong? Hope everyone has read the original AG report..it says it all!!!

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  18. Opressed says:

    Does this idiot think he can match wits with Ms. Matthews??

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  19. The nitty gritty says:

    The answers given to the committee should be a wake up call to all who sit on the fence.
    This is your $160,000 and it is a mere drop in the ocean to the greater amount missing, lost, mismanaged and miscalculated according to the AUDITOR GENERAL.
    This election will not be about "emancipation" as Chris Famous likes to claim while riling up emotions, unless it's emancipation from financial security, hope and any semblance of a future.
    The PLP slogan is 'WE QUADRUPLED THE NATIONAL DEBT-VOTE FOR US' or will it be 'WE GOT OUR PENSION PLAN LOOKING GOOD-VOTE TO KEEP IT THAT WAY'

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  20. holllllaarr!!! says:

    It is obvious that people in this government do not understand their jobs that are paid for by the public purse.. Bermuda Land Development Company has failed to develope any land!!!!!(to the tune of two and half million dollars that was investigated!!!!)Amazing,.. and the Minister thinks he can flex his authoritative muscles to bark a command; all the while compounding the problem of incompetency that exists within the civil service, who feel they are entitled to use our money personally.!!I recall another high paid civil servant barking orders of "make it happen" do they think this is a 'Magical Journey", I would have preferred honest mistakes during a learning curve but outright blatant disrespect for the purse and the Premiers directive should be unacceptable, thats what happens when you give people too much money and not enough accountability to checks and balances ... the cog showed her authority in asking for the minister to pay back but he certainly showed total disrespect in ignoring Her!!The pastor gets rewarded and runs for the party????I'm baffled!!So what were those extra security measures for again??

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