bahamiangoddess
04-21-08, - 01:16 PM
Gov't gave Port shares to RBC
By JUAN MCCARTNEY, Guardian Senior Reporter, juan@nasguard.com
The mystery of who owns the government's supposed 7.5 percent stake in the Grand Bahama Port Authority (GBPA) is beginning to unravel, as The Guardian has discovered that the shares were transferred to the Royal Bank of Canada (RBC) in 1970, to liquidate the government's overdraft that was held by the bank.
Speaking on condition of anonymity, Guardian sources - including several people currently in government or who have previously worked in a significant capacity in government - revealed that the reason the government still appears as the owner of the shares is because RBC was named the beneficiary of the shares, while the government holds them in name only.
For all intents and purposes, RBC basically functioned as the government's bank before the establishment of the Central Bank of The Bahamas in 1974.
Reports are that in 1970, RBC would not extend the government's hefty overdraft until payment was made to bring down the balance.
Shortly after the government changed hands from the United Bahamian Party (UBP) to the Progressive Liberal Party (PLP) in 1967, a Royal Commission was set up by the PLP to conduct an investigation into the operation of the GBPA.
That commission found that the GBPA essentially functioned as a state within a state.
Fearing the PLP might seek to nationalize the GBPA as a form of local government, then owner of the GBPA Wallace Groves and his fellow investors attempted to have the GBPA's stock traded internationally, and placed 92.5 percent of the GBPA's stock in a gold mining company in the Philippines.
The PLP government first opposed the deal, but it went through when the GBPA conceded to modifications of the 1955 Hawksbill Creek Agreement and allowed the government to purchase 162,973 (7.5 percent) of the company's four million shares at a discounted price.
T. Baswell Donaldson, current chairman of Commonwealth Bank Ltd., also served as the government-appointed director on the GBPA's board, to safeguard the government's interest.
When the economy of The Bahamas dipped in the late 1960's and 1970's, the government's borrowing power became strained and RBC refused to extend the government's overdraft.
In order to liquidate that overdraft as major infrastructure and foreign investment projects got underway, the Cabinet decided to liquidate the shares, which could have been worth up to several million dollars, by making RBC the beneficiary.
That decision allegedly lead to the resignation of Donaldson from the board, as the government no longer had any real stake in the GBPA.
According to Guardian sources, there is an actual Cabinet paper on record to show that the shares were liquidated, but attempts by the Guardian to obtain those documents proved fruitless.
Last year, the government conceded that all audits of the government's finances must be on record with the Treasury or in Parliament, as the transfer of government assets has to be approved by Parliament per the country's constitution.
However, attempts to locate any record of that transfer in Parliament also proved fruitless.
One financial expert told The Guardian that the transfer would have taken place before the country gained independence in 1973, and therefore several scenarios could have taken place.
On one hand, the then governor could have approved the transfer of the assets without parliamentary approval, according to the expert.
On the other hand, the Cabinet could have simply made RBC the beneficiary of the shares, and kept the actual documents in it's name, circumventing the tabling of the transfer in Parliament.
After the transfer of the shares to RBC, the trail goes cold, but Guardian sources said it is unlikely that RBC remains the beneficiary of the shares.
Calls placed to RBC's legal headquarters in Montreal, Canada and RBC's Bahamas regional offices in New Providence proved fruitless.
It is unclear exactly what happened to the money that dividends from the shares have yielded since 1970, but the last dividend issued by the GBPA was $10 million, according to Grand Bahama attorney Rawle Maynard in an interview with The Guardian last year.
Conservative estimates by analysts place the value of the GBPA around $200 million.
Government sources confirm that the treasury receives no revenue from the shares.
For several years, The Guardian has conducted investigations into the missing shares, in an attempt to unravel the mystery.
Minister of State for Finance Zhivargo Laing said in July of last year that, "the government wants to know what assets it holds," but that it was engaged in addressing more "critical matters."
Former Attorney General Paul Adderley told The Guardian in 2006 that the shares were sold in 1970.
In 2006, former Minister of State for Finance James Smith, said that the government had sold the shares, but at the time, no one in government knew to whom they had been sold.
When questioned recently about the buyer of the shares, Smith said the question should be directed to the Ministry of Finance.
The Guardian posed the question of the missing shares to Laing again last week.
"As it stands, I do not know what happened to the government's shares. I don't know who they were sold to or why they were disposed of. But I absolutely agree that it should have been brought to Parliament; that is typically the way it's done," Laing said.
"Also, it's a matter of public interest. Obviously people want to know about it. But as it stands, I have no information on it," said Laing.
Last year the GBPA said that there is no existing record of the shares ever being transferred from the government.
Messages were left for Ian Rolle, the controller of the GBPA, in an attempt to determine who receives the dividends from the government's shares, but they were not returned up to press time.
Donaldson, who now chairs the government's special committee to explore the privatization of BTC, which is expected to be in talks this week, was contacted by The Guardian last week but he was tied up in meetings.
The GBPA is currently in a protracted legal battle with the co-owner Sir Jack Hayward and the estate of the late co-owner Edward St. George, over the ownership of the Port.
Sir Jack claims to be a 75 percent owner of the GBPA's shares, while the St. George estate claims that it and Sir Jack are both 50 percent owners of the Port's shares.
By JUAN MCCARTNEY, Guardian Senior Reporter, juan@nasguard.com
The mystery of who owns the government's supposed 7.5 percent stake in the Grand Bahama Port Authority (GBPA) is beginning to unravel, as The Guardian has discovered that the shares were transferred to the Royal Bank of Canada (RBC) in 1970, to liquidate the government's overdraft that was held by the bank.
Speaking on condition of anonymity, Guardian sources - including several people currently in government or who have previously worked in a significant capacity in government - revealed that the reason the government still appears as the owner of the shares is because RBC was named the beneficiary of the shares, while the government holds them in name only.
For all intents and purposes, RBC basically functioned as the government's bank before the establishment of the Central Bank of The Bahamas in 1974.
Reports are that in 1970, RBC would not extend the government's hefty overdraft until payment was made to bring down the balance.
Shortly after the government changed hands from the United Bahamian Party (UBP) to the Progressive Liberal Party (PLP) in 1967, a Royal Commission was set up by the PLP to conduct an investigation into the operation of the GBPA.
That commission found that the GBPA essentially functioned as a state within a state.
Fearing the PLP might seek to nationalize the GBPA as a form of local government, then owner of the GBPA Wallace Groves and his fellow investors attempted to have the GBPA's stock traded internationally, and placed 92.5 percent of the GBPA's stock in a gold mining company in the Philippines.
The PLP government first opposed the deal, but it went through when the GBPA conceded to modifications of the 1955 Hawksbill Creek Agreement and allowed the government to purchase 162,973 (7.5 percent) of the company's four million shares at a discounted price.
T. Baswell Donaldson, current chairman of Commonwealth Bank Ltd., also served as the government-appointed director on the GBPA's board, to safeguard the government's interest.
When the economy of The Bahamas dipped in the late 1960's and 1970's, the government's borrowing power became strained and RBC refused to extend the government's overdraft.
In order to liquidate that overdraft as major infrastructure and foreign investment projects got underway, the Cabinet decided to liquidate the shares, which could have been worth up to several million dollars, by making RBC the beneficiary.
That decision allegedly lead to the resignation of Donaldson from the board, as the government no longer had any real stake in the GBPA.
According to Guardian sources, there is an actual Cabinet paper on record to show that the shares were liquidated, but attempts by the Guardian to obtain those documents proved fruitless.
Last year, the government conceded that all audits of the government's finances must be on record with the Treasury or in Parliament, as the transfer of government assets has to be approved by Parliament per the country's constitution.
However, attempts to locate any record of that transfer in Parliament also proved fruitless.
One financial expert told The Guardian that the transfer would have taken place before the country gained independence in 1973, and therefore several scenarios could have taken place.
On one hand, the then governor could have approved the transfer of the assets without parliamentary approval, according to the expert.
On the other hand, the Cabinet could have simply made RBC the beneficiary of the shares, and kept the actual documents in it's name, circumventing the tabling of the transfer in Parliament.
After the transfer of the shares to RBC, the trail goes cold, but Guardian sources said it is unlikely that RBC remains the beneficiary of the shares.
Calls placed to RBC's legal headquarters in Montreal, Canada and RBC's Bahamas regional offices in New Providence proved fruitless.
It is unclear exactly what happened to the money that dividends from the shares have yielded since 1970, but the last dividend issued by the GBPA was $10 million, according to Grand Bahama attorney Rawle Maynard in an interview with The Guardian last year.
Conservative estimates by analysts place the value of the GBPA around $200 million.
Government sources confirm that the treasury receives no revenue from the shares.
For several years, The Guardian has conducted investigations into the missing shares, in an attempt to unravel the mystery.
Minister of State for Finance Zhivargo Laing said in July of last year that, "the government wants to know what assets it holds," but that it was engaged in addressing more "critical matters."
Former Attorney General Paul Adderley told The Guardian in 2006 that the shares were sold in 1970.
In 2006, former Minister of State for Finance James Smith, said that the government had sold the shares, but at the time, no one in government knew to whom they had been sold.
When questioned recently about the buyer of the shares, Smith said the question should be directed to the Ministry of Finance.
The Guardian posed the question of the missing shares to Laing again last week.
"As it stands, I do not know what happened to the government's shares. I don't know who they were sold to or why they were disposed of. But I absolutely agree that it should have been brought to Parliament; that is typically the way it's done," Laing said.
"Also, it's a matter of public interest. Obviously people want to know about it. But as it stands, I have no information on it," said Laing.
Last year the GBPA said that there is no existing record of the shares ever being transferred from the government.
Messages were left for Ian Rolle, the controller of the GBPA, in an attempt to determine who receives the dividends from the government's shares, but they were not returned up to press time.
Donaldson, who now chairs the government's special committee to explore the privatization of BTC, which is expected to be in talks this week, was contacted by The Guardian last week but he was tied up in meetings.
The GBPA is currently in a protracted legal battle with the co-owner Sir Jack Hayward and the estate of the late co-owner Edward St. George, over the ownership of the Port.
Sir Jack claims to be a 75 percent owner of the GBPA's shares, while the St. George estate claims that it and Sir Jack are both 50 percent owners of the Port's shares.