Premier of the Virgin Islands, Andrew A. Fahie just revealed that the Auditor General’s report on BVI Airways is now under full criminal investigation. The announcement was made a few minutes ago in the House of Assembly.
Premier Fahie said “We usually would have allowed a preamble (before laying a document before the House). But I cannot do any preamble on this one. I can only lay it on the table.
He mentioned that no further details can be offered at this time on the mismanagement of the highly controversial, $7 Million project that was set to offer direct flights between Miami and BVI under the predecessor Government.
“I cannot say anything further on this matter as we have been informed by the Commissioner of Police that this is now under a full criminal investigation” the Premier said.
Premier of the Virgin Islands, Honorable Andrew Fahie, laid on the table of the House of Assembly, the long anticipated and controversial Auditor General’s report on Government’s Financing of BVI Airways Direct Flights to Miami.
The then Premier, Dr. D. Orlando Smith, was repeatedly questioned on
the BVI Airways deal, which eventually went sour, resulting in the BVI
losing out on 7.2 million dollars with no flights, becoming a stain on
Dr. D. Orlando Smith’s administration at the time.
This report by the Auditor General, whose office is completely independent of political influence, lays out in detailed fashion all the details of the one-sided agreement between Government and BVI Airways, the failed attempt of BVI Airways to establish direct flights to the US mainland, the ill-advised actions of Government in relation to the BVI Airways operation, and the subsequent abandonment of the operation by BVI Airways.
The report comes to scathing conclusions in relation to BVI Airway’s role in the failed operation. One conclusion was that the
“The manner in which the project was introduced and progressed suggests that the operator parties were attempting to take advantage of the Territory’s existing airlift issues by providing a solution that would guarantee them above market returns without the financial risk.”
Another hard hitting conclusion was that “The Framework Agreement was crafted by the operator parties and heavily favoured their interests.”
Yet again, the Auditor General pointed out another instance of BVI Airways failed obligations, writing, “The operator parties were required by the terms of the Framework Agreement to submit quarterly financial statements. This did not occur.”
In addition to these conclusions, Government’s blunders in relation to this venture were majorly criticized in this report. The auditor general lists eight main ways “Government erred,” which include, “Contracting an airlift agreement with parties who lacked relevant industry experience and operational contacts”
And in relation to Neil Smith’s role, the former financial secretary, “Assigning the individual in charge of the Government’s finances [to] serve as the primary facilitator to implementation, there was no higher financial authority to question or prevent his decision make early and complete payments to BVI Airways, which were contrary to Cabinet authorizations.”
The Auditor General concludes the report with seven recommendations that would avoid such a debacle in the future, one of which includes demanding accountability from the former financial secretary Neil Smith, but for whatever strange reason - do not demand any criminal investigation against Orlando Smith as well.
Reminder: Gov’t spends over $20M on "consultancies", BVI Airways the single largest spend. A wasted money that could be perfectly use to rebuild the poor infrastructure in BVI.
The Auditor General report on the Government’s Financing of BVI Airways’ Direct Flights to Miami from the Terrence B. Lettsome International Airport laid on the table of the House of Assembly (HoA) on Thursday, May 28, 2020, making it a public document, is still turning heads.
The question asked by many is, was the Virgin Islands (VI) Government scammed out of $7.2M in taxpayers' money?
What was surprising to note, is that besides the taxpayers' cash investment of over $7M upfront, the Operator parties; Jerry D. Willoughby, Lester S. Hyman and the gang, demanded from Government a ‘letter of credit’.
In other words, taxpayers must put up the security for a 'letter of credit' from a bank so the Operator parties would have access to additional funds.
The Operator parties promised in the initial agreement with the then Dr D. Orlando Smith regime, to invest some $6M of their own funds into the BVI Airways deal, however, throughout the report, it does not show that they had invested a dime in the project.
Instead, the parties demanded of the Virgin Islands (VI) Government not only $7.2M, but a letter of credit secured by the Government for additional funds.
On page 9, Sec (iii), of the Auditor General Report, it stated: “the Operator parties may terminate immediately without prior notice, if the Government fails to provide a letter of credit… Where termination occurs, the Government will be responsible for and indemnify and hold the operator parties harmless for all reasonable cost and expenses in connection with the termination.”
The report further stated on page 9, Sec (ix) in the implementation provisions that, “BVI Airways to have sole discretion to determine flights schedules, airfares, aircraft selection, staffing and airport services including (without limitation) counter space, office space and check-in support.”
The agreement was so one-sided against the people of the VI, that on page 9, Sec (xiv), it stated: “the government to guarantee to BVI Airways an annual return on investment of at least 20%”.
That section went on to say in addition as per (xv), the VI Government was to, “abate Airport Authority fees charges or levies including landing fees, navigation charges, storages fees, fuel taxes and surcharges and make improvements to airport facilities and services.”
What was another scam for VI taxpayers over the BVI Airways deal in the final Financing Provisions according to the Auditor General on page 10 No. 41 of the report, was that “the initial proposal for the Government to share in the profits was not included."
"Instead, the Government’s only return on the investment would be repayment of the guaranteed amount which was contingent on available funds after other provisions were satisfied,” the report noted.
The former government of the Virgin Islands, inclusive of its statutory bodies, expended more than $20 million on consultancy services alone in the last six years.
Premier and Minister of Finance, Dr D Orlando Smith, made that disclosure in the House of Assembly last month.
These monies were spent through four main state-owned agencies — the Ministry of Finance, the Office of the Premier, the BVI Financial Services Commission (FSC), and the National Bank of the Virgin Islands.
Throughout the course of that six-year period, the Smith-led Office of the Premier spent $2,108,014.02 for consultancy services while his Finance Ministry expended $14,336,549.98.
The BVI Financial Services Commission, in the meantime, dumped $3,833,845.66 into consultancies. The state-owned National Bank of the Virgin is Islands only expended $716,608.50, Dr Smith said.
BVI Airways the biggest spend
The single largest expenditure of the total amount spent on consultancies was the $7 million to BVI Airways and its affiliated companies back in 2015. This $7 million sum was for the aforesaid airline to commence direct, nonstop flights between BVI and Miami, USA. These services, however, were never received.
Over the six years, government also paid for consultancies in a number of areas inclusive of marketing and public relations, auditing services, technology services, legislative drafting services, examination services, public finance and financial services consultancy, among a list of other services.
While disclosing the figures to the House, Dr Smith noted that the hiring of consultants is part of the “normal course of business for any organisation”. He said consultancies are done when expert advice and/or skills may be required, or when services are needed that cannot be sourced from within an organisation.
“This government is no exception, and therefore is required to engage such services to ensure efficiency in its operations from time to time,” Dr Smith said.
He was, at the time, answering questions from former Opposition Leader Andrew Fahie who, in recent times, has criticised government for what he suggested was the wasting taxpayer dollars on unnecessary consultancies.
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