My Fellow Citizens and Residents, during the campaign leading up to the 2015 elections, Team
Unity spoke to major concerns over the establishment and operations of the Sugar Industry
Diversification Foundation (SIDF). Our concerns were premised on the view that (i) a body set
up to receive funds derived from the Citizenship by Investment Programme must be
accountable to the people of this Country through its Parliament, and must not just be
deposited into a private foundation and out of sight with no direct accountability to the
Government, and by extension the people of St Kitts and Nevis, and (ii) The very significant
amount of funds deposited into the SIDF were being used to further projects, the viability of
which had not been demonstrated, nor was the ability of those projects to diversify or grow the
national economy clearly ascertainable.
Accordingly, when we took office in February 2015, priority was given to understanding the
workings of this private foundation which was being put in receipt of quite significant sums of
money from the Citizenship by Investment Programme. A Board of Councillors was appointed,
with Dr. Robertine Chaderton as Chairperson, an extremely well respected accounting mind.
The Board also comprises Mr. McClure Taylor, an attorney at law; Mr. Leon Lescott, who has
vast experience in the hospitality industry; and Mrs. Marguerite Foreman, also an attorney at
law, appointed as Secretary.
The Board has been informed by Ernst &Young (EY), who have been retained to conduct a
review from 2010 to 2015, that understanding the workings of the SIDF was not an easy task at
all, and one cannot help but suggest that the fact that it was set up in the first place as a
foundation, and the manner in which it was operated thereafter was specifically designed to
make it extremely difficult to follow the flow of funds.
The Board was also informed that the SIDF has made decisions and spent vast amounts of funds
without keeping proper records, such as board meeting notes, reports, opinions, or minutes of
meetings, any of which would reveal on what basis certain decisions were taken with respect to
these vast levels of expenditure. A relevant minute with respect to a decision to spend millions
of dollars, if it existed at all, would take up only a few lines, and there would be no detailed
reason given as to why the particular decision was made.
On more than one occasion, a proposal would be rejected outright, or sent back for further
information, and by the following meeting the proposal would be approved and funds
disbursed without any explanation for the turnabout. It was almost as if the hand of God, or the
hand of someone who considers himself to be God, came down and instructed them to issue
the funds, regardless of their own independent view.
As if to further facilitate bad practices, the Board has been told that the SIDF operated for well
over eight years without by-laws and also without any formal internal process for feasibility
assessments, return on investment analyses, and risk assessments, despite distributing vast
sums of money which belong to the people of St Kitts & Nevis. It is worth repeating, that for the
projects reviewed, in not even one instance was it possible to rely on internal records to explain
a transaction and the rationale behind it. In almost every instance, it was necessary to interview
third parties and request from them supporting documentation, or search electronic databases,
and review correspondence, none of which form part of the records of the SIDF, in order to
attempt to piece together the story as to why our money was spent in the manner in which it
was being spent. Even with all of these efforts, there is still an absence of explanation for many
of these very extraordinary expenditures.
The Ernst & Young report has shown that since its inception, to the year 2014, the SIDF has
been the beneficiary of just about EC$1.5 billion dollars. However, over the same period the
SIDF has spent approximately 1 billion dollars with approximately EC$500 million spent in the
two years prior to the 2015 General Election, almost double the normal annual expenditure of
the SIDF since its inception. Among those rather startling levels of expenditure, was the
discovery that about $150 Million dollars was spent on miscellaneous grants and donations in
the two years leading up to the 2015 General Election. Most unfortunately but not
unexpectedly, the SIDF operations were just another example of the gross profligacy for which
the last administration had achieved most notoriety.
Over the period 2010 to 2015, the SIDF’s expenditure on State funding and projects includes:
Currency: $EC Total
St. Christopher Air
and Sea Ports
St. Kitts Electricity
LED and Solar panel
Small Enterprise 15,000,000
Budget Support 136,508,904
A separate review has not been done in relation to other SIDF funded programmes such as
EQOL, SEAF, etc. I am advised that these matters would be appropriately investigated.
Of concern coming out of the review were significant payments to two members of what I
would describe as the parasitic oligarchy of the previous regime. Over the period June 2014 to
February 2015, Mr. Delano Bart QC received EC$3,000,000.00 in legal fees for advice related to
five (5) agreements entered into between the SIDF and other entities. I am not talking about big
matters and hearings in Court, I am talking about in most instances reviewing and advising on
agreements which in the main have already been drafted by the third party’s lawyers. There is
very little if any basis for the payment of such substantial amounts over an eight (8) month
period. Amongst the very fortunate, was also Mr. Michael Martin, who was put in receipt of
EC$2,300,000.00. This sum was paid for attending Board meetings and performing the role of
Corporate Secretary, the result of which, as I have already explained, is a complete absence of
Board records to properly support or record Board decisions, along with management fees in
circumstances where the SIDF had a full complement of staff, already performing the duties
which Mr. Martin’s company was retained to perform.
With respect to projects in the private sector, the two largest of these are Kittitian Hill, in which
the SIDF has invested just over EC$70 million dollars, and Christophe Harbour where EC$43
million was a loan.
I would ask that you bear with me, while I go more in depth into the rather startling facts which
have been revealed with respect to these two projects:
In 2010, the SIDF made its initial investment of US$11.1 million into Belmont Resort Limited
(BRL) and associated companies the legal entity which owns, constructs and manages Kittitian
Hill. The initial part of the investment was a loan of US$5.7 million, and from all investigations, it
is evident that this loan was initially rejected by the Board of the SIDF and then, without any
explanation, it was hurriedly approved and paid out, without the performance of any due
diligence in order to determine whether the project was in fact a viable one.
This loan was provided along with a share capital purchase of US$5.4 million, which was made
in a similar vein, without any due diligence or feasibility study, and saw the SIDF, which was
never intended to be in the hotel business initially becoming a 60% shareholder of BRL, the
owner of Kittitian Hill.
No doubt, the failure to perform a due diligence exercise and feasibility study prevented the
discovery that CLICO held a EC$4.4 million loan security over those same lands that were
earmarked for use by Kittitian Hill.
The project, now under the Chairmanship of Joseph Edmeade, who you would remember was
also Cabinet Secretary under the previous regime, was supposed to have been completed in
2013, with 291 units and while it was opened in December 2014, it is in this year 2016 still not
SIDF’s involvement in Kittitian Hill has exponentially increased and its current exposure to the
project is now approximately EC$78.3 million. This consists of shareholder loans of EC$51.8
million and equity of EC$26.4 million. In essence, the SIDF has found itself very much the
majority owner of Kittitian Hill, with a 90% equity interest and burdened with significant
financial exposure. The SIDF, as presently constituted, is left with the daunting task of doing all
that it can do to curb the expenditure and salvage the investment.
So what is the SIDF doing? Currently, three members of the Board of the SIDF hold positions on
the Boards of Belmont Resort Limited and associated companies. The Chairman of the SIDF is
the Chairman of these Boards. After a thorough review of the Companies’ operations and
finances which, I should mention, was done for the first time under this current Board, it has
now taken control of all financial aspects of Kittitian Hill while all construction is taken to an
acceptable level of completion. This is expected to be done by year-end. While completion of
construction is being pursued, efforts are underway to identify and retain a specialist entity
which will take over the management of the hotel until a suitable buyer/investor can be found
to relieve the SIDF of all, if not the majority, of its shareholding. The other 10% shareholding in
Belmont Resort Ltd and associated companies is owned by Terra Forma Co. Ltd, an entity owned
by Mr. Valmiki Kempadoo. That 10% shareholding must be recognised but it is important to
point out that the Board, and not Mr. Kempadoo, is responsible for the financial operations of
Belmont Resort Ltd.
As if the SIDF’s glaring irresponsibility in making this investment was not worrying enough, we
have since learnt that in May 2013, again without any deliberations, feasibility study and/or due
diligence, that the SIDF spent the further sum of EC$6.5 million to purchase the Golden Lemon
Hotel for Belmont Resorts Limited, so that Kittitian Hill would have private access to a beach.
One would have thought that consideration would have been given to whether beach access
was necessary at the project’s inception, or whether it was wise to invest such large sums of
money at this very late stage. Again, it is of great concern that this purchase was made in such a
hurried manner and without proper consideration. To make matters worse, this purchase is
currently before the Court: the sale being the subject matter of a challenge by another
prospective purchaser. I can say no more on that issue at this stage.
While the SIDF was investing heavily in Kittitian Hill, two parties associated with Kittitian Hill
managed independently to persuade the SIDF to purchase US$1.2 million in shares in an entity
called A Small World Capital AG, which is, I have been told, some sort of travel club for high net
worth individuals. Despite funds being remitted by the SIDF, the said purchase was not
evidenced by any shareholder certificates. It would now seem that that investment is of little or
no value, there is no tangible asset, and no benefit has been derived whatsoever from the said
investment. I am further informed that there is no realistic prospect of recovery of this sum. It
is almost as if this sum was just given away and there is no explanation as to why.
With respect to Christophe Harbour: the records reveal that in 2011, this development was first
proposed to the SIDF and did not find favour. In January 2013, and without explanation as to
what has changed, the SIDF agrees to pay US$1.5 million to purchase an interest in this
development. This transaction was not completed, and in the meantime, the SIDF forfeited the
US$1.5 million payment. Despite having lost the US$1.5 million, the SIDF then makes another
attempt in June 2013 to get involved in the project. The SIDF then manages to recover the
US$1.5 million lost in February 2013, and then promptly pays out another US$1.5 million as
part of 50% of legal costs incurred prior to the SIDF’s involvement, plus the sum of US$16
million or EC $43,200,000 in loan capital for a 30% shareholding in what can only be described
as a very complicated Joint Venture that owns the Development. As for the US$1.5 million,
there is no explanation as to why it was agreed to pay that sum with respect to expenses which
did not involve the SIDF.
Again, there is absolutely no record of any due diligence or feasibility study being obtained
prior to this investment. The SIDF’s records and databases reveal the unusual involvement of
the Office of the Prime Minister in the Douglas Administration in these transactions, which may
account for the lack of any evidence of a decision-making process being engaged in by the
Board with respect to these matters. At present, the SIDF has recovered only approximately
US$4 million in interest and principal repayment in relation to its investment in this project,
which is, as one can obviously see, nowhere near completion.
I have personally met with the developers on several occasions to express my concern with
respect to the progress of this development, and the current Board of the SIDF has recently met
with the developers in order to better appreciate the way forward and have been put in receipt
of a document which is intended to illustrate the next steps. That document is currently being
reviewed. Again, this is a project which the SIDF ought not to have found its way into, but the
Government considers it to be an important project which if properly managed can yield
benefits to this Country’s tourism industry. The SIDF is therefore approaching its involvement
with cautious optimism, in that it has no intention of being an impediment to the progress of
the development. However, the SIDF is not prepared to invest any further sums without clear
results and tangible benefits to the people of St Kitts & Nevis.
Finally, in April 2013, the Ministry of Housing, Public Works, Energy & Public Utilities (MoE), the
SIDF and the St. Kitts Electricity Company Limited (SKELEC) commenced two programmes in
relation to the reduction of public energy consumption. Over the period 2013 to 2015, the SIDF
spent approximately US$6.6 million on the following the two projects:
1. Renewable Energy Project – US$2.2 million: The purchase of 2.5KW Solar Home Systems
for 300 residential customers. This project seems to have been hastily and ill conceived
as part of an incoherent election strategy of the rejected government.
2. Light Exchange and Distribution Programme – US$4.6 million: The purchase and
distribution of AC LED bulbs, tubes and other accessories.
With respect to both of these projects, there is no evidence of any planning or reasonable due
diligence in order to ensure value for money, the feasibility of the project, and market demand.
There were no formal contracts and wholly inadequate record keeping. Again, the lack of due
diligence, and a feasibility study with respect to this project, most likely led to the current
situation where the 300 home solar systems, at a cost of US$2.2 million, have still not been
used – as a consequence of a lack of interest and unsuitability of existing roofs, are rotting in
storage since September 2013. This reflects highly irresponsible behavior and conduct, lack of
accountability and an absence of a culture of good governance.
No Cabinet authority can be found for the initiation of the Light Exchange and Distribution
programme. SIDF spent approximately US$4.6 million on this project, and once again there was
no due diligence or any feasibility study. Pursuant to this programme, significant quantities of
bulbs were purchased, many of which were incompatible with needs and, as a consequence,
adaptors had to be purchased at significant additional cost. There is evidence in this
transaction of the direct involvement of a then Government Minister, Asim Martin which is
being looked at more closely. Of concern, as is the theme with every transaction involving the
SIDF under the previous regime, there is no documentary evidence available to determine what
items pursuant to this programme were in fact received, and thereafter distributed.
Accordingly, there is no means to ascertain whether the Country has received and utilized that
for which US$4.6 million was spent.
I have briefly taken you through, as best as I can, some of the areas of concern with respect to
the SIDF under the previous regime, where EC$1 billion of this Country’s public funds have been
spent without any proper supporting documentation to show why. This is an entirely
unacceptable situation. The reports from Ernst and Young have been passed to me in my
capacity as Minister of Finance. Due to the fact that we are dealing with a Foundation, I am
therefore required to comply with the Foundations Act and, as such, I intend to follow the
provisions thereof, and exercise the powers given to me under Part VII. Based on the findings of
the report, it is being explored whether the previous Councilors breached their duty to exercise
the care, diligence and skill which a reasonably prudent person would exercise in comparable
circumstances by entering into these projects without the necessary due diligence and
feasibility studies being conducted. I can assure the public that every step will be explored to
recover misspent dollars that belong to the people and where deemed appropriate those found
to have been willfully negligent, to have improperly performed their responsibilities, or to have
benefitted financially in questionable circumstances will be required to account.
Fellow Citizens and Residents, this has not been an easy exercise. I cannot sufficiently
emphasize just how sparse was the information available to piece together what I have told you
above. However, we are obligated to account to you where others have refused, and I will not
shirk my responsibility in this regard. I wish to caution, however, that I hear my friends on the
other side hollering that this is a witch hunt, and I can assure them that it is not. What is taking
place is a very careful process where we are piecing together the SIDF story so that we can
understand where we are, how we got there, so that for the first time reasoned decisions based
on relevant information and in the best interest of the citizens of St Kitts & Nevis can be taken. I
will not lay blame at the feet of those who don’t deserve it, and as such, a reasonable level of
belief of wrong doing is required before steps are taken. In the final analysis, if there is evidence
of wrongdoing, either criminal or civil, then those responsible for pursuing such actions will do