ENRON: Sublime Irony From Barbados Prime Minister Owen Arthur

As reported in the Nation News online here, Barbados Prime Minister Owen Arthur made the following comment while addressing the Institute of Chartered Accountants at the Caribbean's 24th annual conference at Hilton Barbados…

"Happily, we in the Caribbean have thus far been spared Enron-type experiences.

"The duty falls now on our accountants, especially those performing the role of auditors, in addition to our lawyers and other gatekeepers, to ensure that there is no erosion in our system of corporate governance, fragile as it is." …

…Barbados PM Owen Arthur addressing Institute of Chartered Accountants

ENRON Barbados Connections

When the Prime Minister made his Enron comments, was his tongue planted firmly in-cheek? Or perhaps he was just being cheeky?

The Caribbean and Barbados figured prominently in the Enron scandal. Perhaps the PM just had a memory lapse, so we shall remind him…

* ENRON management used Caribbean and Barbados offshore companies and banks to set up some 900 front companies to facilitate the movement of money to the detriment of Enron shareholders.

* Barbados and several of its Caribbean neighbors have been linked to the collapse of Enron, one of the world's largest energy companies, reports Tony Best (Jan. 21, 2002). According to documents which Enron filed with the U.S. Securities and Exchange Commission, the Texas-based energy giant had six subsidiaries in Barbados and they may have been used to help the company avoid paying federal income tax for four of the past five years. Enron had almost 900 subsidiaries in the Caribbean, most of them registered in the Cayman Islands and the Turks & Caicos Islands. The Enron reports showed that on December 31, 2000, the firm had 692 subsidiaries in the Cayman Islands, 119 in the Turks & Caicos, 8 in Bermuda, 6 in Barbados, 4 in Puerto Rico and 1 each in Aruba and the British Virgin Islands. In addition, it had 43 in Mauritius, 2 in Hong Kong, 2 in Panama and 1 each in Singapore, Guam and Guernsey. Experts were quick to point out that Enron's actions were perfectly legal under U.S. laws and there was no evidence to suggest that the tax havens where Enron registered the offshore companies did anything illegal. (link here)

You Want Irony? Prime Minister Owen Arthur Calls For "Full Disclosure" For Corporate Governance (But Not For Elected Officials, Of Course!)

The same newspaper article quotes PM Owen Arthur as supporting a proposed regional code of corporate governance that would "strengthen the role of boards vis-a-vis management, to govern excessive payment of directors and to provide for full disclosure…"

Just hilarious.

This from the Prime Minister of Barbados after 12 years of failing to introduce any Conflict of Interest or public integrity legislation – despite a majority government.

What was that phrase again?

Oh yes… "Do as I say, not as I do"

6 Comments

Filed under Barbados, Business, Crime & Law, Offshore Investments, Politics & Corruption

6 responses to “ENRON: Sublime Irony From Barbados Prime Minister Owen Arthur

  1. Comment Maker

    I think you’ve added two and two and gotten five here 🙂

    The use of offshore tax shelters is pretty standard practice in “Tax Avoidance” (as opposed to tax evasion). Your first statement and the second are a bit at odds. As you yourself said

    “Experts were quick to point out that Enron’s actions were perfectly legal under U.S. laws and there was no evidence to suggest that the tax havens where Enron registered the offshore companies did anything illegal.”

    I find it difficult to equate that with your first statement:

    “…used Caribbean and Barbados offshore companies and banks to set up some 900 front companies to facilitate the movement of money to the detriment of Enron shareholders.”

    The problem with Enron was massive Fraud at the heart of the corporation. (Which BTW is what I think the PM is referring to)

    Having offshore tax shelters does not automatically make one a crook, this is the perception being generated by several interests in the US and particularly in the OECD. Use of tax shelters is in fact a response to high tax rates in one’s home jurisdiction. The proper solution of course is for the home jurisdiction to lower its taxes.

    (Its ironic that after years of being told to “Be competitive” the Caribbean has found something that it can compete at to suddenly be told about “harmful competition”)

  2. West Side Davie

    I love it!

    Good old Comment Maker is actually arguing that the establishment of over 900 offshore front companies had nothing to do with the collapse of Enron.

    The fact that Enron crooks were able to legally set up 900 front companies with zero effective oversight in Barbados and other jurisdictions is at the heart of the matter. It was this ability that facilitated the overall fraud. Notwithstanding that their actions in setting up the individual companies were legal when viewed individually – it was all part and parcel of a massive fraud.

    And that was all possible in part because of a lack of effective securities and corporate oversight in Barbados.

    As to that being at odds with the second part of the statement – that the PM has not introduced accountability and integrity legislation in 12 years of majority government – that is all part of the problem.

    For the PM to declare that their must be more effective corporate oversight in the Caribbean is laughable.

    Yes – very much a “Do as I say but not as I do” scenario.

  3. Comment Maker

    West Side Davy what I’m arguing is that the setting up of offshore companies does not automatically equate with fraud. As to zero corporate oversight, Barbados’ offshore sector actually has a relatively good reputation in the offshore industry.

    Our refusal to sign on to the OECD agreement has made us more of a target, but even the FATF recognised that Barbados’ regime is better than most in the Caribbean which is why we were never on the FATF blacklist.

    This argument stands independent of whatever statements you may want to make about the PM, integrity legislation etc. etc. (which I have not touched)

  4. BFP

    Hi Comment Maker

    West side dave has an interesting point, and so do you.

    But if we were called to make a judgement…

    While the setting up of offshore companies does not automatically equate with fraud, the setting up of 900 offshore companies sure should have raised an alarm…. but did not because there is no oversight.

    We’ll give Round 1 to West Side Davie.

  5. John

    …. and 900 new companies will sure make the GDP rise in alot of Caribbean countries. It’s just plain good business ……. depending on how you measure business.

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