GEMS cover-up continues under DLP: Hundreds of millions of Barbados tax dollars vanish with zero public accountability

What are the functions and objectives of an independent Senator?

During the time the late Sir John Stanley Goddard sat in the Senate he repeatedly called for up-to-date financial statements for Hotels and Resorts Limited to be made available.

After all, it’s a majority Government owned company funded by the taxpayer and surely we have a right to know their current fiscal position?

I understand that HRL’s accounts have now been laid in Parliament
for the subsequent years since 2001, yet why has there seemingly been no Senate debate, discussion or public comment?

Losses for the GEMS project have been quoted at anything from $200 to $400 million, and as yet, no analysis has been in what part in the closure of over 30 private sector hotels over the last fifteen years they have played.

Adrian Loveridge

(Editor’s note: The headline “GEMS cover-up continues under DLP…” was created by Barbados Free Press. The body of the article is exactly as received from Mr. Loveridge)

Below article from the November 12, 2007 Nation News…

THE HOYOS FILE – A GEM OF A FINANCIAL REPORT

by Patrick Hoyos

November 12, 2007

WITH A SORT of morbid fascination, I have been revisiting the shipwreck that was Hotels & amp; Resorts Ltd, the above-ground financial counterpart of the Stavronikita at the end of 2001.

Yes, dear readers, I know this is almost December 2007 – so, you may wonder, what is the point? Well, there really isn’t any except that the 2001 accounts were only recently laid in Parliament along with the remainder of the company’s annual reports from 1997 to 2001, so I thought it would be “interesting” to recap the disastrous position GEMS had found itself in by then.

Writing in the notes to the financial statement for 2001, KPMG stated that “the company incurred a loss for the year ended December 31, 2001 of $22 million and had accumulated a deficit of $60 million at the year-end date. Also at that date, current liabilities exceeded current assets by $51 million. This raises substantial doubt that the company will be able to continue as a going concern without the continued financial support of its shareholders.”

$51 million? How did that happen? Current assets – which were made up of cash in hand as well as trade, VAT and other receivables, prepaid expenses and inventory – totalled a paltry $4.1 million, while current liabilities – the company’s bank overdraft, accounts payable and accrued expenses, a sum due to CRL Ltd, interest-bearing loans and interest payable – totalled $55.6 million. Subtract one from the other.

$150 million from Treasury

Therefore, it wasn’t surprising that Government had to take something like $150 million from the Treasury to clean up the red ink flowing from HRL like water over Niagara Falls. Of course, the sale of a majority stake in BNB to Republic for a similar amount put the money back into the Treasury, so it all got tidied up very nicely – except we sold the majority stake in BNB and had nothing tangible to show for it.Ah well, easy come, easy go.

What can we say positive about GEMS? Well, in the five years it took to build up that $60 million deficit, the company had earned gross revenues (you know, from things like room rentals) of $42 million, and it had paid $29 million in interest on its loans. However, the accounts show that in 2001 the Government lent HRL another near-$10 million to allow it to pay interest on its loans.

Another fun fact about GEMS: its shares at the end of 2001 were worth less than zero; in fact, total shareholder equity was put at MINUS $36 million. Ouch.

And those loans requiring so much interest? A mere $77 million, all but $15 million of it owed to. . . which bank? Yep, you guessed it, good old BNB.
So you see, if you owe the bank and can’t pay, all you have to do is sell the same bank in order to pay it off – except for one little thing: you would have to own the bank in the first place. Again, it all worked out so tidily in the end.

Except that GEMS is still out there, trading (at least its version of trading). Question: is it still creating minuses on its balance sheet for its principal shareholder, the Government of Barbados? How can we have sympathy for Government in this case when it single-mindedly persevered in digging one of the biggest financial holes it has ever dug (and that is probably saying a lot) with this ill-begotten, foolish project?

Remember, this was a project that began as one thing and inexplicably turned into another: GEMS was first envisaged as a sort of co-op to help small hoteliers on the South Coast pool their resources in administration, overhead and marketing; but the deeply indebted hoteliers objected to being corralled instead of letting them sink into the mire of repossession and bankruptcy, so the Owen Arthur administration thought it would be much better to dig a giant hole to throw taxpayers’ money in. The only project rivalling GEMS for nonsensical spending by the administration is probably Greenland.

Arbitration proceedings

Finally, a little snippet on HRL which I must confess I didn’t know about. I must have missed it in the paper, where it was probably Front Page news. At note 13 of the 2001 notes to the financial statement, it is stated: “The company’s former hotel manager, Commonwealth Hospitality Ltd (CHL) has made a claim for an aggregate sum of US$13 583 521 which is the subject of arbitration proceedings.”

CHL suing for nearly US$14 million? Why? The note goes on to say that it was for “wrongful termination of the management agreement between the company and CHL.” However, it adds that HRL believed it was “entitled to terminate the management agreement” and therefore owed CHL nothing. Also, without giving the figures, the note adds that “Various other claims have been made against the company”.

I look forward to the day we will see the next chapter in this intriguing story so that the following questions can be answered: did GEMS finally turn a profit? Did CHL get any money out of it? Is Eastry House sold, refurbished or still in ruins? Was Silver Sands Resort sold off at a profit? How are Timeout at the Gap and the Savannah doing financially? What are the financial projections for those condos being built opposite Timeout, and are they part of the new HRL strategy or a spin-off? Is HRL still a financial drain on the Barbadian taxpayer despite all the dollars sunk into that massive money pit?

Well, it’s only 2007 so I’m looking to see the financials for 2001-2007 sometime in the future, maybe 2015.

I hope I’m still around to hear the rest of the story.

18 Comments

Filed under Barbados

18 responses to “GEMS cover-up continues under DLP: Hundreds of millions of Barbados tax dollars vanish with zero public accountability

  1. Donald Duck, Esq

    What about the release of the 2008 financial statements for

    1. clico life insurance
    2. clico general insurance
    3. clico mortgage and finance
    4. clico balanced fund

  2. Hants

    1. GEMS
    2. Hardwood Housing
    3. Dodds prison and Veco
    4. 3S SRL and Danos
    5. Kensington oval and World Cup 2007

  3. reality check

    Hants and Donald Duck apparently want accountability on different issues. At least there is some common ground.

    Barbadians want accountability on the spending of ALL public monies including personal and government corporations.

  4. Hants

    @ reality check

    “MOST” Barbadians want accountability on the spending of ALL public monies including personal and government corporations.

    There will always be some people who are consumed by greed.

    I just want the lives of poor people in Barbados to be improved and checks and balances on those who try to “tief de people money.”

  5. passin thru

    too bad the DLP lied about introducing FOI, integ laws, conflicts of interest rule etc etc etc.

  6. reality check

    Amen

  7. Johnny Postle @

    OH YOU PEOPLE can really leave it alone. Nothing is going to come out of this. The money done gone, divided, spent, invested, build houses and apartments, in lavish living and travel, show off with, bragged about, gone in yachts and tours all around the world. Just leave it alone, no body will be held accountable and the only ones who will suffer is us. We are suffering the agony of not seeing justice serve whilst the money is already spent.

  8. Nostradamus

    Hants said “I just want the lives of poor people in Barbados to be improved and checks and balances on those who try to “tief de people money.”

    Hants, you only want checks and balances? You don’t want to see some people lock up?

  9. Hants

    @ Nostradamus

    checks and balances and locking up.

    nuh problem wid dat.

  10. 24.244.156.166

    Just what you get for having a brilliant economist run your affairs.

    I could never understand how brilliant people could waste so much of the tax payers money.

    The brilliance of the last prime minister was not his understanding of financial and economic matters but it was really in convincing so many that he as a “trained economist” was doing good for the country.

  11. love

    The last Prime Minister…..was essentially a
    ” Drained Economist” NOT a Trained Economist .

    He DRAINED the Jamaican economy…while working in that country !

    He DRAINED the Barbados economy……while he governed as PM of Barbados !

  12. 166

    In the future, the cabinet of Barbados should consists of men and women who are truly independent. By this , I mean that they could make a decent living without being a cabinet member

    Being a lawyer does not make you independent.

    So many of our lawyers and others cannot make a decent living,that given the opportunity to serve in cabinet they would support the PM in decisions like wasteful spending on GEMS.

    Not to support the PM would mean going back to a hard existence.

    We need really independent persons in cabinet.

  13. Hants

    @ 166 “So many of our lawyers and others cannot make a decent living,”

    You got to be joking.

    There is a difference between a “decent living” and “living rich”.

    Every politician in Barbados was making a “decent” or better than decent living before they were elected.

    Barbados is a capitalist society.

    nuff said.

  14. Donald Duck, Esq

    We hear the government wants to balance the budget in 2012 or 2013. We all know that it can’t happen even if they decide to raise taxes to fill the hole.

    The only possible way is if we strike oil and or if we sell off all of the country’s state assets.

    In addition as many of you are aware 2012 is likely to be an election year when the purse strings of government tend to lose their elastic.

    Any thoughts as how they will achieve their target of a balanced budget

  15. Donald Duck, Esq

    Why no news on the recent report from S &P on Barbados. The following is an extract

    “On Nov. 13, 2009, Standard & Poor’s Ratings Services revised its outlook on
    Barbados to negative from stable. At the same time, we affirmed the ‘BBB’
    long-term foreign and ‘BBB+’ long-term local sovereign credit ratings. The
    short-term ratings remain at ‘A-3’ for foreign currency and ‘A-2’ for local
    currency. The transfer and convertibility assessment for Barbados is ‘BBB+’.”

  16. Hants

    @ Donald Duck, Esq

    Dat news musse gih you an organism.

    De wassa tings get in Babadus de betta chance fuh wanna BLPites.

    doan worry. hope springs eternal as long as yuh livin in Babadus.

  17. Crusoe

    Duck above ”or if we sell off all of the country’s state assets”

    Well, y’know who was in favour of THAT one.

    Doan mind de money was going out de udder side in overspennin’ and mismanagment.

    What? Still no accounting for GEMS???

    BFP!

    How could you even complain bout GEMS, when we doan even have full reporting for Cricket World Cup???

    Does anyone even know for sure how much was spent?

    Or are we left open to conjecture? Maybe it was NOT $250million as so many think.

    Maybe it was really $1.5 Billion!!!

    Heck, why not, the Gov’t wont tell us, so we can make up the figures!

    What, we spent $ 1.5 Billion on CWC???

  18. Adrian Loveridge

    Auditor Generals Report 2006

    ‘In 2003 the Government of Barbados made a loan of $145,328,264.00 to Hotels and Resorts Limited.
    At the 31st March 2006 interest payments due were in excess of $37 million.
    The loan to Hotels and Resorts Limited is currently listed as an Advance in the accounts of the Treasury.
    An assessment of this investment should be made to see if it is recoverable.
    Currently there is not enough information available on the financial status of Hotels and Resorts Limited to make this assessment.’

    4 years on, is the information now available and has the assessment been made?