The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian taxpayer should have a 25 per cent equity stake in the Baha Mar project given the “shocking” amount of concessions handed to it by the Government, an outspoken QC argued yesterday.

Fred Smith, the Callenders & Co attorney and partner, told Tribune Business that the $1.2 billion worth of investment incentives and tax breaks purportedly granted to the Cable Beach development meant its true worth was not $3.5 billion, but instead $4.7 billion.

He argued that this again highlighted why such investment deals needed to be debated in, and approved, by Parliament, with the details fully disclosed to the Bahamian people.

“If the Government is giving away $1.2 billion in concessions, that deserves an equity holding for the Bahamian people,” Mr Smith told Tribune Business.

“I noticed today that the Government disclosed that the concessions given to Baha Mar are worth $1.2 billion. This is a shocking figure, and is certainly something that ought to have been publicly debated in Parliament, fully disclosed to the Bahamian people, and been a matter of transparency for the Bahamas to know that is the kind of deal being made with Baha Mar.

“The investment by Baha Mar really isn’t $3.5 billion; it’s $4.7 billion when you include what the Bahamian taxpayer has contributed to this investment.

“If the Government is investing $1.2 billion of our money, why don’t we have a 25 per cent equity interest in this?”

Mr Smith, a leading opponent of the ‘Heads of Agreement’ device on the grounds that it allows governments to conceal details of their investment deals with major investors, argued that the Government should hold such an equity stake in trust on behalf of the Bahamian people.

The well-known QC said there was a precedent for the Government to hold such an equity stake, given that it initially held a 12.5 per cent interest in Freeport under the Hawksbill Creek Agreement, and subsequently owned 7.5 per cent of the Grand Bahama Port Authority (GBPA).

“The Office of the Prime Minister has no business being in the business of deal making,” he added. “This is why it is so important for Parliament to legislate and authorise deals of this nature.”

Mr Smith, while sympathising with the Baha Mar workers impacted by the ongoing dispute over the project’s future, also criticised the Christie administration for setting a dangerous precedent in paying the employees’ salaries.

“This is very confusing, ill-conceived and secretive, and obviously a potentially catastrophic situation which the Office of the Prime Minister has gotten the Bahamian people into,” he told Tribune Business.

Mr Smith also opposed the Government’s decision to intervene in what is a commercial dispute between private investors via the filing of its petition to wind-up Baha Mar’s 14 Bahamian-domiciled companies.

And he half-backed Baha Mar’s assertion that the winding-up petition amounted to an “expropriation” of private investor assets, labelling it as “indirect nationalisation”.

Such suggestions have been vehemently denied, and rejected, by both Prime Minister Perry Christie and attorney general, Allyson Maynard-Gibson, who pointed out that the winding-up petition - if required - would place control of Baha Mar under the Supreme Court, not the Government.

Suggesting that the Christie administration’s action “should terrify foreign investors”, Mr Smith said: “The Government is bringing its huge political power to bear against Izmirlian.

“It’s unfortunate the Government is using its might and power to force this developer to comply. This is not the kind of positive spirit that this mega development needs to be birthed into.”

He added that the Government’s action also potentially interfered with “the commercial negotiations and/or rights that may exist between the developer, the contractor and the financier, as well as third parties.

“The Government should not be in the business of private enterprise, especially when it does not have an equity stake.”

The Government has, though, backed away from the impression given by the Prime Minister’s national address last Thursday that it was set to immediately move on the winding-up filing.

It subsequently confirmed that this is a ‘last resort’ measure if all else fails to resolve the Baha Mar dispute, and that it is willing to give negotiations time to produce an agreement acceptable to all.

Still, Mr Smith reiterated previous calls by himself and others, such as Raymond Winder, Deloitte & Touche (Bahamas) managing partner, for this nation to legislate similar laws to the US Chapter 11 bankruptcy protection measures.

“Chapter 11 procedures in the US are a useful process to manage debtor crises, and we don’t have such legislation in the Bahamas,” Mr Smith told Tribune Business, describing this nation’s laws as “make or break” for troubled businesses that need to restructure.

While US Chapter 11 procedures allow a business to continue operating and retain staff, while it reorganises and seeks to return to health, Bahamian law simply permitted the appointment of receivers or liquidators.

“I have often in the past urged Parliament to legislate similar processes in the Bahamas instead of having a liquidation,” Mr Smith added.