The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government should let Oban Energies' $5.5 billion project proceed "without sailing through", balancing job creation and growth with its chief promoter's controversial background.

Craig A. 'Tony' Gomez, the Baker Tilly Gomez accountant and partner, told Tribune Business yesterday that the development should be allowed to proceed provided it passes "the smell test" at the Investments Board and other government due diligence processes.

Urging the Minnis administration to "exercise their alertness", Mr Gomez said it could not afford to "half step" and must ensure Oban Energies had the necessary financing to complete the refinery/storage terminal.

"The Government has been placed on alert, and I hope they exercise their alertness," he told this newspaper. "This is not one that should go sailing through. They have been forewarned.

"The infrastructure in place by the Government to perform due diligence, that's the key point. We're relying on their infrastructure, but they [the Government] have been warned."

Mr Gomez was speaking after Tribune Business revealed earlier this week that Peter Krieger, Oban Energies' non-executive chairman, was named as a defendant in two US lawsuits alleging that he misappropriated investor monies.

Mr Krieger, who has acted as the developer's chief spokesperson and 'point person', signing the project's Heads of Agreement with Prime Minister Dr Hubert Minnis on Monday, settled a Securities & Exchange Commission (SEC) lawsuit by paying a $110,000 civil penalty in 2008 and agreeing to be bound from committing securities laws violations.

The US federal capital markets regulator had alleged that Mr Krieger, together with his father and another defendant, "misappropriated more than $3.7 million of investor funds" from a "defunct hedge fund" they ran, called the KFSI Equity Fund.

However, it emerged yesterday that Mr Krieger also pled guilty in November 2006 to a criminal case brought against him by the state of Florida involving the same fund. He was barred from acting as a broker/dealer investment adviser for seven years and, together with his father, ordered to pay a $1.292 million fine.

Tribune Business also revealed that Mr Krieger was sued by the Bahamas-based judicial manager for British American Insurance Company (BAICO), who accused him of misappropriating $8.7 million of the collapsed insurer's funds for his own personal use.

This newspaper's revelations about Mr Krieger, and the backgrounds and seemingly 'overstated' qualifications of other Oban principals, raised serious questions about the level of government due diligence conducted on the Oban Energies project before the Heads of Agreement signing.

Queries were also raised over whether Mr Krieger was a 'fit and proper person' to be leading such a major investment in the Bahamas, although he told this newspaper his role was "more of an ambassador" and he was not a shareholder in Oban Energies.

But, amid the environmental concerns and questions over whether the developer has the necessary experience and financing, Mr Gomez's outlook tapped into a growing body of opinion that suggested the Oban Energies project should be allowed to proceed - albeit with caution.

This take suggests that the 'opportunity cost' in terms of missing out on such a project, especially the jobs, economic activity and investment it is projected to create, would be significant if the plug is pulled now - provided the project is 'for real'.

"Suppose the project is complete and can increase employment," Mr Gomez said. "That is number one for the Government, and increasing the tax base is number two. What do you have to lose?"

He suggested that the Government's message to the developer should be "go get the money", and then subject it - and its principals - to a vigorous assessment and review process.

"I think they should proceed," Mr Gomez said of Oban. "It will still employ people and get some economic activity going. But the Government mustn't half step. You don't want anybody coming in, laying the foundation and they have no money to go further than the foundation.

"If they [Oban] pass the smell test at the Investments Board and other processes, they should be allowed to proceed."

Mr Gomez added that he was "a little concerned" that Oban Energies had so quickly removed the website names and biographies of its principals following this week's revelations, questioning whether this indicated "there are other people on there that you don't want the public to know about".

The Baker Tilly Gomez partner's comments echoed those of K P Turnquest, the Deputy Prime Minister, who yesterday urged Grand Bahama residents to look beyond the controversy surrounding Mr Krieger and the other principals and focus on Oban Energies' potential economic benefits.

Dr Hubert Minnis on Wednesday indicated that the Government knew about Mr Krieger's past prior to signing the Heads of Agreement, and implied that it was comfortable enough for the deal to proceed.

Oban Energies, meanwhile, was proceeding with its plans as its environmental and engineering teams, together with their consultants, began meeting with government officials to 'scope out' the terms of the Environmental Impact Assessment (EIA) for the project.

However, Tribune Business sources familiar with developments said the group is also in the process of hiring a public relations (PR) firm, and engaging attorneys in Nassau and Freeport, to combat the negative publicity surrounding it.

Other contacts close to Oban Energies said the project was "for real", questioning why banks and investment houses were willing to make multi-million dollar financing available once all necessary approvals and permits are obtained from the Government.

"They have it," one source, speaking on condition of anonymity, said. "I've seen the letter, and the Government's seen the letter. I don't think the Government would have signed that [the Heads of Agreement] without seeing the money.

"They're [the banks] ready to fund it as soon as the permits are issued. They're for real. The financing is still there, so there must be something. It must be a good project. I think it's a good project; time will tell. I think you'll see some serious players coming forward in the next few weeks."

Oban Energies' financing partners are Stifel, Nicolaus & Company, the St Louis-based investment bank, and Drexel Hamilton, another finance house, according to the developer's website. A Drexel Hamilton representative was at Monday's Heads of Agreement signing.

The source suggested such financing would not be available to Oban Energies unless the banks were convinced of the project and group's merits.

They added that Oban Energies had been fully paying all its Bahamian consultants and advisers on time, and said Mr Krieger - who had been working on the project for nearly a decade - "didn't try to hide" his issues with the SEC from the Government.

"I hope and pray, and think, it's a real project," the source said. "God knows we need it. It would be good to see the Bahamas get on a run."

They added that Oban Energies was seeking to exploit the Jones Act, which requires a foreign-flagged vessel leaving a US port to call at an overseas destination before returning to the US. In this way, a foreign flagged vessel will bring crude to Oban's facility, where it will be refined and taken back to the US.

Matt Aubry, the Organisation for Responsible Governance's (ORG) executive director, yesterday said "decades of opaqueness" in the investment approval process had contributed to the controversy.

"I think that we have a while to go before people fully trust the vetting and interaction with government and foreign investors because of our history; decades of opaqueness," he told Tribune Business.

While more transparency was necessary, Mr Aubry said that as a jurisdiction dependent on foreign direct investment (FDI) the Bahamas could not subject investors to such intense scrutiny that it drove bona fide ones away.

"In trying to attract foreign direct investment, we don't want them to feel they're under the microscope," he said.