(Trinidad Express) A forensic management audit commissioned by Prime Minister Kamla Persad-Bissessar has found that this country did not get value for money in the £5 million sale of its prime slots at Heathrow Airport in London, England, by former British West Indies Airways (BWIA) to British Airways in 2007.
The audit committee found that the fair market value of the slots then ranged from £23 million to £44 million.
The slots are used for the loading and unloading of passengers and baggage and re-fuelling and re-stocking of the aircraft at Heathrow, one of the world’s busiest airports.
In March 2011, Persad-Bissessar, upon her return from an official trip to London, requested Attorney General Anand Ramlogan investigate the circumstances surrounding the sale and whether there were any breaches in the process.
Economist Jwala Rambarran, now Central Bank Governor, had chaired the Cabinet-appointed committee along with Dr Bijan Vasigh and compiled a 137-page report which cast blame on the former People’s National Movement (PNM) ministers who were involved in the process, namely former public administration minister Dr Lenny Saith, former minister in the Finance Ministry Conrad Enill, former minister in the Finance Ministry Christine Sahadeo and former chairman of the BWIA board of directors Arthur Lok Jack.
The committee’s report, dated May 8, 2012, recommended Parliament convene a special session at which, at a minimum, the former ministers and directors should be called upon to account for the role which they played in the slots sale.
The committee recommended further that Cabinet formally refer a copy of the forensic/management audit to the Attorney General for consideration “as to what actions, if any, may be pursued against any of the above-mentioned former public officials, having regard to all of the circumstances of the case”.
According to the report obtained by the Express, the committee found the fair market value of the BWIA London Heathrow prime slot pair ranged from £23 million to £44 million in 2006 and, at a minimum, this was nearly five times more than the £5 million which BWIA received from British Airways.
“The committee also concluded that both the board and executive management of BWIA failed to fully assess the potential value of the London Heathrow slots, and the then Minister of Finance, in his capacity as corporation sole, failed to act to ensure that Trinidad and Tobago obtained fair market value for its strategic national air transport asset, the London Heathrow slots,” stated the report.
“The Committee concluded that there is sufficient prima facie evidence to suggest that the former board of directors of BWIA and/or one or more of their members, the Permanent Secretary in the Ministry of Finance, who is the accounting officer to BWIA, and the former minister of finance as corporation sole were negligent in the exercise of those responsibilities that are prescribed to them by Act No 5 of 1973 (Chapter 69:03) Minister of Finance (Corporation Sole), the Exchequer and Audit Act Chapter: 69.01 and Financial Regulations 1965, and the Companies Act Chapter 81:01 in the divestment of BWIA’s London Heathrow Slots,” the report added.
The report further found that in the divestment of a State asset, Lok Jack was not reporting to the minister of Finance as corporation sole or even to the line minister of works and transportation, but reporting directly to Saith.
The report stated that Lok Jack was in possible breach of provisions of the Companies Act, “as he failed to take the necessary steps, inter alia, to efficiently and effectively manage the affairs of BWIA and to act, in good faith, in the interest of the airline or to otherwise discharge his fiduciary duties to the company”.
The committee concluded that the former BWIA executive management failed to carry out a detailed analysis of the impact of the positive market conditions on the fair market value of the BWIA London Heathrow slots at that time, especially the impact of the escalation of slot values in the wake of the Open Skies Agreement by the United States and the European Union.
London Heathrow, stated the report, had the most valuable landing slots in the world.
“The Committee concluded that there was sufficient empirical evidence to indicate that the sum of £5 million accepted by the board and executive management of BWIA did not represent fair market value for the country’s strategic national air transport asset, the London Heathrow slots,” the report added.
The report noted that the former BWIA board relied heavily on the advice of its international aviation lawyers, Clyde and Co, which estimated that the value of the BWIA London Heathrow Slots was about £5 million based on the nature of the slots and on historical data on previous transactions in which they were involved.
“The committee found no evidence to indicate that Clyde and Co used a formal valuation model to estimate a fair market value for the BWIA London Heathrow slots.
“The committee concluded that the board and executive management of BWIA were misinformed that the value of the BWIA London Heathrow slot could not be established through formal independent valuation, as several slot valuation models did exist,” stated the report.
The committee also constructed an economic model to estimate the impact of the sale of BWIA’s London Heathrow slots on the wider Trinidad and Tobago economy. It found that the impact that was likely is as follows:
• A reduction of more than $5 billion (US$800 million) in Trinidad and Tobago’s GDP over the course of a decade, or equivalent to a loss of 3.5 per cent of Trinidad and Tobago’s 2011 GDP;
• A reduction of almost 13,000 persons employed over the course of a decade, or equivalent to a loss of two per cent of Trinidad and Tobago’s 2011 labour force; and
• A reduction of $670 million in tax receipts over the course of a decade, or equivalent to a loss of just over 1.5 per cent of 2011 tax receipts.
