BASSETERRE, St. Kitts – AFTER chiding the Editor-in-Chief of this media house for seeking answers to the alleged EC$91M debt forgiveness from the Italian government, Prime Minister and Minister of Finance Dr. Denzil Douglas dismissed the allegation and addressed a 1995 outstanding loan that was guaranteed by the People’s Action Movement administration. He also claimed that it was a ridiculous and stupid question.
Dr. Douglas made this pronouncement, among others, yesterday (Oct. 13) during his monthly press conference in the Parliamentary Lounge at Government Headquarters.
Reading from a statement prepared by the Ministry of Legal Affairs, the PM said when his Labour Party government entered office in July 1995, it was discovered that the Dr. Kennedy Simmonds-led administration had entered into an agreement as guarantor for a US$25,330,000 loan to Nautical Trading St. Kitts Limited, the principal borrower under the Loan Agreement.
“The other parties to the Loan Agreement were: Morgan Grenfell & Co. Ltd., as manager and agent; and several bankers as lenders. The purpose of the loan was the purchase of three hydrofoiled vessels with an option to purchase an additional two. The Agreement was signed by Prime Minister and Minister of Finance Dr. Kennedy Simmonds on May 30, 1986,” Dr. Douglas said.
He informed that Nautical Trading St. Kitts Ltd. was a company incorporated by Terrence Byron’s law firm on December 15, with Vincent Byron as the sole director and Hyacinthe Byron as the company’s secretary. He also informed that the two Byrons acted in those capacities until they were eventually replaced in July 1985.
“The loan”, Dr. Douglas added, “was insured by SACE under the terms of an insurance contract entered into between SACE and Morgan Grenfell & Co. Ltd., as agents for the lending banks, dated August 14, 1986.
He explained that SACE is an export credit insurance agency of the Italian government.
The PM declared that the loan was disbursed and the hydrofoils were purchased, but “you would remember that it was claimed that the hydrofoils disappeared”.
Dr. Douglas noted that Nautical Trading St. Kitts Ltd. defaulted on the loan repayment and “pursuant to the contract of insurance, SACE paid the lending banks the indemnities due and owing under the Loan Agreement. Then, in exercise of their rights of recovery, SACE demanded that Nautical Trading St. Kitts Ltd. repay the indemnities on their own behalf”.
The PM claimed that the company had no assets and was unable to pay its debt, so SACE turned to the guarantor of the loan to honour the payment. He noted that SACE threatened to bring legal action against the government if that sum was not repaid.
He said the loan balance as at June 30, 2007 was US$26,019,368.37 for the principal and interest while the late interest stood at US$24,477,999.81.
“In an attempt to settle the matter after the Italian government continued to complain to my government, my government in June 2007 engaged the services of negotiators to act on behalf of the government to negotiate a cash settlement with SACE.
“As a result of their skilful negotiations, the government was able to arrive at a compromise with SACE, whereby the debt was reduced. The government and SACE agreed to settle the matter in the amount of US$4M. Instead of having to pay the US$26M government negotiated so that the amount for settlement was US$4M…the sum to be paid in two installments,” Dr. Douglas said.
He explained that the settlement was captured in an agreement between SACE and his administration, which was represented by the then Attorney-General, Dr. Dennis Merchant, on December 10, 2007.
The PM declared that the first installment of US$2M was paid on December 15, 2007 and the balance on January 12, 2008 to SACE’s account at the Intesa SanPaolo S.p.A. Bank in Italy. These payments, he added, initiated a letter from SACE, dated February 26, 2008, notifying his administration that the debt “has been extinguished and the government’s liability in this matter has come to an end”.
Dr. Douglas emphasised that his government was able to successfully negotiate a considerable reduction of the debt owed to SACE, and has since paid the compromise amount negotiated in the Settlement Agreement.
“In so doing,” Dr. Douglas stressed, “my government has wholly satisfied and honoured the obligations that were created by the previous administration in its ill-advised transaction, by going and acting as some kind of guarantor for a shell company.”
In early September 2010, the issue of the alleged multi-million dollar debt forgiveness was raised by Washington-based Economist Dr. Everson Hull. This issue was followed up by the Hon. Mark Brantley, who had publicly called on Dr. Douglas to give the nation an explanation about the alleged package given to the Federation.
According to Brantley, in 2008 the Italian government cancelled an EC$91M debt owed to it by the Federation of St. Kitts and Nevis. He explained that the confusion stems not from the forgiveness of the debt, but from the government’s apparent silence on the matter.
“It does suggest, when one does a search online, that the Italian government, through its agency called SACE, has given St. Kitts-Nevis debt forgiveness in 2008 in the sum of some $91M. The confusion has come because no one seems to be able to say where that money is and how it has been accounted for. And the question has to be asked why is it that it has not been reflected in the budget and various documents.
“There may very well be a good explanation. I don’t know but I think it raises the question, because if there is debt forgiveness for the Federation there is also an issue of whether or not the people of Nevis have accessed that to have any benefit from it. So, it is a legitimate question and it requires an answer,” Brantley said.
Brantley also said, “I am calling on the government to give a simple explanation. If there is one, then the government should be willing to explain what the position is. I don’t think that is asking too much. We live in a democracy and it behooves the government to respond. And that is what I am asking for…a simple explanation. If there has been an oversight and the matter has already been mentioned, then say so. But it can’t be that the Italian government announced to the world debt forgiveness but, somehow, the government here doesn’t know about it. That seems a bit strange for me.”
Brantley had claimed that an explanation would be demanded of the Prime Minister, and “if he doesn’t do so willingly, then we will certainly have to deal with it on airwaves, on the highways and the byways, in the media and in every facet that’s available to us, because these are matters which ought not - ought not at all - to be held in secret”.
