The Auditor General has uncovered a troubling series of transactions in which eight State-owned Enterprises (SOEs) engaged the services of 34 attorneys or law firms and paid them close to $11 million in taxpayers’ money under questionable circumstances.
In his annual report for the financial year ending March 31, 2019 which was laid in Parliament on Tuesday, Leigh Trotman exposed a situation where $10.9 million was paid for legal fees by the SOEs over an 11-year period.
Trotman said these SOEs were short-listed from 37 which responded to his request for information on their selection process and the legal fees paid out to external attorneys between April 1, 2007 and August 31, 2018.
The Auditor General said the eight enterprises were chosen for further review because of the value of the fees they had paid to the lawyers.
He said the main objective of the audit was to determine whether the SOEs had implemented systems to facilitate the procuring of legal services from attorneys or firms in a cost-effective manner.
However, the Auditor General concluded that there were significant deficiencies observed with regards to the selection methods employed for the engagement of attorneys, the establishment of terms/conditions for hiring them and in the verification of fees.
“In the majority of cases examined, the agencies did not provide evidence for the basis of the selection of the attorneys. In addition, no clear and defined policies were in place to guide the engagement process. In this regard, there was a lack of transparency with regard to the engagement and selection processes,” he found.
Trotman named the eight SOEs which were selected for further scrutiny as the Financial Services Commission (FSC); the Sanitation Service Authority (SSA); the Fair Trading Commission (FTC); Needham’s Point Holdings Ltd (NPHL); the Barbados Tourism Investment Incorporated (BTII); the Barbados Investment and Development Corporation (BIDC); the National Petroleum Corporation (NPC) and the Barbados Agricultural Development and Marketing Corporation (BADMC).
A startling discovery by the Auditor General involved the SSA where Trotman revealed that some $1.5 million was not recovered from a “non-transparent” transaction and recommended someone be held accountable.
“The authority paid $1.5 million to an attorney relating to a claim for $5.8 million for work purportedly conducted during the negotiation process for a Waste-to-Energy Project. A part-payment of $700,000 was made to the attorney on a directive from the Ministry of Finance. Another payment of $800,000 was made directly from the grant approved by Parliament for the authority by the then Ministry of Environment and Drainage,” the Auditor General reported.
He said management of the SSA indicated they were unaware of this latter payment and that there were no contractual arrangements between the attorney and the authority.
“It was unclear what specific services were provided by the attorney to the SSA and what was the exact involvement of the authority in this project,” the report stated.
The Auditor General also found that according to a letter dated 19 June, 2014 from the Ministry of Finance to the Ministry of the Environment, the sums paid to the attorney were to be reimbursed to the SSA or the Ministry of the Environment by the contracting firm under the agreement for the project.
“This was an unusual arrangement in that the authority was making payments on behalf of the contracting firm and then seeking reimbursement from this firm. It should be noted that the amount of $1.5 million was not recovered. This payment process lacked transparency and those responsible for it should be held to account for any resulting loss to Government,” Trotman recommended.
Another troubling find by the Auditor General involved the BTII in the hiring of an attorney who worked for that agency between 2008 and 2018, and was paid $3.974 million during that period.
He said the attorney, who was employed by the Board in 2008 and by the Cabinet for 2009 to 2018, provided such services as reviewing and advising on agreements or contracts, purchasing or selling of land/property and matters which were before the law courts.
“The attorney was paid after the submission of an invoice for work completed. However, BTII provided no documented evidence that fees/rates were discussed or negotiated before the services of the attorney were engaged,” he revealed.
Trotman reported that no information was provided by the BTII to allow the auditors to verify the management’s position that after the work was completed by the legal counsel, the fees were assessed using the Legal Profession Rules with negotiations entered into where amounts were considered excessive.
He said that on examining a sample of eight invoices, two instances were found where the fees were according to the Legal Profession Rules. These, the Government auditor pointed out, related to the sale or purchase of land/property.
“In the other instances, a determination could not be made as to whether the fees were based on the Legal Profession Rules as the services on the invoice were not defined therein,” he stated.