DB&G, Gov't deal was guided by procurement guidelines, says Bunting

Published: Wednesday May 14, 2008

Peter Bunting yesterday dismissed claims, made by Finance Minister Audley Shaw, of "sweetheart deals" that benefited Dehring Bunting & Golding Ltd (DB&G), a financial institution once owned by the Opposition member of parliament.

In his explanation, pursuant to Standing Order number 18, Bunting sought to "show that (Shaw) misled this Honourable House and also breached Standing Order 35 (5) which states "No member shall impute improper motives to any other member of either chamber."

"I am requesting that the minister withdraw these statements and if he complies then it will be unnecessary to seek further sanctions."

The two deals referred to by Shaw in his closing budget presentation involved the sale by the government of cash flows owing by the Jamaica Redevelopment Foundation and the sale of future receivables from the sale of National Commercial Bank (NCB) to Michael Lee Chin's AIC.

Bunting contends that the former never took place."DB&G did communicate with the Government about the potential benefits of a transaction arising from the Government's ongoing dealings with the Jamaica Redevelopment Foundation. However, those discussions did not lead to any form of transaction," he said.

The second "deal", Bunting said, arose from his company approaching the government with an offer to purchase the receivables for its present value, which, according to him, assisted the government in meeting its 2003/2004 fiscal targets while the transaction fell under the ambits of the Government of Jamaica Handbook of Public Sector Procurement Procedures (May, 2001) of the National Contracts Commission.In particular, the Procedures provide that Sole Source or Direct Contracting may be justified in circumstances such as when the procuring entity receives an unsolicited proposal it considers meritorious; when there is an unusual and compelling urgency; or where it is otherwise in the public interest.

"It was a matter of public record that part of the price at which the Government had sold the National Commercial Bank (NCB) to AIC some time before, included a portion that would be paid over time with interest," said Bunting's statement. "As the 2003/4 fiscal year was drawing to a close, it was also well known in financial circles that the Government was facing a significant challenge in meeting its fiscal target. Failure to meet the target would have been damaging to the Jamaican economy, as it would result in expectations of higher public sector borrowings and higher interest rates in the coming year."

Bunting said his firm had conceptualised the transaction in which the Government would sell the future payments from AIC to yield their present value, applying current interest rates to determine the price of the sale of those cash flows.

By his reasoning, the government would have acted unethically if it had tendered out DB&G's idea to the public and the resultant benefit to the overall economy would have been "thwarted if the transaction did not proceed with urgency".

"It was a clear case in which the Sole Source or Direct Contracting approach was justified in the public interest," he said.

The AIC receivables transaction carried a return of 1.5-2.0 percentage points above six-month treasury bill rate and gave DB&G a one per cent fee for conceptualising and carrying out the entire transaction.

Bunting insisted in his statement yesterday that it would have been unfair to compare the negotiated fee to those Government pays for routine offerings of debt that do not involve any financial engineering or any continuing administrative role, as DB&G had a continuing obligation as registrar and paying agent for the transaction.


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20080513T220000-0500_135579_OBS_DB_G__GOV_T_DEAL_WAS_GUIDED_BY_PROCUREMENT_GUIDELINES__SAYS_BUNTING.asp