State takes legal action against Malcolm Jones and other former Petrotrin directors

The State is suing former Petrotrin Chairman Malcolm Jones and members of the board he chaired.

Lawyers acting on behalf of the Ministry of the Attorney General wrote to Jones  Monday asking for payment of damages of $1.2 billion (US$190 million) in relation to cost overruns on the company's Gas-To-Liquids (GTL) project.

The pre-action protocol letter sent by attorney Gerald Ramdeen is seeking  settlement of the issue within 28 days. 

The State has threatened to file an action alleging breach of duty of care in relation to the GTL project, which had an original budget of TT $857 million in September 2006. That later rose to TT $1.5 billion.

Ramdeen said between 2006 and 2009 members of the former board made decisions to go ahead with the project and authorised 33 payments in relation to a guarantee taken out for it. 

He is charging that the board did not conduct the necessary checks to ascertain whether the company could have supported the payments and whether the contractor could have finished on time. 

“What is clear is that prior to the approval of the guarantee by the Petrotrin Board, there was sufficient evidence warning of the danger of cost escalation,” Ramdeen said.

“This had the implication that the execution of guarantee would have placed a significant proportion of the Petrotrin’s assets at risk, not only in respect of what Petrotrin would have to pay in respect of its own liability representing its shareholding, but also in respect of WGTL Inc., who could not meet their own liability.

“In exercising your powers and discharging your duties, you and your fellow directors owed Petrotrin a duty to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances,” the attorney argued.

“At each stage when the Board approved a further disbursement pursuant to the guarantee it was under a similar duty. It appears that you and your fellow directors chose to ignore their obligations to our clients and proceeded to approve, enter into the guarantee and fund the GTL project in a manner which fell short of the duty owed to it.”

Ramdeen continued, “The Board should not have approved the entering into of the guarantee. It could and should have refused to provide funds at each stage when further disbursements were sought pursuant to the guarantee, and so halted the GTL project in light of the fact that, first, it knew that WGTL Inc could not comply with its obligations pursuant to the guarantee and, second, the completion costs had escalated at each stage of disbursement to the extent that the Board had no reasonable assurance as to the extent of the potential disbursements pursuant to the guarantee.

“As a result, our clients have suffered damage and are entitled to the other relief referred to above. It is our primary contention that the guarantee should never have been entered into. The total level of quantum claimed in the action against all potential directors will not exceed US$190,407,829.00 (which we calculate has been paid under the guarantee) plus interest. However, we will not seek to claim from you any part of the disbursements that took place when you were not a member of the board of directors.”

Ramdeen's letter noted that on March 23, 2006, company official Kevin Singh warned that there was a clear likelihood that the cost of US$135 million would escalate and asked what measures would be put in place to prevent escalation.

In September 2006, the board secured a credit guarantee from Credit Suisse to cover any construction cost overruns of the GTL project, over and above project financing that was to be provided by Credit Suisse.