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| File: Landing slot at Heathrow Airport |
That's the conclusion of a forensic management audit on the sale of slots at Heathrow Airport in London by BWIA in 2007. The state airline, which ewas subsequently closed and reopened as Caribbean Airlines (CAL), sold the slots for £5 million to British Airways in 2007.
An audit committee established by the People's Partnership government found that the fair market value of the slots at the time of the sale ranged from £23 million to £44 million, according to a report in the Express newspaper.
In March 2011, Prime Minister Persad-Bissessar asked Attorney General Anand Ramlogan to investigate the Heathrow sale to determine if there were any breaches in the process.
Jwala Rambarran, who is now Central Bank Governor, chaired the Cabinet-appointed committee that prepared the report that blamed the former government personnel who were involved in the sale.
They included 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 Express said the committee's report has recommended that these people appear before Parliament to explain and account for for actions in selling the slots at what amounted to less than a "firesale" price.
The Express said the committee found BWIA sold the slots at less than five times the fair market value of the Heathrow slots.
The Express said the committee's report has recommended that these people appear before Parliament to explain and account for for actions in selling the slots at what amounted to less than a "firesale" price.
The Express said the committee found BWIA sold the slots at less than five times the fair market value of the Heathrow slots.
The paper quoted from the report:
"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...
"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 also stated that the BWIA chairman was reporting directly to Saith on the matter of the sale of the slots instead of the minister of Finance as corporation sole or even to the line minister of works and transportation.
It noted that Lok Jack was in possible breach 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's conclusion was that BWIA's 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.
It noted that London Heathrow had the most valuable landing slots in the world.
The report noted that the former BWIA board relied heavily on the advice of its international aviation lawyers, Clyde and Co. However it said, "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."
It added, "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."
According to the Express the committee also constructed an economic model to estimate the impact of the sale on the wider Trinidad and Tobago economy. This is what it found:
"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 also stated that the BWIA chairman was reporting directly to Saith on the matter of the sale of the slots instead of the minister of Finance as corporation sole or even to the line minister of works and transportation.
It noted that Lok Jack was in possible breach 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's conclusion was that BWIA's 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.
It noted that London Heathrow had the most valuable landing slots in the world.
The report noted that the former BWIA board relied heavily on the advice of its international aviation lawyers, Clyde and Co. However it said, "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."
It added, "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."
According to the Express the committee also constructed an economic model to estimate the impact of the sale on the wider Trinidad and Tobago economy. This is what it found:
- 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
- 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
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