NIB report revealed
Guardian News Editor
Published: May 06, 2013
Accountants looking into the affairs at the National Insurance Board (NIB) have found that bonuses appear to have been improperly paid to Director Algernon Cargill and other executives, and have also highlighted reported irregularities in the award of certain NIB contracts for various projects.
The report also said that auditors found that Cargill is listed as an officer of the company owned by his brother that rented an apartment to NIB.
As it relates specifically to the issue of bonuses, Grant Thornton, the firm that conducted the review, found no evidence to show that ministerial approval was secured for bonuses received by Cargill.
A legal opinion from Thomas Evans, QC, which was sought by the chartered accountants, determined that the NIB Act requires that overbased increases in salary and bonuses for the director and other members of the executive management require the approval of the minis
Former Prime Minister Hubert Ingraham was the minister responsible for NIB at the time the bonuses in question were paid out.
“The salary and bonus payments made to Mr. Cargill, director of NIB in excess of his contract, if made without the approval of the minister first being obtained is ultra vires the corporation and therefore void,” said the forensic report.
The report also found that if bonuses and salaries paid to executive management personnel were made without the knowledge of the Board of Directors or the members of the Human Resources sub-committee and without the approval of the minister, they are void.
These are among the key findings contained in the long-awaited NIB report that is expected to be tabled in the House of Assembly soon.
Eight NIB executives and one person on contract collectively received bonuses of $723,333 between January 2010 and May 2012, with Cargill taking home $194,791.66 in bonuses during that period, according to information on NIB’s files.
The Nassau Guardian will this week lay out some of the findings of the nearly 300-page document that provides substantial details on the probe.
The report is so detailed that it would be impossible to reveal all the findings in one article.
A separate report lays out the findings of allegations made by Cargill against Gregory Moss, who was fired as chairman in January.
In a 22-page letter written to Minister of Labour and National Insurance Shane Gibson last November, Moss accused Cargill of being in a conflict of interest as it relates to NIB’s rental of an apartment at Sandyport.
It was just one of the reasons Moss listed for the NIB Board recommending Cargill’s termination.
Cargill was suspended pending the outcome of the forensic review and has been on suspension for more than five months now.
“The auditors found that based on a review of the Registrar General’s files, that Cargill is listed as an officer of the Jes-El Car Company Limited (vice president and director),” said the Grant Thornton report.
“This company is owned and operated by Godwin Cargill (Algernon Cargill’s brother) and is the company that rented the apartment at Sandyport to NIB.”
The report continued, “The latest annual return filed by Jes-El Car Company Limited at the Registrar General’s Department is dated June 2004.
“In response to this in his affidavit filed in the Supreme Court of the Commonwealth of The Bahamas, Mr. Cargill also did not disclose the fact that he was an officer of the Jes-El Car Company Limited.
“NIB’s audited financial statements for the three years ended December 31, 2010 through December 31, 2012 did not have the related party disclosure notes as required by International Accounting Standard 24, particularly considering that NIB’s annual audited financial statements are tabled in Parliament.”
Minutes of the board of directors meeting held on October 28, 2010 “indicate that NIB commenced an action against Mr. Godwin A. Cargill in respect of delinquent NIB contributions”, the report also said.
In his affidavit filed last November in support of court action against Moss and NIB, Cargill said NIB executive Raymond Wells “on behalf of NIB, and without my knowledge or any prior discussion, executed the lease agreement on February 25, 2012 with an effective commencement date of March 1, 2012.
“When the lease agreement was presented to me…for my authorization of payment of the first month and last month’s rent and security deposit, pursuant to the lease agreement, I immediately recognized that the lease agreement was with a related party, my brother, Mr. Godwin Cargill, the beneficial owner of Jes-El Car Ltd.
“I immediately contacted the chairman (Patrick Ward), in the presence of Mr. Raymond Wells and we explained on speakerphone the circumstances to the chairman.”
Cargill said that after he was fully appraised, Ward ratified the decision to rent the Sandyport apartment, on the basis that, the decision to rent the apartment, in spite of it being a related party transaction, was a good business decision for NIB.
In his November letter to Minister Gibson, Moss also raised the issue of the award of contracts to Kenuth’s Electrical.
He concluded in that letter that, “The only NIB related explanation as to why Kenuth’s Electrical was so favored by NIB would appear to be the friendship between Director Cargill and Kenuth Knowles.”
The NIB report completed by Grant Thornton said that Kenuth’s Electrical was NIB’s preferred sole contractor that was engaged for most of the electrical repairs and maintenance for all NIB buildings in Nassau during the years 2008 to 2012.
“There was a lack of tendering on a number of projects/contracts including the project performed by Kenuth’s Electric at the Ministry of Tourism where it would have been prudent to control costs and enhance accountability by sending the project to tender,” the report said.
It also said, “There is confirmation from NIB that labor rates were not agreed, which should have been considered especially since Kenuth was viewed as the preferred electrical contractor. It does not appear that labor rates on invoices were checked consistently and queried by NIB’s project manager.”
In his affidavit previously reported on extensively by The Nassau Guardian, Cargill said, “The various contracts approved by the Board of Directors of NIB, in which Kenuth’s Electric was awarded subcontracts, would have been independent decisions of the contractors.
“I would not have been involved in the decision-making.”
Grant Thornton also said a contract for a Family Island clinic was awarded to a contractor who is allegedly Cargill’s first cousin.
The contractor is identified as one of the NIB members to be sued for failure to pay National Insurance contributions.
Regarding the allegation that another substantial NIB contract for a construction project was unfairly awarded, Grant Thornton said the chairman of the Tender Committee John Pinder indicated that he was not aware of the fact that the owner of the company in question was Cargill’s relative.
“Grant Thornton found that Mr. Algernon Cargill exercised significant control and influence over the operations of NIB,” the report said.
It noted that the director has indicated that the owner of the company in question is a relative of his.
But Grant Thornton said it found it interesting that this company was about to win a contract with NIB for $8,653,660.25, “but disclosure of Cargill’s relationship to them was limited”.
Based on information provided to Grant Thornton by NIB, the company’s National Insurance contributions may not have been current when it was awarded an $8,653,660.25 construction contract in 2009.
NIB’s records indicate that the company made contributions to NIB totaling $2,362.98 in 2009.
The company generally hired immigrants, according to the NIB report.
Grant Thornton said it found it interesting that even though they were made aware of the relationship of the director and the complaint by members of the Tender Committee, members of the NIB Board went ahead without discussion of the implications of these issues and approved the contract.
* For a full report on bonuses, salary increases and Cargill’s NIB credit card see today’s National Review section.