IHI Chapter One

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Tuesday, 26 February 2013 02:30

By caribarena news

Antigua St. John's - In late 2004, the Government of Antigua and Barbuda (GOAB) sent a request for assistance to the United States of America under the treaty on mutual legal assistance in criminal matters signed on October 31st, 1996.

The GOAB was conducting an investigation into the Ishikawajima-Harima Heavy Industries (IHI) matter, and had already uncovered many details. It requested from the US government information with regard to the specific activities of Florida-based bank accounts.

This initial move was followed up with more requests between 2004 and 2008.

The documents sent from Antigua’s attorney general to the US attorney general, and later filed in the Southern District Court of Florida, included a detailed investigation, the first part of which is printed below.
 
GOAB and IHI entered into a contract on March 1, 1985 related to the construction of the Crabbs Desalination and Power Plant (Crabbs) at a price of US$33 million, with 85% - or US$29,750,000, to be financed by IHI and repaid over a period of 10 years.

On April 7,1986, VC Bird, as prime minister, signed a GOAB Letter of Guarantee to IHI to secure their loan to the Antigua Public Utilities Authority as owner of Crabbs to finance the building of the Crabbs Desalination and Power Plant in Antigua. The original IHI loan principal was US$29,750,000 with interest at 8% for 10 years that was pre-calculated to be US$12,495,000 for a total repayment amount of US$42,245,000 at maturity, to be paid by 20 semi-annual payments in the months of May and November for the 10 years ending November 1997.

Within the GOAB, the Crabbs is owned by the state agency known as the Antigua Public Utilities Authority (APUA) and as a result of the IHI debt was recorded as an obligation of the APUA and was subject to annual audit by the firm of Pannell Kerr Forster located in Antigua.

On July 17, 1997 K Iijima of IHI wrote to Lester Bird, as prime minister, to advise that a total debt of US$40,236,875 was due for the period of May 1988 to May 1997, and to request that GOAB confirm this debt amount if settlement was not possible. Over the 10 years, minimal repayment had been made by GOAB.

On September 11, 1997, an agreement was made between GOAB and the IHI Debt Settlement Company, signed by Lester Bird, prime minister, and John St Luce, minister of Finance for GOAB and Bruce Rappaport for IHI Debt Settlement Company, whereby the IHI Debt Settlement Company assumed the IHI debt in the amount of US$133,169,013 (calculated to be paid over 25 years) on behalf of the GOAB.

On September 18, 1997, Keith Hurst, as the financial secretary, issued a memo to Minister St Luce to advise that after his review of the agreement proposed by Bruce Rappaport, the total debt to IHI was US$91,276,515.57 (to be paid over 25 years) and “Under the circumstances therefore we cannot recommend signing of the Agreement as the difference is too great”. Hurst has advised that there was no response to him from Minister St Luce.

This investigation is focused on the “difference” and a determination of the ultimate beneficiary of the funds paid to Bruce Rappaport via the IHI Debt Settlement Company.

Summary of Investigation to Date

Keith Hurst was the financial secretary in the Ministry of Finance from 1984 to 1999 and an advisor to the minister thereafter. The position of financial secretary is the highest civil service position in the ministry. During the relevant times, John St Luce was the minister of Finance to whom Hurst reported. We have interviewed Hurst and his input is recorded herein.

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Hurst said that the GOAB could hardly cover its domestic debt and had no ability to repay any of the foreign debt as, “we did not have the money”. Most of these loans were export credits. “I was against the idea of renegotiation, as no matter how low the monthly payment was, we still could not pay,” he said. “The only source of money for external debt was the consumption tax, and that was under the control of Rappaport through West Indies Oil Company (WIOC). Rappaport felt secure in negotiation for GOAB because he had no risk. He held the purse as WIOC would collect the consumption tax from the dealers and pay themselves. Everyone else would be running a risk in doing business with us.”

Bruce Rappaport, in the early 1980’s, acquired the WIOC from the GOAB to become the exclusive importer of fuel products to Antigua, a position he continues to hold today. More specifically, the purchase agreement was made between the GOAB (Lester Bird, Deputy Premier and Minister of Economic Development and Tourism) and the National Petroleum Limited incorporated in Bermuda (Bruce Rappaport). Hence, the consumption tax is paid by the consumers who purchase his products, and it becomes the source of revenue to GOAB that is paid by GOAB to Rappaport to fund the loan repayments that Rappaport negotiates on behalf of GOAB. That explains the Hurst comment “he had no risk”.

On April 10, 1990 S Sakamoto from Ishikawajima-Harima Heavy Industries Co, Ltd (IHI) wrote to Keith Hurst, as financial secretary in the Ministry of Finance regarding their loan for the Crabbs Power and Desalination Plant to advise that principal and interest of US$10,784,375 had been due on April 6, 1990. Sakamoto noted that to date, the GOAB had repaid only US$2,008,125 and that the outstanding amount excluded the interest due on the delayed principal and interest payments.

To be continued

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