Monday, 04 March 2013 02:30
By caribarena news
Antigua St. John's - Following last week's "IHI Chapter Two", Caribarena is continuing with the series of articles on the IHI investigation with IHI Chapter Three.
This “freeze” issue was the subject of a May 9, 1990 letter from Keith Hurst, the financial secretary, to the minister of Finance, addressed to D Woodroffe, the general manager at APUA that states:
• "These negotiations were said to be completed and the agreement reached is as follows:- ... IHI is said to agree to forego any additional interest also and await the paying off of Foster Wheeler ...
They (IHI) claimed their balance to be ... $42,245,000. We have queried their balance which was originally shown as $49,000,000 and they submitted detail analysis as attached. We are still not happy about it as interest is calculated on the Principal from November 1987 to May 1997 ...
Hence, interest does not cease as of now but from May 1997 ... We are of the opinion that if the proposal is as advised that interest should have ceased from April 1990 (italics for emphasis) ...
We have asked the Honourable Lester Bird to inform Mr Rappaport that we would expect to receive agreements as to the terms and conditions of the rescheduling from IHI".
The question of a “freeze” agreement seems answered as the growth in debt was confirmed by Lester Bird when he reaffirmed Bruce Rappaport's authority on November 19, 1996:
• GOAB represented by Prime Minister Lester Bird and Minister of Finance John St Luce, issued an Addendum to the March 16, 1990 Power of Attorney, reaffirming Bruce Rappaport's authority. The Addendum mentioned that considering that "six years have passed" and "that the indebtedness to IHI will have increased the debt materially", GOAB wanted to extend the term of repayment to IHI Japan from 15 years to 20 years without interest.
Finally, the September 14, 1997 "Debt Settlement Agreement" between GOAB and IHI Japan states in paragraph 7 that the "Consolidated Debt" is the sum of the principal, interest, and deferred interest being US$56,763,756.79 as at August 31,1997. There is no “freeze interest” as of April 1990 in this calculation of debt.
Before continuing, it is important to distinguish the difference between Ishikawajima-Harima Heavy Industries Co, Ltd (IHI Japan) and IHI Debt Settlement Co (IHI Bermuda). The former is the creditor, while the latter is a company formed by Bruce Rappaport in Hong Kong with its bank account located in Hamilton, Bermuda at the Bank of Bermuda and later at Bank NT Butterfield.
FIRST the IHI BERMUDA AGREEMENT, then the IHI JAPAN AGREEMENT on SEPTEMBER 11 and 14, 1997 respectively.
On September 11, 1997, GOAB, represented by Lester Bird, as Prime Minister, and John St Luce as Minister of Finance, signed an agreement with IHI Bermuda, represented by Bruce Rappaport stating:
• That the current outstanding debt of US$56,763,756.79 without interest, if paid over 25 years at the current 8% interest, "would require US$443,897 monthly for 25 years for a full settlement of US$133,169,013";
• That this debt of US$133,169,013 was "assigned to IHI Debt Settlement Co., which shall have the responsibility to settle the debt with IHI by monthly payments over a period of 25 years beginning 31 December 1996";
• (HERE IS THE RAPPAPORT ALLEGED MISREPRESENTATION)
(italics for emphasis) " Whereas Mr Rappaport has negotiated terms with both IHI and MITI for the settlement of the IHI debt over 25 years on the basis of monthly payments of US$403,334 and has established an arrangement with IHI Debt Settlement Co. as a mechanism for making all payments".
This agreement dated September 11, 1997 was located within the records of the GOAB. However, the following agreement dated September 14, 1997 was not obtained by the new GOAB until June 2006, when IHI Japan forwarded the agreement in their attempt to seek further repayment of their loan. The current GOAB had stopped payment in January 2006 with the discovery of this alleged fraud.
To confirm the Rappaport alleged misrepresentation, we have a "Debt Settlement Agreement" dated September 14, 1997 and signed between GOAB, represented by Bruce Rappaport as ambassador and special envoy, and Ronald Sanders as high commissioner to London, first special advisor to the prime minister and IHI Japan represented by Y Asakino and Y Sugimoto.
In this agreement, the "Consolidated Debt" being the sum of the principal, contractual interest and deferred interest is US$56,763,756.79 and upon execution:
• GOAB is to repay the debt through monthly installments of US$199,740.25 for a fixed period of 25 years starting September 1997 and ending August 2022 to IHI Japan from the "IHI Settlement Account" opened at the Bank of Bermuda, Hamilton, Bermuda.
In other words, "Mr Rappaport" had not "negotiated terms with both IHI and MITI for the settlement of the IHI debt over 25 years on the basis of monthly payments of US$403,334" but instead it was "through monthly installments of US$199,740.25 ". It should also be noted that Keith Hurst, financial secretary in the Ministry of Finance, issued a memo dated September 18, 1997 to John St Luce, the minister of Finance, criticizing a September 10, 1997, draft of the Agreement. He stated that the GOAB was not responsible for any 8% penalty and further stated that the total payment should be US$91,276,515.57 and not US$133,169,013 and the repayment should be US$302,276.22 and not US$403,334.00. He concludes:
• "therefore we cannot recommend signing of the Agreement as the difference is too great"
John St Luce, the minister of Finance, ignored this recommendation. In a signed statement St Luce now states:
"I cannot say that I read the Agreement very closely and was not aware of all the details. I was asked to sign by the Prime Minister, he was a lawyer and I accepted that the document was properly prepared. I was aware that the debt involved the Desalination plant and so when the Prime Minister asked me to sign I did not question it and I did what he asked. As I said I did not read the document thoroughly and I did not ask or question why we were making an Agreement with IHI Debt Settlement Co. on behalf of IHI in Japan.
The agreement sets out a period of repayment of the debt to IHI over a period of 25 years at a monthly rate of $403,334.00. I accepted and believe that this amount was sent to IHI Japan on a monthly basis to pay the IHI Desalination debt. I was not aware of any part of the monies going for any other purpose. I presumed that Mr. Rappaport was reimbursed in some way by Foreign Affairs for his work. I did not request any person in the Ministry to verify the amounts although I believe Mr. Hurst may have raised the issue of interest sometime later.”
This investigation is focused on the use of the "excess" between the US$403,334.00 and US$199,740.25, some US$203,000 per month, with the identification of the ultimate beneficiary of the US$14 million "excess" that was paid to Bruce Rappaport/IHI Bermuda/DSA Miami by GOAB from December 1996 to January 2006 when the current GOAB stopped the monthly payments.
Excess Payment Is Justified As a Fee for Bruce Rappaport in September 11, 1997 Agreement
In the September 11, 1997 agreement between Lester Bird and Bruce Rappaport, Bruce Rappaport's fee for negotiating with IHI Japan was changed such that the new definition of “Minimum Term ... in Schedule 1” set out in the original Power of Attorney now was modified to allow Rappaport to retain as a fee all funds less than US$133,169,013 that were not paid to IHI Japan:
• "since that time. the debt to IHI Japan has increased to the gross sum of US$56,763,756 without the inclusion of interest and penalties, which over 25 years amounts to US$133,169,013 and becomes the Minimum Term - IHI Debt as defined in Schedule I of the Power of Attorney"
• "Mr. Rappaport's fee, as set out in the Power of Attorney dated 16 March 1990, shall be 'any savings to the Government resulting from [an] ... IHI Settlement or terms more favourable than specified on attached Schedule I and shall be recovered monthly from the sum of US$403,334 which shall be payable monthly to IHI Debt Settlement Co".
Thus, based upon the actual amount to be paid by GOAB, the sum of US$121,000,200, would become the 'Minimum Term ... in Schedule 1' and the Rappaport fee would become the difference between the amount of US$121,000,200 that GOAB is to pay IHI Bermuda and the amount of US$59,922,075 that IHI Bermuda is to pay IHI Japan. Hence, the increase in fees to Rappaport with the new definition of 'minimum Term' is US$61,078,125, payable over 25 years.
To be continued...See related stories:
IHI Chapter 2
IHI Part One
Is The UPP Stalling IHI?
CID Boss Says IHI Investigation Going Good
Browne Addresses Corruption Questions
US IHI Probe Documents Unsealed
Police Search for Sanders Seemingly on Ice
IHI Special Constable Appointed
Police Issue Appeal to Sir Ron Sanders
IHI Files Stolen
Bird Defamation Suit Wrapping Up
Browne Has No Comment on IHI
PM Promises Progress in IHI Probe
Lindquist Report and Police Corruption
DPP Waiting On The Police
Lindquist Report Buried in Mystery
Rappaport Case Ends With US$12 M Payout