RULE OF LAW OR RULE OF ASHCROFT
It started in 1987. Telecommunications was then in the hands of the Belize Telecommunications Authority (BTA), a statutory body entirely owned by Government. The 1987 Telecommunications Act (No. 16 of 1987) not only introduced a virtually revolutionary change in the telecommunications industry, it was potentially the dawning of a new public capital market in Belize . The assets and operations of BTA were vested in a new company formed under the Companies Act but specially organized and designed to enable Belizeans (from employees, public officers, teachers, to professionals, small business men, and business companies ) and also major companies and even international concerns, to invest in a well managed and very profitable business with a
very promising future. Cardinal amongst the Articles of the new company (Belize Telecommunications Limited) were: (i) the creation of a Special Share to be owned and held by the Government of Belize or an agent of the Government of Belize (ii) the holder of the Special Share had a right to appoint up to two directors to the Board
(iii)
there was a limitation on any single person, company or business group owning more than 25% of the outstanding shareholding in BTL (whether directly or indirectly) and indeed it was the obligation of the Board of Directors to investigate and reverse the acquisition of more than 25% of the shares by any person or company. Thus the clear intent of the Articles was that (a) Government was at all times to have continuing knowledge of and maintain an effective interest and a limited degree of control over the company, its direction, plans and development (b) it should provide a vehicle through which Belizeans of all walks of life could make an investment and obtain handsome long term returns even for the purposes of retirement (c)
the Company could not and would not be allowed to be acquired by any business concern since this would simply reduce the Company to a profit making machine with purely private and commercial objectives and it would undermine the very pillars upon which the revolutionary change was conceived.The concept and design upon which BTL was founded proved to be well founded. The Company operated quietly and efficiently; it was immensely profitable with outstanding returns to the shareholders (mostly Belizeans) who invested.
However the best laid plans and laws can be thwarted by wrong intent and so it was with BTL. On the 29
th of June
1993 then Prime Minister George Price wrote a letter to BTL designating companies owned by or affiliated with Lord Michael Ashcroft
as
“Permitted Persons” under the BTL Articles.
This letter was written by Prime Minister Price the day before the general elections.
A Permitted Person could own more than 25% and thus
the clear intent of the Price Government was to open the door so that the Ashcroft Group could acquire, own and control BTL.. As a nation and as a people we will
never know what has happened behind closed doors between
Lord Michael Ashcroft and the PUP. Only Honourable George Price, Said Musa and some senior Ministers of the successive PUP Governments could tell us and they never will. We can only speculate – but there is ground for reliable speculation.
In the wee hours of a dark night in May 1990 the International Business Companies Act was passed. The concept of the “IBC” created by this Act was neither alien nor inherently offensive. This kind of regime was frequently set up to provide a facility for offshore companies to use jurisdictions for tax shelter and asset protection. The jurisdiction (or agents within the jurisdiction) would then enjoy some benefits through annual fees. It was the “PIC” section of the law that was strange and pernicious. In effect, a company that qualified to be a Public Investment Company and was registered as such would enjoy
unprecedented and wide tax exemptions and privileges in Belize
whilst being able to do business in Belize. The Act stated that the PIC would be “
exempted from all forms of taxes and duties whether computed on revenue, profits or income of any kind or by reference to any capital asset … for a period of thirty years …” The exemption covered present and future taxes. The tax exemption period could be extended by “the Minister”. And then, who qualified to be a PIC ? The Act set out a number of qualifications relating to such things as (a) a specific minimum level of net tangible assets (b) a specific minimum level of gross tangible assets (c) a specific minimum time of operation of business in Belize (d) a specific minimum level of net income (e) a specific minimum level of average net income for the past two years. After the Act passed, it turned out that one company was immediately qualified to be a PIC and recipient of all those tax benefits – Lord Michael Ashcroft’s company (I believe at the time it was named “Belize Holdings Ltd.”). This tax exemption law was as specific as if legislating that:
“any man who is 6 feet 2.2 inches tall, with red complexion, brown hair, 6 toes on his right foot and has a mole 1.7 centimetres east of his left nostril shall be qualified to be registered as a permanent tax exempt person”
The prescribed requirements and the immediate qualification status of Ashcroft’s holding company was not a mere coincidence. In fact Ashcroft’s attorneys had drafted the tax exemption law. In effect Lord Ashcroft had had his own attorneys write his own tax exemption law which the PUP national assembly passed for him. No less a person than then Attorney General Glenn Godfrey confirms that this is what took place (an occurrence which Mr. Godfrey himself regrets). It is the greatest fiscal injustice ever done to this Country. It is not only that the PIC itself enjoyed exemptions, but under the Act, the subsidiary companies in the PIC also enjoyed preferential tax rates. These subsidiaries included the Belize Bank. No doubt the other established Banks in Belize remember only too well the unfair playing field created in the banking industry. The PUP Government therefore had bestowed upon Lord Michael Aschcroft through the Belize National Assembly a monumental, multi- multi million dollar gift that would serve Lord Ashcrofts companies for at least a generation (and the gift was renewable). But even though the IBC concept was in itself not repulsive, the Ashcroft Group benefited handsomely from the establishment of the IBC Registry. The Government and the Ashcroft Group had signed an agreement by which the Ashcroft Group set up, managed and operated the IBC Registry thereby dominating in fee collections for IBC companies. This fiscal crime done to Belize and its people was at the time roundly condemned by the UDP in the press, on the rostrum and by independent citizens in the community. But we do not know if anyone could have foreseen the havoc that was to flow from this prostitution of the Belize National Assembly to the desires of and commercial plans of one large businessman.
The PUP had won the elections in 1989; the IBC Act was passed in May 1990 and as stated above, Prime Minister George Price had, just before the 1993 elections, signed the Permitted Persons letter intending to pave the way for the Ashcroft Group to acquire BTL. Surely, these events were all connected.
BELIZE ELECTRICITY LIMITED
But that’s not all. Belize Electricity Board (which also had been a statutory board entirely owned by GOB), was privatized in 1992. In January 1993, an “Indenture” was prepared and executed to govern the conditions upon which shares and debentures would be issued. Shares and debentures to bring capital into the company were sold and the Ashcroft Group bought these securities in a substantial amount and had representation on the BEL Board. The Indenture was a difficult instrument for BEL with onerous covenants and default provisions. It was such that once BEL had fallen into default it was virtually impossible for such default to be cured. The Indenture and the holdings of the Ashcroft corporate group placed BEL in a very vulnerable position vis a vis the Ashcroft Group.
In 1993, the UDP won the national elections. A new Board of Directors was appointed for BTL under the Chairmanship of Net Vasquez and the Board (upon learning of the letter from former Prime Minister George Price to designate Lord Ashcroft’s companies as a “Permitted Person”) immediately took steps to ensure that he was not permitted to be a Permitted Person. The Board’s position was that the letter from Honourable George Price was in flagrant violation of the BTL Articles. A Permitted Person had to be either the government itself or an agent who would act at all times for and at the direction of Government. To proceed to designate the Ashcroft Group or companies in the Ashcroft Group as Permitted Persons was nothing less than unlawful. The Aschroft Group stoutly resisted the new Board’s efforts but the Board was resolute and Lord Ashcroft was held at bay. That is, until the after the PUP returned to power in 1998 under a new Prime Minster Said Musa.
Similarly, in 1993, a new Board of Directors was appointed to BEL after the UDP had won the elections. It soon came to the attention of the Government and the Board that just before the election (as was the case with the BTL Permitted Person letter), a secret agreement had been signed (4th June 2003) between the Government of Belize and a mystery company named “Sealey Limited” with address P.O Box 659 Road Town Tortola British Virgin Islands. Under this Agreement Sealey Limited was appointed by the Government of Belize as an agent to sell substantial blocs of shares and debentures at a healthy commission and Sealey had the right to sell the securities if an election was called. It was an unhealthy deal for the Government and people of Belize and if allowed to proceed it would have resulted in a loss of millions of dollars to the government of Belize without receiving any value for the moneys lost. BEL and the Government resisted the efforts of Sealy Limited to act as agent under the Agreement. Sealy was a company in the Ashcroft Group and went to court and obtained an injunction to put pressure on BEL in relation to the shares/debentures which it claimed it had the right to sell. Sealy’s supporting affidavit was signed by Philip Osborne (as evidence of Lord Ashcroft’s connection). BEL resisted Sealy’s application to the Court and was successful in its own application to the Court to have the injunction removed. Furthermore, the Ashcroft Group was constantly challenging the rest of the Board of Directors at BEL in a number of important matters including negotiations being conducted by the Board and management to extricate BEL and the Government from the oppressive and unworkable Hydro Agreements (again secret) which the PUP Government had signed for the development of a dam on the Macal River. Acting obviously from a considered strategy the Ashcroft Group, suddenly, by a letter of 14th January 1997 to Prime Minister Esquivel, advised that they would be calling for immediate payment of their debentures in BEL on the ground of “continuing default” . And that is exactly what they did – they moved to redeem their debentures and so BEL was faced with an immediate liability of some $8 million. Funds which the Ashcroft group knew that BEL did not have. The consequences could have been dire for BEL, including the winding up and sale of the Company or sale of assets of the Company. It would have been possible for the Ashcroft to buy right back into BEL and obtain a stronghold on the Company. But Mr. Vasquez and his Board came up with an emergency plan, raised funds from Social Security Board, and the Ashcroft Group (much to their consternation) was paid off. That signaled the end of the Ashcroft Group’s investment in that Company and the electricity. It was therefore entirely possible that the Ashcroft Group, if they had their way, could have owned the electricity supplier and the telecommunications provider in the Jewel. With its dominant foothold in the banking industry, by which investments could be made into every profitable sector, the Ashcroft Group, if unchecked could have virtually owned the Jewel. RADIO KREM
But that’s not all. In 1994, through another strange company named “Sagis Investments Limited”, the Ashcroft Group through the Belize Bank invested $25000 to buy a 10% stake in Radio Krem. That investment was dormant but apparently not at all forgotten as we witnessed in later years..
1998 Elections
The PUP were voted back into power in 1998. And Lord Ashcroft soon resumed his quest for his most prized desire – BTL. And under the PUP, of course, he acquired it. The 25% limitation which the Government had enshrined in the Articles was blithely ignored. It is the rule of law that company articles are to be respected and adhered to. This is just one illustration of how the rule of law was ignored and violated by the then BTL Board, the PUP government and the Ashcroft Group. But there was soon trouble, since the former Attorney General Glenn Godfrey had his own plans – INTELCO. A battle royal developed between GOB, the Ashcroft Group and Glenn Godfrey with a myriad of law suits (as is the Ashcroft pattern). Ultimately, Aschcroft drew back, like a pre-Tsunami wave going out to sea. In came Prosser as the new investor and he took over BTL (including the “Special Share” - as one would say: lock stock and barrel) in March 2004. The wisdom of the original drafters of the BTL revolutionary change way back in 1987 became now more than apparent – their fear turned out to be brutally prophetic. Prosser’s objective was, of course, private profit. Furthermore, the PUP Government had simply not carried out the due diligence checks that such a move required. Difficulties developed between Prosser and the Government. And (i) Ashcroft had secretly still maintained a strategic toe-hold in the company (ii) he had a lethal buy back clause (written and also secret) in his pocket. The Government and Ashcroft therefore developed the same goal and objective – to get back BTL from Prosser. The Ashcroft Group launched their own salvo by filing a Court claim for an order for the Court to investigate BTL as provided for under the Companies Act. The Court makes such an Order when it apprehends that wrongdoing has been taking place in the company by those in control. The claim is brought by shareholders and (as mentioned) the Ashcroft Group had strategically retained some shares in the company. The Ashcroft Group led a shareholders group which included the PSU and Teachers Unions to ask the Court for an inspection into the affairs of BTL going back to the date when Prosser had taken over the Company. The Ashcroft Group of course had its own agenda (in contrast to the other shareholders). But the opposing attorneys decided (with their clients approval) to inform the Court that if the Court thought that the affairs BTL should be investigated then go ahead, but investigate the Company right back to 2001, being when Ashcroft, through the PUP government, had taken his long desired control of the Company. Chief Justice Conteh, as he considered only fair, made the Order for investigation but to extend right back to April of 2001. The Ashcroft Group was none too pleased. It was the classic case of going to Court and getting more than you had bargained for. By and by, to the obvious surprise of even the Chief Justice, the Ashcroft Group and the Government ignored the findings and order made by the Court. In fact the Government went further, as will be shown below.
But there was another connected event. The Government went to Court to acquire the Special Share from Prosser. But Chief Justice Conteh, after hearing the claim, refused to grant the Government the declaration they sought.
And there was a further court event. In the tug of war over BTL there was an all out legal battle over the composition of the Board of Directors of BTL. Apart from Government’s war with Prosser, it had entered into agreements to sell shares to Ashcroft which would result in Ashcroft effectively re-taking control of BTL. These Agreements were made in 2005 (between March and July). Ashcroft had been quietly buying out small shareholders and by July 2005 had already acquired approximately 25% of the issued shares in BTL. The two parties (Government & Ashcroft: like man and wife) went to Court to for “Declarations” to the effect that the Prosser appointed directors were not in law directors of the company and that the lawful directors were those appointed by (a) the Ashcroft Group (by such companies as Ecom Limited) and (b) GOB. At first instance, before the Chief Justice, Ashcroft and GOB won and the Court granted the declarations. However, on appeal, the decision was reversed and the Court of Appeal, ruled that the Prosser Directors were the lawful directors of BTL. But the Ashcroft Group, and GOB did not proceed as the Court of Appeal had declared. When Prosser’s attorney, Lionel Welch, having obtained the Court Order with the seal on it, tried to have it served at the Biltmore whilst the Ashcroft Group, in de facto control of BTL, was conducting a General meeting of shareholders, notwithstanding the ruling of the Court of Appeal, he was barred from going upstairs to the meeting hall.
Thus, as at August 2005, the Ashcroft Group and GOB were in a quandary in relation to the control of BTL. There were several Court decisions that stood in the way of their common objective – that the Ashcroft Group would take back BTL. Note that there very objective was contrary to the rule of law – in that BTL had been established on the basis that no company or business person can be allowed to own more than a 25% interest in BTL – whether directly or indirectly.
Faced with this dilemma, GOB neutralized the Court decisions by formulating, introducing and passing the Public Utilities Commission (Amendment) Act 2005 No. 30 of 2005 (called the “Amendment Act”). The Act passed in the National Assembly on the 3rd of August 2005 and was assented to on the 9th of August 2005. The Act amended the existing Public Utilities Commission Act by introducing as new provisions Sections 22A and 23A. Section 22A authorized the Minister to declare “entrenched rights in the constitution of a public utility” “ unlawful and of no effect”. This in particular was unheard of – how can a Minister declare anything unlawful: that is a matter for the Courts. But by a Statutory Instrument (No. 109 of 2005) issued on the 26th of August 2005 then Minister Ralph Fonseca declared Jeffrey Prosser’s Special Share to be unlawful and of no effect and also declared that all rights flowing from that share are of no effect. The Minister named the new directors consisting, of course, of Ashcroft and GOB appointees.
The Second Amendment to the PUC Act, the new Section 23A did the following:
(a) It removed the power of the Court contained in the Companies Act to: (i) appoint an inspector to examine the affairs of public utility company in case of suspected wrongdoing and (ii) set the terms of appointment of that inspector. The power was by the Amendment Act, now vested in “the Minister”. To be clear, the power to order an investigation still remained in the Court; but when the Court made the Order to investigate, it would then be the Minister (not the Court) who would decide who would carry out the investigation and on what terms. It was clearly aimed at changing the legal consequences of the Order of Chief Justice to investigate BTL right back to when the Ashcroft Group took over BTL in 2001.
(b) The Amendment introducing Section 23A was quickly followed by a Statutory Instrument (No. 108 of 2005) by which the Minister appointed George Swift to be the Inspector into BTL’s affairs and limited his inspection to the period commencing from 1st April 2004 which was from the time that Prosser took over BTL. The Ministerial Order thus reversed the Order that the Court had made that the inspection should date back to April 2001 (the Ashcroft era before Prosser).
(c) The Order made by the Minister even called for examination of specific items as if to express an indication of what the Inspector should find as wrongdoing
Without faze, the then Prime Minister Said Musa was quite frank about the objective of the legislation. In an interview aired on the Channel 7 News on the 3rd of August 2005 (the day the Act was introduced and passed) the following exchange took place:
Jules Vasquez:
“Will the PUC move decisively to de-authorize the golden share that was, by the pronouncement of the Chief Justice, sold to Jeff Prosser for a $1, a dollar which he has not paid as well ?”
Said Musa
“That is so. He has not paid for it and since we could not, it seems we cannot get it back through the judicial process, then it will require the legislative action that we took today to deal with that”
The PUC Amendment Act which achieved the above was challenged as unconstitutional by Prosser and in a judgement delivered on the 19th of September 2006 Chief Justice Conteh declared the Amendment Act and the Orders issued by the Minister under Act, unconstitutional and unlawful in their entirety.
And how did the PUP Government respond ? Clearly, in cooperation with the Ashcroft Group, it passed the Telecommuncations Undertaking (Belize Telecommunications Limited Operations) Vesting Act (No. 10 of 2007 – passed on the 29th of May 2007). By this Act, the then Government of Belize handed over the assets of BTL “lock, stock and barrel” to Lord Michael Ashcroft and his group. By that Act BTL’s assets were vested in the new company Belize Telemedia Limited. Thus this was to neutralize the effect of the Court judgements which were contrary to the objectives of the Ashcroft Group and the PUP Government. Belize Telemedia changed colours and the logo of BTL.
But it turned out that quite some time before the 2007 Vesting Act that formally gave BTL to Lord Ashcroft, the PUP Government had secretly entered into arrangements with the Ashcroft Group. On the 19th of September 2005, then Prime Minister Said Musa had signed the infamous “Accomodation Agreement” which even with its euphemistic heading spelt dread. And the promises made by Mr. Musa in that Agreement were dreadful indeed. The promises, apart from being made in secret (and secrecy was itself a term of the Agreement) were to have Government do things which were against the Belize Constitution, contrary to the Finance and Audit Act, the Income & Business Tax Act, the Customs and Excise Duties Act, the Telecommunications Act, and the Public Utilities Commission Act. The Agreement was therefore, in many respects, made by the PUP government in violation of the rule of law. But more, the Agreement in effect promised the Ashcroft Group a perpetual and exclusive monopoly on telecommunications. It also provided the Ashcroft Group with a guaranteed rate of return of 15% per annum. And again, all this was done in secret and in betrayal of the public interest. As the present Prime Minister has stated the Agreement is “absolutely immoral”. And it must be immoral not only on the part of the former Prime Minister but also the Ashcroft Group. The harm that this Act could cause on the people and nation of Belize is unimaginable. Telecommunications is a foundation of national development. And to complete (again in secret) the benefits of the Agreement were transferred to the new Belize Telemedia Limited in January 2008, just before the national elections.
And there is more. In 2007 the Ashcroft appointed Board of BTL caused the Company to borrow $45 million from British Caribbean Bank (Ashcroft Bank). At least the bulk of these funds were used for the purchase of shares from RBTT Merchant Bank which that Bank held as security for shares owned by Jeff Prosser. The shares were placed in the name of a subsidiary of BTL, namely BTL Investments Limited. And then in August 2007 BTL declared a dividend by way of distribution of shares. The same shares were thus distributed and the Ashcroft Group acquired shares from that distribution. That transaction was in itself unlawful because in law a company’s funds should not be used to buy shares in the company itself. And then later, the Ashcroft Group claims compensation for these same shares which they acquired with Belize Telemedia’s moneys, other words, compensation for assets they did not pay for. In addition, the Company was placed in the precarious position of owing a huge debt to Lord Ashcroft’s Bank which undoubtedly gave the Ashcroft Group the power to foreclose on Belize Telemedia and/or wind up the Company.
But again there is more. Belize Telemedia Ltd. under Lord Ashcroft’s control systematically weakened the Company’s position through its agreements and arrangements with Smart and Speednet which were companies in which the Briceno brothers (including the Leader of the Opposition Johnny Briceno) had major interests which they sold for millions of dollars. Furthermore, Belize Telemedia Board and management financed Great Belize Productions (Channel 5) and transactions relating to Great Belize Productions to the tune of millions of dollars (approximately 10 million) and these funds included the 3.6 million used to purchase the property on Coney drive where Channel 5 now operates. And then (weakening Belize Telemedia even further) the Ashcroft Board turned around and wrote off the debt that Great Belize Productions owed to Belize Telemedia just before the Company was acquired by the Government in August 2009. Belize Telemedia had in fact owned Great Belize Productions and its assets (except for some property down in Placencia) and just before the acquisition, the Ashcroft appointed Board stripped the company of its ownership of Great Belize Productions and distributed it to the Ashcroft shareholders of Belize Telemedia. The Board in the minutes of the meeting of 23rd August 2009 actually had the audacity (or imprudence) to state its reasons for its actions:
“…that the current shareholders of Telemedia, which included the Telemedia employees and the Unions, continue to have an unbiased voice in the media to stand up against the hostile and illegal acts of the current Government”
This of course was and is painfully transparent – the object was to entrench the Ashcroft Group as owners of Channel 5 even after the acquisition so that they (and in effect the PUP) could bash the Government and hope to play their own pivotal part in the next elections. And with the people’s money at that. It is ultimately the public Belizean subscribers whose money was used to finance the Board’s moves to own and operate Channel 5.
If there is one thing the Ashcroft Group can be credited for is their absolute resolve to act in pursuit of its commercial and monetary interests no matter what damage may be caused to the people of Belize, including those who are hungry for scarce public funds.
This essay cannot end without pointing out the almost comic (but yet deeply troubling) irony of how the Ashcroft Group brought a Queens Counsel from England to chase and pressure Mose Hyde and the Kremandala Group in pursuit of “dividends” from the $25000 Sagis investment way back in 1994. Yet the Ashcroft Group used their position to move millions of dollars from Telemedia to the PUP TV station – Channel 5.
Our Prime Minister, Dean Barrow, has tried mightily and with firm resolve to do that which he knows and which all people of Belize who love this country know – it is in the stellar interests of this country to keep Belize Telemedia Limited out of the hands of Lord Michael Ashcroft and his group. The task of meeting this challenge is a daunting one – but the Prime Minister has been fearless and even selfless in meeting that challenge. The great irony is that the same people who got us into this mess are the same ones who are foremost in attacking him because of the bold steps he has had to take in trying to sort out and reverse the mess. Even more – they seek to make political mileage out of it and in fact to waltz together with Lord Ashcroft back into power come the next election. But the late Philip Goldson used to say time and time again with that wagging finger: DON’T TAKE BELIZEANS FOR FOOLS!
Really, it is all so plain to see. This controversy is not so much about the Rule of Law; It is about the Rule of Ashcroft! It is about the welfare and abiding interests of the people of Belize. And it demands that all Belizeans (of whatever political belief) stand up for our nation and our people against an extraordinary quest for profit and economic domination.
