Dan Duguay, the former auditor general of the Cayman Islands, said corruption is a widespread problem that impacts the perception of Cayman among international investors.
Citing several examples of alleged corruption, he said the dollar amounts involved are not large, but corruption in Cayman is insidious. “The numbers in the [corruption] examples from the Cayman Islands are quite small by comparison, but I think they have a big impact in regards to how people view the region and whether they are going to put their money in there.”
Mr. Duguay made his remarks as part of a presentation on corruption in the Caribbean at the Offshore Alert conference in Miami on Tuesday, 7 May.
“Perhaps the worst situation that Cayman could have, has recently come into play. The premier was indicted,” he said in reference to the charges of theft involving a government credit card, abuse of office and corruption brought against former Premier McKeeva Bush.
While Mr. Duguay reminded conference delegates that these were only allegations that have not been heard in court, he said every time a premier is thrown out of office “it sends a terrible message to anybody who is thinking about investing in the Cayman Islands”.
Mr. Duguay said examples of misuse of government credit cards are not uncommon and, in his time as auditor general from 2004 to 2010, he had seen many officials who used their government credit cards for personal use. In these cases the money was paid back. The examples of alleged corruption given by the former auditor general included recent charges against ex-premier Bush and Joey Ebanks, the Cohen and Company refinancing deal, a proposed financing of the Turtle Farm, the abuse of Gas Boy cards for the government refuelling station and the selected paving of private parking lots using government resources in Cayman Brac.
The former auditor general said corruption in Cayman is supported by a sense of entitlement, lack of investigative resources at the Anti-Corruption Commission and a lack of will to bring criminal prosecution.
Although the examples of alleged corruption are small, people are well aware of it, he said. “Everybody knows it and accepts it and perhaps the biggest question is how can I get my share of that?
“And to some extent everybody expects that you are going into politics to make your money. And you should get some if you are in politics.”
Lack of resources
Although Cayman has an Anti-Corruption Law and an Anti-Corruption Commission, the commission does not have investigative resources of its own. Mr. Duguay noted, it is not effective to only have the support of the police department, which has other duties and may have different priorities.
Police Commissioner and Chair of the Anti-Corruption Commission David Baines said he wholeheartedly concurs with the sentiment that the lack of investigative resources available to the commission is a problem and has to be covered by police investigators.
“Bids to secure dedicated resources for the Anti-Corruption Commission have stalled in the past two years due to financial cuts in government. We have a willingness to prosecute and have demonstrated the same with arrests; we have further investigations in the pipeline awaiting resources but we are having to prioritise our actions,” Mr. Baines said. “Additionally, legal support has to be secured when available, as we have no dedicated staff committed to this area of complex and difficult legislation.”
Mr. Duguay also questioned the position of the auditor general as a permanent member of the Anti-Corruption Commission, stating that he was not comfortable with the dual role.
Asked why many of the corruption allegations have not led to criminal prosecution, Mr. Duguay said it is in part due to the lack of resources and in part the reflection of an attitude “of once they are found out, that’s punishment enough”.
“I never did understand that point of view, quite frankly, because if there is something criminal then you should go through the criminal process.”
Mr. Duguay added, “there seems to be a lack of will”, for example regarding allegations of embezzlement of several hundred thousand dollars by Hassan Syed, the former president of the University College of the Cayman Islands. “My office uncovered it. We sent it over to [the] Financial Crimes [Unit] and they said: ‘Well he’s gone now, we can’t get him back, so we are not going to prosecute.’” Mr. Syed left the country before the affair became public in 2008.
Commissioner Baines said the investigation remains open and efforts continue to bring Mr. Syed to face justice in Cayman. “Evidence in relation to this matter has been put before the courts in Cayman and, as a result, an international arrest warrant has been issued. When he is traced he will be arrested and transported back to Cayman to face justice,” Mr. Baines said.
Sense of entitlement
Former chairman of the Monetary Authority Tim Ridley, who attended the Offshore Alert conference, said Cayman’s very success requires honest, transparent and accountable government. “This is essential for the community, including legitimate business both local and international. At the same time as we tackle corruption head on through law enforcement, we must also eliminate the culture that breeds and treats corruption as acceptable behaviour,” he said.
“This requires not only changing those of our elected officials and appointed public servants who want to dance; it requires us all to refuse to tango. After all, corruption needs a partner; if it remains unrequited, it must wither and die.”
Mr. Duguay named the abuse of government cards for the refuelling station for government vehicles as an indication for this sense of entitlement. “When we went and did an audit of that we found that pretty much everybody in Cayman had a card for that facility and nobody was monitoring it. It was amazing. One guy had six different cards. And nobody really thought that this was all that unusual,” he said.
Mr. Duguay also mentioned the case of Joey Ebanks who, when he was general manager of the Turtle Farm, had drawn several salary advances without asking the Turtle Farm board’s approval. The money was paid back after the auditor general’s findings became public.
The key question, Mr. Duguay said, is why, “despite this lack of an ethical situation on the part of Mr. Ebanks, was he appointed last year as the managing director of the Electrical Regulatory Authority, which is a government function again”. Mr. Ebanks was suspended as head of the Electricity Regulatory Authority in March and is facing 29 counts of theft, forgery and drug charges.
Mr. Duguay also recalled a government debt refinancing deal in 2010, which initially went through a proper process to identify a lender until then-Premier Bush intervened and picked another supplier – New York finance firm Cohen and Company. “Well, it turned out not to be the best deal because that company was asking for a bigger interest rate than before and they actually lost a fair bit of money for this. But the question remains: Why, if there is a process to select a provider, would the premier intervene?”
Mr. Duguay’s successor, Auditor General Alastair Swarbrick, found that Mr. Bush did not break any laws but had violated financial regulations when he disregarded recommendations by the Central Tenders Committee.
Similar questions were raised during a $15 million financing of the Turtle Farm, which was audited by the auditor general’s office in 2007. “They actually hired two guys who never did any finance before; they just hired the friends of the ex-premier. They arranged for financing, got a million dollars to do it and at the end of the day they had to throw it out because it was way too expensive,” Mr. Duguay said. “Where did the money go? It went into their pockets and after that we don’t really know what happened.”
The final example he gave was the paving of selected parking lots in Cayman Brac using government machinery and resources. “Now, the person who is the premier now is the person who is the elected representative from Cayman Brac and I think you can possibly guess which individuals were selected to have free paving from the government and which individuals did not,” Mr. Duguay said.