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'OCG has no power to probe Sandals Whitehouse'

Gorstew goes to court to protect hotel, integrity of professionals over 'secret talks' allegation

Sunday, September 09, 2012    

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GORDON 'Butch' Stewart's dream of a resort that would fuel unprecedented development on Jamaica's scenic but virginal south coast continues to face obstacles years after the hotel's birth in controversial circumstances.

In the latest development, Stewart's holding company, Gorstew, which owns the Sandals Whitehouse Hotel in Westmoreland, has asked the Supreme Court for an interpretation of the powers of the contractor general which says it is continuing its investigations into the sale of the hotel in 2011.

Pledging to accept the ruling of the court, Gorstew, in court documents filed on Friday, September 7, 2012, said the OCG investigation was based on an article published in the December 12, 2010 Sunday Herald newspaper, claiming that "secret talks" were in progress between the Government and the Sandals chain for the sale of the hotel.

"That the OCG could base an investigation of this nature on a spurious news story is of great concern," Gorstew said in a press statement over the weekend.

At the time, the newspaper did not substantiate its claims of secret talks, but was carrying a string of anti-government articles, especially after a fight with the tax department for millions of dollars in arrears, including unpaid statutory deductions from employees' salaries.

Gorstew in its statement insisted: "Far from being secret, the negotiations for the sale of Sandals Whitehouse were not only transparent, but also benefited from the expertise and goodwill of a large team of skilled negotiators and professionals from the public and private sectors. The teams were led by the chairmen and officials from all the parties, backed by their respective boards."

The parties included: the Ackendown Newtown Development Company Limited, the holding company for the property; the state-owned Urban Development Corporation (UDC); the state-owned National Investment Bank of Jamaica (NIBJ), as well as Gorstew.

The negotiations were facilitated by the well-known statesman R Danny Williams, who was appointed by the Government to ensure the interest of the Jamaican people was protected. The negotiations were conducted over several months and the US$40-million sale agreement was approved by Cabinet, followed by a formal report on the transaction to Parliament by the then prime minister.

Gorstew said it accepted the sale price of US$40 million, which was set independently by international valuators Ernst & Young and approved by the relevant boards.

In addition, in the spirit of the negotiations, Gorstew decided to drop claims against the Government totalling some US$28 million, which the hotel lost from damage accrued when the project managers, the Urban Development Corporation (UDC), delivered the hotel late and with substantial defects.

"It would be an indictment on Jamaica and quite a travesty of natural justice if, after more than a year following the sale, any effort was allowed to try to undermine the sale and sully the reputation of those involved in the negotiations," Gorstew said.

"We have full respect for the Office of the Contractor General and the objectives of its mandate. However, all the expert legal advice available to Gortstew has indicated that the contractor general does not have jurisdiction over the sale of the Whitehouse property.

"We feel so strongly about the matter that we are prepared to let the courts determine the issue and we will abide by the final determination of the courts," the company added in the court documents.

"At stake, in all that has transpired, is the question of whether the private sector can comfortably do business with the Government of Jamaica.

"The basis on which the OCG is making its case raises the spectre that any 'lie or suss' can create a lawsuit which questions the legitimacy of transactions with Government, which were conducted in a transparent and professional manner and duly authorised by the relevant boards.

"It is our view that enough damage has already been done in the way the entire matter surrounding Sandals Whitehouse has transpired.

"We feel it is very important that we take this position to protect the integrity of a significant number of Jamaican professionals who were involved in the negotiations in good faith and who are respected for their integrity," Gorstew said.

In conceiving the Whitehouse Hotel, Stewart believed that his Sandals brand could inspire development on a scale not previously envisioned and create jobs on the rugged south coast where lush vegetation and unspoilt beauty could transform it into a tourism hub.

In or about 2001, Gorstew entered into a joint venture agreement for the construction of a 360-room hotel on lands located at Ackendown in the parish. Upon completion of construction, the hotel was to be leased to Gorstew and/or its nominee for a period of 20 years.

The other parties to the joint venture agreement were Ackendown Newtown Development Company (ANDCO), and the UDC. The shares were split: UDC 861 shares or approximately 37.43 per cent of the ordinary shares; NIBJ 689 shares or approximately 29.96 per cent of the ordinary shares and 700 preference shares; and Gorstew 750 shares or approximately 32.61 per cent.

The construction of the hotel took over two years and encountered several problems relating to massive cost overruns; delayed completion; and substandard construction resulting in significant losses to Gorstew, which sued ANDCO, UDC and NIBJ. These court proceedings were discontinued and the parties to the litigation decided to have the issues in dispute resolved by arbitration.

Early last year, the joint venture partners and the Government considered the possibility of settling the arbitration in the best interest of taxpayers who were pocketing the losses. To facilitate the settlement discussions, the Government appointed the highly regarded R Danvers Williams to be a mediator.

He succeeded in brokering an agreement for the sale of the hotel. The sale was completed on April 26, 2011 and the hotel transferred to Gorstew's nominee, Sandals Whitehouse Management Limited.

But on June 20, 2012, over a year after the sale was completed, the OCG wrote Gorstew asking more than 30 questions related to Sandals Whitehouse and the purchase of the hotel.

The letter also referred to the continuation of a special investigation by the OCG relating to "...secret talks, discussions and or negotiations which concern the sale of Sandals Whitehouse Hotel, which was a public majority owned asset, to Gorstew Limited".

The June letter set a deadline of July 11, 2012, but that was extended to September 11, 2012.

Based on advice from its attorneys, Patterson Mair Hamilton, Gorstew said it did not believe that the OCG had the power under the Contractor General Act to conduct a special investigation into the purchase of the hotel "nor does he have the power to issue requisitions/questions contained in the letter of June 20, 2012".

"As a result, the applicants herein have decided to challenge the actions of the respondent by applying for permission to commence judicial review proceedings.

Among other relief, Gorstew is seeking a declaration that the letter of June 20, 2012 from the contractor general to Gorstew "is illegal, void and of no effect", and that "the commencement of the special investigation into the alleged secret talks, discussions and/or negotiations concerning the sale of the Sandals Whitehouse Hotel is illegal, void and of no effect".

Further, Gorstew is seeking a declaration that "the extension of the special investigation into the alleged secret talks, discussions and or negotiations concerning the sale of the Sandals Whitehouse Hotel to include Gorstew Limited and/or the Honourable Gordon Stewart, OJ, is illegal, void and of no effect".

Gorstew is arguing that contractor general's functions are limited to the monitoring and award of: licences, permits, concessions or authorities issued by a public body; and agreements entered into by a public body for the carrying out of building or other works or for the supply of any goods or services.

"In the premises, the contractor general has no jurisdiction or function relating to the sale and/or purchase of land or property such as the hotel," Gorstew maintained.

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