Three days before ownership of Air Jamaica, the national airline, was to change hands in June 1994, the Canadian investor who partnered with Peter Rousseau bailed out, causing the US$24.6-million privatisation bid to collapse.

The collapse coincided with news that the Government wanted to hold onto a $450-million surplus in the Air Jamaica Pension Fund.

Keith Senior, the finance specialist watching the divestment process for the finance ministry, wondered if the dots were connected.

Senior did not know at the time that this episode would come back to haunt him and lead to his falling out with the finance minister, Dr Omar Davies, a friend for over 40 years and whose South St Andrew constituency he managed up till June 2007.

After the privatisation bid fell through, a new bidder emerged in Gordon ‘Butch’ Stewart and NCB, called the Air Jamaica Acquisition Group, or AJAG. A supplemental agreement to the previous privatisation pact was signed on June 29, 1994.

The new investors immediately indicated they had no interest in the Pension Fund, which grabbed headlines after a group of the former airline employees sued the Government for the surplus funds which amounted to $570 million. The Supreme Court ruled in favour of the employees in 1996, Senior recounted. The Court had, in its ruling, set the interest rate on the surplus at 29.4 per cent, which the Government insisted was excessive.

The Government took the case all the way to the United Kingdom-based Privy Council which ruled in 1999 that the surplus should be shared 56 per cent to the former employees and 44 per cent to the Government. The interest rate was again set at 29.4 per cent, based on a settlement date of June 30, 1994.

According to Senior, the Government in the meantime had been taking money from the pension surplus. He reasoned that the Privy Council had erred in setting interest on the entire sum, as if it had been taken out all at once, and that the settlement date was incorrect.

“My argument found favour with the law lords in London who then set the share of the surplus at 50-50 per cent and the settlement date was corrected to June 2002. The upshot was that instead of paying out a total of $2.6 billion, the Government shelled out $1.4 billion, saving $1.2 billion,” Senior said.

Air Jamaica Divestment

Senior then set his sights on the Air Jamaica Divestment agreement with AJAG. Transport Minister Horace Clarke agreed at the time that the Government would need to pump in at least J$1.6 billion to wipe out the airline’s net current liability position.

Senior offered to remove and manage an estimated $500 million of what is called Unearned Passenger Revenue from the current liabilities on the airline’s balance sheet. He also proposed to create a special account receivable on the airline’s balance sheet and the settlement thereof with proceeds from the airline’s pension fund.

Those proposals, described by AJAG negotiators as “novel” and “innovative thought”, resulted in concessions from the new owners to the Government of over $600 million.

Senior also proposed the inclusion of the value of $147 million assigned to two Boeing 727 aircraft in the Closing Agreement.

For his work, Senior sent in two invoices – one for $4 million and a second for $140 million, based on time put in for preparation and negotiation of the pension fund affair and the AJAG acquisition. The per hour rate, he said, was based on the going rate for consultants of his calibre, which, he insisted, was the rate paid to those from PriceWaterhouse and others.

When the claims arrived on Davies’ desk he apparently freaked.

“Omar kept saying to me that other people said they did the work,” Senior told the Observer, adding that Vin Lawrence, who had in the interim become chairman of Air Jamaica, was the one blocking his payments.

Senior showed the Observer a copy of a letter from Lawrence to Minister Davies on the matter, dated April 10, 2007. The letter was scathing.

“I find it preposterous that Mr Senior is now asserting that I am attempting to attribute the achievements to myself and it certainly displays a state of mind which possibly explains the unjustified and ridiculous claims he is now attempting to make against the Government of Jamaica,” Lawrence lashed out.

Later in the same letter, he told Davies: “I have no knowledge of whether Mr Senior did any work for the Ministry of Finance or not. I am only aware that Mr Senior was being paid by Air Jamaica without approval of the Board of Directors for ‘liaising with the Government of Jamaica’ whilst he was a government-appointed director of Air Jamaica. This I learnt sometime after it had been implemented and was terminated when I became chairman of Air Jamaica.

“I must repeat that I am not aware that Mr Senior.served in the 1994 Privatisation in any capacity that was different from other members of the team and was not party to any agreement to compensate members of the team.”

Hitting back the next day, Senior wrote to Lawrence, providing evidence of his work supported by minutes from several meetings and other documents including five affidavits from members of the AJAG negotiating team. He told Lawrence that his actions were based on conscience.

Senior alleged that he had a verbal agreement with the finance minister.

He later admitted in the letter to depriving AJAG of “sums totalling in excess of $500 million at privatisation”.

Said Senior: “The results of these professional endeavours were omitted from my invoices to the Government in 2002 because of the repeated reminders from the minister that the claimed work was done by ‘others’, presumably the ‘Privatisation Team’.

“Prior to December 2004, I frequently pretended that I had nothing to do with the funds immorally ‘retained’ (from AJAG). However, after AJAG paid the Government US$20 million, I have never had a comfortable thought on that subject again. Consequently, I am overburdened with guilt.”

Senior’s reference to the US$20-million payment was to the amount given to the airline after Stewart handed back Air Jamaica to the Government, saying he was tired of the political shenanigans.

Senior challenged Lawrence to review the documents he provided showing evidence of his work and to get the auditing firms of KPMG and Deloitte & Touche, the joint auditors, as well as members of his (Lawrence’s) team, to verify any “falsehoods or misstatements”.

“Dr Lawrence, I am extremely happy to hear that you headed ‘a’ Privatisation Team in the Air Jamaica divestment process.

This suggests that you might be able to answer some ‘troubling’ questions I have had about the Air Jamaica privatisation agreement and the process relating to the delay in the ‘rule change’ of the pension scheme,” Senior shot back, hinting at the possibility of questionable dealings.

Senior also challenged Lawrence to debate the saga in public, through Parliament or the media and continued: “If I hear nothing from you with the time allotted (seven days), a copy of this letter will go to Mr Gordon ‘Butch’ Stewart of AJAG, together with the questions on the privatisation exercise.The Cabinet Secretary was already warned about the possibility of restitution to AJAG. The independent confirmation of the accomplishments of your ‘Team’ is the only hope for the Government to morally retain the US$20 million from AJAG.”

The letter was copied to Dr Davies and his brother, Dr Carlton Davis, the cabinet secretary. Neither gentlemen nor Dr Lawrence responded to the letter, Senior said.

In June, he resigned as campaign manager for Davies and as a member of the South St Andrew constituency executive.