THE Auditor General’s Department says that the National Housing Trust’s (NHT’s) purchase of the Orange Grove/Outameni property in Trelawny in 2013 was a buyout of a bad debt owed by the owners of the property to a local merchant bank.

The decision to purchase the property followed a letter from the owners, Orange Valley Holdings Limited (OVHL), in November 2012, bringing to the attention of the NHT board its indebtedness, and urging it to negotiate a buyout of the bank loan covering the realty.

According to the report of a performance audit done by the department and tabled by Auditor General Pamela Monroe Ellis in the House of Representatives yesterday, the letter gave the NHT “full authority” to negotiate a buyout of the loan, pointing out that the property comprised assets consisting of “real estate of 10 acres, a 300-year-old great house and the built attraction”.

Shortly after, then Managing Director Cecile Watson sent a submission to the board stating that there was a need for “urgency” in settling the issue, “because of a provisionary order by the court to sell the home of the guarantors for the loan”, and that a final order was expected, if OVHL failed to settle the debt within limited time, the auditor general’s report said.

“In December 2012, the NHT board approved the purchase of the loan of $180 million, in exchange for the assets owned by Orange Valley Holdings Limited (OVHL) valued at $311.1 million,” the report said.

The purchase was consummated, although a site assessment of the property conducted by the Trust’s Construction and Development Unit had indicated “that the property does not appear to facilitate the NHT’s mandate for affordable housing solutions and is more suited for recreational/heritage type facility”.

In February 2013, the NHT commissioned a valuation appraisal, which valued the property at $280 million; a difference of $31.16 million (or 10 per cent) when compared with the valuation of $311.16 million conducted in September 2011.

Further, the NHT incurred additional cost of $28 million for salary and other administration expenses related to the property.

However, the purchase did not include chattels and other structures related to the cultural Outameni Experience. But four months after the execution of the sales agreement, Watson “appeared to be uncertain as to what the NHT should receive in exchange for the purchase of the loan”.

The auditor general said that this was evident in her e-mail, dated July 24, 2013, to the NHT’s company secretary and general counsel.

The report said, however, that the NHT’s company secretary and general counsel had warned that there could be issues raised “regarding whether this transaction falls within the mandate of the Trust”.

The counsel suggested that “the transaction should not be structured as debt purchase, but as one for the purchase of land”.

The auditor general also determined that permanent secretary in the Office of the Prime Minister (OPM) Onika Miller’s failure to obtain the minutes of NHT board meetings was in breach of the Government’s accountability framework for senior officers.

She said that the Public Bodies Management and Accountability Act requires that permanent secretaries, as accounting officers, “shall receive board minutes and corporate plans for public bodies and shall be submitted for approval to the portfolio minister through the responsible permanent secretary”.

Monroe Ellis has recommended that, in keeping with the Public Bodies Management and Accountability Act, the NHT board should take the necessary steps to enhance its due diligence process “undertaken prior to investments and acquisition of land, so as to maximise return on investment and ensure that all properties acquired are suitable for housing development”.

She also encouraged the permanent secretary in the OPM to immediately institute measures to ensure that copies of the minutes of the board meetings are received in a timely manner, in compliance with the Government’s accountability framework.

The Outameni saga rocked the NHT for weeks late last year, especially after it emerged that Lennie Little-White, a director of Orange Valley Holdings, had expressed fear that a scandal would erupt if the NHT had chosen not to operate the heritage attraction after purchasing it for $180 million.

“This transaction begs for another scandal when the public learns that the NHT purchased the property for hundreds of millions of dollars and has now chosen to dismantle the attraction,” Little-White said in a July 2013 letter to Watson.

“The site is built as a heritage attraction which was architecturally designed to house this specific concept. It has limited usage otherwise,” he wrote.

“Neither history nor the taxpayers of Jamaica will ever forgive us.” Little-White appeared to have penned the letter in frustration, telling Watson that he had, during a November 2012 meeting with NHT Chairman Easton Douglas, offered to continue managing the property “or act as a transitional consultant to any new operator” of the Trust’s choice “for the future of the attraction”.

The debacle resulted in calls for the sacking of the NHT board, but Douglas insisted that the board had done nothing wrong and that it acted in the best interest of the NHT’s contributors.