The Government has allowed an unusual amount of transparency with the White Oak contract. The recent (12 May 2019) Financial Times article reported that White Oak would receive an “absurd” fee of US$27M. I assumed that they meant US$2.7M since the calculations were done by Financial Times’ staff, and the error could have been missed by the editors.
Avinash Persaud responded to the Financial Times article, but surprisingly, he did not challenge the reported fee. Rather, he claimed that Barbados got value for money. Then Clyde Mascoll provided a similar endorsement, with the shocking claim that no Barbadian could have done the job. Their uncritical and fawning endorsements of White Oak should demand an unbiased examination of this no-bid contract.
In their contract, White Oak specifically state that they are not providing any accounting or legal services. They are mainly giving advice, for which they are to be paid a monthly retainer fee of US$85,000. They also get a success fee of 0.45% on foreign debts that they can get cancelled or amended, and 0.40% on any local debt that they can get cancelled or amended.
The total Barbados debt was approximately BD$15B, with about $12B in local currency and $3B in foreign currency. The BERT restructuring of the local currency debt resulted in a BD$2B reduction of our debt. We were told that White Oak were working on the foreign currency debt.
If White Oak can save Barbados from paying 25% of the foreign currency debt after one year of negotiations, then they stand to earn a success fee of approximately US$1.7M plus a retainer of US$1M. This total fee of US$2.7M led to my assumption that the decimal point was mistakenly omitted from the Financial Times’ article.
The only way that White Oak can earn anywhere near the reported US$27M, is if their success fee rate is applied to the total local currency debt, instead of just the amount that they can successfully negotiate to avoid us paying. Clearly that could not be the intent, since success fees are normally applied to the amount that the consultant can save the client from paying.
If White Oak’s success fee rate is misinterpreted to be applied to the total debt, then White Oak can ludicrously get creditors of Barbados’ $15B debt to agree to a one-month delay of payment. For that lunatic advice, White Oak can legally earn US$30M, and we would still have to pay the entire $15B of debt. No political administration could be foolish enough to sign such an unfair contract.
The retainer is also badly arranged, since White Oak can simply make US$1M each year by doing absolutely nothing. After approximately one year, they still have not completed renegotiating our foreign currency debt, which is what they were reportedly contracted to do.
This confusion could have been avoided if the Contractor General, who should be able to identify weaknesses in contracts before the Government signs them, had been appointed. The BLP promised to address political corruption by appointing such a person, but has yet to do so.
The listed services that White Oak are contracted to provide, should be well within the competence of any accounting firm in Barbados experienced in liquidation or judicial management. If such local accounting firms agree with Clyde Mascoll’s assessment of their competence, then they should be ashamed of themselves for their incompetence, cowardice, or both.