Mea - Where Do We Go From Here

[P.K.]

WTF? MR clicky

 

A local advocate is praising the 'fairly responsible attitude' of the Manx Electricity Authority in admitting it obtained £120 million in loans unlawfully.

 

John Wright hopes the Select Committee which is set to examine the issue can whitewash the whole farrago leaving nobody to blame as per usual find the answer to questions such as who took the decision to borrow and why, with such a huge sum involved, the Treasury didn't realise what was happening.

 

So Mr Wright, that would be the same "responsible" MEA board that obtained illegal loans of £120 million without bothering to tell the Treasury who were bankrolling the whole enterprise with public money? Yeah right......

[John Wright]

Thanks PK.

 

The clip is not the whole interview

 

The MEA case is divided into three.

 

First was the loan illegal. That was the case before the court. It was being brought by the auditors. The MEA is owned by Government and has no income apart from what it sells electricity to us for. Governemnt were paying the auditors costs, both the accountancy firm and their lawyers, and consumers were paying the MEA's legal costs. The MEA board is not the same board that borrowed, thay have all been replcaed. What the present board have done is decided that they will throw in the towel and admit the loans were illegal. Saves a fortune. Does not let anyone off the hook. The court only had to find legal/illegal. It may have never uncovered the why's and wherefores and apportioned blame. It was not being asked to do that.

 

Part two. The immediate consequences of illegality, once established. Questions arise as to whether the loan can be enforced by the bank and as to whether the then MEA board members have personal liability. Those cases may still run. It will depend on the terms of the retrospective authorisation in Tynwald. I haven't seen it and cannot comment, I would say I would hope any authorisation is without prejudice to outstanding legal remedies. We shall have to see what happens there.

 

Third there is the public interest. Whatever the outcome of any court cases there was always going to be a public enquiry, because this was not just about the MEA but about Treasury, and its procedures, Tynwald and its procedures, public perception and also the perception of the IOM by the outside financial and other communities if a government agency welched on a deal, illegal or other wise.

 

I would not have welcomed another enquiry like Mount Murray or Child care at huge cost. I do welcome an enquiry by a select ccommittee. Would like to see who was on it and would like to ensure it has proper advice. The matter should not be swept under the carpet.

 

It affects us all. After all if government subsidises MEA by givibng it the money then that is capital taken from pension funding or reserves. If MEA has to repay then we all face higher electricity bills for many years to pay off the loan.

 

So what was wrong with a new board, admitting that the loan was illegal and stopping a case from riunning for two or three yeras at expense to us all. The saving in legal costs is significant and we now know definitely the loan was illegal. I think that was responsible, rather than going on and running up legal costs unecessarily. It isx no different from a person after receiving advice changing their plea to guilty from not guilty to avoid cost of trial they may be about to lose.

[P.K.]

First was the loan illegal. That was the case before the court. It was being brought by the auditors. The MEA is owned by Government and has no income apart from what it sells electricity to us for. Government were paying the auditors costs, both the accountancy firm and their lawyers, and consumers were paying the MEA's legal costs. The MEA board is not the same board that borrowed, thay have all been replaced. What the present board have done is decided that they will throw in the towel and admit the loans were illegal. Saves a fortune. Does not let anyone off the hook. The court only had to find legal/illegal. It may have never uncovered the why's and wherefores and apportioned blame. It was not being asked to do that.

This is being disingenuous to say the least. There is no such thing as "Bank of Tynwald". Unless there are folks not using electricity (unlikely) then for accuracy this should read:

Consumers were paying the auditors costs, both the accountancy firm and their lawyers, and consumers were paying the MEA's legal costs.

I was so annoyed at the whole thing I had forgotten that the original board resigned en masse because they were having certain "local difficulties" dealing with Tynwald. So presumably the new lot have looked at the issue and not "thrown in the towel" as you put it but rather they are going to let the original lot defend their original actions which would have happened anyway. It's not exactly rocket science.

 

Part two. The immediate consequences of illegality, once established. Questions arise as to whether the loan can be enforced by the bank and as to whether the then MEA board members have personal liability. Those cases may still run. It will depend on the terms of the retrospective authorisation in Tynwald. I haven't seen it and cannot comment, I would say I would hope any authorisation is without prejudice to outstanding legal remedies. We shall have to see what happens there.

If the loans are definitely illegal why on earth should Tynwald give retrospective authorisation for them? Because if Tynwald do give authorisation doesn't it then make them automatically liable? Why not leave the bank and the MEA ex-board to fight it out between them? With a certain individual having a foot in each camp we're bound to at least get a laugh out of it.

 

Third there is the public interest. Whatever the outcome of any court cases there was always going to be a public enquiry, because this was not just about the MEA but about Treasury, and its procedures, Tynwald and its procedures, public perception and also the perception of the IOM by the outside financial and other communities if a government agency welched on a deal, illegal or other wise.

 

I would not have welcomed another enquiry like Mount Murray or Child care at huge cost. I do welcome an enquiry by a select ccommittee. Would like to see who was on it and would like to ensure it has proper advice. The matter should not be swept under the carpet.

 

It affects us all. After all if government subsidises MEA by giving it the money then that is capital taken from pension funding or reserves. If MEA has to repay then we all face higher electricity bills for many years to pay off the loan.

Currently the IOM lives or dies by it's finance sector. Government ministers are forever going on unnecessary junkets promoting the way they regulate the IOM finance sector to the n'th degree so it is a safe haven for your ill-gotten gains. Making out that the IOM is whiter than white and that dubious financial practices could never take place under their watchful eye. Yet their own Treasury and one of their most crucial Utilities seem able to throw around £millions of public money without any checks or balances at all. On financial regulation would you now believe anything the IOM Treasury told you? It's enough to make a cat laugh.

 

So what was wrong with a new board, admitting that the loan was illegal and stopping a case from riunning for two or three yeras at expense to us all. The saving in legal costs is significant and we now know definitely the loan was illegal. I think that was responsible, rather than going on and running up legal costs unecessarily. It isx no different from a person after receiving advice changing their plea to guilty from not guilty to avoid cost of trial they may be about to lose.

There's nothing wrong with the current MEA board doing this because for them it is a win/win. So, does the current MEA lot saying the loans were illegal actually make them illegal or is that definitely the case and they are merely admitting what would be proven after a waste of yet more £zillions anyway?

[John Wright]

Your analysis is faulty. Not every consumer will be a tax payer and not every tax payer will be a bill payer.

 

So the auditors side was being funded by tax payers and the MEA side was being paid for by MEA bil payers

 

What will happen with the ex board members I do not know. Have proceedings been taken against them, will proceedings be taken against them ? How are they/will they meet their fees? Presumably personally unless thay had taken out directors liability insurance. But that is for another day, another sety of proceedings.

 

What is acheived at stage one is an admission of ilegality and a cutting short of legal fees. That I applaud. It is only binding between the MEA and the auditors.

 

However the rest of it has to be done properly, and I cannot anwer if it is being/will be done properly. I hope it will.

 

The banks primary claim will be against the MEA, not the ex Board Members. The MEA will start in a better position to defend, if that is what it is advised to do, if its position is loans illegal. If it did not say that I wonder what its defence might be at all. The bank may have a claim against the ex directors if they personally gave a warranty of the authority of the MEA to enter into the loan. That is a whole other case. So is any case to surcharge the board members. That would be a claim by the auditor to recoiver the money from the directors.

 

I agree any retrospective authorisation will need to be carefully worded, perhaps so as to alow the auditors to complete their audit of MEA for years a, b, c etc but without in any way changing the position of the MEA, the Bank, the board members or any civil claim.

 

If the bank cannot recover it will more likely turn to look at the advice given by its lawyers, of course the MEA board decision to admit illegality will have no bearing on that case.

 

Of course, whatevcer the real position in law Tynwald and the MEA may decide to pay up anyway so as not to have finger pointing about non repayment and default.

[P.K.]

Your analysis is faulty. Not every consumer will be a tax payer and not every tax payer will be a bill payer.

 

So the auditors side was being funded by tax payers and the MEA side was being paid for by MEA bill payers

Come off it Mr Wright, the words "hairs" and "splitting" spring to mind here!

 

I was afraid that the scenario you spell out above would be the case and please correct me if I am wrong but doesn't it mean that the "illegality" of the loans is just between the current MEA board and their auditors and NOTHING TO DO WITH LEGAL LIABILITY.

 

So I still think Tynwald should not give retrospective authorisation. Unfortunately you can just see where something like this might go. The bank will take legal advice and then approach the easiest target (which doesn't have to be the one that is legally liable) to get it's money back. My guess would be MEA. Tynwald won't want the IOM to look like a financial Toytown so they'll probably pay up whilst muttering phrases like "lessons learnt", "actually gave good value", "the IOM consumer is the real winner" etc etc etc - pass the sickbag Alice! I personally would like to see the ex-directors made personally liable for the loan and frankly I don't give a flying fourpence about Mr Wright's "How are they/will they meet their fees?" although I can see how something like that would be of a major concern to an Advocate....

 

I am stilll extremely doubtful that the Treasury were unaware of what was going on. But in this case it's definitely "damned if you are and damned if you're not".

 

Wait and see mode.

[Utah 01]

'If the loans are definitely illegal why on earth should Tynwald give retrospective authorisation for them?'. In effect Tynwald, would be sanctioning an illegal act; what kind of message does that send out?

 

If an illegal transaction has taken place then those involved must be held to account and punished if found culpable. I would suggest that the greatest negligence lies with the government. The MEA board 'tried it on' and thought they had got away with it; a more robust supervisory regime from goverment would/should have hit this on the head at a very early stage. I still find it incredible that, in the close-knit financial community with so many links in all parts of government, a loan of £120M was so 'secret' that nobody in the Treasury had any idea about what was going on.

 

There must be no 'sweeping under the carpet' on this one just to satisfy financial or political expediency.

[Chinahand]

Well Tynwald have sanctioned the loans. It was an interesting debate.

 

Things I was glad were emphasised - no evidence of fraud or criminality from the Attorney General and Chief Minister, the loans were used to buy useful assets that have diversified the IOM's energy supplies - Eddie Teare and Mr Lowie.

 

The Treasury would have approved the borrowing if they'd have known about it - Teare and Chief Minister.

 

The Tynwald which set up the KPMG investigation was "out for blood" and got distracted - Cannel. It was interesting hearing Cannan and Cannel raising the fact that almost identical resolutions to sanction the loans were proposed a year ago, but rejected in favour of spending £1 million on an investigation which has gone nowhere.

 

At the time Mr Brown suggested having a select committee consider the actions without all the sound and fury and decide then whether to sanction or proceed to court - but it was rejected - shame - again misdirected blood lust got in the way.

 

Mr Karren was - what - well his usual self. I have to admit to feeling I can't report alot of what he said - he had the protection of Tynwald - without it he could well have found himself in court for libel - The President of Tynwald said his some of his comments were totally out of order and were withdrawn.

 

Its now down to the Select Commitee to investigate what happened, though how far this will get is open to question. This was raised multiple times - some MHK's defending it, some saying it'll get nowhere.

 

A major point was made that some protagonists are no longer on the Island and so cannot be summoned to attend.

 

Don't know - various statements were made which from my understanding twisted things and reminded me of the blood lust mentioned by Cannel - I worry this issue is too politicized and personalized to have an open enquiry, but many of the major players haven't been driven from the Island, but I don't know how keen they'll be to attend a show trial!

 

And then there are the Skyward sums spent etc which haven't been sanctioned - Proving Skyward was an unreasonable expenditure is going to be interesting - The MEA had given up something like £300,000 a year in revenues from the DTI and had agreed with DTI to look for alternatives ways to commercialize the fibres etc. I wonder what the DTI thinks it costs to create a business with a £300,000 profit a year? £1.7 million isn't such an excessive amount!

 

The DTI had a liason officer who regularly met to see progress, foreign dignitaries were invited to see the equipment installed at the MEA headquarters with full government knowledge, and the DTI wrote and put through Tynwald a bill to allow the MEA to commercialize their ideas.

 

Oh yes there are lots of jucy revelations ready to come out if the auditors are going to say the MEA acted without consent in trying to commercialize the fibres, but there we go - looks like that is what will happen!

[P.K.]

Well would you believe it!

 

Tynwald won't want the IOM to look like a financial Toytown so they'll probably pay up whilst muttering phrases like "lessons learnt", "actually gave good value", "the IOM consumer is the real winner" etc etc etc - pass the sickbag Alice!

Well Tynwald have sanctioned the loans. It was an interesting debate.

 

Things I was glad were emphasised - no evidence of fraud or criminality from the Attorney General and Chief Minister, the loans were used to buy useful assets that have diversified the IOM's energy supplies - Eddie Teare and Mr Lowie.

After you with the whitewash brush!

 

I love the "no evidence of fraud or criminality" bit. Lets just put aside all the Tynwald debate BS for a moment and put up some simple but unpalatable facts for general scrutiny:

 

The MEA by statute CANNOT take out a loan, any loan, without Treasury approval.

 

The MEA financial estimates for Pulrose et al were around the £180m mark.

 

The Treasury (i.e. Joe Public muggins taxpayer) put up the £180m for MEA to produce the goods.

 

The MEA estimates were so abysmally inaccurate that the project ended up costing half as much again - £300m plus!

 

The MEA board arranged for the financial shortfall to be made up by two loans to their subsidiary Manx Cable Company.

 

The loans were made out to the Manx Cable Company allegedly without Treasury knowledge by a division of Barclays Bank.

 

The then CEO of MEA - Mike Profitt - was also the chairman of the division of Barclays Bank that gave the MEA the extra money.

 

Mike Profitt "had no conflict of interest" i.e. as chairman he claimed he had no input into a massive £120m loan from his division......

 

To my mind this raises certain questions:

 

1. Why do Manx banknotes not have "Bank of Toytown" printed on them?

 

2. Why was the cost estimate so wildly inaccurate, I mean, wrong by half as much again? Energy professionals - you've got to be having a laugh!

 

3. Why were the loans deliberately made out to the Manx Cable Company if not to circumvent the legislation which states that the MEA cannot take out loans without Treasury approval?

 

4. Why was the project left to run itself so over budget with no apparent government scrutiny of the spending of £millions of public money?

 

5. How is it the project ran miles over budget with apparently no-one in MEA bothering to tell anyone in Tynwald?

 

6. Why does Barclays Bank have a divisional chairman who has no authority when it comes to sanctioning massive £120m loans?

 

7. Why does a small area of less than 40k households and no heavy industry need a state-of-the-art (i.e bloody expensive) power plant in the first place?

 

8. Who actually believes that power produced in the IOM via gas subsea pipeline and shipped to the UK via subsea cable is produced cheaply enough to be sold in the UK at a profit?

 

9. Why do the Manx people put up with this nonsense from their "elected" representatives and the rest of the cosy rosy rip-off club?

 

10. Who are Mec Vannin anyway?

[3v0]

The words "banana" and "republic" spring to mind.

 

Here's a definition from Google.......

 

"Banana republic (or Bananaland) is a pejorative term for describing a country with a non-democratic or unstable government, especially where there is widespread political corruption and strong foreign influence."

 

Silly me. Of course the Island isn't like that......it doesn't mention the word "ineffective" in association with "government".

[copycat]

The words "banana" and "republic" spring to mind.

 

Here's a definition from Google.......

 

"Banana republic (or Bananaland) is a pejorative term for describing a country with a non-democratic or unstable government, especially where there is widespread political corruption and strong foreign influence."

 

Silly me. Of course the Island isn't like that......it doesn't mention the word "ineffective" in association with "government".

 

isn't there going to be a banana plantation planted up pretty soon up near Jurby?

[manxman8180]

....blah....blah.....

 

To my mind this raises certain questions:

 

...blah....list of questions.....blah....

In my mind you're involvement in this whole debate certain questions.

 

Why are you interested / bothered?

 

What is it to do with you?

 

Your adopted home has enough problems of its own. Go bitch about them.

 

Thanks.

[Roger Smelly]

What is really fishy is that Mr Profit (no pun intended) was working for the MEA and also for barclays.

 

As we all know Barclays gave the loans to the MEA without the government knowing.

 

This whole matter stinks from top to bottom, also Mr profit got a massive golden handshake from the MEA also.

 

No wonder peter k is wanting the who thing taken to court, this would implicate more and more if it did.

 

I reckon Mr Profit is a horlicks drinker

 

[P.K.]

In my mind you're involvement in this whole debate certain questions.

 

Why are you interested / bothered?

 

What is it to do with you?

 

Your adopted home has enough problems of its own. Go bitch about them.

 

Thanks.

I'm interested/bothered because everyone who is Manx should be. This is obviously going to come as a surprise to you but actually you can't just change your place of birth at will. Strange but true. If you're not interested/bothered then fine, to me you then deserve to be shafted, which you undoubtedly are being.

 

Besides which my "involvement" in this "debate" (your words) happens to be taking place on an anonymous, public, internet forum. Which raises the interesting question "Why have you got up on your hind legs to try and push me back?" I've pointed out in simple terms a lot of things that were obviously dodgy about MEA but it's all in the public domain.

 

The only answer I can think of is that you have connections (a relative perhaps?) with the amateur circus known as Tynwald and you don't like their multiple shortcomings being so openly mocked. TS mate.

[Ramsey]

A lot of people made a lot of money out of the various MEA projects one way or another.

 

It is fair to say that each and everyone of them would rather things just moved on and we drew a line under this whole affair. Sort of thing.

[Lost Login]

I am very happy for the matter to be reviewed as long as the appropriate matters are reviewed and looked into. To be honest I am not that bothered about whether the loan was or was not illegal as ultimately it is a technical point on whether Treasury approval was required or not. If it was it probably would have been granted anyway as they would not have pulled the plug on the financing and left a half completed power station. The alternative option was persumably a govt subsidy.

 

I note the current board of the MEA have announced that it was an "illegal loan" which has at least resulted in the Govt now restrospectively sanctioning rather than waste Govt money on legal fees etc. To my mind that does not mean the loan was actually illegal as I could announce I was the Queen of Sheba but it would not necessarily be correct. I have to admit I have doubts that in was in fact illegal or at least that there was no legal advise saying the loan was lawful as I doubt Barclays or any lender would lend to any company without first getting a legal opinion. The agreement and retrospective approval has at least put the matter to bed.

 

Yes there are issue like why was the budgetting so poor, why from the MEA reporting did the Treasury not pick up on the matter which need to be reviewed and corrected in the future but they do not lead me to start screaming scandal and whitewash. Profitt may have questions to answer but I doubt if he was corrupt or dishonest but rather he saw it as his job to get the power station built. Yes he may have cut corners to make his job easier and get the job done. I am all sure we have done it in our own lives. If I was in his shoes and could get a loan via a subsidiary without any delay or have to go through hoops and government committees to do the borrowing from the parent then I would taken the easy route especially if I believed from the reports that went back up to the Treasury that they would be aware of it.

 

Ultimately I doubt if much will come out of this to justify all the calls of whitewash. I also think that unless somebody and preferably a chief executive or a politician is the sacrifial lamb many will never be happy. They see the words illegal loan and the first thing they believe is that somebody has syphoned funds or similar and nothing will persuade them other wise.

 

In this topic some are getting hot under the collar that Profitt was also Chairman of a division of a part of Barclays when the loan was taken out. To me that is a fairly irrelevant issue as do you really believe that as Chairman of that division he had the authority to grant and sign off loans. In fact do you really believe a chairman of any division is any more than a figure head who chairs meeting. In all proability the loan would have been dealt with the senior full time managers at the bank but even then it was probably sanctioned from the UK.

 

So yes lets have a review but lets stick to the main important issues was the money spent correctly and prudently for a start. If not then I would prefer to just move on if all it is going to be another soap box for a few politicians to mouth off and make accusations while protected by Parliamenty privilage when all they appear to be concerned about is their column inches rather than doing anything that is sensible and practacle.

 

 

 

A lot of people made a lot of money out of the various MEA projects one way or another.

 

It is fair to say that each and everyone of them would rather things just moved on and we drew a line under this whole affair. Sort of thing.