Legal Costs

[FCMR]

Forgive me if I'm being naive, I'm no expert on financial matters, but, it seems that we are faced with two conflicting sets of facts:

The first one is presented by the board of the MEA who, up until this time, appeared to be doing a reasonable job of running our electricity supply and investing in technology for the future;

The second one is offered by a group of politicians who have as much knowledge of finance as I have, and who are facing a general election in a year's time.

Is that a fair assessment? If so, it's a really tough decision to choose which one to believe!

 

 

In the building trade on the Isle of Man, before you can carry out any work in which the tax payers money is being used you have to prove and pay the Government to accept the proof before you can carry out any work, what proof have this bunch of politicians given for the jobs they are doing and the money they are spending, the New hospital was a good example £millions spent on the say so of a buss driver

[Gladys]

I think you are right FCMR, this kind of matter wouldn't be covered by PI insurance. The MEA does not provide professional services so probably would only have limited PI cover, in any case.

 

Correct, you'd actually be looking for the Directors' & Officers' Liability Insurance

 

Stav.

Cheers Stav, but doesn't that only kick in when the board members are being sued in their personal capacity? At the moment it is still MEA (and subsids) and KPMG and is, in any case, an application to the court for a ruling rather than another party taking legal action against the MEA.

 

Thank you Chinahand for your long explanation. I fully accept that there will be others far more in the know than me, but I do seem to recall in the Sunday Opinion programme on MR when this first blew up, someone from MEA referred to the loans being taken out in a manner to avoid the provisions of their incorporating statute. The inference being that what was done was similar to a tax avoidance scheme (legal exploitation of the rules) rather than evasion (illegal tax dodging). That implied to me that there was some conscious design in how the borrowing was structured. Now whether that involved some kind of connivance from IOM Govt side and whether it was, indeed, a successful avoidance scheme who knows and only a court ruling will give us the answer to that latter question!

[Upstream]

Surely the reason there is a fiasco in the first place is down to inept legal advice.

 

So the Government chuck another £million of our money at it to pay more or less the same people to sort it out.

 

Nice work if you can get it. At £100s per hour.

 

 

 

There needs to be an enquiry into the fees charged by the greedy legal people on the Island.

[Lonan3]

A lawyer was driving his big BMW down the highway, singing to himself, "I love my BMW, I love my BMW." Focusing on his car, not his driving, he smashed into a tree. He miraculously survived, but his car was totaled. "My BMW! My BMW!" he sobbed.

A good Samaritan drove by and cried out, "Sir, sir, you're bleeding! And my god, your left arm is gone!"

The lawyer, horrified, screamed "My Rolex! My Rolex!"

[TheTool]

Nice one lonan

 

Well guys and girls here is an idea that most companies tend to stick to when loans are involved.

 

THEY USUALLY SPEND THERE PROFITS ON OUTSTANDING LOANS.

 

Surely the MEA should be spending any profit on loan repayments instead of the manx government bailing them out.

 

How these idiots even got on the MEA board is beyond me.

 

Instead of spending all that money on a power station and pipe line why not install some cables and get all your power from the uk.

 

This is madness we could have all the power and gas from the uk without spending money producing our own.

 

did anyone look into that, or maybe that would do people out of a job

[Chinahand]

I do seem to recall in the Sunday Opinion programme on MR when this first blew up, someone from MEA referred to the loans being taken out in a manner to avoid the provisions of their incorporating statute. The inference being that what was done was similar to a tax avoidance scheme (legal exploitation of the rules) rather than evasion (illegal tax dodging). That implied to me that there was some conscious design in how the borrowing was structured. Now whether that involved some kind of connivance from IOM Govt side and whether it was, indeed, a successful avoidance scheme who knows and only a court ruling will give us the answer to that latter question!

 

GTBB, an awful lot has been made of a single line in a lawyers reply to KPMG ... a reply which was leaked and spun by Mr Bell ... so much for confidentiality! You're correct that a distinction was made between avoidance and evasion, but the whole point of that distinction was that the MEA wasn't setting anything up any illegal structures and wasn't hiding anything, rather it was using already existing ... and legal ... mechanisms. That is what the definition of avoidance is!

 

The MEA has said multiple times: it had a choice in 2003 ... apply to Tynwald for an uncertain amount of extra funding, risking delays and the chance that contractors and suppliers would insist on payment of outstanding debts before any new deliveries; OR raise funds as had happened before using MCC.

 

Yes this was a deliberate choice; they were concerned that if things went wrong or were delayed the entire project was at risk. Given the reaction that has happened since then there is no doubt in my mind the decision was the correct one! If all this had happened while the project was ongoing it would have collapsed with huge implications for the Island's power supplies ... can you imagine the costs of prolonged unplanned power outages?

 

At the time the MEA board firmly believed they were acting legally in a way that had been sanctioned previously, they also firmly believed that everything had been reported to treasury as required and that they were taking the best decision to protect the IOM's electricity supply. That's exactly what the legal opinions at the time showed.

 

The PKF report basically agrees with this; saying it was mainly a communications breakdown between Treasury and the MEA.

 

I don't think anything has changed since then. The decision to use MCC was deliberate; it wasn't to hide or conceal things ... everything had been fully reported ... rather it was to ensure things weren't delayed. Now its been spun as a deliberate fraud ... bull!

 

The Board assumed all along that the interim financing would be converted over to long term funding once the project was over and the costs finalized. The banks were willing to fund this as the project is viable over its life ... the problem is liquidity, not viability, and the private sector would be willing to fund those short term shortfalls.

 

A project expanded in scope and cost more than expected thats basically it.

[Gladys]

Thanks Chinahand, you are probably right and all involved were acting bona fides in the best interests of the Island in securing the power supply. But the fact remains that the legality of the loans must be established in order for this mess to be sorted out.

 

If they are legal then all well and good, with confidence on all sides the repayments can be scheduled, or the loan re-financed, to be serviced within the anticipated cash flow. But if they are found to be illegal, then there will have to be some nifty footwork to regularise the position, not least Barclays will have to look at their position under a loan/security which may prove unenforceable.

 

The point is that there is doubt as to the legality and if the loans are illegal something will have to be done to address that. You can't just say well, we will act as though the loans are legal, because who knows what problems that will create in the future. Much better to have a judicial review now and identify the problem, address it and move on. With the amounts involved, you can't whistle, touch wood and hope for the best.

[Jonty]

and wasn't hiding anything, rather it was using already existing ... and legal ... mechanisms. That is what the definition of avoidance is!

 

The MEA has said multiple times: it had a choice in 2003 ... apply to Tynwald for an uncertain amount of extra funding, risking delays and the chance that contractors and suppliers would insist on payment of outstanding debts before any new deliveries; OR raise funds as had happened before using MCC.

 

Yes this was a deliberate choice; they were concerned that if things went wrong or were delayed the entire project was at risk. Given the reaction that has happened since then there is no doubt in my mind the decision was the correct one! If all this had happened while the project was ongoing it would have collapsed with huge implications for the Island's power supplies ... can you imagine the costs of prolonged unplanned power outages?

 

 

I don't think anything has changed since then. The decision to use MCC was deliberate;

 

 

A project expanded in scope and cost more than expected thats basically it.

 

How did it cost so much more than expected? Who was controlling the expenditure? Surely it was known in plenty of time that the project was going way overbudget - it wasn't a sudden emergency where they woke up and realised one morning things were way over budget and had to get emergency funding.

 

They had plenty of time to adopt the proper procedures and put their case to Treasury for extra funding. Wonder why they chose the other route - 'avoidance'. Was it because they knew the Treasury would say no - or at the very least would ask awkward questions as to why it was massively so overbudget.

[Loki]

stick a Gerbil in the Laxey Wheel and connect it up as a generator to power the Island's Electricity. Eco Friendly and problem solved !!

[TheTool]

yes that maybe a good idea but what do you do with the Gerbils bedding and poo that would cost £100 per ton to get rid off so it would not be value for money lol

 

Good idea though.

 

Let's hope the government get to the bottom of this matter i know its going to cost money but if we get some answers maybe its worth it.

 

After all the MEA has basically gone behind the back of the people of the isle of man to obtain money from a bank and they never told anyone about it.

 

I think the old board have basically used the money to help profit to profit