The following is a Jamaica Observer reportNew twist in Whitehouse saga -Samuda says gov't report shows Alston Stewart's firm to blame for US$41-m overrun-Observer ReporterWednesday, June 21, 2006Karl Samuda yesterday painted a picture of reckless management of the Sandals Whitehouse project by a company headed by influential People's National Party member Alston Stewart, which he said emerged in a government-commissioned probe that the administration has chosen not to release.
At the same time, Samuda called on the government to take legal action if necessary to have Stewart's firm, Nevalco Consultants Ltd, repay the US$41-million overrun on the 400-room hotel, saying that the firm breached its contract with the Urban Development Corporation (UDC), one of the developers of the property, "in a fundamental way".
"The taxpayers cannot be asked to cover these costs," Samuda, the Opposition spokesman on foreign affairs and foreign trade, said in Parliament.
"Our conclusion is that, because the breach was committed by the Mr Alston Stewart-led Nevalco Consultants, the JLP is demanding that the government take appropriate steps, including, if necessary, court action, to recover from Nevalco these overruns for which they were responsible and must be held responsible," said Samuda in his contribution to the sectoral debate.
Sandals Whitehouse, the first major hotel on Jamaica's south coast, was expected to be the catalyst for tourism development in that section of the island. But it became mired in controversy after Sandals complained that the developers failed to deliver the property completed and fully functioning when the hotel opened in February last year.
Sandals, which manages the hotel, said it was forced to cut rates and refund hundreds of guests. The company also said the issue damaged its reputation.
The hotel was completed more than a year behind schedule and well over the US$70-million budget. The Opposition has claimed mismanagement and cronyism during the hotel's construction, which was overseen by the UDC.
Last November, two firms owned by Sandals chairman Gordon 'Butch' Stewart, sued the UDC and the two other developers, the National Investment Bank of Jamaica (NIBJ) and Ackendown Newtown Development Company. The UDC and the NIBJ own two-thirds of Ackendown, while Gorstew, 'Butch' Stewart's holding company, owns the other third.
The suit by Gorstew and Sandals Whitehouse Management Limited - the management vehicle being used by Stewart for the Westmoreland hotel - argues that the terms under which Sandals leased the property were breached because of the negligence of the other parties.
Sandals is seeking US$29 million for the losses it incurred and has asked the court to rule that it should not contribute to the US$41 million cost overrun because it made no material design change to the property that would have contributed significantly to the increased cost.
But the UDC has claimed that a substantial reason for the cost escalation was because of extensive changes in design demanded by Gorstew/Sandals.Gorstew has rejected these arguments, saying in court documents that the overrun was because of the failings of the government agencies.
Last October, the Parliament voted on an Opposition motion that the government conduct a forensic audit into the financial and management aspects of the hotel's construction.
Yesterday, Samuda said that a committee set up by former prime minister P J Patterson to probe the issue had completed and submitted its report on November 21, last year. He accused the government of withholding the report from the public.Claiming that he had a copy of the report, Samuda said its findings were not complimentary.
According to Samuda, the report showed that "no documentation has been presented by any of the parties showing any instructions for changes in design". Gorstew, Samuda said, requested a variation amounting to US$1,281,560. "This amount is to be paid by Gorstew subject to any offsets or other matters to be adjusted between the parties," the report said.
Samuda said the report showed that the NIBJ acknowledged and expressed concern that it was not aware of the extent of the cost overrun until January 2005, it had seen no authorisation for the variations to the project, and procedures and processes set out in the agreements may not have been followed.
"These are incredibly damning confessions," said Samuda. "This confirms exactly what we have been saying about the careless manner in which this whole project was managed by both the UDC and. Nevalco Consultants Ltd."
But Samuda added that Alston Stewart and Nevalco were the parties on which the spotlight should be turned in relation to the cost overrun.
He explained that under clause 10 of the principal agreement between the UDC and Ackendown, the UDC indemnifies Ackendown against the consequences of any breach by the project manager, including cost overruns.
He said, too, that the agreement between the UDC and Nevalco provides for the UDC to retain overall liability for the performance of the project manager's duties.Samuda also said that under clause 6 of the agreement Nevalco agreed to indemnify the UDC against the consequences of any breach of its obligations under the pact.
"In a nutshell, what we have is the UDC indemnifying Ackendown against any breach of contract which may be committed by Nevalco and Nevalco indemnifying the UDC against any breach that it may commit," said Samuda.
He said he had information that the UDC and possibly the NIBJ have been trying to have Petrocaribe funds used to cover the overrun. However, there is a disagreement between the parties on this strategy.
"This government really should resign," said Samuda. "In any civilised country they would have to resign."
Mr. Samuda’s comprehensive and analytical presentation in parliament, recently. His disclosures of gross mismanagement, cronyism and consequent overruns on the part of the government at the Sandals Whitehouse project again brings to the fore the issue of good governance and in particular accountability.
