Unfortunately, in making his case, Mr. Bean has adopted an approach that is both legally and procedurally flawed, and is more likely to undermine his objective.

First of all, it is constitutionally incorrect to suggest that Bermuda has separation of church and state in the form suggested by Mr. Bean.  While Section 8 of the Constitution (Protection of Freedom of Conscience) guarantees the freedom to practice one’s religion and the right not to be forced to receive religious instruction, it does not prohibit churches from voicing their opinions on state matters.  In other words, under the Bermuda Constitution, the separation only works one way—the Government can’t interfere with the operation of the churches, but there is nothing preventing the churches from using their influence to affect Government policy.

In fact, Section 9 of the Bermuda Constitution (Protection of Freedom of Expression) specifically guarantees the right of everyone in Bermuda (including religious leaders) to express their opinions on any matter including political matters such as the implementation of gaming.

So, legally speaking, Mr. Bean has no justification for stating that churches should not get involved with the gaming debate.

Second, and most importantly, the success of gaming in Bermuda will only occur if Bermudians work together to make it a success.  That doesn’t mean that everyone has to agree with the implementation of gaming; it simply means that buy-in for gaming will be much greater if the process to arrive at the decision to allow gaming is widely seen as being fair.

In other words, not only should all Bermudians (including church leaders and members) have a right to vote on the matter, but they also should have the ability to publicly state their reasons for or against gaming, and those reasons should be made available for all to read and hear.  In this regard, it would be helpful for Government to set up a website that publishes all formal submissions made by various concerned groups or individuals, as well as a comment section that allows individuals to voice their support and provide reasoned argument for or against the proposal.  Only after the completion of such a process to allow everyone a public voice should the matter then be put to a vote by referendum.

Mr. Bean should be applauded for his attempt to help struggling Bermudians and the tourism industry. But if his objective is not just to legalize gaming, but to make gaming in Bermuda a success, then instead of attempting to exclude certain parties such as the churches, he might try supporting a system that engages all parties throughout the decision-making process.  In that way, the process will be seen as fair and therefore the buy-in supporting the decision and its implementation will be greater.

If you are a blue-collar worker, you have likely seen expat workers come and go with minimal disruption to work flow.   For example, if an expat electrician, plumber or mason is scheduled to leave a company, it is often only a matter of weeks before his expat replacement is completely up to speed.

That’s because the world of physical labour, by definition, deals predominantly with physical things that are relatively constant.  Stranded 12-gage wire, 675-PSI copper pipe, and 43-grade cement do not change their essential form or substance from day to day or from job to job.

So the new expat employee, who already has much experience working with the materials and tools of his trade, can smoothly transition into the job vacated by the old expat employee.   Yes, he must learn certain idiosyncratic parts of the Bermuda industry, such as which stores are the best sources of certain materials and which workers are the best sources of helpful information, but he can easily and quickly handle the largest part of his job—working with familiar equipment and materials to build or repair a given product.

Given that perspective, it is understandable that a blue-collar worker might consider the Term Limits Policy a viable way to control long-term residency of expatriate workers and perhaps encourage employers to train more Bermudians for jobs.

However, if you are a white-collar worker, particularly someone in middle or upper management, your perspective of the costs and benefits of the Term Limits Policy is likely the complete opposite.  That’s because International Business is predominantly a world of non-physical things like information and relationships.

For example, the manager of an insurance company’s Claims Department (usually a lawyer) requires legal training to understand the intricacies of each of the numerous lawsuits that he deals with on a daily basis.  In that regard, he is much like an electrician or plumber who requires training to understand the intricacies of his profession.  But that does not mean a company can easily replace its claims manager without suffering great disruption and potential risk of loss.

That’s because the nature of a claims manger’s work involves very specific information unique to his job and depends on very specific relationships that have been developed over the course of his employment.

For instance, the manager will have developed a strong working knowledge of the legal strengths and weaknesses of each of the numerous insurance claims and lawsuits he manages on a daily basis.  It would take his replacement many months to get up to speed on those files and it is quite possible that some time-sensitive matters could be mishandled during the transition.

The manager also will have developed a strong working relationship with each of the overseas lawyers who are handling these various lawsuits, and over the course of time he will have come to know their individual strengths and weaknesses.  That time-acquired information enables him to better manage the company’s legal exposure by ensuring that the right files are handled by the right lawyers.

These types of personal assessments, which are made on a daily basis yet can only be accurately made after years of working together, are but a small fraction of the world of relationships and job-specific information that are an essential part of international business.

For instance, Reinsurance Companies, Insurance Brokers, Captive Managers, Investment Management Firms, etc., have numerous employees—from the CEO all the way down to administrators—who help develop and maintain time-acquired information and long-term relationships that meaningfully contribute to the successful operations of these companies.

So in 2002, when the PLP Government announced the introduction of its Term Limits Policy that limited an expatriate’s term of employment in Bermuda to six years (with waivers to a maximum of nine years), the International Business community was stunned.

“How can you possibly ask that we fire our expat employees every six years and replace them with new ones when doing so will jeopardize the hundreds of relationships these individuals have developed with our clients, consultants, suppliers and strategic partners?”

But the PLP Government refused to withdraw the policy.  Instead, they pointed out that key employees such as the CEO and other top executives could apply to the Government for waivers and that the policy would only go into effect in 2008—six years after its introduction.

Over the next six years IB representatives met numerous times with the Premier and Government Ministers.  They explained that valued relationships were developed and maintained at almost all levels of IB companies, not just at the CEO and key employee level.  They explained that many of these expat employees had amassed time-acquired information that may be jeopardized if they had to keep replacing these employees.  They explained that limiting a person’s employment to six years made it difficult to recruit the best and the brightest candidates.  They explained that having to rely on a waiver from Government—which may or may not be granted—was too big a risk for them to take.

Most important, they explained that if the Government did not revoke the policy, the companies would have no choice but to move entire departments out of Bermuda resulting in the loss of hundreds of Bermudian jobs in the IB sector and thousands of Bermudian jobs in the local industries that directly and indirectly relied on IB business (e.g., law firms, accounting firms, computer companies, retail stores, restaurants, landlords, etc.).

Unfortunately, the PLP Government refused to revoke the policy.

So in 2008, when the policy became fully effective, IB companies began shipping jobs, departments, and in some cases their entire operations, overseas.  Over the next four years the predicted devastation became a reality.

Perhaps the saddest part about the Policy is that its unintended effects—the loss of thousands of Bermudian jobs and the loss of hundreds of millions of dollars in Government tax revenue—was completely predictable.  The IB representatives had explained numerous times to the Premier and various Ministers what would happen and why it would happen, but the Government ignored the warnings and steadfastly refused to revoke the policy.

Further, when it became clear that Bermudians were losing thousands of jobs, the Government tried to deflect the blame by claiming that those job losses were simply the result of the global recession.  Such explanation might have made sense if the IB companies had simply eliminated jobs as part of a downsizing in the face of falling global demand for their services, but the fact is that these IB jobs were not being eliminated; they were simply being moved to other countries that did not have a Term Limits Policy or extremely high payroll taxes.

In other words, the loss of many jobs in Bermuda had little to do with the global recession, and much to do with a Government that applied a blue-collar perspective to a predominantly white-collar economy.

On March 1^st, a number of well-intended blue-collar workers will likely join the rally to reinstate the Term Limits Policy.  Because of the perspective they have acquired from years of working in blue-collar industries, they can be forgiven their belief that Term Limits are a reasonable answer to the problem of long-term residency of expatriate workers in Bermuda.

But PLP Ministers know better.  They know the devastation that Term Limits caused, and they know the reasons why.

They also know that they could help bring some of those IB jobs back to Bermuda by declaring that the PLP has no intention of reinstating Term Limits if they are returned to power.

That public promise to forever kill Term Limits would go a long way to welcoming IB companies back to Bermuda so that the island can begin its slow recovery from a self-inflicted wound.

Kevin Comeau

February 27, 2013

The problem is not unique to Bermuda.  Many economists, businessmen and political leaders around the world are trying to decide the best way to stimulate their respective economies.  Some argue that government spending is best; others believe tax cuts are the way to go.

Because there are merits to both sides of this economic debate, it is difficult for these countries to decide which road is best for them.

Fortunately, in Bermuda, the appropriate choice is much less difficult because Bermuda’s economic structure is fundamentally different than that of most other countries.

Part One         Why Government stimulus spending doesn’t work well in Bermuda

Bermuda’s economic structure has three unique factors that dramatically decrease the effectiveness of stimulus spending.

First, unlike most countries, almost all goods and materials purchased in Bermuda are imported from foreign sources.  That’s a big problem for many stimulus spending programmes because every dollar of spending that goes toward the purchase of foreign materials adds zero benefit to the Bermuda economy.

For example, Government spending on physical infrastructure like the new courthouse was helpful to the extent the money was used to pay local architects, contractors, masons, electricians and general labourers, but it was unhelpful to the Bermuda economy to the extent the money was used to pay for the foreign-produced bricks, steel beams, lumber, drywall, electrical wiring, tile, new furniture and hundreds of other items that were purchased to build and furnish that building.

In other words, Bermuda’s reliance on imported goods and materials generally makes spending on physical infrastructure in Bermuda a less effective economic stimulator than similar spending in other countries where all of the labour, goods and materials are produced in that country.

Second, unlike most countries, the main driver of Bermuda’s economy—International Business—consists of foreign companies that sell their products outside of Bermuda.  That means that Bermuda Government stimulus spending in Bermuda will effectively do nothing to stimulate demand for the products sold by the companies that are the main driver of the Bermuda economy.  And since a huge number of Bermuda local companies do their hiring based on the direct and indirect demand for their services from International Business, stimulus spending will provide much narrower “trickle-down” benefits throughout the Bermuda economy.

Finally, and perhaps most important, it is structurally much more difficult in Bermuda to raise the tax revenue needed to pay for stimulus spending because International Business—the main driver of the Bermuda economy—consists of foreign companies that can easily arrange their affairs to minimize their exposure to Bermuda taxes by simply moving jobs to other jurisdictions (as they have been doing for the last four years).  So even if stimulus spending in Bermuda were an efficient way to create jobs in Bermuda (which, as discussed above, it isn’t) the raising of taxes to pay for that spending could trigger a large exodus of jobs at a much faster rate than in other countries, thereby negating much or all of the benefits of the stimulus spending.  Indeed, the exodus of IB jobs after the large payroll tax increase in 2010 is a perfect example of that problem.

In other words, most other countries can raise taxes without fear of a large percent of their companies simply getting up and leaving the country.  But in Bermuda, that is not the case.  A significant increase in taxes will result in a large exodus of the companies that form the core of Bermuda’s economy.  For that reason, increased government spending (and the debt it creates) is much harder to pay down in Bermuda and it would take a much lower debt threshold to cause a complete collapse of the economy.

So the reality is that, in Bermuda, Government stimulus spending creates much less benefit and has a much higher cost than stimulus spending in other countries—it provides proportionately less stimulation to the Bermuda economy and it results in higher tax costs that cannot be easily passed on to anyone other than Bermudians.

Most important, the debt threshold created by stimulus spending will bring Bermuda to economic collapse much sooner than it would in other countries because Bermuda can’t easily pass on that debt by increasing taxes without risking a mass exodus of International Companies and jobs.

That makes Government stimulus spending in Bermuda not just a high cost/low benefit proposition—which is always a bad investment—but it also makes it a very dangerous game that could easily lead to economic collapse.  For that reason, the Bermuda Government should try to find a more effective, less expensive and less risky method of stimulating the economy.

Part Two        Why tax reductions work better in Bermuda than in most other countries

In most countries, the businesses that are the main drivers of the economy usually don’t have the economic mobility to simply get up and leave the country if the government raises taxes.

For instance, if the US Government were to raise taxes, it may cause a slowdown of the economy, but it is not going to cause the majority of American companies to simply get up and leave the country.  Conversely, a decrease in American taxes may cause an increase in economic activity, but it’s not going to cause the number of businesses operating in America to double in the next year or two.

That’s because most businesses in America need to be in America to conduct their business. (Yes, outsourcing can reduce that need, but for many businesses, outsourcing to other countries is not possible, e.g., shale oil production, grocery stores, railway transportation etc.)     So an increase or decrease in taxes may affect the amount of business they do, but it usually will not affect their decision to remain in the country.  For the most part, they just have to suck it up and accept the reality of higher taxes.

In Bermuda the opposite is true.  An increase or decrease in taxes has a direct effect on whether the main contributors to its economy—International Companies—stay or go.  That’s because these companies sell their products and services to customers who are located outside of Bermuda, and therefore there is no intrinsic need for them to be in Bermuda to conduct their business—they can just as easily service their clients from Ireland, Switzerland, Cayman or any other low tax jurisdiction.

That makes tax rates in Bermuda a double-edged sword that can be swung powerfully in either direction.

In the same way that these types of companies have the operational freedom to move jobs from Bermuda to more tax-advantageous countries, they also have the freedom to move jobs from other countries to Bermuda if Bermuda were to offer more competitive tax rates, particularly lower payroll tax rates.

So if Bermuda wants to stimulate its economy, one of the most effective ways to do that is to reduce payroll tax rates for IB companies to the much lower levels that prevailed before the PLP dramatically raised them.

But the Government must be careful about how it structures its tax relief because, while it would be nice to give all businesses in Bermuda a tax break, the present high national debt ($1.5 billion) makes that difficult if not impossible to do without causing the debt to further skyrocket.

Realistically, the Government can only afford to give tax relief in targeted areas, and so it should target the industry that gives the biggest bang for its tax stimulus buck.  That means targeting tax relief for International Companies because, unlike most local companies, they can generate jobs not just in their own industry, but also in many other sectors of the economy.

For example, offering lower tax rates only to local companies will generate only a minimal increase in long-term growth and jobs, while offering lower tax rates only to International Companies should significantly increase long-term growth and jobs.

That’s because a large majority of Bermuda local companies derive their revenue either directly or indirectly from International Business.  If International Business is not expanding, then these local companies will not significantly expand their businesses, and no amount of tax relief is going to change that.

Conversely, if tax rates were significantly lowered only for IB companies, it would not only stem the flow of exiting IB companies, but it would also make Bermuda much more attractive to new IB companies.  The resulting increase in IB operations would not only increase the number of Bermudian jobs at the IB companies, it would also increase the number of Bermudian jobs at the local companies that directly and indirectly provide services to IB.

In other words, lower tax rates for IB companies would increase the number of Bermudian jobs at International Companies (e.g., insurance companies, captive management companies, mutual funds and fund administrators) which would increase the jobs at the local companies that directly service the IB companies (e.g., law firms, accounting firms, computer companies, office supply companies) and the jobs at local companies that indirectly service the IB companies (e.g., retailers, restaurants) as well as increase the incomes of the individuals who provide services to the IB workers ( e.g., landlords, taxi drivers) and the charities that receive donations from IB (basically all charities in Bermuda).

This additional economic activity at numerous levels of the Bermuda economy would also increase future Government tax revenues giving Bermuda a five-layered positive effect from the lowering of IB tax rates.  No other sector of the Bermuda economy can respond to tax reductions anywhere near as powerfully as the IB sector.

The dire state of the Bermuda economy, with high unemployment and high national debt, requires prudent governance to guide it forward.  By carefully wielding the sharpest, most powerful weapon in its arsenal—lower tax rates for International Companies—the new OBA Government can generate new jobs and higher incomes in multiple sectors of the economy.

Kevin Comeau

December 2012

The second thing to keep in mind is that Bermuda has a large national debt ($1.4 billion and growing) and therefore the evaluation of suggested programmes must be based on the expected amount of benefit for each dollar expended.  In other words, if a programme has a low taxpayer cost and a high social benefit, then it should be put at the top of the list of programmes to consider implementing.

The final thing to keep in mind is that community discussion is paramount.  The greater the community input into the development of a program, the greater the probability of community support, which for most programmes is a critical element of success.

With those three points in mind, I present the following four programmes to help reduce some problems in the black community that are now affecting everyone in Bermuda.  These suggested programmes should not be considered “solutions” to these problems, but rather viable starting points to begin a community discussion of what is needed and what is possible.

The Answer is Not Solely Education

Many social commentators and public officials have concluded that if we can improve public education, we can give all Bermudians the opportunity to reach their full potential. 

Unfortunately, this conclusion is only partially correct.

First of all, even if we improve public education by improving teaching and the curriculum, many Bermudian students, particularly those that come from dysfunctional families, will likely still be unable to reach their full potential.  That’s because the number one determinant of a child’s education success is the degree to which his parents participate in his education.  So unless steps are taken to help all parents, particularly those from dysfunctional families, become better parents, their children will continue to have very limited chances of education success.

Second, the greater the number of kids in a classroom that come from dysfunctional families (in particular, where the parents aren’t actively involved in their children’s education), the greater the number of kids that will not do their homework, will fall behind the rest of the class and will likely become disruptive, which forces teachers to spend more time at classroom management, leaving less time for teaching.  So even if a parent is doing all the right things to help his child succeed, that child will still be inhibited in his progress if there is a significant number of kids in his class whose parents are not doing the right things.

In other words, unless we develop and implement programmes to help dysfunctional families become less dysfunctional and non-involved parents become more involved, not only is it unlikely that their children will reach their full potential, but it is also unlikely that the other children who attend the same class will reach their full potential.

This is a large problem in Bermuda and is a significant reason why Bermuda public schools have fallen behind private schools in academic achievement—the higher the percentage of students from dysfunctional families/non-involved parents attending a school, the greater the chance that the school itself becomes dysfunctional.

So if we want to improve public education for all students, we have to help all parents, particularly those from dysfunctional families, become more involved in their children’s education.  Here are several suggested programmes that can help because they do four key things: (i) provide meaningful incentives for dysfunctional family members to learn how to be better parents; (ii) provide meaningful incentives for all parents (including those from dysfunctional families) to become more involved in their children’s education, (iii) provide meaningful incentives for deadbeat dads to give financial, educational and nurturing support for their children while providing a strong disincentives for fathering illegitimate children in the future; and (iv) improving the quality of education by providing meaningful incentives for the removal of bad teachers from the public school system.

Programme 1     Combining food and shelter programmes with family education programs

Bermuda spends tens of millions of dollars each year on social programmes to help the disadvantaged.  These programmes are important.  They provide the social safety net that allows struggling Bermuda families to pay their rent and put food on the table.  But the ugly truth is that many of these families are immersed in generational dysfunction that they don’t have the tools to fix.  They were born into dysfunction and they will give birth and raise their children in dysfunction because that’s the only pool of experience from which they can draw upon to deal with the problems they face.

The Bermuda Government, charities and social agencies have numerous programmes to help these families develop the life-skills needed to turn their lives around, but unfortunately many of these families don’t take advantage of these programs.  In many cases they are so immersed in dysfunction and debilitating nihilism that they can’t see that these programmes can help them and their children build a better future.  In other words, from their perspective, there is no incentive to take these life-skills programmes and so they don’t—or if they do, they do so only half-heartedly.

The Bermuda Government can change this.  They can go through every single social assistance programme they fund and, wherever possible, restructure it to provide incentives for education and life-skills improvements.  And they can do all this while spending only minimally more than they presently do.

For instance, the Bermuda Housing Corporation provides rent subsidies to needy families so that they can pay their rent, and in return we as a society receive the satisfaction that we take care of our needy.  But we can obtain a much bigger social return on our money simply by making part of the rent subsidy dependent on the recipients taking any number of life-skills programs, particularly programmes that teach them how to become more involved in their children’s education from the time the child is born right through to graduation.

For example, instead of paying an unemployed, single-parent mom $1,500 a month in rent subsidy, the Government can pay her only $1,000 but offer to pay another $500 if she enrols in and passes a parenting-skills class that teaches the importance of reading to your child every day, providing him with nourishing, affordable meals and singing songs or telling them stories to help them develop their vocabulary and imagination.  (The list of skills is long and varied and can extend right through the teen years.)

Each of these subsidy programmes can meaningfully help people improve their lives provided they are structured properly.  The key to the success of these integrated social programmes is to find out what each recipient needs to do to change his or her life around, and then to use a meaningful part of the financial subsidy as an incentive for them to take the steps needed to make that change.  The increased costs to Government are minimal while the increased benefits to both the individual and society are unlimited.  Consequently, on a cost/benefit basis, this programme ranks high.

Programme 2     Improving education by increasing parental involvement

Study after study has consistently shown that the number one factor in determining how well a child will do in school is not income or social status (it doesn’t matter if you are black, white, rich or poor).   Active parental involvement in a child’s education is the most accurate predictor of a student’s achievement in school—attending school regularly, earning higher grades, passing their classes, graduating senior school and going on to obtain a postsecondary education.  So what can be done to encourage parents to become more involved in their children’s education?

Fortunately, in December 2010, the Bermuda Board of Education unanimously approved a programme to increase parental involvement in children’s education, which involves three parts: (i) Getting the message out—a marketing programme aided by International Business to tell all parents about the importance of their involvement in their children’s education, (ii) Providing parents with the tools needed to get more involved—implementing a communication system that advises parents each day what their children learned in school and setting out the homework assignment, and (iii) a Scholarship program—every public school student would have the opportunity to earn $500 each year for completing their homework more than 90% of the time, an extra $250 for a B average and an extra $500 for achieving an A average (for a maximum pay-out of $1,000/year).  The money would be held in trust, conservatively invested, would only vest if the child completed high school and could only be used to pay for post-secondary education including trade school.  (For a complete description of the programs, see “Parental Involvement in Children’s Education” at www.bdagoodgov.org.)

Unfortunately, in the 19 months since the Board approved the Scholarship Programme (which would be funded by private donations with no cost to the Bermuda taxpayer) the Ministry of Education has neither given final approval nor even held one meeting to discuss the issue.

Programme 3     A Programme to reduce the problem of low income, single-parent homes with minimal father input

The unique and debilitating difficulties children from dysfunctional families face can be substantially reduced by implementing a programme that (i) assists single moms to collect delinquent child-support payments from fathers who contribute neither money nor time toward their children’s upbringing and (ii) encourages these fathers to spend more time with their children.  The programme works like this.

Under our present legal system, a mother seeking to obtain child-support payments must go to Court to obtain a judgment ordering the father to make those payments.  When the father simply refuses to pay, the mother then must go back to court for a garnishment order that must be served upon the father’s employer ordering that company to deduct support payments from the father’s salary.  This may sound like a good system—and sometimes it works—but far too often these fathers simply change jobs, thereby forcing the mom to start all over again.  With limited time and finances the mother often has little choice but to give up her quest for child support.  The result is a mother who has to work longer hours to pay the rent and put food on the table, thereby leaving even less time for her to properly nurture her child by (i) instilling in him proper moral principles, (ii) providing help and guidance with his education (particularly in the early formative years) and (iii) giving him a sense of belonging that comes from strong family and community involvement.

We can improve this inefficient and ineffective system by implementing a programme under which Government (i) helps single moms obtain the required court order against delinquent fathers and (ii) registers the garnishment order on a computerized national registry that constitutes continuous notice to all Bermuda employers.   Under this system the father will no longer be able to avoid payment merely by changing jobs because registration on the national registry will constitute continuous notice to all Bermuda employers, both at the time of registration and in the future.

It works like this.  Prior to paying salaries, each company will be required to enter the social security number of all their employees into a computerized national registry system.  This may sound like a large task, but it really just requires a one-time input of employees’ social security numbers, and thereafter it takes only one computer click to receive a computerized response.  Any moneys owing under a garnishment order will be deducted from the delinquent father’s pay-cheque and remitted to the single mom.

But there is even more that we can do, and it is this second part of the programme that is most important.  Once it becomes clear to fathers that they can’t escape responsibility for child-support payments, the programme can allow for a negotiated reduction in payments in exchange for the father spending more time with his children.  For instance, the original garnishment order can be for an amount equal to, say, 30% of the father’s salary, with provision that it be lowered to a lesser amount, say, 20% if the father agrees to certain conditions such as (i) spending at least 8 hours a week helping his children with their homework and playing with them at a community centre (like the Sandys 360 Centre or the Aquarium) or coaching their soccer or cricket teams and (ii) taking a parenting course to learn how to best nurture his children and help them with their educational endeavours.

What are the benefits of such a program?  The implementation of this National Garnishment Registration System will (i) increase the income level of single-parent families, (ii) reduce the need for single-parent moms to work a second job, thereby increasing the time mothers can spend nurturing their children and getting more involved in their children’s education, (iii) increase the time fathers spend nurturing their children and getting more involved in their children’s education, (iv) increase parent and child involvement in community activities, and (v) discourage men from fathering children when they are not prepared to provide the necessary financial and emotional support.  These five outcomes should not only dramatically reduce the number of at-risk children causing problems in the classroom, but they should also reduce the number of children becoming involved with gangs.  Since the programme can be implemented with minimal cost to the Government, on a cost/benefit basis, this programme ranks high.

Programme 4     Replacing Bad Teachers with Good

In the Bermuda public school system we have good teachers, mediocre teachers and bad teachers. With training, some of these mediocre teachers may become good teachers, but no amount of training can convert bad teachers into good.

For the sake of Bermudian children in our public school system, the problem of bad teachers has to be fixed. Studies have shown that if a child has a bad teacher for just one year, it will take that child one and a half years to catch up. And if the child has a bad teacher for a second year, he not only is unlikely to ever catch up, but he is also much more likely to drop out before completing high school and his chances of joining a gang and becoming involved in criminal activities increase substantially.

Bad teaching not only destroys lives, it perpetuates the cycle of poverty and dysfunction that prevents lower to middle class mobility—a key component to social stability, lower crime and more equitable income distribution between the races. In other words, bad teaching prevents all the good things that good public education can achieve.

We can dramatically improve public education if we can simply remove the five worst teachers from every school and replace them with excellent teachers. But there are two large barriers in in our way:

1.  The Bermuda Union of Teachers is required to protect all teachers, including bad teachers, from termination. Remember, the role of the BUT is not to improve teaching—that is the role of Government. The BUT’s role is to protect the jobs of teachers even when those teachers are bad teachers.
2. Because it is critically important that Bermudians all work together to solve their common problems, the Government should do its best to not simply fire Government workers—even bad teachers—but instead help them find other employment, which is difficult in our weakened economy.

So how do we get out of this mess?  How do we (i) get rid of bad teachers that are destroying our children’s lives, (ii) replace them with excellent teachers, and (iii) find some other employment for the terminated teachers?

A solution can be found by looking at an unrelated problem—the high cost of operating a business in Bermuda—to find a potential deal for all parties concerned.

Over the last ten years, International Business has seen their average annual employee costs more than double as a result of higher wages, higher pension and health-care costs and, in particular, higher payroll taxes, which now stand at 14% on a maximum salary base of $750,000.  When you consider that the annual payroll tax for a top executive is now $105,000 (14% of $750,000) and in 1998 it was only $9,000 (12% of $75,000) it is little wonder that the 1,167% increase in tax has persuaded a number of companies to simply transfer much of their work and their top executives to lower cost jurisdictions, which has meant fewer jobs for Bermudians, lower tax revenue for Government and lower sales for retailers, restaurants, taxi drivers and other local businesses.

So here’s how the Government can deal with the problem. They can set up a programme under which companies agree to hire former teachers and in return the Government agrees to give those participating companies a reduction in their payroll tax. The exact amount of the reduction will depend on the number of ex-teachers a company hires and the additional terms of the programme can be negotiated between Government and the business sector, but might look something like the following.

For every teacher hired, a company will be exempt from paying payroll tax for any one other employee (presumably it will choose a top paid executive), effectively allowing the company to pay for all or most of the teacher’s salary through payroll tax savings. The teacher will be paid at his former teaching wage and will be trained on the job for two years. At the end of two years’ probation, the company can then decide whether to continue his employment permanently. Under such a structure, ex-teachers who are offered continued employment will have the opportunity to possibly make far more than they ever could as teachers.

Keep in mind that even though someone is a bad teacher doesn’t mean he will be bad at his new job in business. Many of these teachers have Master’s Degrees and PHDs and may shine at jobs that require a different skillset than classroom management.

Some of these bad teachers may need a nudge out the door. This might be done by announcing that Government will start publishing the assessment scores that teachers receive each year. Let’s face it, parents should have the right to know if their children are about to be subjected to a year of bad teaching that may ruin their lives.

By addressing the needs of two key parts of Bermuda society—Education and Business—we can develop policies that can make all Bermudians better off.  And remember, every day that Government avoids implementing a programme to get rid of bad teachers is another day that they are choosing to support the interests of bad teachers over the interests of young children whose lives may be destroyed.

July 2012

The sad reality, however, is that such a dramatic shift in attitude and understanding is unlikely to happen in such a short period of time.  That’s because many whites, with good reason, no longer want to hear about the racial-equity issue, and many blacks, with good reason, no longer want to talk about the racial-equity issue, particularly with whites.

That breakdown in communication is, to a large degree, the result of two factors: the way many white Bermudians view the racial-equity problem, and the way many Bermudian race-equity advocates present the problem.

Fortunately, as we move closer to an election, there is an increasingly strong incentive for white Bermudians to carefully listen to the racial-equity concerns of the black community and to support the introduction of programmes to help struggling black Bermudians.

If racial-equity advocates can shift their approach to take advantage of that opportunity, Bermuda may be able to not only bridge the racial divide that has plagued this island throughout its history, but also come to a better understanding of why its education and political systems are failing to meet the needs of its people.

Strong incentive for whites to act

Many whites in Bermuda are reluctant to become involved in meaningful discussions of racial equity because they believe that there is no racial inequity any more, which rests on the argument that racial inequity ended with the removal of segregation laws and racial glass ceilings, and now everyone has equal opportunity.

This belief is particularly problematic because it has contributed to many whites no longer even listening to what racial-equity advocates are saying, making community-wide understanding and cooperation to develop solutions virtually an impossibility.

This is unfortunate because there are compelling reasons for implementing programmes that address the growing problems in the black community.  Moral fairness alone would dictate that a people who have been mistreated for hundreds of years should be given help in their time of need.  But on a more practical level, whites have much to lose if they do not work with blacks to go to the root of the problem because racial inequity, generational family dysfunction, a failing education system, a malfunctioning political system and gang violence are so closely interrelated in Bermuda that unless we minimize the former two, we are unlikely to turn around the latter three.

Fortunately, with the election soon upon us, there is an additional reason for whites to listen carefully to the concerns of the black community.  Simply put, if they fail to do so, the PLP will likely be re-elected, and many in the white community believe that outcome will be extremely detrimental to the future of Bermuda.

Justified or not, there is a strong feeling in Bermuda’s white community (with a fair amount of support from blacks employed in senior positions in International Business) that this country’s large economic problems are, to a great extent, the result of Government incompetence and the perception of corruption, and that if the PLP were to win the next election, Bermuda’s problems will become decidedly worse, not simply because the PLP are unlikely to govern better in the future than they have in the past, but because many Bermudians and expats will simply give up on Bermuda.  Their thinking goes like this—“if the electorate won’t throw out these guys after 14 years of incompetence and corruption, then there is little hope for the country and we should build our future elsewhere.”

Those Bermudians who hold this strong belief have a correspondingly strong incentive to reduce the odds of that happening.  And that means addressing the race issue in a meaningful and constructive manner.

While in many countries it would be highly likely that a governing party with a record of numerous breaches of good governance and a massive growth in Government debt would have little chance of re-election, in Bermuda that is not the case because good governance and fiscal competence are not the sole deciding factors in choosing the Government.  For years, one other factor has also played a primary role: race.

So right now the white community has a choice to make.  It can do nothing and simply gamble that a sufficient number of black Bermudians will give greater weight to the good governance issue than the racial-equity issue and therefore vote against the PLP, or alternatively, the white community can address the racial-equity issue in a meaningful way.

The following is an attempt to move that discussion forward, and is divided into three parts:

(i)                  Widening the White Perspective (which I will discuss today),

(ii)                Changing the Way the Racial-Equity Problem is Presented (which I will discuss in my Rotary speech next Tuesday), and

(iii)               Some Programmes That Can Help (which will be published in the Royal Gazette late next week).

Part 1       Widening the White Perspective

Eliminating the cause does not equate to eliminating the problem.

One of the biggest obstacles in dealing with racial equity in Bermuda is that whites and blacks generally see the issue very differently.  In fact, many whites don’t even see a “racial-equity” issue; they see only a poverty issue or a bad parenting issue that just happens to be greater in the black community than in the white community.  As far as they are concerned, racial inequity ended when segregation laws and racial glass ceilings ended.  In other words, because state-supported racial discrimination is legally and effectively a thing of the past, they believe that, by definition, everyone has equal opportunity.

The following discussion is an attempt to convince whites that not only is there another perspective of the racial-equity issue, but that other perspective is both valid and important.

There is one caveat: in no way should this discussion be considered complete.  I am a white guy talking about a complex issue that directly affects blacks and only indirectly affects whites.  Obviously blacks, particularly black racial-equity advocates, can tell you much more about this issue because they have studied it for years and lived with the problem all their lives.

My goal is simply to open the door to the possibility of whites and blacks taking another look at the issue because so much rides on the outcome.

The racial-equity struggle is different in Bermuda than in the US

Before beginning a discussion of racial equity in Bermuda, it is important to make clear what we are not talking about.  Specifically, we are not talking about overt, racist acts occurring today.  Yes, such acts of racial bigotry still occur, but they are relatively infrequent compared to yesteryear and victims now have legal recourse to address such wrongs, such as under the Bermuda Constitution and the Human Rights Act.

We are also not talking about a lack of political or civic power.  Unlike their counterparts in the United States, blacks in Bermuda not only control the legislature, but also hold an overwhelming majority of the key positions in the judicial and executive branches of Government.

In other words, the racial-equity struggle in Bermuda is much narrower than its counterpart in the United States.  In Bermuda, the principal concern is not about racial bigotry occurring today; those happenings (with the exception of some criminal justice/racial profiling problems) are relatively infrequent.  Nor is it about achieving political and civic power; blacks already have that.

The racial-equity struggle in Bermuda is, for the most part, about state-sanctioned discriminatory actions that occurred in the past—specifically over hundreds of years of slavery, segregation and racial glass ceilings—that have directly and indirectly contributed to the disadvantages many black Bermudians face today.

These disadvantages—economic, educational, psychological and social—vary significantly from family to family and person to person.  In some cases they are mere obstacles that with hard work and the help of dedicated parents are already being conquered, and in other cases they are so overwhelmingly large and crippling that they have become principal contributors to the generational family dysfunction that not only impedes economic and social advancement but also plays a significant role in Bermuda’s increasing levels of gang violence and crime.

Racial inequity in the business world

Let’s begin our examination of racial inequity by looking at the world of Bermuda International Business.  This may seem like a strange place to start because racial inequity in the business world is not Bermuda’s biggest racial problem.  In fact, it is relatively minor in comparison to racial inequity as it relates to generational family dysfunction, education and gang crime.

But the business world—particularly International Business—is an area in which many white Bermudians and expats are intimately involved yet they are unable to see any racial inequity.  They generally see two types of IB companies: (i) those that go out of their way to be colour blind, hiring employees based only on their credentials and promoting people based solely on their performance, or (ii) those that go out of their way to hire and promote black Bermudians wherever possible.  On that basis many white Bermudians and expats conclude that there is either no racial inequity in International Business or, if there is any, it’s against whites.

The problem is that racial inequity is often difficult to detect except when it is happening to you.  That’s because although racial inequity can pose difficult hurdles to climb, it is usually very subtle, blending in to our daily lives like the flow of traffic, yet leaving behind accident victims few of us can see.

To illustrate the point, let’s look at an example where racial inequity arises in the business world yet, as we will see, no one will have acted improperly.

Let’s assume there are two Bermudian boys of exactly equal high intelligence.  One is white, the other black.  They both come from loving parents that instil in their children a strong work ethic with a heavy emphasis on education.  The white boy’s parents have substantial inherited wealth (they were part of the group pejoratively referred to as the Forty Thieves) and the black child’s parents have no inherited wealth but they both work at mid-level jobs that provide them with enough money to buy a house but not enough to pay for private school.  So the white boy attends Saltus from P1 to the completion of high school at the same time that the black boy goes through the public school system.   Both boys graduate at the top of their class.

Based upon private and public school test scores of Bermuda students over the last ten years, we can assume at this point that, academically, the black boy will probably be at least a year behind the white boy because public schools are typically that far behind private schools even when the student is an excellent student, as in our present example.  (This point is discussed more fully in Part 3—Some Programmes that can Help, which will be published in the Royal Gazette late next week.)

Upon graduation from high school, the white boy goes to an Ivy League school, and the black boy goes to a mid-level American college, which is the best that his parents can afford with their limited savings, education bank loans and some scholarship money the boy has earned.

Several months before college graduation, the white young man’s father informs his Mid Ocean golfing buddy (who is the CEO of a major re-insurance company) that his son is about to graduate from Harvard.  The CEO is thrilled to hire such a bright young Bermudian with excellent education qualifications, and after an interview the young white man is hired with the expectation of grooming him for great things in the company.

The young black man sends his resumé to a number of reinsurance companies, and because they want to hire well qualified Bermudians, particularly black Bermudians, he obtains a job with a large reinsurance company, in this case, the same reinsurance company that hired the young white man.

The young white man does wonderfully well in the company.  He is soon completely at ease with his co-workers, knowing how to act and what to say (and not say) because that is the world he has always lived in.  He is also great with clients, often taking them golfing at Mid Ocean where he has been a member all his life.  He is everything the company hoped he would be, and the company is everything he hoped it would be.  Their future together is as solid as a rock.

The black young man is less at ease within the company.  He must be more careful about what he says and sometimes faces awkward moments, such as when some boss casually asks him in passing why so many young black males are joining gangs and shooting each other, or why so many young black girls are having babies out of wedlock.

How does he answer those questions?  He could point out that whites are never asked to defend their race when some white serial killer murders a dozen young women.  But then he would be seen to have a racial chip on his shoulder, a career limiting trait that he wishes to avoid.  So instead he says something safe and unthreatening like, “I don’t understand it.  If these kids would just apply themselves and work hard, they could have great lives too.”

But then he feels like a traitor because he knows his answer is simplistic and ignores the difficult reality that so many of his school friends faced—kids who were born into families of generational dysfunction who never received the time, love and guidance that we all need to grow into loving and productive adults; kids whose parents never read to them, taught them the alphabet or how to count before they started school; kids whose parents never made sure they did their homework or gave them guidelines enforced with love and consistency that helped them make the right choices in life.

The young black man also notices that he is still paying off student loans so he can’t afford a membership at Mid Ocean to take clients golfing and he can’t afford to buy a house, unlike the young white man who has no student loans because his dad had lots of money to pay for his entire education.

Both men go on to have long careers with the company; the white man eventually becomes the CEO and the black man becomes an executive vice president.

No racism, yet there is still racial inequity

Throughout this example, there were no racists.  The company hired the young white man before the young black man based purely on the strength of the schools where they were educated.  Further, the company promoted the young white man over the young black man because he truly fit in better in the Euro-American world of International Business—he was great with clients and got along with everyone in the office, always knowing the right thing to say and do.

On that basis, it is easy to come to the simplistic conclusion that there was no racial inequity.  But, in fact, it goes to the very heart of what racial-equity advocates are telling us and many whites find difficult to understand—just because there is no racist act occurring today does not mean that there is no racial inequity today.

For the most part, today’s racial inequities are the result of yesterday’s racial injustices.  And it is for that reason that even at the highest levels of black integration into the world of International Business, there are more complex hurdles for young black executives to jump over on their road to the top, while there are continuing advantages for whites.

And to be clear, these advantages are not limited merely to those families referred to as the Forty Thieves.  In racially segregated Bermuda, all whites gained economic and educational advantage because they had better access to jobs, housing, schools and bank financing.  Further, even Bermudians of Portuguese decent, who themselves were the victims of discrimination, were granted access to better jobs in Bermuda long before the racial glass ceiling was lifted for blacks, which gave many of these Portuguese men and women the ability to earn and save enough money that they can now afford to send their children to private schools to eventually take advantage of the great opportunities in International Business.

These lingering white advantages and black disadvantages are something that the black community is very aware of and something that the white community often fails to see, and it can be particularly galling for blacks to hear the repeated myth that the end of segregation brought an end to racial inequity.

An integral part of the racial-equity struggle in Bermuda is about making whites more aware of the connection between the lingering advantages from 400 years of institutional white affirmative action and the lingering disadvantages from 400 years of black slavery, segregation and racial glass ceilings.  Without that increased awareness, it will be difficult to develop the community-wide understanding and commitment needed to address the racial-equity problems in Bermuda, of which the International Business example is but the smallest part of the problem.

The future for many others promises little hope

The above example illustrates how high intelligence and hard work does not equate to equal opportunity in Bermuda.  Centuries of racial injustice have resulted in economic disadvantages for today’s blacks and, given the wide gap in effectiveness between our private and public schools, those economic disadvantages usually translate into educational disadvantages because many black parents can’t afford to send their kids to private schools and expensive colleges.  This, in turn, perpetuates the cycle because the weaker the school attended, the lesser the chance of getting a higher-paying job in International Business or elsewhere.

But in many ways two other disadvantages of racial inequity—psychological and social—can be even more difficult to overcome.  For centuries the white community, in need of moral justification for the enslavement and segregation of an entire race, proclaimed blacks less than fully human, with higher thresholds to pain and lower thresholds of innate intelligence.

It therefore should be no surprise that hundreds of years of constant denigration, through both actions and words, has left many blacks with lingering doubts about the inherent intelligence of their race, which make the normal doubts of one’s own personal intelligence and self-worth all the more complex and difficult to resolve.

While these psychological disadvantages can be found at all socioeconomic levels in the black community, they can be particularly crippling to those blacks immersed in generational family dysfunction with limited economic, parenting and education support.

Had the bright young black man in our example been born into a single-parent family where the father provided minimal or no economic, education or parenting support, and the mother worked long hours just to pay the rent and put food on the table thereby leaving little time to give the child the nurturing and consistent guidelines needed to do well in school and make the right choices in life, the chances of that young man completing high school, graduating from college and having a successful career in International Business are next to none.

Conversely, his chances of joining a criminal gang are many times greater.  Not only are Bermuda gangs targeting their recruiting efforts at young black teenagers from single-parent homes (they are considered the low hanging fruit) but even if a teenager were to stand firm and say no, he becomes vulnerable to physical attacks from rival gangs who simply assume he said yes.

Further, if a young man ever wants to leave the gang life, the jobs he can realistically obtain are extremely limited not simply because he has minimal education but also because he is often unable to work at a job that takes him far beyond his neighbourhood—for instance, if he were a 42 gang member, he can’t become a plumber or even a delivery truck driver because if he goes west of Warwick he risks getting shot.

To be clear, this is not simply a poverty issue.  Young white males from poor, single-parent homes in bad neighbourhoods do not have the same bleak future as their black counterparts.   They are not the target of gang recruiting, they are not assumed by rival gangs to have joined their neighbourhood gang, and they don’t face the threat of being shot if they travel past Warwick.

It’s more than a black problem; it’s a Bermuda problem

This gang culture, which is responsible for a dramatic increase in violent crime and murder over the last few years, is now adversely affecting the lives of everyone in Bermuda.  We are now a less safe tourist destination, a less safe International Business domicile and a less safe place to raise our children.

In other words, the so-called “black problem” in Bermuda is more than a black problem, it is a Bermuda problem.  It was caused, to no small degree, by white Bermudians (through hundreds of years of slavery and segregation and the propaganda that supported it) and even though black Bermudians disproportionately suffered and continue to suffer from its harmful effects, now all Bermudians are being affected.

But once recognized and accepted as a Bermuda problem, a great shift can begin.  The white community can change the way it listens to racial-equity advocates, moving from a position of “I don’t want to hear this” to “how can we all work together to solve this?” 

It is this shift in the white community that can give racial-equity advocates the opportunity to build the coalition needed to heal this lingering wound that lies at the centre of just about every problem Bermuda faces.  But the big question remains—will racial-equity advocates take advantage of that shift by adopting a more inclusive approach to the way they present the racial-equity issue?

Part 2    Changing the Way the Racial-Equity Issue is Presented

Yesterday’s solution is today’s problem

A number of racial-equity advocates have dedicated their entire lives to the racial-equity cause, continuing to speak out about the problem even though it personally cost them dearly.  Their intentions have always been honourable and they should be publicly thanked and praised for the tireless work they have done to make Bermuda a better place.

These advocates understand that the racial-equity issue is so important yet so complex and unwieldy that meaningful progress will likely only occur if all Bermudians—blacks and whites—work together to address the problem.  Unfortunately, many white Bermudians are no longer listening, and for good reason.

That’s because, at present, the racial-equity movement in Bermuda is based on the old construct of “black authenticity” (“I’m black and I have struggled, therefore blacks should rally around me”).  In other words, blacks must support other blacks simply because they are part of the same historically-persecuted racial group; hence the rallying cry, “United we stand, divided we fall.”

The problem with this method is two-fold.  It inhibits meaningful participation from the white community and it propagates Government incompetence and corruption.

A number of America’s leading racial-equity advocates, including Princeton Professor Dr. Cornell West, Harvard Professor Henry Louis Gates, Jr., and social commentator Tavis Smiley, have spoken at length about the need to shift from this archaic “black authenticity” construct to a “morality-based” construct, which rests on the proposition that we, as a just society, should take action to meaningfully address racial-equity problems because it is morally justified.

This is much more than a semantic shift.  It means that all parts of the racial-equity issue—the justification for action, the programmes advocated, and the purposes for which advocates and others use the racial-equity issue—must be examined from a moral perspective.  The more consistently these essential parts can be placed and maintained on the moral high ground, the greater the chances of persuading members of the public—both black and white—to support the cause.

So let’s take a look at how the old “black authenticity” construct has failed to galvanize white support for the racial-equity movement in Bermuda and how the “morality-based” construct can change that.

How the “Black Authenticity” construct is now harming the racial-equity movement

Sixty years ago, before universal suffrage, black Bermudians did not have a political voice, and so unifying their cause through collective solidarity was their best chance of ending segregation—hence, the need for the “black authenticity” construct.

It was only by unifying themselves through black collective action, particularly boycotts and demonstrations, that blacks were able to coerce the white Government into capitulation, ending segregation.  Moral arguments alone were simply not sufficient firepower to compel the white elites to end generations of institutionalized white privilege.

Today, all that has changed.  Segregation has ended; racial glass ceilings have ended; universal suffrage is complete, and black Bermudians not only control the legislature but also hold an overwhelming majority of the senior positions in the judicial and executive branches of Government.

Unfortunately, the harmful aftereffects of hundreds of years of racial discrimination are still with us, and over the last ten years the problems in the black community have become significantly worse.

The issues—in particular, generational family dysfunction, a failing education system, and gang violence—are serious and complex and, as everyone seems to agree, we are unlikely to dramatically reduce these problems unless the entire community comes together to more fully understand the issues and then work together to develop and implement meaningful programs.

The problem, however, is that the “black authenticity” construct that was so crucial to ending segregation is now alienating so many white people that it makes a unified community approach extremely difficult if not impossible.

If you look at it from a white Bermudian perspective—and that is the only relevant perspective when we are trying to convince whites to support the cause—that result is not surprising.  A racial-equity group that defines itself simply by being black naturally alienates anyone who is white.  So it’s understandable that whites have walked away.  Who wants to be where you’re not wanted?

But the problem for whites is much deeper than that.  The “black authenticity” construct requires participating blacks to publicly support other participating blacks no matter what the circumstances. That may sound honourable, but what if the black participant does something dishonourable?  What then?

That’s not just some hypothetical question.  Over the last ten years black Cabinet Ministers have been at the epicentre of numerous scandal-tainted Government contracts that have cost Bermudians many millions of dollars.

When members of the Official Opposition in the House of Assembly asked probing questions about these tainted contracts, the black Cabinet Ministers refused to answer, using racial metaphor as a defence.  “That’s a plantation question,” they cried, and even referred to the questioning member of the Opposition as a “racist dog.”

Whites, including those in International Business, were stunned.  How was it possible that key black Cabinet Ministers could shield themselves from questions about their own possibly corrupt activities simply by wrapping themselves in cloaks of racial indignation?

And the most stunning part of all—not one racial-equity advocate said a word.

But then how could they?  The Bermuda racial-equity movement is still based on the archaic “black authenticity” construct, which requires all participating members to protect other participating members no matter what—remember, “united we stand, divided we fall.”  So if a high-ranking elected Government official publicly tarnishes the most sacred issue in the black movement for his own selfish purposes, black racial-equity advocates must remain silent.

For many in the white community, that was the last straw.  No more would they listen to arguments about a moral imperative to support the racial-equity movement when, from their point of view, the leaders of the movement had tacitly allowed its good name to be used for immoral purposes.

Collateral damage to the political system

Unfortunately, the damage caused by the archaic black-authenticity construct was not limited to the racial-equity movement.  As I came to find out first hand more than five years ago, a racial-equity construct that bases its support on racial affiliation instead of universal morality can create unintended negative consequences that go to the heart of Bermuda’s political system.

In early 2007, I met with a Cabinet Minister (who has been one of the PLP’s key strategists for decades) to discuss a number of policy proposals that I had developed over the prior two years, most of which were designed to reduce the growing gap between the haves and have-nots in Bermuda.

It had become clear that the biggest expense for Bermuda’s poor was rent, and the increase in rents caused by the then raging housing boom was causing great hardship to Bermuda’s struggling poor, many of whom are black.

I explained to the Minister that if Government would simply ask companies to change the way they structured housing allowances (move to a cash basis to replace the “you-lose-what-you-don’t-use system), we could dramatically reduce upward pressure on rents and house prices, which would not only help the struggling poor but also help retail stores, hotels and restaurants that were forced to pay higher wages because their employees were forced to pay higher rents.

He said he loved the idea, calling it truly brilliant.  “But, unfortunately,” he said, “we’re not going to do it.”

When I asked why, he explained that most of the Cabinet Ministers were landlords, so the last thing they wanted was lower rents.

I literally broke out laughing and asked why he was being so candid.  He could have simply told me that he would bring it to Cabinet, and then do nothing.

He then explained that the opposition UBP was a party in disarray and it would be many years, if ever, before they would be re-elected.  “So,” he said, “We can do whatever we like.”

The statement was truly appalling.  Not only was he effectively saying that he and his fellow PLP Cabinet Ministers were putting their personal financial interests ahead of those of struggling workers and the poor, but he was also making clear that he didn’t even care if I, a member of the general public, knew it.

But then again, under a “black authenticity” construct of racial equity, he was right—the PLP could do whatever they wanted without political consequence.  It simply didn’t matter if they chose to put their own personal financial interests ahead of their struggling black constituents because under a black authenticity construct, all blacks who support the racial-equity movement were duty bound to vote for the PLP.  In other words, Cabinet Ministers were free to abuse their black constituents, and these constituents still had to vote for them.

Sadly, the 2007 election proved the Cabinet Minister knew of which he spoke.  Even though several PLP Cabinet Ministers and Parliamentary Candidates were then embroiled in controversies of corruption, the PLP once again used the race issue as a rallying cry for electoral support and won another majority Government.

After the election, the political corruption scandals grew exponentially worse, eventually exceeding far more than a hundred million dollars in tainted Government contracts.

Sadly, Lord Acton’s words were once again proven true—Power corrupts, and absolute power corrupts absolutely.

The power of a morality-based construct

Dr. Cornel West, one of America’s most prominent (and brilliant) racial-equity advocates, has strongly advocated replacing of the “black authenticity” construct of racial equity with a “morality-based” construct.

In his 1994 book “Race Matters” Dr. West states that we must replace “racial reasoning” with “moral reasoning”—to understand the black struggle not as an affair of skin pigmentation and racial phenotype but as a matter of ethical principles and wise politics.

He eloquently explains that “tribalism is too exclusive to succeed and is more likely to cause division and economic and social collapse.  It is the ethical dimension that creates the critical mass needed for a successful social movement.”

Although Dr. West was generally speaking about the American racial-equity movement, his 1994 words could not have been more prophetic for Bermuda.  Over the last ten years Bermuda, under the governance of a black Government, has seen a marked deterioration in race relations while the problems in the black community have both widened and deepened.

Gang violence and crime have skyrocketed, generational family dysfunction has increased, and more black families are struggling to pay their rent and put food on the table.

How was it possible that the racial-equity movement—the struggle to give poorer black Bermudians a better life—worsened under a black PLP Government?

The missing piece of the puzzle is what racial-equity advocates have been calling for all along—white support. It is not simply that whites constitute 40 percent of the population and control an even higher percentage of the island’s wealth that makes them a critical element of a successful movement.  It is that the problems of racial equity are so complex and unwieldy that it takes the entire community—both blacks and whites—to work toward viable solutions.

But because Bermuda is still using the old “black authenticity” construct, whites are constantly being pushed away from the racial-equity movement to the point that many whites no longer even want to hear about the issue, let alone work toward the development of helpful programs.

Clearly there is a lot of work to do.  The inherent moral persuasiveness of the racial-equity movement in Bermuda has, in the eyes of many, been undermined by what they see as high-profile elected officials hijacking the black racial-equity movement to protect themselves from public scrutiny of possible corrupt self-enrichment.  Getting white Bermudians to believe that the racial-equity movement is a worthy and moral cause will take some explaining by racial-equity leaders.

But with the election approaching, there is a window of opportunity.  Many whites want to see the PLP removed from power because they believe they are both corrupt and incompetent and are causing great harm to all Bermudians.  So in addition to the moral impetus to address racial injustice, there is an additional incentive for whites to meaningfully address the race issue—if they can make clear to the black community and racial-equity advocates that they are serious about wanting to help, they may give pause to those black Bermudians who are disillusioned with the PLP but feel duty bound to vote solely on racial lines.

So what action should whites take if they want to help?  A good place to start would be to call CURB (Citizens Uprooting Racism in Bermuda at 542-2872) where they can learn much more about racial inequity (I have only touched upon the issue in this and last week’s speech) to gain a deeper understanding of the problems facing the black community.  For some whites that may be a big step because they may have certain preconceived ideas about CURB and the racial-equity movement.  But they must realize that unless one side takes the first step, the two communities will never develop the mutual trust needed to meaningfully address the serious problems that are now crippling Bermuda, all of which involve race to some degree or another.

Finally, and most importantly, whites need to understand that, while talking about the issue is a critical first step to understanding, the ultimate goal is to develop and implement viable programmes that address the serious problems resulting from racial inequity.  In other words, “wanting to help” must include not only a willingness to talk about the issue, but also a willingness to take action.

Will Racial-Equity Advocates make the needed shift?

Getting more whites on board should pose an exciting opportunity for the racial-equity movement.  As Dr. West points out,  white supporters of the racial-equity movement can be extremely persuasive advocates because, as members outside the “persecuted group”, they had to think critically beyond their own self-interest into the higher realm of dispassionate moral principle—and that makes them powerful allies.

If the racial-equity leaders can meet that opportunity with a shift in their approach from a “black authenticity” construct to a “morality-based” construct, they have a good shot at finally making a great leap forward in the racial-equity struggle.

But that shift will require the same high integrity that Dr. West, Tavis Smiley and other American race-equity advocates showed when they both publicly hailed certain policies and actions by President Barrack Obama and publicly criticised certain policies and lack of action by President Obama.  In other words, their allegiance was to the morality of action in furtherance of their cause, and their criticism was targeted at any action or inaction that undermined their cause.  It made no difference if the person receiving the accolades or criticism was black or white or even a close friend.  They simply judged morality by the particular action in question.

That shift to a morality-based construct did not come without personal costs.  Many black Americans, particularly black politicians and their close allies, publicly criticised Dr. West and Mr. Smiley, claiming they were not being faithful to their race.  Their response, in both words and action, made clear that it would have been even more irresponsible to hold on to a dying construct that was holding back the racial-equity movement.

By consistently steering the racial-equity movement on a virtuous path, these American racial-equity leaders have moved their cause to a higher level of integrity, commanding the respect of all communities.  Time will tell whether Bermudian racial-equity leaders will show the same level of courage or simply continue to support a dying construct that is now not only undermining the black struggle but also corrupting the democratic principles of good governance and moral justice.

And that brings us to the third and final part of this speech, “Some Programmes that will Help.” which will be published in the Royal Gazette on Thursday and Friday.  I ask that you please read those four proposed programs and then carefully consider the words of Edmund Burke:

“All that is necessary for the triumph of evil is that good men do nothing.” 

Part 3    Some Programmes that will Help

General

The first thing to understand about social programmes is that there is no magic bullet.  All important public policies are, by their very nature, dealing with subjects that are insoluble.  Poverty, racial inequity, drug addiction, an ineffective education system—these problems will always be with us to one degree or another because they involve complex matters that are entwined with the frailties of the human condition.  So when we attempt to evaluate the worth of a public policy, the question is not “will the implementation of the policy solve the problem?” the question is “will the implementation of the policy have a reasonable chance of reducing the problem?”

The second thing to keep in mind is that Bermuda has a large national debt ($1.4 billion and growing) and therefore the evaluation of suggested programmes must be based on the expected amount of benefit for each dollar expended.  In other words, if a programme has a low taxpayer cost and a high social benefit, then it should be put at the top of the list of programmes to consider implementing.

The final thing to keep in mind is that community discussion is paramount.  The greater the community input into the development of a program, the greater the probability of community support, which for most programmes is a critical element of success.

With those three points in mind, I present the following four programmes to help reduce some problems in the black community that are now affecting everyone in Bermuda.  These suggested programmes should not be considered “solutions” to these problems, but rather viable starting points to begin a community discussion of what is needed and what is possible.

The Answer is Not Solely Education

Many social commentators and public officials have concluded that if we can improve public education, we can give all Bermudians the opportunity to reach their full potential. 

Unfortunately, this conclusion is only partially correct.

First of all, even if we improve public education by improving teaching and the curriculum, many Bermudian students, particularly those that come from dysfunctional families, will likely still be unable to reach their full potential.  That’s because the number one determinant of a child’s education success is the degree to which his parents participate in his education.  So unless steps are taken to help all parents, particularly those from dysfunctional families, become better parents, their children will continue to have very limited chances of education success.

Second, the greater the number of kids in a classroom that come from dysfunctional families (in particular, where the parents aren’t actively involved in their children’s education), the greater the number of kids that will not do their homework, will fall behind the rest of the class and will likely become disruptive, which forces teachers to spend more time at classroom management, leaving less time for teaching.  So even if a parent is doing all the right things to help his child succeed, that child will still be inhibited in his progress if there is a significant number of kids in his class whose parents are not doing the right things.

In other words, unless we develop and implement programmes to help dysfunctional families become less dysfunctional and non-involved parents become more involved, not only is it unlikely that their children will reach their full potential, but it is also unlikely that the other children who attend the same class will reach their full potential.

This is a large problem in Bermuda and is a significant reason why Bermuda public schools have fallen behind private schools in academic achievement—the higher the percentage of students from dysfunctional families/non-involved parents attending a school, the greater the chance that the school itself becomes dysfunctional.

So if we want to improve public education for all students, we have to help all parents, particularly those from dysfunctional families, become more involved in their children’s education.  Here are several suggested programmes that can help because they do four key things: (i) provide meaningful incentives for dysfunctional family members to learn how to be better parents; (ii) provide meaningful incentives for all parents (including those from dysfunctional families) to become more involved in their children’s education, (iii) provide meaningful incentives for deadbeat dads to give financial, educational and nurturing support for their children while providing a strong disincentives for fathering illegitimate children in the future; and (iv) improving the quality of education by providing meaningful incentives for the removal of bad teachers from the public school system.

Programme 1     Combining food and shelter programmes with family education programs

Bermuda spends tens of millions of dollars each year on social programmes to help the disadvantaged.  These programmes are important.  They provide the social safety net that allows struggling Bermuda families to pay their rent and put food on the table.  But the ugly truth is that many of these families are immersed in generational dysfunction that they don’t have the tools to fix.  They were born into dysfunction and they will give birth and raise their children in dysfunction because that’s the only pool of experience from which they can draw upon to deal with the problems they face.

The Bermuda Government, charities and social agencies have numerous programmes to help these families develop the life-skills needed to turn their lives around, but unfortunately many of these families don’t take advantage of these programs.  In many cases they are so immersed in dysfunction and debilitating nihilism that they can’t see that these programmes can help them and their children build a better future.  In other words, from their perspective, there is no incentive to take these life-skills programmes and so they don’t—or if they do, they do so only half-heartedly.

The Bermuda Government can change this.  They can go through every single social assistance programme they fund and, wherever possible, restructure it to provide incentives for education and life-skills improvements.  And they can do all this while spending only minimally more than they presently do.

For instance, the Bermuda Housing Corporation provides rent subsidies to needy families so that they can pay their rent, and in return we as a society receive the satisfaction that we take care of our needy.  But we can obtain a much bigger social return on our money simply by making part of the rent subsidy dependent on the recipients taking any number of life-skills programs, particularly programmes that teach them how to become more involved in their children’s education from the time the child is born right through to graduation.

For example, instead of paying an unemployed, single-parent mom $1,500 a month in rent subsidy, the Government can pay her only $1,000 but offer to pay another $500 if she enrols in and passes a parenting-skills class that teaches the importance of reading to your child every day, providing him with nourishing, affordable meals and singing songs or telling them stories to help them develop their vocabulary and imagination.  (The list of skills is long and varied and can extend right through the teen years.)

Each of these subsidy programmes can meaningfully help people improve their lives provided they are structured properly.  The key to the success of these integrated social programmes is to find out what each recipient needs to do to change his or her life around, and then to use a meaningful part of the financial subsidy as an incentive for them to take the steps needed to make that change.  The increased costs to Government are minimal while the increased benefits to both the individual and society are unlimited.  Consequently, on a cost/benefit basis, this programme ranks high.

Programme 2     Improving education by increasing parental involvement

Study after study has consistently shown that the number one factor in determining how well a child will do in school is not income or social status (it doesn’t matter if you are black, white, rich or poor).   Active parental involvement in a child’s education is the most accurate predictor of a student’s achievement in school—attending school regularly, earning higher grades, passing their classes, graduating senior school and going on to obtain a postsecondary education.  So what can be done to encourage parents to become more involved in their children’s education?

Fortunately, in December 2010, the Bermuda Board of Education unanimously approved a programme to increase parental involvement in children’s education, which involves three parts: (i) Getting the message out—a marketing programme aided by International Business to tell all parents about the importance of their involvement in their children’s education, (ii) Providing parents with the tools needed to get more involved—implementing a communication system that advises parents each day what their children learned in school and setting out the homework assignment, and (iii) a Scholarship program—every public school student would have the opportunity to earn $500 each year for completing their homework more than 90% of the time, an extra $250 for a B average and an extra $500 for achieving an A average (for a maximum pay-out of $1,000/year).  The money would be held in trust, conservatively invested, would only vest if the child completed high school and could only be used to pay for post-secondary education including trade school.  (For a complete description of the programs, see “Parental Involvement in Children’s Education” at www.bdagoodgov.org.)

Unfortunately, in the 19 months since the Board approved the Scholarship Programme (which would be funded by private donations with no cost to the Bermuda taxpayer) the Ministry of Education has neither given final approval nor even held one meeting to discuss the issue.

Programme 3     A Programme to reduce the problem of low income, single-parent homes with minimal father input

The unique and debilitating difficulties children from dysfunctional families face can be substantially reduced by implementing a programme that (i) assists single moms to collect delinquent child-support payments from fathers who contribute neither money nor time toward their children’s upbringing and (ii) encourages these fathers to spend more time with their children.  The programme works like this.

Under our present legal system, a mother seeking to obtain child-support payments must go to Court to obtain a judgment ordering the father to make those payments.  When the father simply refuses to pay, the mother then must go back to court for a garnishment order that must be served upon the father’s employer ordering that company to deduct support payments from the father’s salary.  This may sound like a good system—and sometimes it works—but far too often these fathers simply change jobs, thereby forcing the mom to start all over again.  With limited time and finances the mother often has little choice but to give up her quest for child support.  The result is a mother who has to work longer hours to pay the rent and put food on the table, thereby leaving even less time for her to properly nurture her child by (i) instilling in him proper moral principles, (ii) providing help and guidance with his education (particularly in the early formative years) and (iii) giving him a sense of belonging that comes from strong family and community involvement.

We can improve this inefficient and ineffective system by implementing a programme under which Government (i) helps single moms obtain the required court order against delinquent fathers and (ii) registers the garnishment order on a computerized national registry that constitutes continuous notice to all Bermuda employers.   Under this system the father will no longer be able to avoid payment merely by changing jobs because registration on the national registry will constitute continuous notice to all Bermuda employers, both at the time of registration and in the future.

It works like this.  Prior to paying salaries, each company will be required to enter the social security number of all their employees into a computerized national registry system.  This may sound like a large task, but it really just requires a one-time input of employees’ social security numbers, and thereafter it takes only one computer click to receive a computerized response.  Any moneys owing under a garnishment order will be deducted from the delinquent father’s pay-cheque and remitted to the single mom.

But there is even more that we can do, and it is this second part of the programme that is most important.  Once it becomes clear to fathers that they can’t escape responsibility for child-support payments, the programme can allow for a negotiated reduction in payments in exchange for the father spending more time with his children.  For instance, the original garnishment order can be for an amount equal to, say, 30% of the father’s salary, with provision that it be lowered to a lesser amount, say, 20% if the father agrees to certain conditions such as (i) spending at least 8 hours a week helping his children with their homework and playing with them at a community centre (like the Sandys 360 Centre or the Aquarium) or coaching their soccer or cricket teams and (ii) taking a parenting course to learn how to best nurture his children and help them with their educational endeavours.

What are the benefits of such a program?  The implementation of this National Garnishment Registration System will (i) increase the income level of single-parent families, (ii) reduce the need for single-parent moms to work a second job, thereby increasing the time mothers can spend nurturing their children and getting more involved in their children’s education, (iii) increase the time fathers spend nurturing their children and getting more involved in their children’s education, (iv) increase parent and child involvement in community activities, and (v) discourage men from fathering children when they are not prepared to provide the necessary financial and emotional support.  These five outcomes should not only dramatically reduce the number of at-risk children causing problems in the classroom, but they should also reduce the number of children becoming involved with gangs.  Since the programme can be implemented with minimal cost to the Government, on a cost/benefit basis, this programme ranks high.

Programme 4     Replacing Bad Teachers with Good

In the Bermuda public school system we have good teachers, mediocre teachers and bad teachers. With training, some of these mediocre teachers may become good teachers, but no amount of training can convert bad teachers into good.

For the sake of Bermudian children in our public school system, the problem of bad teachers has to be fixed. Studies have shown that if a child has a bad teacher for just one year, it will take that child one and a half years to catch up. And if the child has a bad teacher for a second year, he not only is unlikely to ever catch up, but he is also much more likely to drop out before completing high school and his chances of joining a gang and becoming involved in criminal activities increase substantially.

Bad teaching not only destroys lives, it perpetuates the cycle of poverty and dysfunction that prevents lower to middle class mobility—a key component to social stability, lower crime and more equitable income distribution between the races. In other words, bad teaching prevents all the good things that good public education can achieve.

We can dramatically improve public education if we can simply remove the five worst teachers from every school and replace them with excellent teachers. But there are two large barriers in in our way:

1.  The Bermuda Union of Teachers is required to protect all teachers, including bad teachers, from termination. Remember, the role of the BUT is not to improve teaching—that is the role of Government. The BUT’s role is to protect the jobs of teachers even when those teachers are bad teachers.
2. Because it is critically important that Bermudians all work together to solve their common problems, the Government should do its best to not simply fire Government workers—even bad teachers—but instead help them find other employment, which is difficult in our weakened economy.

So how do we get out of this mess?  How do we (i) get rid of bad teachers that are destroying our children’s lives, (ii) replace them with excellent teachers, and (iii) find some other employment for the terminated teachers?

A solution can be found by looking at an unrelated problem—the high cost of operating a business in Bermuda—to find a potential deal for all parties concerned.

Over the last ten years, International Business has seen their average annual employee costs more than double as a result of higher wages, higher pension and health-care costs and, in particular, higher payroll taxes, which now stand at 14% on a maximum salary base of $750,000.  When you consider that the annual payroll tax for a top executive is now $105,000 (14% of $750,000) and in 1998 it was only $9,000 (12% of $75,000) it is little wonder that the 1,167% increase in tax has persuaded a number of companies to simply transfer much of their work and their top executives to lower cost jurisdictions, which has meant fewer jobs for Bermudians, lower tax revenue for Government and lower sales for retailers, restaurants, taxi drivers and other local businesses.

So here’s how the Government can deal with the problem. They can set up a programme under which companies agree to hire former teachers and in return the Government agrees to give those participating companies a reduction in their payroll tax. The exact amount of the reduction will depend on the number of ex-teachers a company hires and the additional terms of the programme can be negotiated between Government and the business sector, but might look something like the following.

For every teacher hired, a company will be exempt from paying payroll tax for any one other employee (presumably it will choose a top paid executive), effectively allowing the company to pay for all or most of the teacher’s salary through payroll tax savings. The teacher will be paid at his former teaching wage and will be trained on the job for two years. At the end of two years’ probation, the company can then decide whether to continue his employment permanently. Under such a structure, ex-teachers who are offered continued employment will have the opportunity to possibly make far more than they ever could as teachers.

Keep in mind that even though someone is a bad teacher doesn’t mean he will be bad at his new job in business. Many of these teachers have Master’s Degrees and PHDs and may shine at jobs that require a different skillset than classroom management.

Some of these bad teachers may need a nudge out the door. This might be done by announcing that Government will start publishing the assessment scores that teachers receive each year. Let’s face it, parents should have the right to know if their children are about to be subjected to a year of bad teaching that may ruin their lives.

By addressing the needs of two key parts of Bermuda society—Education and Business—we can develop policies that can make all Bermudians better off.  And remember, every day that Government avoids implementing a programme to get rid of bad teachers is another day that they are choosing to support the interests of bad teachers over the interests of young children whose lives may be destroyed.

July 2012

Anti-Corruption Pledge

The undersigned, being an electoral candidate for a seat in the Bermuda House of Assembly, here pledges that, if elected, I will do everything within my power to immediately enact:

1. Legislation that gives the Auditor General administrative subpoena power to obtain access to the bank records, files, share registers and all other documents and data of every Government contractor and their affiliates (to better ensure there are no kickbacks to persons in power);
2. Legislation that requires the inclusion in every Government contract for capital      projects and procurement of goods and services in excess of $10,000, a legal undertaking by the contractor to provide the Auditor General with access to all of the bank records, files, share registers and all other documents and data of the contractor and its affiliates (to better ensure there are no kickbacks to persons in power);
3. Legislation that requires each contractor tendering on a Government contract in excess of $10,000 to disclose, by way of sworn affidavit posted on the Government’s website, each of its directors, officers and direct and indirect beneficial shareholders and those of its affiliates (so that the people of Bermuda will be able to see who is benefitting from Government contracts);
4. Legislation that requires each member of the House of Assembly and the Senate to disclose, by way of sworn affidavit posted on the Government’s website, all of his or her direct and indirect beneficial interests in any company, trust, partnership or business along with an undertaking to update such disclosure within seven days of any change in such beneficial interests (to ensure any potential conflicts of interests of elected officials are fully disclosed to the public);
5. Legislation that requires, in respect of every Government capital project in excess of $10,000, that the Ministry of Finance place on the Government’s website disclosure of every change order in excess of $3,000 along with a written reason why the change order was made, why it was not included in the original specifications, whether the change order was put out for separate tender, the name of the Government employee or elected official who approved the change order, and the amount of increased costs resulting from the change order (so the Bermuda public can see whether their money is being spent efficiently); and
6. Legislation that requires the Ministry of Finance to place on the Government’s website a copy of every personal expense report and every back up receipt submitted by an elected official on his or her personal Government expense account (so the people of Bermuda can see the extent to which elected officials are spending taxpayers’ money on personal items).

Dated this ____ day of __________ 2012

____________________________________

(signature of electoral candidate)

___________________________________

(printed name of electoral candidate)

Anti-Corruption Pledge

1. Rules and Procedures
2. Transparency
3. Participation
4. Accountability

So let’s look at each of these democratic protections and see how we might improve upon them in Bermuda.

Rules and Procedures

In addition to basic criminal laws prohibiting corruption, (i) Government need to have in place comprehensive and effective rules and procedures to prevent corruption, particularly with respect to Government contracts for capital projects and the procurement of goods and services and (ii) the rules within that framework should be enforced impartially.

It is difficult for you to know how comprehensively the Bermuda Government’s internal rules deal with protections against financial corruption because those rules are not available to the public.  Yes, that’s correct.  A top official in the Ministry of Finance advised me last week that the Financial Instructions rules set up to protect the public purse from Government mismanagement and corruption are not available to members of the public.  In other words, the public has no way to see for themselves whether the rules set up for their protection are being breached.

I’m happy to report that a person of influence, who apparently thought it silly that the public not be given access to the Financial Instructions, surreptitiously gave me a copy on the condition that I not disclose his name.  So I won’t disclose his name, but I do want you to know that he is a core PLP person and I thank him for his civic decency.

From my review, it appears that the biggest problem in Bermuda over the last ten years was not that we needed new internal rules for Government contracts, but that officials simply weren’t enforcing the rules that were in place.

For instance, Section 9 of the Financial Instructions requires that goods and services in excess of $1,000 be obtained on the basis of 3 quotes.  For larger amounts, it also stipulates that the range of suppliers providing quotes must be as wide as possible, the lowest price must be accepted or reasons for not doing so must be documented.  Finally, section 3.9 states that all Government employees are personally responsible for the performance of financial duties entrusted to them and, in accordance with section 29(1) of the Public Treasury (Administrative and Payments) Act, 1969, may be surcharged for any missing or misspent money and then fired.

Unfortunately, numerous major Government contracts totalling many hundreds of millions of dollars were never properly put out to tender (e.g., Port Royal Golf Club, Heritage Wharf in Dockyard, Global Hue and TCD) or were awarded to persons contrary to the recommendations of the Government’s own technical officers (e.g., Berkeley Institute and the new Magistrate’s Court).

As we know all too well, these and other major contracts resulted in cost overruns collectively in the hundreds of millions of dollars.  Yet no Government person was surcharged for these breaches of the rules, no employee was fired by the Minister of Finance and no Government Minister was forced to resign.  In other words, it appears that the rules simply weren’t enforced by those in charge.

In response to the public outcry over political corruption, the Government enacted the Good Governance Act which codifies the Financial Instructions (which is a good thing) and creates the Office of Project Management and Procurement to provide oversight of the awarding of Government contracts (which is also a good thing).

But nothing was done to give the Auditor General the power to subpoena the bank records, share registers and other relevant documents of contractors and elected officials, as is done in other jurisdictions.  In other words, the Auditor General still doesn’t have the ability to follow the money to properly investigate political corruption that may have occurred in the past or may occur in the future.

So has the Government taken a step in the right direction?  Technically, yes.

But it is similar to the situation where a man is shot in the chest, is bleeding profusely and is rushed to the hospital where the doctor puts a Band-Aid on his scraped knee and says, “There you go.  I’ve taken a step in the right direction.”

That metaphor is not intended to be humorous.  Bermuda is suffering from a massive loss of financial blood yet the Auditor General is still denied the proper medical instruments to operate properly.

Unfortunately, the Bermuda Government, like so many other Governments around the world, has little incentive to give independent investigators the ability to thoroughly investigate Government’s dealings because, even if they don’t find corrupt practises, they are bound to find mistakes.  We all make them; it’s part of the human condition.  Placing these corrupt practises and mistakes in the public forum for all to see can only hurt the governing party’s chances of re-election.

In other words, our elected officials have yet to give the public what it needs because it isn’t in the personal best interests of these officials to do so.  Their principal objective right now is to get re-elected.  To be clear, I’m not saying that is a shortcoming unique to Bermuda; I’m only saying that is the reality we, the public, need to deal with.

So how do we overcome that crippling structural weakness in our system of governance?

The answer is found in the other three areas of democratic safeguards: transparency, participation and accountability.

Transparency

The concept is pretty simple:  the greater the amount of information directly available to the public, the greater the opportunity for members of the public to monitor the actions of elected officials and to voice their objections through both free speech and the electoral vote.

It is here that Bermuda can do so much more.

Now, before I continue, I’d like to do a little experiment.  Everyone who is a PLP supporter, I’d like you to pretend that the OBA is now in power.  And you OBA supporters, you don’t have to pretend.  I want you to just work through this experiment keeping in mind that the PLP is in power.

Together, let’s imagine the type of rules of transparency that we would like those guys in power to have (i.e., the guys that we don’t trust).  How about this, for a start:

1. 1.            The Government place on its website a copy of every expense report and every back up receipt submitted by an elected official on his Government expense account.  (While some of the more expensive local restaurants might not like that rule, the taxpayer should see a decrease in the number of dinners and drinks charged to the public purse.) 
2. 2.            The Government immediately require that every Government contract include a disclosure by the contractor of the names of each of the directors, officers and direct and indirect beneficial shareholders of the company and its affiliates.  In other words, no secret shareholders, no secret trusts.  And that information must be posted on the Government’s website for the public to view.
3. The Government website disclose, for every Government contract, the name of every bidder, the amount of his bid and, if the contract is not awarded to the lowest bidder or to a bidder recommended by the responsible civil servants, the reasons why.
4. The website disclose every change order on a Government contract, a written reason why the change order was made, why it was not included in the original specifications, whether the change order was put out for separate tender, the name of the Government employee or elected official who recommended or approved the change order, and the amount of increased costs resulting from the change order.
5. 5.            The website disclose all Government internal rules including Financial Instructions (so that the public can decide if they adequately protect the public purse and can better identify potential breaches).
6. 6.            The website disclose every breach of a Financial Instruction or other Government internal rule, the name of the person committing the breach, the sanction imposed on that person and, where no sanction is imposed for a breach, the reasons why.
7. 7.            The website provide a comment section attached to each of these disclosures so that members of the public can express their views and see the comments of others.

How many people in the room like those new disclosure rules?  A show of hands please.  Remember, it’s the other guys that are in power, the ones you don’t fully trust.

Who thinks we should implement those rules immediately?  Not next year or even next month, but immediately?  Because we can.  The Premier could make that announcement tomorrow morning and have the whole thing set up by the end of the month.

Remember, the level of Government transparency right now is so low that you don’t even have the right to get a copy of the Financial Instructions that protect your tax money.  So the question is—what are you going to do to ensure the Bermuda Government moves its level of transparency to the 21^st Century?

Which brings us to the next principle of democratic safeguards.

Participation

The democratic rights of the citizen include much more than simply the right to vote once every four or five years.  The citizen has the right to question, to receive information and answers, and to hold those in power accountable for not only their actions but also their failure to act.

You will never have greater ability to increase and protect those rights than during the lead up to an election because that’s when you have the greatest power to ensure your needs are met by those wishing to gain or hold elected office.  Their principal objective is to get elected, but now they will have to meet your demands else risk not getting your vote.

So let’s continue our experiment and see how powerful the electorate can collectively become.  Since a large majority of people in this room, whether PLP or OBA supporters, want more transparency in Government, why can’t we simply unite to demand that each candidate of the OBA and the PLP pledge to make the above changes immediately?

But we must be both discerning and specific in this endeavour.   We have to look closely at the words the politicians choose to describe what they are going to do.  For instance, last week Premier Cox stated in her press release that

“The Government will introduce legislation to enable public authorities include [sic] the Director of Internal Audit and the Auditor General to ‘follow the money’, that is, ensuring that money paid to vendors, contactors and organisation [sic] receiving grants is used for the purpose for which it was authorised.”

Premier Cox may well have the country’s best interest in mind when she frames her pledge in such a nebulous manner, but as a lawyer I can tell you that you could drive a truck through the opening she has given herself.

For instance, she could give the Auditor General the right to follow the money to make sure it was all spent on the Government project at hand and that would be for “the purpose for which it was authorised,” but it wouldn’t give the Auditor General clear powers to subpoena the bank records and share registers and all other relevant documents of Government contractors and elected officials to ensure there were no illegal kickbacks.  In other words, it wouldn’t solve what I believe to be one of the biggest problems in Bermuda: the lack of investigatory power of the Auditor General.

So what can we do to change the relatively unhelpful wording of the Premier’s pledge?  We can participate in the democratic process.  We can ask each PLP and OBA candidate to make a pledge (the “Anti-Corruption Pledge”) that as soon as he or she has the power to do so, they will immediately:

1. enact legislation that gives the Auditor General administrative subpoena power to obtain the bank records, files, share registers and all other documents of every Government contractor and their affiliates (to ensure there are no kickbacks to persons in power);
2. include, in every Government contract for capital projects and services in excess of $10,000, a legal undertaking by the contractor to provide the Auditor General with access to all of the bank records, files, share registers and all other documents of the contractor and its affiliates;
3. require each contractor tendering on a Government contract to disclose, by way of sworn affidavit, each of its directors, officers and direct and indirect beneficial shareholders and those of its affiliates (so that the people of Bermuda will be able to see who is benefitting from these Government contracts).
4. set up a Government website that makes all of the disclosures set out in items 1 to 6 above (under “Transparency”) and gives every person the right to comment on the website and to see the comments of others.

Extra points are to be given to the political candidate in each constituency that makes this pledge first.

That’s democratic participation in action.  It can be done and it should be done because it is in everyone’s best interests, no matter what his or her political affiliation.  It’s an issue that PLP supporters and OBA supporters can all agree upon.

My guess is that the only people who will not want to see it happen are a few politicians, a few connected contractors and a few closely connected political supporters.  But they don’t have enough votes to override the collective wishes of a fully participating majority of both parties.

The beauty of such participation is that it will not only lead to better democratic safeguards against political corruption but it will also improve the citizen’s ability to participate even more actively and efficiently in the future.

The second part of democratic participation is the ability to voice one’s opinion without being subject to personal attack by the Government itself.  I can tell you from personal experience that exercising your constitutional right of freedom of speech is not always easy in Bermuda.  It can result in some pretty vicious personal attacks.  I do, however, take some solace from the truism that when they stop attacking your arguments and start attacking you personally, it generally means they have no rebuttals left and you have won the argument.

But my goal in discussing political corruption in Bermuda is not to win the argument; it is to change the way Bermuda is governed.  It is to ensure that the massive cost overruns of the last ten years, that are now in the hundreds of millions of dollars, never happen again; it is to promote civic participation that demands a full investigation of potential wrongdoing so that if crimes have been committed, the perpetrators will be prosecuted to the full extent of the law; it is to send the message out to all future elected officials that if you breach tendering rules, authorise numerous large change orders or create massive cost overruns, you will be fully investigated, as will your bank records and those of the contractors; it is to ensure that independent investigators, like the Auditor General, be given the tools needed to look under every stone and examine every document, so that the machinery of Government can be “cleansed with the sunshine of public scrutiny.”

To make all of that happen, Bermuda needs to dramatically increase the democratic participation of the electorate.  Simply put, if you want a better country, you have to stand up and take action.  Because by doing nothing you risk losing everything.

Which brings us to the fourth and last principle of democratic safeguards against political corruption.

Accountability

Decision-makers in Government must be held accountable to the public.  If rules are violated, there must be sanctions consistently and impartially imposed on those responsible.  At the civil servant level, sanctions can be in the form of reprimand, loss of job and personal surcharge for recovery of funds improperly expended.

As I previously discussed under Rule and Procedures, we have had numerous breaches of these rules on projects that have cost the taxpayer hundreds of millions of dollars, yet no one was sanctioned by the Minister of Finance.  We were not even told why, let alone who, what, when and where.

At the elected official level, the citizen must hold Members of Parliament accountable for their actions and their failure to act.  Specifically, Bermudians have the right to ask why elected officials chose to do nothing about the political scandals and the breaches of rules and laws, and Bermudians have the right to receive answers.  But the sad but simple truth is that these MPs did nothing about these breaches because Bermudians let them do nothing.

I have heard the argument that it is the PLP supporters who are to blame.  A number of the political corruption scandals had already been made public before both the 2003 and 2007 elections, yet PLP supporters still voted for those PLP MPs who were at the heart of the scandal and those who failed to do their job to prevent the scandals.

I suggest that the net of accountability be cast much wider.  Those who insisted on keeping the UBP alive long after it was clear that, because of its controversial history, it was never, ever going to regain the Government, need to accept some responsibility because they failed to provide a viable alternative to those PLP supporters who wished to send the Government the message that enough was enough.

Also, in response to the often heard criticism that many candidates of both parties were of low calibre, I suggest that this too is an avoidance of accountability.  Where were the very accomplished Bermudians—the senior executives from IB, the law partners, the accountants—who chose not to step forward as candidates?  As Teddy Roosevelt said, “Credit belongs to the man who is actually in the arena.” Whatever else you may say about the men and women who hold seats in Bermuda’s legislature, they at least stepped forward to serve.

The simple fact of politics is that if voters are unwilling to elect anyone other than the party in power, then they will have created a Government without accountability.  And I don’t care how honourable those men and women may have been when they started, with that type of unchecked power, they are highly likely to place their own interests and the interests of a few chosen friends before the interests of the public.

In other words, there are many who must share the blame for the creation of a Government that has caused (i) capital projects to amass cost overruns in the hundreds of millions of dollars, (ii)  international business executives to leave the island in droves, (iii) an IB industry now downgraded from an international headquarters to a collection of branch offices, (iv) a ballooning national debt, (v) slashed social programs, (vi) a failing retail industry, (vii) a failing tourism industry and (viii) a dramatic increase in the number of have-nots.

Democracy is like many things in life; you get out of it what you put into it. But the good news is that by putting in more, by immediately and dramatically increasing their democratic participation, the people of Bermuda can get a better performing Government.

In the short time before this coming election, supporters of both political parties can unite to demand unequivocal commitments from those who seek to rule.  Bermudians can demand that these political candidates pledge to (i) give the Auditor General unfettered power to follow the money as far as the eye can see; (ii) require that the names of all directors, officers and shareholders of Government contractors be fully disclosed so that everyone can see who is gaining from these Government contracts; (iii) require complete transparency in Government so that everyone can see what the rules are, who has broken them, what it has cost us, and what sanctions were applied for any breaches, and (iv) provide a Government website where all these disclosures can be made and citizens can comment and see the comments of others.

Ultimately, the effectiveness of democratic safeguards against political corruption comes down to you.  It’s about your willingness to stand up for the country you love by getting involved.  It’s about reaching across the political aisle to collectively demand a much better system of governance.  Most importantly, it’s about taking action now.

By doing so, by getting engaged, by speaking out and demanding specific reforms, you can create a better Bermuda for both you and your children.

Thank you.

Kevin Comeau

March 21, 2012

Last night at the Centre for Justice “Your Right to Know” Forum, I explained to the audience the following:

1. It was legally incorrect to state that if the allegations concerning Dr. Brown and the Bermuda Housing Corporation were true, they would have only amounted to unethical, but not illegal acts.  The fact is that if the allegations were true, they would have amounted to the criminal offenses of Conspiring to Defraud and Official Corruption.

Does that mean that Dr. Brown committed these offenses?  No.  It merely means that the public has yet to receive an explanation of why the criminal investigation was halted.  It’s quite possible that the Acting DPP had good reason to halt the investigation of Dr. Brown (such as lack of credibility of a key witness) but clearly the public deserved a more complete explanation, particularly when the subject matter involved allegations of corruption at the highest level of Government.  And just as clearly, Dr. Brown deserved the opportunity to clear his name.

1. The continuing harm that emerged from the Acting DPP’s statement was that it caused many Bermudians to mistakenly believe that there is no legal remedy available to investigate and, if appropriate, criminally prosecute any Government official that benefits personally from tainted Government contracts.

So, over the last ten years, each time a new Government scandal broke out, the Bermuda public simply threw their hands up, erroneously believing that there was no law prohibiting the perceived plundering of the public’s money.  But if the allegations surrounding any of those scandals over the last ten years were true, they would have likely amounted to, at a minimum, Official Corruption, which is a criminal offense with a maximum penalty of three years in prison.

1. The independent person who investigates these Government contracts—the Auditor General—unfortunately, is not authorized under Bermuda law to follow the last half of the money trail.  She only has the authority to investigate transactions between the Government and the parties with whom it contracts.  She has no power to subpoena the private records and banks accounts of these contractors or the suspected Government Officials to find evidence of illegal kickbacks.
2. Under Bermuda law there is only one way to follow the money to reveal all the facts concerning suspicious circumstances surrounding politically connected Government contracts: a Commission of Inquiry under the Commission of Inquiries Act (1935).

The problem is that only the Governor is authorized to issue a Commission of Inquiry and, because of the political sensitivities involved, he is unlikely to do so unless the Premier requests a Commission and the Finance Minister agrees to provide the funding for that Commission.  In other words, the most effective investigatory tools to gather the evidence needed to prosecute are either controlled or heavily influenced by persons at the centre of the controversy.  And it is this lack of investigatory independence that is the biggest hurdle in reducing political corruption in Bermuda.

1. When we get to the part of the Good Governance Act that deals with investigatory independence, something very curious happens.

The Good Governance Act deals with the powers of investigation for three people: (i) the Director of the Office of PMP, (ii) the Director of Internal Audit and (iii) the Auditor General.  The first two persons report internally to the Government (i.e. to the Minister of Finance and the Cabinet Secretary) and third person, the Auditor General, is completely independent.  Now watch what happens to their powers to investigate under the new legislation.

The Good Governance Act amends the Public Treasury Act as follows:

Notwithstanding any other Act or any privilege under the law of evidence, the Director may obtain any documents or information relating to procurement and capital projects from a public officer, and no such documents or information may be withheld from the Director on any grounds.

 The Good Governance Act makes the virtually identical amendment to the Internal Audit Act, thereby giving the Director of internal audits the same sweeping power.  But when the Good Governance Act amends the Audit Act, (i.e., the powers of the Auditor General) it leaves out that section.  What does that mean?

It means that the Director of the Office of PMP and the Director of Internal Audit, both of whom effectively report to the Premier, have the right to demand and obtain all documents from Government, and any claim by Government that the documents are legally privileged (i.e., Government officers don’t have to show them to you) is not enforceable against those Directors.  The Directors must be given the requested documents.

But the Auditor General—the only truly independent investigator of Government financial wrongdoing—is denied that power.  That makes no sense whatsoever.  Except of course, if you remember what was happening at the time the legislation was introduced.

The Auditor General recently released a damning report about the Government’s unlawful payment of $30,000 in legal fees for the private defamation action brought by Deputy Premier Derrick Burgess and former Premier Ewart Brown, otherwise known as Defamationgate.  The Auditor General reported that (unbeknownst to the rest of Bermuda) on July 18, 2011 she made a demand for all documents related to that unlawful payment, and in response Premier Cox and her colleagues refused to deliver the documents claiming that the documents were legally privileged.

It might strike you as more than a little strange that four days after the AG’s demand for documents, the Good Governance Act is tabled for a second reading in the House of Assembly, and it has a major omission: it forgot to give the Auditor General the power to obtain all documents even when they are legally privileged.

The Good Governance legislation, which Premier Cox hails as “[underscoring] our commitment to enact measures geared to strengthen financial accountability in Government,” not only fails to provide the most essential tool to stop political corruption—investigatory independence to follow the money—but the Premier structures the legislation in a way that specifically undermines the Auditor General’s ability to investigate a political corruption scandal that is at that very moment on the Premier’s desk.

1. The Bermuda Government has failed to follow the lead of other countries to safeguard against political corruption.  These countries have given their Auditor General the right to follow the money even after it reaches the hands of contractors such as by (i) granting administrative subpoena power to the Auditor General and Inspector General (USA), (ii) requiring Government contracts to contain a contractual right of the Auditor General to inspect the records of contractors (USA, Australia), (iii) giving an Anti-Corruption Commission (which includes the Police Commissioner and Auditor General) the right to require information from any person (including contractors) and failure to comply can result in a $50,000 fine and two years in prison (Cayman Islands).
2. Numerous Government capital projects over the last ten years (e.g., Berkeley Institute, Port Royal Golf Course, Heritage Wharf, the new Courthouse, TCD) have collectively resulted in cost overruns in the hundreds of millions of dollars.  Generally, only two things can cause large cost overruns:  managerial incompetence and financial corruption.

When you consider that the cost overruns on some of these projects exceeded 100% of the initial cost estimates and that Government had at its disposal civil servants with collectively more than a hundred years of architectural, engineering and construction expertise, it is hard to conclude that only incompetence was at play.  Someone at the highest level of Government had to be doing something unscrupulous, either at the front end or through kickbacks and undisclosed interests.  Individually and collectively, these and other large Government contracts simply don’t pass the smell test.

Not only were tendering rules violated and the recommendations of civil servants ignored in the granting of some of these and other large Government contracts, but inordinately large change orders were frequently made, a well-known way to slip much larger profits to connected contractors.   When you add to this the multiple damning reports of two Auditors-General, we are left with strong circumstantial evidence suggesting massive political corruption.

1. 8.                   At the end of the presentation I stated that, “If you are unsatisfied with the level of unresolved political corruption in Bermuda, it is your democratic right to look to Premier Cox.  It was her job as Finance Minister to stop the corruption that has occurred over the last ten years; she failed to do so.  It is within her power today as Premier to stop the corruption by calling for a Commission of Inquiry; she has failed to do so.  Instead, she gave us the Good Governance Act, which continues the failure to provide independent investigators with the tools most needed to ensure good governance. 

As stated above, I find Premier Cox’s statement sad.  It could have been a great opportunity for her to take action to end the corruption that has occurred on her watch over the last ten years.  She could have simply called for a Commission of Inquiry to clean up this entire mess once and for all.  But instead she chose to conflate this issue by stating as follows:

1.          “The statement that the reason for the overruns in all the projects can only be due to corruption (or managerial incompetence) – does that apply only to this Government or is he being even-handed in levelling the criticism since there are a number of instances of over runs that preceded this Government’s election.”

I respond as follows: I would make that statement about any Government that

(i)       has cost overruns in the hundreds of millions of dollars, a number of which exceeded 100% of the original cost estimates,

(ii)       has granted numerous large Government contracts without being tendered ( a violation of the Government’s Financial Instructions, the sanctions for which the Minister of Finance chose not to enforce),

(iii)      has capital projects that have large multiple change orders in the tens of millions of dollars, which is a widely known way to provide connected contractors the ability to charge huge mark ups far in excess of their costs, thereby ensuring large profits at the expense of the taxpayers,

(iv)      has allowed its Ministers to grant numerous large contracts contrary to the recommendations of the authorized expert civil servants,

(v)       has had two successive Auditors General issue damning reports, including the latest in which the Auditor General states “In my opinion, this entire situation is deplorable and represents a blatant disregard for the public purse and a lack of transparency and accountability at the most senior levels of Government.  The question to be asked is who will be accountable—the answer is likely no one.”

(vi)              Has thrown the Auditor General in jail.

If the Premier wishes to call for a Commission of Inquiry and wishes to include an investigation into any wrongdoing committed by the UBP Government, then I am all for it.  I have no connection to the OBA or the UBP; I am simply sick and tired of seeing in-your-face massive political corruption that is ripping this country apart, and no one doing anything about it.

1. 2.                   “In making his unfounded accusations, he calls into question the integrity of not only Ministers but that of Civil Servants.”

I definitely call into question the integrity of Ministers.  I do not call into question the integrity of the Civil Servants.  In fact, I have nothing but sympathy for the overwhelming number of honest civil servants who have had Ministers ignore their expert advice and then breach tendering rules to grant multi-million dollar contracts to contractors with strong ties to members of Cabinet.

1. “Regarding the changes to the Audit Act, he is once again under-informed. I liaised with the Auditor General directly as to her recommendation for changes to the Audit Act.”

In my presentation, I pointed out that Premier Cox, through the Good Governance Act, gave the Director of the Office of Project Management and Procurement and the Director of Internal Audit (both of whom effectively report to Premier Cox) the power to demand all documents from Government even if they are legally privileged, but the Good Governance Act failed to give the Auditor General—the only truly independent investigator of Government financial wrongdoing—that power.

Madam Premier, by stating that you “liaised with the Auditor General…”—are you suggesting that the Auditor General recommended or agreed that she should not have the right of access to any documents that the Government claims are privileged?  I must say I find this extraordinary, particularly when, at the time this legislation was before the House of Assembly, the Auditor General had demanded that all documents relating to Defamationgate be disclosed to her and you and your colleagues refused such demand by claiming a legal privilege that doesn’t exist (see my January 31 RG article, “What Legal Privilege Means”) which is a violation of the Audit Act that attracts a penalty of $5,000 fine and 12 months in prison.

1. “The Government will introduce legislation to enable public authorities include the Director of Internal Audit and the Auditor General to ‘follow the money’, that is, ensuring that money paid to vendors, contactors and organisation receiving grants is used for the purpose for which it was authorised”

Madam Premier, just to make sure there is no misunderstanding, would you please confirm to the people of Bermuda that the above statement means that you will, as is the case in other jurisdictions such as the USA,

(i)                  Provide the Auditor General with administrative subpoena power to obtain the bank records, files, share registers and all other documents of every Government contractor and their affiliated companies to ensure there are no kickbacks to persons in power;

(ii)                Include in every Government contract for capital projects, goods and services, a legal undertaking by the contractor to provide the Auditor General with access to all of the bank records, files, share registers and all other documents of the contractor and its affiliated companies.

In addition, Madam Premier, will you also confirm to the people of Bermuda that you will require each contractor tendering on a Government contract to disclose each of its directors, officers and beneficial shareholders so that the people of Bermuda will be able to see who is benefitting from these Government contracts?

I invite the Premier to address each of the claims I have made above and simply explain why she believes they are incorrect.  Most of all, I ask the Premier to explain to the people of Bermuda why she has not requested that the Governor issue a Commission of Inquiry to investigate the political corruption that has cost the taxpayers hundreds of millions of dollars.

In this time of great need for Government revenue for social programs and education, doesn’t it make sense to spend a relatively small amount of money for a Commission of Inquiry to get back all that money that was wrongfully taken from the Bermuda people?

Kevin Comeau

March 17, 2012

Shame on Mr. Kevin Comeau for his reckless and misguided statements.
This speech is an extraordinary attack made worse by being under informed and
ignoring numerous public statements on the topic.

I hope that it is not done wilfully. In essence it appears as if it is being
made up as the speaker went along.

The statement that the reason for the overruns in all the projects can only be
due to corruption (or managerial incompetence) – does that apply only to this
Government or is he being even-handed in levelling the criticism since there
are a number of instances of over runs that preceded this Government’s
election.
[To read more, click here: Premier Cox statement condemning Kevin Comeau (published)]

Discussion of the Good Governance Act

The Good Governance Act 2011 was introduced in response to the public outcry against perceived political corruption at the highest levels of Government.  Over the last ten years numerous large Government contracts involving suspicious cost overruns in the hundreds of millions of dollars have immersed the Government in a sea of scandal amid rumours of insider dealings.  Believing nothing could be done to prosecute the perpetrators because their actions were merely unethical but not illegal, the public demanded reform.

But this widely held public belief that these scandals involved merely unethical behaviour is based upon a misunderstanding of the law.  The reason no one was prosecuted was not necessarily because no crimes were committed—it’s likely that crimes were committed, and repeatedly.  The real source of the problem was that independent investigators lacked the legal tools to gather the evidence needed to prosecute, and those at the centre of the controversy controlled or had means of influence over the only other legal means to gather that evidence: A Commission of Inquiry.

So in order to understand the effectiveness of the Good Governance Act to stop political corruption, we need to first identify the difference between unethical behaviour and illegal or criminal acts. Here are some working definitions.

In the context of political corruption, we generally use the term “unethical behaviour” to refer to acts that fall short of unlawful or criminal behaviour but otherwise involve a breach of fiduciary duty, which generally means any failure to act in the best interests of the country.  For example, if a politician, when a making a decision on behalf of the Government, puts his personal interests ahead of those of the country, he is acting unethically.

Illegal or criminal acts generally include any act that contravenes the laws of Bermuda for which there is some form of sanction (such as a fine or imprisonment).

A fundamental misunderstanding between these terms arose about ten years ago when several Government scandals came to light at the same time.

As you may recall, the police launched an investigation into a number of allegations of corruption involving several Cabinet Ministers and PLP backbenchers, which included (i) allegations that Dr. Ewart Brown and another Minister coerced the head of the Bermuda Housing Corporation to purchase Dr. Brown’s property in Flatts at an inflated price and (ii) allegations that a contractor did major renovations at Dr. Brown’s home and then billed the Government’s Southside housing project for that work.

The then Acting Director of Public Prosecutions, Kulandra Ratneser, explained that he would not be proceeding with the prosecution of any Government MPs because even if some of the allegations were true, they will have only amounted to unethical behaviour but not a criminal offense.

While such explanation may have included an accurate summary of the law as it pertained to the allegations involving the other Cabinet Ministers and PLP backbenchers, it did not include an accurate summary of the law as it pertained to the allegations involving Dr. Brown because if the allegations were true, he may very well have committed the criminal offenses of Conspiring to Defraud and Official Corruption.

So was the Acting DPP lying?  No.

His explanation was technically accurate because he used the operative word “some.”  The misunderstanding arose because members of the public took the general description (“if some of the allegations were true”) and made the incorrect inference that the Acting DPP was referring to “all of the allegations” including those involving Dr. Brown.

Does that mean that Dr. Brown committed these offenses?  No.  It merely means that the public has yet to receive an explanation of why the criminal investigation was halted.  It’s quite possible that the Acting DPP had good reason to halt the investigation of Dr. Brown (such as lack of credibility of a key witness) but clearly the public deserved a more complete explanation, particularly when the subject matter involved allegations of corruption at the highest level of Government.  And just as clearly, Dr. Brown deserved the opportunity to clear his name.

The continuing harm that emerged from the Acting DPP’s statement was that it caused many Bermudians to mistakenly believe that there is no legal remedy available to investigate and, if appropriate, criminally prosecute any Government official that benefits personally from tainted Government contracts.

So, over the last ten years, each time a new Government scandal broke out, the Bermuda public simply threw their hands up, erroneously believing that there was no law prohibiting the perceived plundering of the public’s money.  But if the allegations surrounding any of those scandals over the last ten years were true, they would have likely amounted to, at a minimum, Official Corruption, which is a criminal offense with a maximum penalty of three years in prison.

What is Official Corruption?

Generally speaking, a holder of public office will have committed the criminal offence of Official Corruption if, in carrying out his duties, he corruptly receives any property or benefit for himself or others (such as a member of his family).

Further, a member of the public will have committed the criminal offence of Official Corruption if he corruptly gives or offers to give a public employee or Minister any money or other benefit in return for some favour or benefit.

So if a Minister awards a Government contract for which he receives some personal benefit (such as a kickback to himself or a member of his family), both he and the contractor will have committed the criminal offence of Official Corruption.  If the Minster awards a contract to a friend without a kickback or personal benefit, he probably has not committed a criminal offense, but he will have breached his fiduciary duty (and therefore engaged in unethical behaviour) if he acted other than in the best interests of the country when he awarded the contract.

So why was no one prosecuted?

The biggest problem in prosecuting corruption at the highest level of Government is that, because of the political sensitivities involved, the police and DPP need an almost airtight case before they can prosecute.  And that case will only be airtight if they can obtain proof that the elected official in question has received some direct or indirect payment from the connected contractor.  In other words, they have to have a way to follow the money.  And that is the central problem in Bermuda.

A principle way to follow that money is to obtain a court order to subpoena the bank accounts, files and records of the connected contractors and the suspected elected officials, but it’s a big political risk to attempt to get that court order without something more substantial than the fact that these Government contracts smell rotten.

The independent person who investigates these Government contracts—the Auditor General—unfortunately, is not authorized under Bermuda law to follow the last half of the money trail.  She only has the authority to investigate transactions between the Government and the parties with whom it contracts.  She has no power to subpoena the private records and banks accounts of these contractors or the suspected Government Officials to find evidence of illegal kickbacks.

Under Bermuda law there is only one way to follow the money to reveal all the facts concerning suspicious circumstances surrounding politically connected Government contracts: a Commission of Inquiry under the Commission of Inquiries Act (1935).

The problem is that only the Governor is authorized to issue a Commission of Inquiry and, because of the political sensitivities involved, he is unlikely to do so unless the Premier requests a Commission and the Finance Minister agrees to provide the funding for that Commission.  In other words, the most effective investigatory tools to gather the evidence needed to prosecute are either controlled or heavily influenced by persons at the centre of the controversy.  And it is this lack of investigatory independence that is the biggest hurdle in reducing political corruption in Bermuda.

Good Governance Act

Last summer, Premier Cox introduced the Good Governance Act.  Let’s see how well that legislation met the country’s need for investigatory independence, the missing tool to unearth political corruption.

First of all, the legislation is not stand-alone legislation; it merely makes amendments to four other existing acts:

1. Public Treasury (Administration and Payments) Act 1969
2. Internal Audit Act 2010
3. Audit Act 1990
4. Employment Act 2000

The amendment to the Public Treasury Act creates the Office of Project Management and Procurement.  The Director of that office

1. oversees Government contracts and pre-contract negotiations to ensure fairness in tendering;
2. applies performance measures;
3. handles complaints; and
4. issues a Code of Practice for public officers to follow when obtaining goods and services for Government.

The legislation also places the Office of Project Management and Procurement within the Ministry of Finance.  While some may claim that it should be independent of Government, I believe that such change is not only unnecessary, but probably counterproductive.  As the Premier of Bermuda pointed out when she introduced the legislation, the Office of PMP is itself part of the process: it can become involved in negotiations on behalf of the Government, it oversees implementation of capital projects, and manages inventories.  It is much more than just a watchdog; it is an active participant.

So there is no need for the Office of PMP to be independent.  The only thing that really matters is that the person who is independent—the Auditor General—be given full investigatory powers to unearth political corruption, which generally means the ability to follow the money after it is in the hands of connected contractors (e.g., to prevent kickbacks to elected officials).

But when we get to the part of the Good Governance Act that deals with investigatory independence, something very curious happens.

The Good Governance Act deals with the powers of investigation for three people: (i) the Director of the Office of PMP, (ii) the Director of Internal Audit and (iii) the Auditor General.  The first two persons report internally to the Government (i.e. to the Minister of Finance and the Cabinet Secretary) and third person, the Auditor General, is completely independent.  Now watch what happens to their powers to investigate under the new legislation.

The Good Governance Act amends the Public Treasury Act as follows:

Notwithstanding any other Act or any privilege under the law of evidence, the Director may obtain any documents or information relating to procurement and capital projects from a public officer, and no such documents or information may be withheld from the Director on any grounds.

 The Good Governance Act makes the virtually identical amendment to the Internal Audit Act, thereby giving the Director of internal audits the same sweeping power.  But when the Good Governance Act amends the Audit Act, (i.e., the powers of the Auditor General) it leaves out that section.  What does that mean?

It means that the Director of the Office of PMP and the Director of Internal Audit, both of whom effectively report to the Premier, have the right to demand and obtain all documents from Government, and any claim by Government that the documents are legally privileged (i.e., Government officers don’t have to show them to you) is not enforceable against those Directors.  The Directors must be given the requested documents.

But the Auditor General—the only truly independent investigator of Government financial wrongdoing—is denied that power.  That makes no sense whatsoever.  Except of course, if you remember what was happening at the time the legislation was introduced.

The Auditor General recently released a damning report about the Government’s unlawful payment of $30,000 in legal fees for the private defamation action brought by Deputy Premier Derrick Burgess and former Premier Ewart Brown, otherwise known as Defamationgate.  The Auditor General reported that (unbeknownst to the rest of Bermuda) on July 18, 2011 she made a demand for all documents related to that unlawful payment, and in response Premier Cox and her colleagues refused to deliver the documents claiming that the documents were legally privileged.

It might strike you as more than a little strange that four days after the AG’s demand for documents, the Good Governance Act is tabled for a second reading in the House of Assembly, and it has a major omission: it forgot to give the Auditor General the power to obtain all documents even when they are legally privileged.

This really is quite sad.  The Good Governance legislation, which Premier Cox hails as “[underscoring] our commitment to enact measures geared to strengthen financial accountability in Government,” not only fails to provide the most essential tool to stop political corruption—investigatory independence to follow the money—but the Premier structures the legislation in a way that specifically undermines the Auditor General’s ability to investigate a political corruption scandal that is at that very moment on the Premier’s desk.

So investigatory independence—the fundamental missing element to unearth and prosecute political corruption in Bermuda—was short-changed when it came to providing the Auditor General with access to documents in the Government’s possession.

But what about the ability to follow the money after it reaches the hands of connected contractors?  How does the Good Governance Act deal with that crucial need?

It doesn’t.  The July 22, 2011Official Hansard Report of the House of Assembly indicates that John Barritt repeatedly stressed the fundamental need for the Auditor General to be given the investigatory power to follow the money.  He pointed out that the Government already had lots of rules, in particular the Government’s Financial Instructions, which were repeatedly breached by Government Officials but the sanctions for those breaches were never enforced.

In other words, the Good Governance legislation creates more rules, but it fails to give someone truly independent, like the Auditor General, the ability to follow the money by having the power to subpoena the accounts and records of the contractors and the elected officials at the heart of the scandals.  And so the Good Governance Act really just gave Bermuda more of what wasn’t working and failed to give the country what it needed most to stop corruption at the highest levels of Government—the ability to follow the money.

Simply put, the Bermuda Government has failed to follow the lead of other countries to safeguard against political corruption.

The US Senate Report on the 1978 Inspector General Act states,

Subpoena power is absolutely essential to the discharge of the Inspector and Auditor General’s functions.  There are literally thousands of institutions in the country which are somehow involved with receipt of funds from Federal programs.  Without the power necessary to conduct a comprehensive audit of those entities, the Inspector General could have no serious impact on the way federal funds are expended.’

Hence, the 1978 provision gave Inspector General’s the right to subpoena “the production of all information, documents, reports, answers, records, accounts, paper and other data and documentary evidence necessary.”

In Australia, as a matter of good governance, the Government includes in its agreements a contractual right of the Auditor General to inspect the records of contractors.

With the enactment of its 2008 Anti-Corruption Law, the Cayman Islands gives the Corruption Committee (which includes the Police Commissioner and the Auditor General) the right to require information from any person (including contractors) and failure to comply can result in a $50,000 fine and two years in prison.

But in Bermuda, the Government included none of those powers or practises in the Good Governance Act.

I would conclude by saying this to the people of Bermuda.  Stop thinking that these political corruption scandals involve only unethical behaviour.  That analysis is legally flawed.

The strong circumstantial evidence surrounding these numerous political scandals suggests that criminal acts were committed at the highest level of Government.  The reason the perpetrators were not charged with criminal offenses is most likely because there is no independent investigator, such as the Auditor General, with the power to follow the money, and therefore the only means available under Bermuda law to properly investigate these scandals is through a Commission of Inquiry, which Premier Cox can make happen at any time merely by requesting the Governor issue one.

So if you are unsatisfied with the level of unresolved political corruption in Bermuda, it is your democratic right to look to Premier Cox.  It was her job as Finance Minister to stop the corruption that has occurred over the last ten years; she failed to do so.  It is within her power today as Premier to stop the corruption by calling for a Commission of Inquiry; she has failed to do so.  Instead, she gave us the Good Governance Act, which continues the failure to provide independent investigators with the tools most needed to ensure good governance.

In other words, there is little reason to believe that ten years of political corruption in Bermuda will be resolved anytime soon.

Kevin Comeau

March 14, 2012

My Response to a question from the floor about the basis for believing there is political corruption in Bermuda

Numerous Government capital projects over the last ten years (e.g., Berkeley Institute, Port Royal Golf Course, Heritage Wharf, the new Courthouse, TCD) have collectively resulted in cost overruns of hundreds of millions of dollars.  Generally, only two things can cause large cost overruns:  managerial incompetence and financial corruption.

When you consider that the cost overruns on some of these projects exceeded 100% of the initial cost estimates and that Government had at its disposal civil servants with collectively more than a hundred years of architectural, engineering and construction expertise, it is hard to conclude that only incompetence was at play.  Someone at the highest level of Government had to be doing something unscrupulous, either at the front end or through kickbacks and undisclosed interests.  Individually and collectively, these and other large Government contracts simply don’t pass the smell test.

Not only were tendering rules violated and the recommendations of civil servants ignored in the granting of some of these and other large Government contracts, but inordinately large change orders were frequently made, a well known way to slip much larger profits to connected contractors.   When you add to this the multiple damning reports of two Auditors-General, we are left with strong circumstantial evidence suggesting massive political corruption.