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Report Slams WAPA Over Land Purchase

May 21, 2005 – The Virgin Islands Inspector General has recommended that the Attorney General look into possible criminal actions in connection with the Water and Power Authority's improper purchase in 2000 of land formerly used by V.I. Cement and Building Products in Christiansted.
In a report released earlier this month, V.I. Inspector General Steven van Beverhoudt examined the $2.3 million purchase of the property from stateside-based Devcon. The report found such fundamentally flawed aspects of the purchase that it raised the question of whether actions by the former WAPA governing board and Raymond George, former executive director, were criminal or just unprofessional. The inspector general recommended turning the investigation over to the attorney general, and current WAPA Governing Board Chair Daryl Lynch has agreed with that recommendation.
In January 2000, WAPA used proceeds from a 1998 bond to buy eight acres of former V.I. Cement land from Devcon to expand WAPA's Richmond facility. It was a major transaction, yet the inspector general's report cited "a disingenuous lack of knowledge" about it by the board.
This refers specifically to the former board's refusal to take minutes of its executive sessions. The report states: "The only reason for this kind of intentional neglect was to allow the former board, and its individual members, to insulate itself and themselves from the consequences of its own actions or failures to act."
A failure of the board, as cited in the investigative report, "was a penchant to manage by delay." It says the board took too long to act on matters of importance and concluded, "This kind of delay belies a good-faith effort to manage."
The lack of executive session minutes means it was difficult to determine what the board knew, and when it knew it. However, the investigators are not buying the claim that the board members knew little of the purchase. The report introduction states, "Given the critical nature of this purchase, the amount of money involved, the negotiations that went into the purchase, the transfer of monies to cover the cost and the number of corporate executives involved over an eight-month period, it tests the bounds of reasonableness to conclude that the former board knew nothing of the Devcon purchase, of its terms and conditions, until after the Contract for Sale was executed."
The 15-page report was the result of an agreement in April 2003 between WAPA and the inspector general's office to look into line losses of power and water services on St. Croix and to review the facts concerning the acquisition of the Devcon property. The line-loss report was released last December.
The issues of concern about the land purchase to present WAPA officials were:
— Did the former executive director have the authority to purchase the property?
— Why was no title insurance purchased?
— Was an outdated appraisal used as the foundation for the purchase?
— Were details of the contract, which gave an inexpensive lease back to V.I. Cement and which did not obligate V.I. Cement to clean up the property, negotiated in the best interest of WAPA? Officials were also concerned that the check for the purchase was issued improperly, and they questioned whether the bond money used to cover the purchase could legally be used for that purpose;
— Other concerns included the issue that no cost-benefit analysis was done before the purchase, and the potential illegality of offering V.I. Cement a two-year option on other property.
The investigative report noted that the appraisal of the property was only three years old, but good business practice dictates that a new appraisal should have been done.
The report stated that the two-year option was contrary to V.I. code requiring that before the government can sell property, the property must be declared surplus.
The part of the contract that gave V.I. Cement a lease on an acre of property for $10 a year appeared favorable to V.I. Cement, according to the report. The report pointed out that WAPA paid V.I. Cement $1,300 per month to rent a warehouse and $800 a month for additional storage space.
The inspector general's report could not ascertain why the ground was not cleaned up by V.I. Cement before the sale. As the report stated in many other areas, "there was no documentation" concerning why this happened.
The report came to no conclusion on whether the former executive director exceeded his authority in making the sale. There were different versions of whether he was given the authority. Neither version was formally documented. Cecil George, the brother of Raymond, is the only board member who recalls giving the executive director permission to make the purchase. (See "WAPA Board Looking to Lay Blame for Purchase").
As for the purchase details, the report stated, "WAPA's Chief Financial Officer arranged for an improper transfer of bond money to buy the Devcon property" and adds that the check did not have necessary support documents when it arrived at the accounting office for clearance.
The report made five recommendations to WAPA to prevent these irregularities from occurring again. Lynch has agreed to implement the recommendations.
Van Beverhoudt recommended that the report be turned over to the Attorney General's office to determine whether criminal charges are appropriate. Lynch agreed to do so.
The members of the present WAPA governing board who were there at the time of the purchase are Ira Hobson, Andrew Rutnik, Alfonso Franklin and Claude Molloy. Molloy and Franklin had just come aboard in the November preceding the January purchase.
At the governing board meeting last week, Lynch said he was asking Gov. Charles W. Turnbull to replace Rutnik on the board.

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