Monday, 5 September 2011

Green Street Barracks Saga – Part IV – Understanding the Lime Grove House “train crash in slow motion”

I took soundings from a variety of sources to ensure I was confident
Treasury Minister Senator Philip Ozouf – oral evidence to Scrutiny sub panel

I am sure you can appreciate how utterly frustrated and let down my clients are feeling at what they consider to be unconscionable behaviour by the States.
Vendor’s Agent to the States of Jersey Treasury Agent on learning of a revised offer price from £8.75m to £8.25m. 11.04.2011

This is one of the biggest blame cultures I have ever lived in ........there will be a witch hunt.
David Flower, Head of Jersey Property Holding Department – oral evidence to Scrutiny sub panel 02.09.2011
 So far the full details are not in the public domain and the public has only the faintest hint of the scandal that is about to break. The government media, CTV, JEP and BBC Radio Jersey, in the meantime will be spinning to save the reputation of Treasury Minster Senator Philip Ozouf.

After a week of oral evidence to the Corporate Services Scrutiny sub panel, it is becoming palpably clear that the responsibility for the loss of the Lime Grove House purchase deal rests squarely with the Treasury Minister and senior Treasury civil officials.  

The decision to assume personal responsibility for the negotiations late in the day and then to seek both a reduction in the “headline price” and the cost of alterations and fitting out, was described as a “recipe for disaster” by the Head Jersey Property Services Department. So it has proved.

Based on the current lessee’s terms, the yield on the Lime House Grove is 6.25% to 6.75%, giving a capital value of £11m to £12m. Trying to reduce the purchase price by half a million from £8.75m has resulted in the loss of a building worth more than was being paid, created a probable three year delay in finding or building new offices for the Police, together with the loss of an annual £1m saving from the wider government office relocation strategy.

Evidence given during hearings revealed that abortive fees of surveyors and architects prior to 2008 amounted to around £1m. One can only imagine the total loss now in aborted professional fees incurred over a period of five years of protracted negotiations.

“Phone a friend decision time” – impaired decion making

At the time of intervention, it appears that Treasury Minister and his CEO were spooked by a possible fall in the commercial property market, of the magnitude of a 50% drop. Of course we do live in exceptional times of crisis and market volatility, so caution might well have been justified, albeit historically declines have never been more than 5% in Jersey. Quite what was the source of this fear is unclear.

The Treasury Minister stated he took informal soundings as to valuation, refusing, when pressed, to identify to whom he had spoken. The estranged former Assistant Treasury Minister Deputy John Le Fondre believes that the Treasury CEO John Richardson had formed his opinions based on telephone conversations with a Canadian friend and property developer.

A pure property transaction being conducted by professional was suddenly subject to political intervention; a volte face in terms of style of negotiation and aggressive price reduction. Neither the Treasury Minister, nor its CEO, has any property management experience. Based on purely subjective factors and a phone around friends, the advice of Jersey property professionals, in the form of formal valuations and reports, was discarded.

Part of the issue must be Senator Philip Ozouf’s leadership style. He is not sufficiently humble to recognise when he is out of his depth on technical areas.

The media will manage the message and limit damage

By what ever means the media seeks to protect the reputation of the Treasury Minister, property professionals and the educated will quickly draw their own conclusion from correspondence, documentation and transcripts of evidence given by civil servants, professionals and politicians close to the deal that is soon to appear on Scrutiny’s web site.

For the media, this is a complex matter of property development not easily served up in sound bites, especially as comprehension requires some thought.

In terms of the damage limitation campaign, Senator Ozouf stole a march on Thursday by having prepared an extensive written defence. It was not simply through the Senator’s hubris that it appeared on his web site even before he had started giving evidence to the sub panel, it was made available early to ensure the media had time to read his thoughts and adopt the correct political line. There is nothing like spoon feeding a lazy journalist.

Give that this enquiry has the potential to be a serious political scandal, just in advance of a general election; it is surprising there has been no consistent mainstream media presence at the scrutiny hearings.

Acts of desperation

In order to defend himself, the Treasury Minister in the “Defence” published on his blog site has had to resort to impugning the reputation of not only his own professionals in Jersey Property Holdings, a branch of Treasury, but also that of the external negotiators and at least three firms of private sector chartered surveyors that prepared separate valuations. This is a desperate act that will not go down well at the golf club bar or dinner parties in professional circles.

A £17.50 “blow out lunch” or irony in an email

The first diversionary “red herring” by Senator Ozouf was to claim that a senior civil servant from Property Holdings had been invited to a “blow out lunch” by the vendor’s agents and implying attempted corruption. It was reported that the official was now subject to disciplinary proceedings as a consequence, thus suggesting the act was a serious breach, rather than a lapse of judgment.

That lunch at Bohemia restaurant in fact turns out to be a modest set lunch at £17.50. In any event, the firm was on the panel of professionals used when out sourcing work and this lunch was no simple one off event to discuss a specific deal. It cannot be treated as corruption of an official, as the individual did not carry sufficient authority to “fix” a deal as complex as Lime Grove House, especially one requiring Ministerial sign off. The Treasury Minister has alleged that this affected policy formation and was a reason undermining his confidence in Property Holdings. A cheap lunch is hardly a plausible reason for removing an entire department and negotiating team.

A second diversion was to claim that the sub panel Chairman was conflicted, as she and her starlet, Deputy Tracy Vallois, had, at various times, lobbied him to proceed with the transaction as speedily as possible.

Chief Minister battle

Certainly Senator Ian Le Marquand is hoping to make some political capital out of the embarrassment caused to his rival, in his bid to become the next Chief Minister. He hopes the scandal may be fatal. It has upset the well laid plans of Senator Ozouf to declare for Chief Minister and his official announcement is probably delayed pending the final report of the Scrutiny sub panel.

However, Senator Le Marquand’s performance on CTV Thursday was lack luster and upstaged by the ever confident Treasury Minister. Perhaps Senator Le Marquand is playing a waiting game in the hope that the facts will speak for themselves. Certainly there was no attempt to deliver the final coup de grace.

Attack being the best form of defence, what could have been a Waterloo, turned out to be a skillful counter attack. Neither Senator Le Marquand nor the CTV presenter was sufficiently confident of the facts to refute the spin that the Treasury Minister was “batting for Jersey” in a bid to prevent another capital overspend on a par with the infamous Cavern project.

The White Rabbit

The Treasury Assistant Minister Constable Refault was interviewed by CTV Friday and gave a weak and incoherent explanation for why the Property Holdings department was removed from the purchase negotiations. He become Assistant Treasury Minister in January 2011.

He said to camera:

 “The negotiating team was changed because they had been working on this project now for approximately a year and things had not progressed very far and there was need to refresh the whole project again and to re-look at it and reopen the negotiations, in light of we were now twelve months further on. What we decided to do was, rather than use internal staff, to bring in a professional, commercial property negotiator to ensure that the States got the best value for the money.”

Nearly every aspect of this statement does not square with the detailed facts and sequence of events revealed in evidence by others to Scrutiny.

During a hearing on Friday, Constable Refault looked extremely uncomfortable and clearly was not conversant with the facts. He had failed to be briefed on what had been said and by whom to the panel in previous days. Like the White Rabbit in Alice in Wonderland, he kept looking at his watch hoping the meeting would end soon.

True to form, the authoritarian secrecy mode kicked in and he started referring to emails in a code fashion by their date and time but without mentioning sender or recipient. The result was bizarre, especially as these were the same emails the Home Affairs Minister had read out and attributed when giving evidence earlier.

He became so defensive that he accused the sub panel of cross examining him when their terms of reference limited them to collecting evidence. This impertinence was reprimanded by the Chairman and again he looked foolish. His understanding of what went on is clearly so defective, that the only purpose for his for attending, along with John Richardson, the Treasury CEO, was to act as a “minder” for David Flowers, the head of Property Holdings, as he gave evidence.

The sub panel hearings continue tomorrow, Tuesday.

Homeless Police officers take the search for new offices into their own hands

1 comment:

  1. Ozouf is clearly a very worried person. His future political career hangs on this. There are so many hidden agenda - such as the spin view of Jersey's still vibrant economy whereas the property market is dead or dying and prime offices rents are £24 yet in Guernsey they are £40 per sq ft. and still buzzing. The only other new prestige offices in Jersey currently on offer were at the Esplanade but State Street accepted the Lime Grove option in a curious rented deal that the Boston managers seemed to decide upon very quickly after a conversation with Ozouf? Is there a hidden deal? State Street could have bought this property and saved paying a 6% annual premium to the owners.
    Ozouf's behaviour in dismissing all the expert valuations in favour of the opinion of an un-identified "friend" is positively dangerous and autocratic. He claimed himself to be an expert "in asking questions" but there are a great many more to be posed about this ambituous Treasury Minister. Ozouf's role stinks and his posse of advisers such as acting CEO Richardson - who also consulted a "phone a friend" for his professional guidance - surely puts them squarely in the old Ogley tradition.
    But shall this become a live election issue as it deserves? Doubtful - there were hardly any States members at the scrutiny hearings.
    The "domino" affect of this failed Police HQ was said to be nearer £34 millions of lost developments with loss of Category "A" houses on the Summerland site, the redevelopment of the Planning Offices, the old JCG, fire and ambulance stations etc.
    When Ozouf first announced that he was cancelling the Lime Grove Police HQ transfer he apparantly proposed to the Police that they might consider a move to a site at the Airport!
    He must never be allowed to become CM.