The Prime Minister’s unlawful invitation for US millions
Introduction
Brigadier (ret’d) Mark Phillips has served in military uniform at the highest level in the country. And now serves at the second highest level in civilian society. Those offices are often identified with personal virtues like valour, honour, courage and integrity, and with qualities like competence and judgment. Not too long ago, I associated him with all of those, and with the conviction that the holder’s words – written or oral – are an undertaking that once made, is a personal debt incurred. There is no room for vacillation, for seeking refuge in delegating blame to others, or for the brazen breach of a national commitment. He has failed and fallen precipitately in my esteem.
Some time ago, as Liquidator designate of the company that published the Stabroek News, I raised with him directly the matter of an outstanding debt of approximately ninety million dollars owed by the Department of Public Information for advertising carried in the Stabroek News over a period of more than a year. He gave his personal assurance that the obligation would be settled after the passage of the Budget. The Budget passed two months ago. The debt remains outstanding. He has since assigned the matter to one of his juniors. Such conduct is indefensible in much lesser beings. It is dishonourable in one as exalted as he is.
I mention this not because it is the subject of this column, but because it bears on issues of credibility and integrity. A man whose personal assurance on a straightforward matter of public debt does not travel the short distance between his office and the Ministry of Finance is a man whose loose language to an unsuspecting investing public warrants close examination. That is the subject of this column.
On Thursday, Kaieteur News carried a report on an advertisement in which the Prime Minister’s Office – the lead ministry for the poorly planned and ineptly executed Gas-to-Energy project – invited “investors, both local and foreign,” to submit expressions of interest in two private companies: the Guyana Ammonia and Urea Plant Inc. (GAUP), estimated at US$300 million, and the Guyana Gas Bottling and Logistics Company Inc. (GGBLC), estimated at US$40 million.
Investors are told they can commit up to US$5 million or US$1 million respectively, and can “assume a government guarantee of 10% annual return.” Apparently expanding the statutory function of the National Procurement and Tender Administration Board, the invitation directs prospective investors to forward their expressions of interest to the chair of that body.
The advertisement is, in my view, unlawful on its face. It is a public invitation of investment capital dressed up as a procurement notice, inviting members of the public to commit money on the basis of a government promise on a venture that is like a financial plague on the country. PM Phillips is aware that the PPP/C enacted the Securities Industry Act, (SIA) precisely to protect the public by ensuring that adequate information is provided to allow informed decision-making and risk-taking. In failing to meet those standards, the invitation is reckless, dangerous and unlawful. Before anything further is done under it, the Prime Minister would be well advised to take legal advice from independent counsel conversant with both the Companies Act and the SIA.
A cynic might wonder whether, by its emphasis on “private” company, the PM’s Office believes that the identity of the investors will also be private. They would be wrong. The Financial Intelligence Unit might wish to step in and advise the NPTAB that there is a test in money-laundering law called “source of funds.” Another reason feeding cynicism is the recent removal of property tax on individuals. These “private” investment offerings might be interpreted as opportunities to hide assets right here in Guyana – and in a government company with considerable experience in that area.
And here is why the PM’s Office needs legal advice. Unlike Humpty Dumpty, words in real life have a real meaning, not just what the OPM “chooses it to mean – neither more nor less.” Section 2 of the Companies Act defines a public company as one whose issued shares or debentures are or were part of a distribution to the public within the meaning of section 531 or are intended for such distribution. Section 3 of the Securities Industry Act adds a second limb: a company is also a public company if it is “the issuer of a security that is beneficially owned by more than fifty persons.” Both statutes treat the public character of a company as a consequence of how its securities are offered and held, not a label the government attaches to it.
Two features of the invitation make the self-description difficult to sustain. At a US$5 million cap on a US$300 million plant, sixty investors are required if each takes the maximum, and in practice many more. The moment beneficial ownership crosses fifty, the SIA treats the company as public, with the expansive duties that follow. Second, the offer is made publicly and directed to “local and foreign” investors, including the diaspora. That falls squarely within the SIA’s definition of “offer to the public”. The advertisement seeks shelter behind the statements that “all information provided is only indicative” and that the document is “only a preliminary Expression of Interest.” The Act offers no such escape hatch.
Conclusion
Honest and sincere prospective investors should be careful about this “invitation” and about what they may be getting into. A “private company” in which the government exercises control is still a government company. A “private” company whose securities are offered to the public is by statutory effect a public company. No ifs and buts.
Until the law is complied with – including the full set of information, documents and processes – by the two companies, the invitation should be treated as what it is: a public offer which the law does not permit. It ought not to be that difficult for the PM to disclose the composition and election of the companies’ boards, the terms of the sovereign guarantee, the appointment of a Trustee to protect the interest of the investors, and the ranking of the investors’ claims.
The PM will do himself some good to seek advice on promoter’s liability and the provision of the laws which attach personal criminal liability to those who authorise, permit or acquiesce in such conduct, subject only to very narrow defences. Those are matters for next week’s column.
(This column which appears on chrisram.net is reproduced with the kind courtesy of the author).