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Devcon International Corporation and Political Opportunism

Political Opportunism"There is a strong incentive for bureaucrats to behave opportunistically and to maximize their budget at the expense of executing public policies efficiently and effectively" - Corruption and Rent-Seeking by John Mukum Mbaku.

This article examines Government of Antigua & Barbuda and U.S. based Devcon international business association, particularly regarding investment-corruption and potential bid rigging. Therefore, it is especially important to review U.S. based Devcon International Corporation subsidiary businesses: the leasing of 30.61 acres of Crown Land, signed on September 12, 1966 between Commander of the British Empire Hugh Burrowes and Antigua Sand & Aggregate Ltd (ASA) as lessee. Later, managing all aspects of the transition to a new-lessee, Antigua Masonry Products (AMP) in 1967.



U.S based Devcon International, incorporated four subsidiaries in Antigua: Antigua Masonry Products (AMP), Antigua Heavy Constructors Ltd (AHC),  Antigua Development & Construction Ltd (ADC), and Antigua Cement Limited (ACL). Collectively, these companies are referred to as AMP. Next Devcon divested two of these subsidiary assets in 2000, ending with the conclusive sale of the remaining subsidiaries on March 2, 2006. Consequently, Devon Executive Vice President Mr. Richard L Hornsby, recognized this forty-year collective simultaneous responsibility with the sale of AMP/ACL  and settlement of former Antigua Labour Party (ALP) government liability on March 2, 2006 "... the forty-year relationship that Antigua Masonry Products and DEVCON have with Antigua and Barbuda has reached a new level and believes that now is the right time to assist in the restructuring of the economy..."

Beyond doubt, Antigua Labour Party (ALP) government left the country on the edge of bankruptcy. ALP had no immediate response to the growing debt defaults, including dredging of the St. John's Deepwater Harbor on April 3, 1987, and the enormous amounts primarily owed to lending institutions and private sector companies. Reorganization of the Antigua & Barbuda economy began with the newly elected UPP government on March 24, 2004. A few months later, UPP and Devcon signed two different agreements. One  contract entailed construction of the  Point Fisheries Development Complex, another, government tax-exemption guarantee and payment of liability to Devcon and it's subsidiaries.

Actually, as soon as the deal was inked in October 2004, the complex tender-procurement of the Point Fisheries Complex was handed over to AMP/Devcon. Clearly, AMP/Devcon received preference to construct the Fisheries Development Center (FDC) at the Point Wharf, Antigua. Obviously, Devcon's stated solution "..to assist in the restructuring of the economy..." was inherently flawed, the result: neither transparency nor reform of Government's procurement regime appears to exist! Firstly, the Japanese government, grantor of the FDC project, selected a Japanese company TOA Corporation. Secondly, the UPP government ignored mandatory tendering bidding on the project. Thirdly, the chosen company TOA Corporation subcontracted AMP/Devcon. Getting that selection right reflect the preferences and demands of the political process. ( Issue No. 93 October 2004)


The Satisfaction of Indebtedness Agreement
 
 
Also, Devcon accessed business benefit from the advantages of The Satisfaction of Indebtedness Agreement. This agreement signed between the Government and Devcon on December 3, 2004 eventually finalized Devcon divestment in 2006. But much larger and dominant issues remain prior to 2006. Before 2006, Devcon's filing with the U.S. Security Exchange Commission(SEC) regularly recorded 30.61 acres of Crown Land, except in 2000. In 2000, there was noticeable and questionable lack of detail regarding 8.0 acres. According to Devcon's vague SEC filing 10-K on December 31 2000 AHC,ADC plus 8.0 acres of land were sold or assigned in the first quarter of 2000 (1): "Property and leases were in whole or in part sold or assigned in transactions consummated in the first quarter of 2000" (SEC filing for the fiscal year ended on December 31, 2000)
 
Similarly, AMP and ACL were sold or assigned in 2006, inclusive of 22.61. This was done under the Satisfaction of Indebtedness Agreement (2)signed on December 3, 2004  between the United Progressive Party (UPP) Government and Devcon. Conceivably, AMP and ACL assets were sold to private investor Aziz Hadeed, and Devcon's principal General Manager of AMP Gary O'Rouke for US$5.1 million. Hadeed & O'Rouke received 7.5 years tax and duty free exemption.(DEVC SEC filing 8-K  EX-10.1 December 03, 2004 AGREEMENT FOR SATISFACTION OF INDEBTEDNESS AND AMENDMENT NO. 10 Filing December 8, 2012)
 
The above mentioned agreement was contingent upon the Antigua & Barbuda government releasing and discharging all duties and taxes owed by Devcon's subsidiaries: "(b) releasing and discharging in full all Duties and Taxes, as well as all income and withholding taxes and duties, consumption taxes and customs services taxes due and owing by AMP, the AMP  Subsidiaries and Devcon International Corp.."  Separately, a cash-settled incremental payment inclusive of a 5.4% increase totaling US$987,5000 was paid in the first quarter of 2005. (Devcon SEC filing for fiscal year ended December 31, 2005 pag 63)


Devcon Debt Cancellation:


By the same token, The Satisfaction Agreement of Indebtedness detailed the following: Devcon tax debt of US$6.4 million, Devcon debt cancellation of US$17.9 million, Antigua Government tax credit of US$7.5 million, Government cash payment of US$11.5m, and tax exemption of all four subsidiaries. In fact Government simply conceded too much concessions, at the same time Devcon's AMP subsidiary had a consistent recurring revenue stream "...outside of US and it's territories, AMP was the most progressive"  For example AMP foreign % of sales are as follows: 32% in 2001, 33% in 2002,  38% in 2003, 24% in 2004 and 22% in 2005 generating a total of US$72.146 million or 29% of the overall US$249.333m (Devcon SEC filings form 10-k fiscal year ended December 31, 2002, Commission file number 0-7152)


Not to mention, Devcon and it's subsidiaries consistently refuse to pay Antigua & Barbuda assessed corporate taxes of US$6.4million. Based on this underlying dispute Devcon filed a litigation suit against the ALP government.  Devcon in admitting to tax-default acted defensively "...if our appeal is not successful, a significant tax liability may have to be recorded." (Devcon SEC filing for fiscal year enede December 31, 2002)
 
Therefore, why did the Antigua government swiftly borrow the minimum of US$11.5 million to pay off Devcon and not an additional US$5.1 million to purchase Devcon's subsidiaries? Apparently there were other significant source of demand, absolutely none from the UPP government. Seemingly, only well-connected businesses can maintain their source of income, influence and wealth- building capacity through such covert mechanism as The Satisfaction Agreement of Indebtedness.Why was AHC and ADC included in the above mentioned agreement?

Today, AHC and ADC maybe in the hands of a local trustee, and that's one reason for their inclusion. Another to deflect US business ownership of both companies, so as not to be subjected to anymore US Internal Revenue Service (IRS) taxes and FATCA scrutiny. Remember, these companies were sold in 2000, so "releasing and discharging  in full all Duties and Taxes" was a dubious misstatement. Furthermore, the magnitude of Government guarantee undermined Antigua & Barbuda tax to GDP ratio between 2004 and 2006. What was Antigua & Barbuda treasury Tax-Exempt maximum cumulative loss (MCL)?

John Mukum Mbak "Corruption and Rent-Seeking" thesis identify instances of non-cooperation as typically cited bureaucratic support of special-interest at the expense of public policy "...non cooperating individuals often garner for themselves level of wealth that is above and beyond what they would have obtained in the absence of opportunism"

Regrettably the UPP Government ill-defined Satisfaction Agreement relieved Devcon from its US$6.0 million liability. Previously, assessed taxes of US$6.0 million owed to the Antigua government was officially reduced by 15% to $5.1 million and offset by the US$7.1 million tax credit. Plus, the $700,000 income benefited derived from "... the reversal of accruals for uncertain tax positions" (  What's the meaning of  "uncertain tax positions"?(Devcon SEC Filing December 31, 2005 page 63)
 
Uncertain Tax Positions (UTP)  is a U.S. Internal Revenue Service applied term used by corporation, featuring Schedule UTP tax accountability. However, the UTP was continuously abused by countless corporation resulting in Large Business & International (LB&I) examiners scrutinizing the business activities of  corporations, mandated by IRS Announcement 210-76. The IRS Announcement 210-76 required certain corporation to file Schedule UTP, and directives to LB&I examiners: "Directives to LB&I personnel have been issued setting forth the IRS’s planned treatment of these UTPs by examiners and other personnel." 


The Rise of Lester Bird and Monopoly Power
 
 
The wealth-creation and capacity-building of Devcon began as soon as the ALP won the 1976 election. Lester Bird was appointed Deputy Prime Minister in 1976, and subsequently Prime Minister in 1994, controlling Minister of Economic Development, Tourism & Energy. All of these activities led to corrupting abuse of power intrinsically linked with money power quid pro quo. The great majority of special privileges were joint-business tourism development under the guise of government projects. That monopoly power systematically disempowered local entrepreneurship and competition in the marketplace.

Adversely, Government-owned Green Castle Quarry, Antigua leased to Devcon offers a striking illustration of diminishing financial returns to the Antigua & Barbuda Treasury. ALP Government ministers complicity enabled Green Castle quarry over-exploitation of more than 168,000 tons per year. According to a third party survey this resource exploitation coincides with the lease expiration and depletion in 2015 and 7 months.
( SEC filing March 15, 2005 view Form 10-K December 31, 2004 page 21)


Lester Bird, the Leader Emeritus of the ALP, maintained joint business link with Devcon and it's subsidiaries including Red Jacket Mines, Sandco, and Antigua Aggregates Ltd.  Clearly these business association assured monopoly of Barbuda sand mining business and the exporting of several billion cubic yard of sand. Coming after was a mind-boggling deal to develop over 230 acres of Crown Lands at Dickenson Bay, Antigua, however, based on comprehensive surevys it's more in the region of 350 acres! These acres of Crown Land came under the control of Corbkinnons Ltd, the company consist primarily of  PM Lester Bird, Norman Wexelman and Devcon International Corporation.

Devcon purportedly sold it's interest in the non-transparent joint venture to Corbkinnons Ltd in 1990. Knowing fully well the deal was not consummated, the ALP Government granted Corbkinnons Ltd a 12 year income, duty and tax-free exemption. Following the UPP settlement of Devcon  debt on July 21 2006, Devcon officially handed over Corbkinnon shares to Wexelman on July 16, 2007. Since 1987 other accounting issue remain, concerning the lease payment of the 230 acres. No transparency exist for the US$20,000 monthly lease payment on the 230 acres of Crown Land. Undoubtedly, funds collected from 1987 to 2004 was never deposited into the Antigua treasury.

Additionally funds from Crown lands sold for as much as US$800,000 per 8,000 sq. ft parcel ended up in politicians offshore accounts. Imagine 230 acres is equivalent to 10, 018, 800 sq.ft, the sum total of US$1,001,880,000.00 billion. These lands are being sold by trustee Norman Wexelman accredited brokers. Norman Wexelman regular deposits to former ALP Prime Minister Lester Bryant Bird offshore account establishes a nexus of money, business and political greed. ( ( Devcon SEC Form-10/K-A filing date February 28, 1997 view (2) RECEIVABLES December 31, 1994 to 1997, and (10) FOREIGN SUSIDIARIES )   

Norman Wexelman payment of US$200,000 to former PM Lester Bird facilitated the predatory sell-off of State property. Not surprising Corbkinnons project lands are now advertised on the international market as: "..the only beachfront and marina land remaining on the island" Devcon US SEC filing confirmed the the real estate joint venture arrangement  "..primarily to acquire and develop land for sale in Antigua, West Indies." Today's worries concern the more than 230 acres of Crown lands now in the hands of trustee Norman Wexelman, and the zero benefits derived from Devcon's booming level of business activity. More was lost, nothing was gained, NASDAQ Stock Market delisted Devcon International Corporation on May 16, 2008. ( Devcon SEC filing December 31, 1995) (Caribarena Corruption Recordings)


NASDAQ Delist Devcon; Time for Change


On May 16, 2008 NASDAQ Stock Market delisted Devcon International Corp for non-compliance. In addition, the six processes leading up to the company's delisting was never challenged. Owing to its failure to comply with the NASDAQ Capital Market [NCM], Devcon filed a Form 15 with the SEC to voluntary deregister five months later. According to Devcon the delisting was because the Company's stockholders equity was below the $10 million minimum equity requirement for NASDAQ "..the Company's stockholders' equity of $5,205,000 reported on it's Form 10-K for the period ended December 31, 2007 does not comply with the minimum $10,000,000 stockholders' equity requirement for continued listing on the Nasdaq Global Market, as set forth in Marketplace Rule 4450(a)(3).." 

Antigua & Barbuda never beneifted from Devcon's presence, benefits went to shareholders and politicans. ALPs policy preferences was neither about social development nor local empowerment. The basis of power was economic self-interest revolving around Antigua Isle Company, Deep Bay Development Company, Newport (Antigua) Ltd, Antigua Aggregates Ltd, Red Jacket Mines, Sandco and Corbkinnons Ltd..

 
There are definitive messages regarding Antigua & Barbuda macroeconomics from 1970 to 2012, in conjunction with UNCTAD FDI analysis over the last four decades. Of particular interest, the governance and management of the country for the past twenty-years. PM Baldwin Spencer  leadership endured a dreadful domestic and world market crisis. Through it all UPP managed to produce and distribute more benefits to the economy: by increasing the minimum wage, the minimum aggregate pension, Senior Citizens Utility Subsidy Programme administered by PDVCAB, expanding the school meal program. Recent accomplishment include the dedication of the national Public Library after 40 years, and construction of a public school in the St. John's Rural West Constituency. On the other hand contemporary critics agree Leader Emeritus Lester Bird's tenure was beset by ill-fated crisis of political greed! Nevertheless this upcoming election will neither be based on issues, nor political knowledge of democratic principle, but on political personalities. More than any other, 2014 will define who we are. Who are we, do you know?


Upcoming article: Corporate Monopoly and Government Complicity-ALP Business Mismanagement


Reporting by Caribarena news, publishing by Ofer Shaked.

See related stories:

Antigua Political Corruption, West Indies Oil and Our Future

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6 Comments In This Article   

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RE: Devcon International Corporation and Political Opportunism

#6 ANTIGUAN WOMAN! » 2014-04-30 22:59

This Bombshell person surface every Election. Little does he know the Red train has left the station;loaded with its ammunitions and is headed in one direction; ie towards the finish line to victory. We are not looking back,side ways or down,we are bolting straight Ahead;and nothing will slow down or wreck this train;unless the Almighty say it should.
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ANTIGUAN WOMAN!

InteresTed - pig farmer

#5 tenman » 2014-04-30 18:57

InteresteD, I am not a believer in persons assumptions. The writer tends to make leaps and has no data to back it up. This is why I wished for him to present the evidence via at least links. I doubt any study would find Antiguan's claiming they are better off now than they were in say 2002. The writer based on comments in this article would probably try to blame most of that on the Global recession. InteresteD, Since you so believe in tapes, I challenge you to call into Observer Radio or even Crusader Radio and get them to allow you to play the tapes on air. If that's too hard for you how about you write a letter to Daily Observer, and using your own name, quote things you heard on the tape

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tenman

RE: Devcon International Corporation and Political Opportunism

#4 R. S. Baptiste » 2014-04-30 11:45

"Bonmshell", as usual, great article..

Thanks..
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R. S. Baptiste

tenman

#3 InteresteD » 2014-04-30 09:12

It is amazing that all you got from this was a defence of Lester Bird"s offshore accounts......have you listened to the tapes? oh I remember they can do no wrong............in the face of all the evidence you still are arguing that it was not proven in court and until then you are burying your head in the sand.......Real sad.......
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InteresteD

Interesting!

#2 Meigo Man » 2014-04-30 07:55

Who was the Minister of the UPP who negotiated and "settled" the Devcon deal in 2004?

Why was this "deal" kept secret?

Maybe this will be ventilated in Part 2 of this article?
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Meigo Man

RE: Devcon International Corporation and Political Opportunism

#1 tenman » 2014-04-30 06:12

You know writer, I thought the provided link would provide evidence of your charges about offshore accounts. In this regards, when the PM made such charges against LB, he lost a defamation case. The AG showed up, just like you in this article (regarding bank account), with rhetoric only and no proof. The judge in ruling against the PM stated he was motivated by malice, what's your motivation? The PM also had to publicly apologize to Gaston Browne for making a similar allegation against Browne
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tenman

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