Daly Bread: Subversion by subvention; how state companies like the NCC make mas

Our country has been widely shamed internationally by the Trinidad and Tobago Coast Guard’s fatal shooting of an illegal migrant baby. 

The use of the label ‘accident’, the premature ducking of responsibility and due process as well as the crude, partisan political exchanges have compounded the shame.

Photo: A Trinidad and Tobago Coast Guard vessel cuts through coastal waters.
(Copyright Pridenews.ca)

For the moment, however, I return to the latest National Carnival Commission (NCC) financial debacle. I do so to consider the wide gulf between the legal position of the NCC as a debtor and the political understanding by reference to which it and other state entities blithely operate.

The Chairman of the NCC announced that the NCC had a budget of TT$25 to TT$30 million to spend on a Taste of Carnival for 2022. He did so when the NCC had no approval for such a sum from the government but had already spent significant sums.

The state enterprises and statutory bodies have a recognised legal personality separate from the government. When these bodies incur debts, they become liable for payment. 

The bodies are not automatically the agent of the government. Their top-level officials have legal authority to make the relevant contracts but not to bind the government.

The political understanding is that the government is going to pay anyway. Without that political understanding, those that deal with state entities that have no funds or are effectively insolvent take a risk.  

Photo: NCC chairman Winston ‘Gypsy’ Peters (left) inspects a Carnival pod.
(via NCC)

However, the political understanding can usually be relied on, particularly if the creditors of these entities are friends, family, financiers, ‘batch’ or simply complicit elements in the private sector.

Usually, there are chairmen, board members and/or managers planted in the enterprise through whom the political directorate can covertly signal its intentions. On this occasion, the hierarchy in the NCC ‘jumped the gun’ but nobody will get financially hurt—except, of course, the performance artistes, who will get the crumbs.

The political understanding is costly for the country as it is a conduit for waste, price padding and worse. The subventions that are routinely given to make good on the political understanding are subversive of accountability for public funds.  This latest NCC financial misadventure is a bold-faced demonstration of the moral hazard of contracting for goods and services without a public procurement process and funds to meet the liabilities.

Twenty years ago, in a column entitled Interfering intravenously, I described how the state enterprise system, including the statutory authorities, were capable of being used to mask the expenditure of taxpayer money.  

Photo: Former Sport Minister Anil Roberts (centre) is flanked by ex-SPORTT Company CEO John Mollenthiel (left) and ex-SPORTT chairman Sebastien Paddington, all three key figures in the controversial Life Sport fiasco.
(Copyright SPORTT)

Successive governments have evaded Central Tenders Board requirements by funding projects, money-losing businesses and padded employment payrolls behind the veil of companies incorporated under the Companies Act or by statute.

The core of the analysis was as follows: ‘The untold political value of this state enterprise system is the cover that it provides for the wickedness of politicians in power.  

‘These state enterprise veins run below the surface of the political skin so that the skin of the political face can say one thing about how the veins operate while the politician behind the face is interfering intravenously with the supply of information, water, natural gas or petroleum or with the provision of jobs or the making of contracts, all in order to obtain unfair benefit for the followers of the party in power to the exclusion of others.’

In defensive mode, the Minister of Culture said the government would provide only TT$15m in funding for Carnival and anticipated another TT$5m in revenue streams and sponsorships. Much of that TT$15m is probably long gone in the erection of the infrastructure and building of the pods, both widely photographed in mainstream and social media.

Photo: Minister of Culture, Tourism and the Arts Randall Mitchell makes a presentation.
(Copyright NCC)

We can anticipate that when there is a shortfall between budget and actual expenditure, the government will cough up funds by way of what is euphemistically called a subvention. That is the clear political understanding on which statutory bodies and State Enterprises operate.  

From whichever party the political directorate is drawn, that is a cushy and beneficial understanding.

Moreover the personal risk to the chairmen and board members of liability for breach of fiduciary duty is diluted, as they know that the government will hinder or withdraw lawsuits claiming breach of such duty, Malcolm Jones-style.

And so the beat goes on.

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About Martin Daly

Martin G Daly SC is a prominent attorney-at-law. He is a former Independent Senator and past president of the Law Association of Trinidad and Tobago. He is chairman of the Pat Bishop Foundation and a steelpan music enthusiast.

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