Monday, 14 October 2013

DID JEROME KENNEDY BITE HIS TONGUE?

If the departure of Jerome Kennedy, from the Cabinet, had been marked with the silence that normally follows any Minister’s return to private life, who would want to invoke his name now? 

Well, it seems Mr. Kennedy did not go silently; he seems to have ‘bitten his tongue’ as he left Confederation Building.  His name still resounds within the halls of high office.  As his vehicle left the parking lot, very senior people acknowledged, to each other, that he ought to have explained himself differently than he had.

That comment strikes at the heart of the question: why did Mr. Kennedy resign? 

Source: The Canadian Press
Whether certain disturbing issues weigh heavy on him, only he can answer.  If the information this scribe has received, is correct, which has been corroborated by three additional sources, Mr. Kennedy may wish to re-consider anything he may have omitted from his exchange with the media, justifying his departure.

What is the issue?

It seems that Mr. Kennedy’s resignation was occasioned, less by a desire to return to his law practice, than to deeply felt concerns over certain financial aspects of the Muskrat Falls Project, specifically involving Nalcor.  Just two years ago he sought election for a full term.
At the center of his resignation maybe the refusal by the Premier to accede to demands Kennedy made of her to protect the public interest, his officials and himself. 

Here is the sequence of events as best as I have been able to ascertain, so far:
 

1.      Over the last number of months Kennedy had grown weary of Nalcor’s secrecy. He was frustrated that his own officials could not get sufficient information to confirm Nalcor’s numbers or perform their own analysis. His Department was expected to accept Nalcor’s information entirely on its face. 

 

2.      Mr. Kennedy wanted his own staff, supplemented by outside experts, to comprise an “Oversight Committee” for the purpose of conducting the Finance Department’s independent analysis of Muskrat Falls Project costs.  Evidently, he was no longer prepared to defend the Muskrat Falls Project without the verification of independent scrutiny.

 

3.      Mr. Kennedy went to the Premier with two demands: firstly, that she order Nalcor to release the information referred to and, secondly, that his Department of Finance be permitted to assemble a “Muskrat Falls Oversight Committee”.

The Premier and Kennedy apparently had several “dust-ups” or serious confrontations over these issues, in the Confederation Building as well as in China, from where Mr. Kennedy was reported to have left the Delegation and returned to the Province, only a day or so after their arrival in that Country. 

The Premier evidently steadfastly rejected both Mr. Kennedy’s demands and
Source: The Canadian Press
following the final “dust-up” with the Premier, Kennedy informed her that he would tender his resignation from Cabinet.

Now Kennedy should have become concerned over the problem of obtaining information from Nalcor regarding the matter of cost overruns.  He should certainly have been alarmed that the increased costs, for which the Province would also be on the hook, might imperil the economic rationale on which Project Sanction is based.

Kennedy no doubt had his own private industry sources that would have conveyed the latest from the site itself – massive cost overruns are being incurred.

Kennedy would have known that NL was on the hook for 100% of the cost-overruns on the Generating Plant, on the Labrador/Island Transmission Link and 80% of the cost overruns on the Maritime Link. 

The 80% exposure on the Maritime Link alone would likely to see Nalcor cut Emera a cheque exceeding half a billion dollars. 

Kennedy would have known the requirement that the DG-3 cost estimates, on the Maritime Link, due under the original Emera contract to be submitted on October 1st, 2013 were delayed until the end of this year, without public explanation. Worse, the Premier recently announced an agreement with Emera regarding the UARB’s demand for all the surplus power, without Nalcor even knowing the DG-3 cost estimates on the Maritime Link.

On the North Spur, even if he didn't know the precise amount, he would have known a big bill was coming due for Nalcor's plan to try and fix the stability problems which plague that section of Muskrat Falls.  

Nalcor’s myopic determination to award a billion dollar contract to the Italian Contractor, Astaldi, in spite of not having financing in place and the project’s many other major unsolved problems, must have been equally troubling.  An announcement on the contract occurred within a few days of Mr. Kennedy’s walk down the steps of Confederation Building.

Noticeably, Nalcor provided no disclosure of the cost variance between Astaldi’s bid price and Nalcor’s DG-3 Estimate.

The Italian contract should be exposed as the most irrational act of the Dunderdale Government.  It can only be explained as a “come hell or high water“ move, to put the project beyond recall.   

These issues are all very serious and the consistency of the narrative, now flowing from Confederation Building is equally disconcerting.

By any standard, with so many billions of dollars at stake and the economic basis of the Muskrat Falls Project fundamentally flawed, the public interest would be best served if Nalcor’s assumptions, cost estimates and cost increases were required to undergo the test of independent scrutiny.

We might remember that while awarded contracts now represent very large expenditures, they constitute only the first indication of cost overruns.

The concerns ascribed to Kennedy underscore an even deeper problem. 

That an Agency of the Government could send demands for money, to the Cabinet, without question or review by Finance Officials, (the very people who construct the annual Budget Estimates and manage the finances of the Province), constitutes a deficiency of management unparalleled in Canada.  It is unthinkable that Moody’s or another Bond Rating Agency has not taken notice.

Mr. Kennedy’s zeal to be one with the Premier and an enabler of Muskrat Falls is all a matter of public record.  He helped create a monster; one that cost him his political career. But, as one who has earned the esteem of his colleagues, both in Government and in the legal profession, he must have known that the evolution of a Project, as complex and economically shaky as Muskrat Falls in the hands of an Agency as secretive and arbitrary as Nalcor, would  inevitably cause new questions to be raised.

Given all that has been said, before normalcy embodies his return to private life, he may wish to re-think the message he described upon his departure.  For certain, the public needs to hear from him one more time.

Let me state my final comments to Mr. Kennedy directly:

The senior officials who counted on you to protect them from failure by implication in a fiasco-in-the-making no doubt still want you to deal with matters they are unable to influence.

If you have information that suggests Nalcor is not acting prudently or with due regard for the public interest, if you believe that the financial well-being of the Government may be imperilled by Nalcor’s actions, or that our long awaited prosperity is being jeopardized by that Agency and the Muskrat Falls Project, please speak to us now! 

We ask that you cast aside your partisanship and any allegiance you may feel to the Premier or to her predecessor. 

While your critics and you have sparred over specific matters of public policy, we need to put these disagreements behind us. What is past is past. The question is: do you possess critical information which, with the help of the public, can change the future for the better? 
Muskrat Falls Sanction Ceremony (Source: The Telegram)

We need to know, in your own words, any warnings that you placed in front of the Premier which she apparently rebuffed. 

Think of the people, Sir.  More than any senior official, more than the Premier or the Cabinet, they are the ones in whom you must have faith, in whom you must confide. They are the ones who will pay for Nalcor’s and the Premier’s mistakes.

How will you be compensated for your courage and your wisdom? 

Like all citizens who push back against those who are reckless with consequence, who set their wits against the unwise, who, at any price do battle against those who possess the capacity to cause irreparable harm, inadvertently or callously, you too, Sir, will receive our respect and gratitude.   

Alternatively, Sir, you may give a repetition of the counsel you offered on September 30th.  Confirm for us, if you wish, that the matters I have raised are untrue or that my sources have exaggerated the dangers described and that all of us have nothing to worry about.

8 comments:

  1. If this is only partially true then it is very concerning. The Premier, the Minister if Finance and the Deputy Minister of Finance should have ultimate responsibility and accountability for public funds which are transferred to Nalcor. It should be entirely reasonable and expected that the Finance Department should provide some level of oversight of Nalcor, to represent the shareholder. If the premier stopped this request borders on negligence, as it prevents the deputy minister of finance from fulfilling their judicial responsibility under the Finance Administration act.

    why would the premier do this? more importantly why does this oversight committee not yet exist? In the absence of a federal loan garuntee is the Provincial Government underwriting these expeditures?

    many questions.... We need answers now.

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  2. ....why do i smell a civil war happening in this province????...it's bled to death....

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  3. As we know, Kennedy says he looks into his "crystal ball". And what he saw 6 months after sanction of MF was likely very different from before. Now the Premier's crystal ball ran the same old picture. Crystal balls.....not exactly evidence based approach, but that's the basis of this 10 billion monster.

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  4. People may get caught up in the politiics of this narrative. However, we should look past this and consider the idea of a independent oversight committee on the spending being completed by Nalcor. I am very concerned that Nalcor are about to commit to a 1 Billion dollar contract. This combined with the 400 million in pre sanction costs, and the 200 million spent since sanction will put the value of the committments near the 2 Billion mark. This is an incredible amount of money, and too my knowledge has never been approved in its current form in the House of Assembly. When I reference the current form I talk about the current uncertainities (1) UARB condition which will likely raise the rates to NL'ers (2) The HQ court challenge and (3) the lack of a federal loan garuntee. Without these items being resolved this government and Nalcor have NO mandate to continue with this project. We should be demanding an Department of Finance oversight committee.

    Kennedy is not the issue... the issue is that the money is being spent without the proper controls in place. Plain and simple. If this 1 Billion dollar contract gets signed, without the proper mandate and oversight which is both public and transparent then the Premier should be considered negligent.

    Ed Martin needs to be reined in. Lets not kid ourselves in a real business this would never happen. As CEO he is about to committ into a contract which is 2 x his annual revenue. This would never happen in a real business without a shareholder revolt. It is about to happen here because Newfoundlanders are not engaged.

    This is a unfolding disaster. We are in the back seat, quite and oblivious, just as the Premier and Ed Martin are driving us over the cliff.

    Kennedy got out of the car, to save his own hide. Unfortunately the entire province are still in the car.

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  5. Jerome Kennedy may very well have had his fill of the garbage emanating from government and the lack of transparency from NALCOR. My concern is simply this: a project of this magnitude has the potential to reduce us to third-world status and allow ever more control of our economy from outside interests.

    It is incumbent upon Mr. Kennedy to "clear the air" and either confirm or refute the rumours now floating around. All of us who hope there is truth to them would feel more respect for him were he confirm what we already know. It is difficult for opponents, given the lack of proprietary information available to us, so Mr. Kennedy should be more forthright now that he is out of government.

    I again call upon Mr. Kennedy and current members of the government to start speaking up about their concerns.....because it is impossible that they don't have any. The myopia of Paul Lane, Steve Kent, and a few others, is surely not the mindset of all members of this administration. If Crosbie and Wells could defy Joey in the late 60's, then surely these members are more than capable of rational thought. The common good is greater than the solidarity of caucus. Furthermore, the destruction of the PC administration is assured as long as they continue to function in a vacuum.

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  6. Hear that. That's the sound of nobody from gov talking to Des again.

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  7. This comment has been removed by a blog administrator.

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  8. Those editorials are definitely a witch hunt. How can an armchair editorialists know more about what is happening then all of the people who are making the decisions?

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