Lime Grove House - Minister for Treasury and Resources - session 1 - Transcript - 1 September 2011

1st September 2011

Lime Grove House

Ministry for Treasury and Resources PUBLIC SESSION

CHAIRMAN:

Right, good afternoon, ladies and gentlemen. Welcome to this sub panel of the corporate services scrutiny panel, reviewing the purchase of Lime Grove House. Now, have you all read the health warning?

SENATOR OZOUF: Many times, chairman.

CHAIRMAN: Laura?

MS ROWLEY:

Oh, yes, chairman. Would you like me to recite it?

CHAIRMAN:

Yes please. You can sing it if you like. Right, before we begin, I wonder if we could just say who we are and what our position is for the transcription team.

SENATOR OZOUF:

Indeed, Senator Phillip Ozouf , Minister for treasury and resources.

MR RICHARDSON:

John Richardson, acting chief executive, (inaudible) Jersey.

MS ROWLEY:

Laura Rowley, treasurer for the States.

MICHAEL HEALD:

Michael Heald, assistant chief executive.

DEPUTY de SOUSA: Deputy Debbie de Sousa.

CHAIRMAN:

Senator Sarah Ferguson, chairman.

DEPUTY EGRE: Deputy Colin Egre.

SPEAKER:

Sammy McKee , Training Scrutiny officer.

SPEAKER:

Kellie Boydens , Scrutiny officer.

CHAIRMAN:

Right. So, I wonder probably the best approach is if you can give us the -- an overview of the background and the chronology.

SENATOR OZOUF:

Yes, indeed. I mean, obviously I am pleased to be here to answer your questions this afternoon and we have attempted over the last 36 -- three or four days in order to provide the panel with extensive documentation and there's obviously been a great deal of work and I hope the panel have satisfied, if over not satisfied with the docs. I thought it might be helpful, almost as an aide memoir to my own remarks, throughout the course of the afternoon's discussion, if I give you my aide memoir in terms of what I was going to say. And I certainly have a few introductory remarks, if I may say, about the background because I suspected that that was going to be your introductory question. And so, perhaps, chairman, I can hand out these notes. Have people got enough for individuals? There we go.

I mean, I think I should start by saying that, as treasury Minister, I have got a legal obligation under the public finances law to ensure that the public finances of Jersey are regulated, controlled and supervised in accordance with the law and that the provisions of the law, the public finances law that is, are complied with. My job as treasury resources Minister is to be the gate keeper and guardian of the public purse. And to understand this complex matter, I think I need to set out a few brief remarks, this is only the first two or three pages. We'll go into the detail later about the issue.

I have seen that it's been reported that the loss of Lime Grove House has cost the public 8 million. I have to say to the panel this afternoon that I don't think there's a basis of that. I expect the current budget to be sufficient to deliver a new purpose built police headquarters. The comments that may have been made, and there may be, obviously, erroneous errors in terms of the media reporting, I don't know, but it might reflect lack of understanding by those that have made them in terms of property and finance matters and this is a complicated issue. I want to be absolutely clear to the panel that the original business case that was presented to me was, I regret to say, poorly drafted and could not be implemented. And also I want the panel to be aware that there was unprecedented political lobbying on this matter to me. And I have to say that I have never experienced such lobbying in my time of 12 years as a politician. I need to say to the panel that the offer that was made was not properly authorised, was unclear and was justified by subsequent valuation, and that I, as Minister, had not been told about the original offer. As a result of the unclear offer, there was never a clear agreement between the parties to buy Lime Grove at 8.75 million.

I need to probably explain to the panel, the panel probably know this, we're not property experts, but I am certainly clear that a valuation is not an indication of what the State should pay for a property. The transaction needs a willing buyer and a seller, and if the parties don't agree, that is something outside of my control. The only point at which a price was agreed was in 2012 this year. It's been reported, so far, in evidence to the panel, that the State has some how lost out in the State street transaction. It would be, I think, wrong, for us to compare the purchase of an unlet, decayed and empty building, unoccupied by 10 years by the State of Jersey with the lease of a building to a uniquely interested tenant. In my view, the State should not be paying for its only AAA covenant. The State should not be competing for expensive financial services space. I need to say to the panel that I did take informal opinions of commercial property experts for their views to confirm my initial concern that the building was not worth the price which was

suggested at the later stage. The latest valuation showed, I think, that I was right to be cautious, but I again state that valuation should not be the basis on which we buy property.

I had evidence that led me to conduct, question conduct by officials within property holdings, and this has led me to have concerns about the independence of the State of Jersey negotiating team, added to the extreme political lobbying I had in relation to this matter. I hope the public will understand my unease as treasury Minister. Had it not been, I have to say to the panel, of the actions of me of treasury and resources and my senior treasury officials, that the States of Jersey might have entered into a project that could have become, in time, a major capital over spend.

I take my responsibilities extremely seriously. Accounting officers have duties and statutory obligations under the public finances law to carry out their functions in a prudent and economical manner and to ensure that resources are effectively and efficiently used. I expect department officials to discharge those duties responsibly. The proposed purchase of Lime Grove was possibly one of the biggest land transactions that the States has made. It follows that it had to be absolutely right for me to raise challenging questions about the prudence, committee efficiency and effectiveness of the proposal performing. As a Minister for six years and a committee president before that, I am used to making swift complex decisions on a regular basis.

Spending ministers, on the other hand, rightly are going to pursue the interests of their own departments, spending departments. Whilst property holdings is part of treasury resources, it's my view that there needs to be a proper segregation of duties between treasury and resources and that's the reason why there continues to be an assistant Minister with special responsibility for property.

The decision to acquire Lime Grove was not going to go through to the States for formal decision. And so I felt that it was particularly incumbent upon me to be extra cautious. As treasury Minister, I asked challenging questions and that is my job. Normally, I have questions answered fully, professionally and in a timely fashion and I feel confident in making the many and varied decisions that are before me every day. However, I need to report that my confidence was undermined in a number of ways, as I have set out in the annex of this document and it is crucial to make this clear in order to understand that this is a complex matter and I want to explain some of the details to the panel.

With this one project, the acquisition of Lime Grove, I was uncomfortable, not least because I was being lobbied in an extent -- in an extensive and an extraordinary way. I found  this  so  unusual  and  unsettling  that  I  asked further questions  in  order  to be satisfied. Scrutiny, I would hope, will expect nothing less. Islanders would expect nothing less of the treasury Minister. In short, I had a duty to protect the public purse and tax payers, this means asking challenging questions about major capital projects, so as to be prudent and to deliver value for money. It would be wrong of ministers to yield to unreasonable pressure for lobbying. I act in the public interest. Whilst there is disappointment that the viable deal that I signed has not been completed, I remain confident that we can deliver an equivalent solution for the police, or better, within the available resources. The States is one of the biggest property owners in the island and a solution must and will be found.

Now, those are my introductory remarks, if I may say, chairman. We've also done some notes which I won't read, because you have got them. So, we can just basically perhaps just move around to the different questions and I will refer to the notes as appropriate. But I hope that this note will provide a helpful bit of evidence for the panel in terms of your questioning and perhaps raising some of the questions that you might be wanting to raise with me.

CHAIRMAN:

Yes. In fact, your questions will come into -- we shan't be following them up in due course. I mean, if we go back to the background and the chronology, when was the purchase of Lime Grove House initiated?

SENATOR OZOUF:

I mean, that's -- I think the whole issue with Lime Grove goes back for quite some time. It probably goes back to the same extent set that we've been discussing the much needed relocation of the police. I understand that there's been discussions within property holdings to look at the potential possibility of Lime Grove House going back a number of years and I have reviewed files with my officials over the last couple of days

which indicate that there's been ongoing discussions about a lease and a purchase over a number of years. But it certainly goes back for quite some time. My own involvement in the matter came to a head in and around October of last year, as I recall.

CHAIRMAN:

When were you first aware of the proposal?

SENATOR OZOUF:

I mean, I have been aware of the -- I'd heard rumours about -- I think I'd read in the media that there had been an interest in the States in acquiring Lime Grove, but certainly one of the difficulties that I have and it does need to be an appropriate segregation of duties is I have said in relation to property holdings and treasury, I should treat property holdings almost in no different way than I deal with other departments. Effectively, I think I was made aware of the purchase of -- a potential purchase of Lime Grove in July 2010.

CHAIRMAN:

When were you first briefed on it?

SENATOR OZOUF:

I think I was first briefed in relation to the specific issue of Lime Grove in around 2010. I mean, if I -- if I am -- my memory doesn't recall every single question, there are questions that I can't answer, then my team can help because they've been reviewing -- my team.

MS ROWLEY:

Yes. It was around about May 2010 that Phillip -- there's a presentation which was prepared on the office accommodation strategy. Now, you appreciate I wasn't here at the time, I got this from the files, and David Flowers prepared a presentation which was intended for around the 29th of April, but having reviewed diaries, which think the meeting actually took place on the 11th of May and that was a general presentation around the office accommodation strategy. We have checked a subsequent note following that meeting and actually it's not until later, much later than the offer is actually being made, that the treasury resources Minister is advised that the offer is being made and how -- and as to the amount. So, there is a significant gap as between when the offer's made, which is the end of March 2010, I think the 25th but we put the documents in the file for you, and the point at which the treasury resources Minister's actually told that there is a -- an offer has been made. We have put some notes for you, if I may refer you to page 6, there are some notes there for you to help and –

CHAIRMAN: Yes, we haven't been through the file as yet.

MS ROWLEY:

No, it's understandable, if it takes you as long to go through them as it took for us to prepare them then it will take some days.

SENATOR OZOUF:

It certainly in the -- it certainly in the -- in the early part, late April, May of 2010, that I would have been aware of a general property rationalisation approach, but at a pretty high level.

MR RICHARDSON:

And can I just add that it was -- I think it's in your document, if not we'll certainly provide them, there was a presentation from Property Holdings, which the treasury Minister attended and myself, which showed the office rationalisation, which is quite a big document, which is why I used the July date before, because it's actually dated July. There had been a number of previous meetings leading up to it, but that was the document and it was at that stage that concluded all property, be it police, State building, (inaudible), hospital, health, education, it was at that stage we decided it was too big, it needed to be split into component parts.

DEPUTY EGRE:

Just to clarify, did that include mention of Lime Grove?

MR RICHARDSON:

Yes, I think there was mention of Lime Grove as an option in that at that stage.

DEPUTY EGRE:

And at that stage, was it regarded as a key element of the strategy?

MR RICHARDSON:

It was seen as a timely element.

SENATOR OZOUF:

I mean, I think -- I think that the (inaudible) strategy document, as I recall it, was a massive complex document which had a number of interwoven -- I mean, frankly, Lime Grove would have been one piece of a very large jigsaw. I recall, you know, disposals of very significant properties, of South Hill, big reorganizations of property. It was almost too big to digest in terms of a -- and that was, indeed, one of my problems with the whole of the office strategy is that it was so big and so complex that it needed to be broken down into constituent parts so it could actually be delivered. And I am a -- I hope I have a reputation as an action Minister that wants things happen, I don't want -- I don't want high level documents, I want deliverable programs that have got fully costed, that have got big business cases and that will get support that we can make progress on and certainly my view of that office strategy, at the time, was that it was just simply too big and too complex.

If we come back to the police relocation, one of the important points is that the States has approved a budget for the police relocation over a number of years and that is a discrete project which needs to happen. And risk sometimes is that one puts so many other elements into a project, that you end up talking about it for so long and then you actually don't deliver and that's been one of the features of that States decision making and poor States decision which I have been trying to avoid.

DEPUTY EGRE:

Without pushing too far, Minister, is that not what actually happened?

SENATOR OZOUF:

That's -- you could say that's exactly right. I mean, the business case that -- the business case that I eventually saw, but could not support, in October, was a complex web of property transactions, which, you know, if you are going to deliver, you need to break it down into bite sized chunks, have proper governance, proper team work in terms of individual projects and progress them. If you start with highfaluting projects, you are just not going to deliver and the States -- I mean, the public can rightly criticise us for in the past, I don't think in my tenure as treasury Minister is that we just don't -- we just end up with highfaluting ideas that just can't be delivered on the ground. And certainly that business case in October could not be delivered in terms of its implementation and in terms of its -- and in terms of the budget available, which was my -- one of my principle concerns and of course, I don't make those, I act upon advice. And the advice that I was receiving was that it was -- that it was not something that I could support.

SPEAKER: Just (inaudible).

SENATOR OZOUF: My advice –

MR RICHARDSON:

I was the accounting officer and I of the one who wrote, on the 17th of October I think it was, 2010, as the accounting officer I could not support the business case. There were too many issues with it, it had not given me the confidence that it was a project that could be delivered with sufficient confidence that the States, as the Minister has said, without exposing itself to significant liability.

CHAIRMAN:

Now, one of the things we've been doing, you will understand, Mr Richardson, we have been asking all our witnesses as to their qualifications in dealing with property. Now -- well, their qualifications and background. Now, I know that the treasurer is a chartered accountant; is that correct?

SENATOR OZOUF:

Well, first of all, if I may say panel chairman, you are asking me questions, I am the politician with policy responsibility and you need to ask me policy decisions about whether I am satisfied with the advice. So, I can refer to -- this is an interview between the panel and the politician, that's what scrutiny is. I am advised, and you are basically testing whether or not the Minister has discharged his responsibility in an appropriate way. So, it is right to perhaps ask me whether or not I was satisfied with the advice that I'd received.

CHAIRMAN:

Right, that's fine. Who were you receiving advice from on property matters?

SENATOR OZOUF:

I have a Property Holdings department within treasury resources, of which the accounting officer is Mr Richardson.

CHAIRMAN:

So, what property advice you were receiving from property professionals?

SENATOR OZOUF:

Property Holdings consisted of property professionals that advised the accounting officer, and the accounting officer, based on the decision that I made for accounting officer is Mr Richardson.

CHAIRMAN:

Right. Now, you have said that you have taken unofficial advice on the value. Who did you take that from?

SENATOR OZOUF:

Well, we need to go into the valuation in, I think, some considerable detail because, first of all, I think we need to take -- there are two other things that need to be taken in relation to -- in relation to –

CHAIRMAN:

No, I am asking about your advisers.

SENATOR OZOUF:

My advice -- ministers act upon advice from their accounting officers.

CHAIRMAN:

But you were also acting on advice from other than accounting officers. SENATOR OZOUF: I took soundings.

CHAIRMAN:

Okay. Where did you take soundings from?

SENATOR OZOUF:

And I take soundings from a variety of sources in order to make myself confident. But you need to understand of the reasons why that I was concerned about the issue that was before me in terms of the purchase of Lime Grove.

CHAIRMAN:

Right, so what is the issue.

SENATOR OZOUF:

Lime Grove, and I want to make it absolutely clear that I am doing this hearing in that anything that I say, I am offering absolutely no criticism whatsoever to the parties of the transaction, have transacted a deal in relation to that property. It is not my business and I don't wish to -- I don't wish to criticise them in any way. We're an open society in a free market and they are entitled to do what they do. The fact is that I was being asked to sign a -- to sign -- I was not given advice in relation to that, but I was briefed on it and the process of decision making is an informal briefing, Minister are you comfortable with this, do you have any questions, what are you going to be looking for in terms of the advice, how does this fit with your general policy stance in relation to policy matters? And of course there will be a good relationship between a Minister and his accounting officer in terms of that advice. And I have to say that I have been uneasy and was uneasy, and make very clear in my statement to the States when I made that I have been difficult to convince in relation to this thing. And I think it's important for the panel to understand why I have been uneasy in relation to this issue. I have been uneasy because I need to say that I have been advised on -- of difficulties and questions which would heighten my concern about the actions of certain officials, and I am not going to name them in public, within Property Holdings, in relation to the discharging of their duties in relation to the process leading up to the offer price. And this -- and this will -- I mean, there are

departments which and there are officials -- I have been a Minister for six years. I am used to a lot of people coming in, briefing me, advising me. Ultimately, the treasurer advises me on treasury matters and the deputy executive advises me on ultimately resources matters. But obviously there's going to be briefings that lead up to that so that one doesn't have surprises. And I have weekly meetings with my ministerial team. And the indications were that there was a serious issue in relation to the Lime Grove offer.

DEPUTY EGRE:

Just to clarify, Minister, what were those indications? It's details we're after.

MS ROWLEY: May I help.

SENATOR OZOUF: Please, treasurer.

MS ROWLEY: The -- you will have (inaudible) blue file there labelled interim report on valuations, within which are a number of independent professional valuations provided during the course of the last year or so. So, you will be able to -- there are a number of those, we thought they were important for you to see.

CHAIRMAN: Thank you.

MS ROWLEY:

So, that's the sort of information that's been available for advising –

CHAIRMAN:

Are you talking about the valuations by CBRE, Drivers Jonas, BMP (inaudible).

MS ROWLEY: Guy Gothard and –

CHAIRMAN:

No, Guy Gothard didn't do any valuations. He was told not to.

MS ROWLEY:

There are -- those materials are there for your challenge on the files.

CHAIRMAN:

Yes, and those -- those valuations, in fact, agreed with the valuations -- but anyway.

SENATOR OZOUF:

Yes, let's go back to the central issue.

CHAIRMAN:

No, wait a minute please Minister, let's go back to Deputy Egre's question.

SENATOR OZOUF: What were my concerns.

CHAIRMAN:

What were your concerns?

SENATOR OZOUF:

Okay, let's turn to the annex. Let's turn to the annex of my note and here we have a number of issues which heightened my serious –

DEPUTY EGRE:

Can you just point out the annex at which point.

SENATOR OZOUF:

Yes. We'll go through them, if we go to the annex. The first issue of concern was that the offer made by Property Holdings was an offer made in a letter to Buckley and Co on the 25th of March 2010. This offer was made without my knowledge. I think it is extraordinary that such a high profile, I have said that this was one of the most expensive pieces of land that the States would buy in a decade, could have been not notified to the Minister. I actually think that it was of such importance that it probably needed to be notified to the council of ministers. And there were issues in relation to that offer. The position on the acquisition of Lime Grove was being represented differently to Buckley and Co, through no fault of their own, and they were told in writing that the Minister was briefed on the details. It is regrettable that Property Holdings -- the Property Holdings official wrote to Buckley and Co on the 10th of May saying we have made significant progress  with ministers involved in  this project, having briefed  the ministers and assistant ministers for home affairs and treasury as to the details, rationale and the need to complete the purchase of Lime Grove. They have all confirmed their understandings and support. The Minister can understand why Buckley and Co believed that ministers had been fully brief. The Minister had been told details in contrast to an internal memorandum of the 12th of May Property Holdings say JPH representatives met with the Minister on the 5th of May to consider indicative proposals for solution to the current police HQ. Furthermore, nothing in the memorandum, had been made clear to me that an offer had been made by Property Holdings to Buckley on the 25th of March. Property Holdings was not clear with Buckley as to the level of briefing for Minister that happened at this stage, nor were Property Holdings being clear to ministers about the extent and the detail of the negotiations that had been taking place. I believe that this divergence contributed, understandably, to a lack of confidence by Buckley and Co in dealing with the States of Jersey on their client's behalf. So, that's the first issue, my confidence is shaken.

CHAIRMAN:

Just wait a minute, isn't there a delegated authority as well? It was a condition -- we understand from Buckleys that it was very conditional, dependent on Ministerial approval and so forth.

SENATOR OZOUF:

Indeed, but I -- I have -- as I have said before, and I don't need to repeat to the panel, I have been a Minister for six years. I think that I have -- I think the panel will be aware that I was the first Minister to develop the concept of delegated responsible with assistant ministers, with a dedicated area and so therefore –

DEPUTY EGRE:

Minister, with due respect, we understand.

SENATOR OZOUF:

Right. So, no surprises should exist between the ministers and assistant Minister.

DEPUTY EGRE:

Exactly. But the surprises that exist as we've been going through to date, is sometimes the lack of notes that were taken at specific meetings and it would appear that you are indicating a meeting took place with Ministers, held by Jonas Property Holdings. Are there any minutes or notes of that meeting?

SENATOR OZOUF: We've got the briefing.

MR RICHARDSON:

Right, this is the briefing now of my notes of the 30th of December. So, we've moved on.

SENATOR OZOUF:

Okay. So, we need to check the file but, yes, there will be briefing notes.

DEPUTY EGRE:

We actually need to have those briefing notes because it will clarify the point I think you are trying to make.

SENATOR OZOUF:

Okay. What I can be absolutely clear about is that I, as Minister, was not told of the fact that an offer had been made on that building.

DEPUTY EGRE:

And in what paper is that.

SENATOR OZOUF:

That's the briefings that we've been talking to, briefly.

MS ROWLEY:

Page 18, chairman, if I can help. Page 18.

DEPUTY EGRE: Page 18.

CHAIRMAN:

Yes, it would actually have been helpful to have these before the meeting.

SENATOR OZOUF:

Well, chairman, we have done our level best. We have been working until midnight, all over the weekend, we've been serving the panel in a (inaudible) way which I doubt a Minister has attempted to give documentation. So –

CHAIRMAN:

Yes, and I can appreciate it.

SENATOR OZOUF:

I am hopefully helping the panel by giving you a note which sets out what I am saying.

DEPUTY EGRE: Just to clarify one particular point, we're talking about documentation, how hard you have will to work, I believe that this is documentation that was produced by your department, the treasury. Have you had all the document station, equivalent documentation, from Property Holdings?

SENATOR OZOUF: I hope so.

DEPUTY EGRE:

Is that going to be made available to us?

MR RICHARDSON:

Well, there's five lever arch files, bigger than that. We're still going through a lot of it. Some of the key documentation we'd extracted and put into that file. There's still a lot more to go through but it's made available to you.

CHAIRMAN:

Well, it actually probably would have been simpler to just give us the whole file.

MR RICHARDSON: Well, we can do that.

SENATOR OZOUF:

John how many files we've already given you but we've been gathering information ourselves.

DEPUTY EGRE:

As you are right, this is a very important issue. (inaudible) sure.

SENATOR OZOUF:

-- it is absolutely vital but I am sure that the panel, and you as colleague politicians, you would expect the Minister to be aware of an offer of a heads up of an indication of an offer between a department and the Minister, who's ultimately going to have to sign the decision. This isn't the State's decision. This is a ministerial decision that ultimately the treasury Minister will have to make. So, the treasury Minister will have to make the acquisition in relation to not only for the Property Holdings issues, because it's such a very significant transaction, but also because it's a capital project and all the other things. This is not just £80,000. This is eight and three quarter million pounds of tax payers money and I think it was incumbent of Property Holdings to make sure that I, as Minister, was comfortable with that proposal.

CHAIRMAN:

Now, was it -- was the acting chief executive, in his then capacity as head of resources, surely you were aware of the position.

MR RICHARDSON:

Please bear with me for one minute. On the 31st of March 2010, I did receive a briefing on progress and I was advised at that time that negotiations were ongoing with the acquisition for Lime Grove, but at no time, like the Minister, at no time, until I saw that file, which is that is the file that was presented to me in October 2010, was I ever made aware that a letter had been sent to formally make an offer on behalf of the public for that building.

CHAIRMAN:

But it was a provisional offer.

SENATOR OZOUF:

It's not a provisional offer. It's an offer.

CHAIRMAN:

But you could have been -- you could have withdrawn from it at any time.

SENATOR OZOUF: But reputationally.

MR RICHARDSON:

The first  time  I saw  that the  public  had made a formal offer, subject to the usual conditions, was when I opened that file and read it. I had been briefed back in March that we were progressing, but at no time did I ever see a business case that supported the reasoning behind making that offer in March. I did not see a business case until that one landed on my desk in October.

CHAIRMAN:

So, forgive me, but how often do you actually -- or as head of resources, how often did you actually have meetings, just general sort of progress meetings, with the heads of your department?

MR RICHARDSON:

I met -- well, I meet my heads of department on a two weekly basis for one to one and I was not told at any of those that we were at this stage. I was told on the 31st of March that progress was being made towards the acquisition of Lime Grove, but I repeat, and it's very important, because a number of discussions will take place between two parties, but at that time I was not told that we had made a formal offer on the 20 -- when did we make the formal offer? The 25th of March. So, we made the offer on the 25th of March, that's the letter. It can't be much more formal than that, subject to the (inaudible), subject to all the usual contractual conditions, et cetera. I refer to our recent meeting and conversation, this is from a senior officer at Property Holdings to the agent. "I refer to our meetings and conversations regarding the above property and confirm that, on behalf of the public, we wish to make an offer for the acquisition of the free hold interest in this property." It goes on condition of sale, 8.75 million.

SENATOR OZOUF:

Now, chairman, I want to be absolutely clear that I find it an extraordinary state of affairs that a department of which I am a hands on Minister, but appropriate dealing with policy issues and advice, that is a very, very, very significant transaction, which, as Minister, I would expect to be alerted to. I remember at that date because it's my birthday and I certainly didn't know about it. I certainly was not made aware of it and I certainly have no recollection of it whatsoever. I was aware that there were discussions about Lime Grove, but that is a very different situation for a formal offer being made and frankly -- but it -- but I am afraid my problem with this goes further, because that's not my only issue with it. We'll discuss later the fact that this offer is unclear in terms of what it actually means and the handling of it, which is another issue which meant that my warning signals are going and that's obviously as a Minister, you are sitting in front of an official, you are receiving a briefing, it's going well, you have got lots of documentation, things are going well. I need to tell you -- I need to tell you that this is not going well when I am made aware to this later on in the year. I am aware that not only I learn, with surprise, that the offer is being made, but there are also problems in relation to the offer. I need to say to you that that offer, I understand from my officials, was made without a scheme for the police relocation being in place. And I also need to tell you that we have not found any valuation, to the extent that a valuation is what you offer to buy the price, we'll debate that a little bit later on, if we may, the valuation is not necessarily what you do and we'll explain why in a bit, but there was not a scheme or valuation which justified that -- which justified that. And I think that that's a problem and shakes my confidence.

MR RICHARDSON: And if I can add to that –

SENATOR OZOUF:

So, it will raise my questioning.

DEPUTY EGRE:

We can't have two running conversations. So, let's just go back to questioning. You raised concerns about an offer being made back on your birthday.

SENATOR OZOUF:

No, no, I didn't know about it.

DEPUTY EGRE:

Well, when you knew about it, you were concerned.

SENATOR OZOUF:

October. I know later. I know later. I don't know when I know, but I know so late on in relation to this issue -- I certainly know that Lime Grove is an option to purchase in October, but I don't know the details of it, and when I do see the business case, which we can go on to discuss, I am very concerned and we can go on to discuss that and I want the panel to be aware of the fact that I raised concerns. My job, I am the public trustee, I am responsible. I am the gate keeper. I am the decision maker.

DEPUTY EGRE:

We understand that, but having said that, I think you also admit that you are not an expert in everything, no one is. So, therefore, as a consequence, you have to take and seek advice.

SENATOR OZOUF:

I am an expert in questioning and I can normally tell whether or not I am getting the right answers. That's what my job is. And if I am told that an offer was made without a valuation, or a valuation that was retro fitted and the scheme was not made, what was the basis on which the 8.75 million valuation was -- so I am not particularly –

DEPUTY EGRE:

So, you are good at question.

SENATOR OZOUF: Absolutely.

DEPUTY EGRE:

And you found that you were unhappy. So, what advice are you now taking and from whom?

SENATOR OZOUF:

Well, at what point are we talking about because the time line –

MR RICHARDSON:

We're just talking about six months ago.

SENATOR OZOUF: Yes.

MR RICHARDSON:

Are we now talking about the events around the 31st of March? Are we talking about events post my first reading of this document?

DEPUTY EGRE:

Just remind me of the date of your first reading of that document.

MR RICHARDSON:

Somewhere around the 7th/10th of October 2010.

DEPUTY EGRE:

And what point was the Minister informed?

MR RICHARDSON:

Of this? Of the problems I had there. Late October, because I had families issues which meant I was delayed in report –

SENATOR OZOUF: By about two weeks.

MR RICHARDSON:

By a couple of weeks. I think I actually wrote the letter -- well, the formal time was, I am pretty sure I have got the e-mail somewhere, the 17th of October I e-mailed to say, and I copied it to the chief Minister, treasury Minister, chief executive, that as accounting officer I could not sign that project off.

SENATOR OZOUF:

And I want to also be clear, when I referred earlier in my earlier remarks to the fact that I was receiving lobbying, I was being lobbied about this. I recall the chairman herself attended upon my office, the deputy (inaudible) lobbied me about this particular issue. So, I was receiving lobbying about this proposal, and being encouraged in order to progress this, from all sorts of parties.

CHAIRMAN:

You had a lot of lobbying from the home affairs Minister, he tells us.

SENATOR OZOUF:

I had lobbying from you, chairman.

CHAIRMAN: Yes.

SENATOR OZOUF:

In my office, of which  I called down the chief  executive  in order  for us  to have a discussion with the business plan, which I explained to you at the time was not capable of being justified and not capable of being signed off and I would not have signed it off and I maintain that position. I am not going to be responsible for signing off a capital project that, effectively, would be in future, if I would have signed it off, there's another cavern over spend which would have been justified. We've got long experience of capital projects going wrong and I am not going to be the Minister to sign off another problem and you and I had a difficult conversation about that.

DEPUTY EGRE:

How do you equate that with your fellow Minister, the Minister of home affairs, lobbying you -- lobbying is perhaps the wrong word. I don't see ministers lobbying each other, I see you –

SENATOR OZOUF: It happens all the time.

DEPUTY EGRE:

I see you working as a team to achieve an event here, which is very important.

SENATOR OZOUF: Indeed.

DEPUTY EGRE:

And what went wrong in that lobbying, as you put it, because (inaudible) full.

SENATOR OZOUF:

No, indeed not and I think that, deputy, I think we need to -- we need to organise our questioning into various different sequences of times here, because the home affairs minister's frustration, and indeed my frustration, indeed in relation to this matter is a feature of the later discussions, which we also need to examine.

DEPUTY EGRE:

But if I may just interject, the home affairs Minister appears to have been involved in this exercise at a far earlier stage than you are suggesting that you were involved.

SENATOR OZOUF:

That's entirely -- that's absolutely fine.

CHAIRMAN:

He knew about it early in 2010, he said so.

SENATOR OZOUF:

He did and I have got an exchange of e-mails. They are not confidential but there's no reason why I have got an e-mail exchange with Senator (inaudible) in November, Dear Neil, I agree with what you are saying. I am as frustrated as you that this has taken so long time to complete. You and I have been promised this months ago. The issues are the Lime Grove valuations attributed to the disposal of sites and the price at which it is proposed to buy Lime Grove. The realistic valuation makes the whole project unaffordable. We need to understand this. I certainly agree that ministerial level, we should attempt to get a decision. I am open to progress Lime Grove in isolation. That was actually -- and we need to then -- we need to then explain to you what we did. Faced with a business case upon which I had been lobbied –

CHAIRMAN:

Let us go to that point.

SENATOR OZOUF: We then deployed –

CHAIRMAN:

You have a business case –

SENATOR OZOUF:

Well, hold on, we haven't covered other things yet and I think I just need to be clear because the annex deals with a number of other concerns which the panel will understand why I was so concerned about it. And I just want to run through the -- I want to deal with the other issues of the problems that I had about the way in which the offer was made and why my alert bells were ringing. There was a divergence in relation to what ministers were being told and the agents were being told and I was surprised about that.

DEPUTY EGRE:

What was that divergence?

SENATOR OZOUF:

I have just explained that earlier, but I am happy to do it again. The agent had been told that details had been given, other people had been told -- there was an offer made. I'd been told that there were details --

CHAIRMAN:

A conditional offer.

SENATOR OZOUF:

Yes, but the fact is that you don't just go around making offers and then saying we'll retro fit it later. The fact is that it says subject to ministerial approval, of course. You only get that if you get a ministerial decision. There's a long way to go. There's nothing wrong in anything of that but I wasn't aware of it, and also the agent, there is a disconnect between what the agent was being told and what I was being told and that's clear. I have -- the evidence before the panel has to absolutely make that abundantly clear. There can be no doubt at all about that. Now, the other issues –

CHAIRMAN:

So, you are -- well, okay.

SENATOR OZOUF:

There is no doubt and so my hackles are raised, my concerns are raised. My alert buttons are rising and I am talking to the chief executive to say, look, I am concerned about this. I want this done properly, what are we going to do about it. And we'll discuss that in a minute.

CHAIRMAN:

And this was when?

SENATOR OZOUF:

This was in October or November.

CHAIRMAN:

Well, if you were keeping tabs on what was going on in your department, did it not come across your -- swim across your pen before then?

SENATOR OZOUF: When, chairman? CHAIRMAN:

Well, you had a briefing on the office strategy in May. Did you not have regular comments to –

SENATOR OZOUF:

I had delegated responsibility to an assistant Minister for Property Holdings and I have to express the fact that I was disappointed and continue to be disappointed and this continued to be an issue which I -- was one of the reasons why I subsequently had to make a change in relation -- regrettably, in relation to the assistant Minister portfolio responsibilities of the fact that I was not being properly informed. And I have good relations with my assistant ministers, we meet on a weekly basis. I think that my department has been held up as a model, both of economic development of treasury, of good communication with ministers. If I am away, I expect my ministers -- assistant ministers to be able to stand in and vice versa, and I wasn't, and that was a source of frustration. But there's nothing I could do about that. Communication needs to be a two way street and if you don't get the information, you can't make decisions and you can't share and you can't debate things and I regret the fact that I was not being briefed in the manner in which I -- I think I needed to be, such was the scale and the importance of these transactions.

CHAIRMAN:

But you said you were good at questioning.

SENATOR OZOUF:

I am, but I have many other things to deal with as well and I have limited time and I have a weekly ministerial meeting which there's an understanding that my assistant ministers share with me the issues at we have an inform meeting every week. Then we're joined by our officials and the treasury and resources team, as my EDT was previously a very happy and cooperative team which were sharing information and, regrettably, on this occasion, that was not appearing to be the case. And I was concerned -- I need to say that I was also concerned about aspects of Property Holdings in the discharging of their responsibilities in relation to this issue. And the evidence of the file review, as I have done with officials in the last couple of days, indicates that I was right to be concerned. I quote from a e-mail internally on the 11th of -- on the April -- April 2011, where the Director describes himself, this is all very messy and totally unsatisfactory. In an earlier e-mail of the 6th of April, the Director counsels against reducing the head line price, other things, you can read my notes. Looking back, it's quite clear that I was right to be concerned and I was right to be asking questions. And there is a whole –

CHAIRMAN:

Yes, but surely, when you refer to that e-mail, I think if you go on to the next paragraph -- yes, it then talks about -- the real thing is that you are -- the disagreement is on the snagging and the dilapidation.

SENATOR OZOUF:

Not only that. I mean, for the fact -- for the Director to say it's all very messy and totally unsatisfactory –

CHAIRMAN:

It was messy because the later details need to be sorted out.

SENATOR OZOUF: It's not very good, is it?

CHAIRMAN: There's a head line –

MR RICHARDSON:

Sorry, chairman, that's not correct. This is one of the major issues which was uncovered by this project. The price that I just read out to you, which was the offer price dated 21st of March -- 25th of March, was 8.75 million, with the dilapidations and electrical supply being put right at the vendor's expense. The response that came back was the acceptance of 8.75, but it excluded putting right electrical supply and the dilapidations on the basis that we could accommodate that in what's called a category A fit out. So, there was a divergence of position which is very significant, and that will -- that features from that point all the way through to the point where the deal fell and this is one of the key threads as to why things went wrong. The e-mail you are quoting from there, was when I tackled Jersey property holding staff and said what has happened here, gentlemen. On the one hand I have you making an offer. A week later, less than a week later, I

have the vendors accepting that offer, but the terms of those offers have changed significantly. What did you do to put that right, to protect the States, because at that stage we did not know what the cost of putting those dilapidations, snagging, electrical supplies –

DEPUTY EGRE:

What stage did you become aware of the actual cost of those?

MR RICHARDSON:

Can I come to that as I go through, because it forms part of why things went wrong -- well, what happened at the very end. Those had not been priced at that time. So, when, in the March period, my staff in Property Holdings did not pick up and did not react to the fact that the acceptance letter was different to the offer letter, and the exposure at that time was not known, that is a key point of why things, in that business plan, were not right. I didn't uncover that, obviously, until we started doing a detailed analysis of that business case.

SENATOR OZOUF:

And, I mean, if we just move forward, in the period of October, I was uncomfortable with the business case that I'd been given, communicated that with Mr Richardson and we then, in the subsequent weeks, there was then e-mail exchanges as evidenced by my own frustration and agreeing with Senator (inaudible) that action needed to be taken. But, of course, then I also, with John, organised that there be some independent review, some diligence carried out in this process. What we're telling you now, of course we didn't know at that stage, because there was only limited information on this whole issue. We subsequently identified other problems in relation to this issue.

DEPUTY EGRE:

Who carried out your due diligence?

SENATOR OZOUF:

Well, the -- well, there were two things that were done –

DEPUTY EGRE:

Well, who did it?

SENATOR OZOUF:

The interim treasury of the States conducted a review and he -- he was asked -- he ask a report which was done in January 2011.

DEPUTY EGRE:

Which we have two copies of, the usual draft –

SENATOR OZOUF:

Yes, and obviously the end -- the end one is the thing that matters, yes.

CHAIRMAN:

Who did that get circulated to?

SENATOR OZOUF:

I don't know. I don't do -- I am the Minister. I receive final reports.

CHAIRMAN: Well, okay. So, we're at the stage of the business case.

SENATOR OZOUF: Yes.

CHAIRMAN:

You are saying you are unhappy with it.

SENATOR OZOUF:

Well, it's completely unaffordable. It's not within the budget. The States has -- the States has agreed that I have got to do what the States tells me to do and the States have basically allocated a -- an amount of money for this proposal. So -- and I have got –

CHAIRMAN:

Well, how much was allocated?

SENATOR OZOUF:

We had 80 million pounds to date, and we subsequently -- we haven't got it yet. That's for us to decide when we're discussing the business plan, we've got an extra 2 million, but we had 18 million pounds available. So, the business case in October 2010 needed to fit the budget that was available. It didn't.

CHAIRMAN:

Well, wasn't part of the problem that Property Holdings had been told to come up with a scheme that was self funding?

SENATOR OZOUF:

Well, Property Holdings have got to come up with a scheme that is within the available resources.

CHAIRMAN:

But that was self funding.

SENATOR OZOUF:

And one of the concerns that I had about that 2010 October business case was that it took one of the most valuable pieces of real estate that the States has got, South Hill, assumed its sale in a depressed market, which I was concerned about selling valuable residential land without getting an up lift for the benefit of a planning application, et cetera, and assumed that that was going to be sunk into the police boat. I couldn't sign that as Minister. I couldn't sign off at the whole aspect of that. If one of my team can give me the business case that I was given, we can de construct it, if you like, but it was completely –

CHAIRMAN: The only –

SENATOR OZOUF:

There were cash flow issues. It didn't work from a cash flow point of view. It took South Hill and pocketed that and spent that on the police station. I think other -- I think States members would have something to say about that.

DEPUTY EGRE:

Well, Minister, you are using very broad terms there.

SENATOR OZOUF: But it's true.

DEPUTY EGRE:

You are using very broad terms. What figures are we talking about, because we understood, to date, that in the development, there was a bridging gap that was required, which was about 2 million.

SENATOR OZOUF: No.

MR RICHARDSON:

Can I -- I have asked Nicki Hill to get some figures.

CHAIRMAN:

Because we understand –

MR RICHARDSON:

Can I just give you the background figures because I think this is a good starting point. The Minister's explained the budget that was allocated to the police headquarters relocation, as per the amount of cash available, and that was subject to additional funds of 2 million being made in the 2012 business plan, which was subject to members approving.

SENATOR OZOUF:

I think it's in 13 and 14.

MR RICHARDSON: And that came later on.

CHAIRMAN:

Yes, Mr le Marquand spoke of 2 1,500,000.

MR RICHARDSON:

Sorry, we're jumping forward here. Let's stick to the time line.

DEPUTY EGRE:

Well, just for a minute, as we're jumping, there's confusion that reigns. When one's talking about a figure of 18 million, and somebody else is talking about a figure of 21.5 million, what are we talking about?

MR RICHARDSON:

Could I talk you through those figures? That's what I am trying to do. The budget that was available to the State -- the State had approved, was the figure that the Minister had read out. There was an indication of 2012 business plan had a third of 2 million allocated in it. The cost of the police relocation as per that business plan, which was the two phases, which was purchased, acquisition of Lime Grove, category A category fit out of Lime Grove, and then the construction of a new operational police station on (inaudible) -- sorry, on some land site, amounted to 28 million, 28 million pounds. That was the cost of the police location in here. Now, in order to fund this, this very simple little cash flow graph, what it showed was that all the available funding was spent and that got us to the point of having Lime Grove purchased, fitted out and occupied. We didn't have enough money to build the new operational police station on Summer Land.

CHAIRMAN: Where's the sale of the Amberland Station?

MR RICHARDSON:

Oh, that's further -- you are two years away from that, chairman. So, at this point here, which is that large increase in money, that was a sale at South Hill, which is shown on here at 12 million pounds. Now, in order to get to that point, we had to relocate all of the staff who were in South Hill. So, within the time line here, this proposal came up with the (inaudible) department building an extension on Elizabeth terminal at their cost to accommodate harbours and customs to vacate Maritime House. At that point, when it was vacated, when could then sell South Hill and, as the Minister has already said, we were working in a very depressed market and we were working at extremely high value.

Had that value not been realised and we were some way further down the graph and we'd had that much expenditure to go on the next line, you can imagine what would happen, we'd be into a negative position. I have picked that up. I then asked Property Holdings and I challenged Property Holdings and said this wasn't acceptable because (1) you have got no indication that we will get 12 million pounds at that particular point in the market and we'll have 12 million cash to be able to go on and do the rest of this project up to that point. So, they ran some additional funding lines for me and you can see I have got some little dots on there, all the details are in one of the files, I think they are actually in that file that you have got, that showed what happened if alternative cash flow analysis was done. And that's when the negative came -- we did come into a shortfall of funding at one stage. But that meant that the whole of the value of South Hill, whatever we got for it at that time, was being reinvested in a 28 million pound scheme. And that's one of the reasons why I was alarmed and certainly (inaudible) was alarmed, because it meant that we didn't have certainty on delivering that project at that stage, other than hoping we were going to get 11 million, 12 million pounds at South Hill. So that's one of the first big alarms that was ringing. What also came out was that when I went into the detail of this case, that the costs associated with moving planning environment and transport technical services from South Hill to Maritime House had a budget figure in here at 350 thousand pounds. When I asked the question of TTS and planning, are you satisfied you can get in there, the answer came back that they'd been advised by Property Holdings that they could fit in there because of number of staff times office area allocation. Well, what detailed designs are being done? What spaced allocation? What planning? None. And all the way through this analysis, there was no certainty that they would fit in there, because no detail and no costings had been done. 350 thousand, and as I say, I am not a property expert, but I have been involved with major projects all of my working life and 350 thousand pounds for something as complex as that, which required a significant refurbishment and internal alterations of that building seemed very, very likely –

DEPUTY EGRE:

Where did this -- in this overall business case that the Minister's mentioned on several occasions already, was this addressed in the business case in anyway?

MR RICHARDSON:

That's what I am explaining, it wasn't.

SENATOR OZOUF: It wasn't.

MR RICHARDSON:

All that was addressed -- this is the business case, this is it.

SENATOR OZOUF:

That's the business case that Senator Ferguson lobbied me on to say that we should be progressing. When I looked at it, I said I am sorry, I looked at it, I am not an expert, but irrespective of my own view, my officials were not prepared to say Minister, yes, you should be progressing this and I don't -- I don't make decisions without advice. My official (inaudible) to me, I am sorry, Minister, but I can't recommend that you approve this.

MR RICHARDSON:

Those three pages, and this is the business case, this hasn't been touched at all, those three pages are the only three pages that detail the move of relocation as headed up here, relocation of planning TTS and State (inaudible) Maritime House. That is all I had in terms of financial appraisal, detailed analysis, work plans, everything. That's it.

SENATOR OZOUF:

And we were being rushed to sign this off.

CHAIRMAN:

What discussions did you have with Property Holdings regarding that?

MR RICHARDSON:

Well, that's exactly what happened. My challenge back to them was how can you ask me to sign this off on 350 thousand pounds, based on that? And the answer that came back was we haven't done the detailed design, because there have been so many abortive attempts at this, that we didn't want to employ an architect to do all the detailed analysis side of it. So, when I asked whether 350 thousand pounds was sufficient, they said they thought it would be. But I have come back to my own experience of 30 odd years as an engineer and project manager and I used that experience significantly to say 350 thousand pounds, knowing the amount of work that would be required, seemed very, very light to me.

CHAIRMAN:

I don't think you –

MR RICHARDSON:

And what subsequently happened, which is important, because it could have been done as part of this business case, is when the (inaudible) was appointed, he used a local space planner and their own architect for a few thousand pounds to do that work for me. Now, that could have been done. It could have been costed by Q S to substantiate what's in here. It wasn't. I am giving the reasons why the uncomfortable feeling was there.

CHAIRMAN:

Did you get the cost (inaudible).

SENATOR OZOUF:

Well, can I just put -- can I just make the point –

CHAIRMAN:

No, I am just asking a question.

SENATOR OZOUF:

Fine. No, it's an important point, because I think we also need to be clear, is because of the uncomfortableness of some of the aspects of the business plan and the deputy chief executive, then deputy chief executive, made a decision to appoint a project manager in order to properly shape these issues and deal with them and that's when the assistant chief executive entered the -- entered this. And I have to say, I hope he won't blush, I think he is done a fantastic job in actually taking the business case that was in October to the point at which I was then able to be much more comfortable with a decision later on. But my goodness me was there a lot of work and the assistant chief executive has deconstructed and reconstructed the business case and interest there have been substantial changes to the business case to get us to the point at which I came comfortable and I said in the States, when I made the statement, I have been difficult to -- I have been difficult to convince. Well, you now are having a flavour of why I was difficult to convince. But the assistant chief executive can make his -- can make his remarks.

CHAIRMAN:

Are you actually aware that the business case had been reviewed by an independent consultant?

SENATOR OZOUF:

Well, it wouldn't pass me and it didn't pass my accounting officer. So, I am afraid to say, a cash flow thing that doesn't work, project that doesn't meet the budget, project that assumes the sale of South Hill, I don't know who the -- I don't know who did it but I don't take my advice from independents. I take my advice from my officials.

CHAIRMAN:

This was an independent project manager.

SENATOR OZOUF: Well, I don't –

CHAIRMAN:

-- who considered that it was a very robust business case.

SENATOR OZOUF:

Well, I don't know on what –

CHAIRMAN: In the industry.

SENATOR OZOUF:

Well, perhaps that's the basis on which you lobbied me, chairman. But I am afraid to say that I -- I am afraid to say that I am not prepared to accept the hearsay of an independent. I have a legal obligation to take the advice of my accounting officer and I am confident –

DEPUTY EGRE:

I have to caution you on the word hearsay in this environment, because –

SENATOR OZOUF:

My client is the accounting officer.

DEPUTY EGRE:

We've just been talking about an independent professional.

MR RICHARDSON:

I'd like to comment on that.

DEPUTY EGRE: Sorry?

MR RICHARDSON:

I'd like to comment on that.

DEPUTY EGRE:

Well, I am sure you will have the opportunity -- an independent professional person who looked at this and to suggest what you just suggested is perhaps not a good –

SENATOR OZOUF:

Well, sorry, as a business –

CHAIRMAN:

With considerable experience in the building industry.

SENATOR OZOUF:

Well, if you are telling me that that business case was able to be find -- able to be signed off, then I -- you can throw me out as treasury Minister, because if you would expect me to sign that or direct my accounting officer to sign that business case, then you can throw me out because it's just simply I wouldn't do it.

MR RICHARDSON:

Well, I am surprised at the comments that you just made to the panel, because when I read that, one of the standard procedures within the State is (inaudible) risk analysis of business cases. There is no risk analysis and risk work shop in that business case. I instructed that that be undertaken, after I have reviewed this, and I think did you set it up?

SENATOR OZOUF:

No, it was after -- it was before I –

DEPUTY EGRE:

And what happened at this work shop?

MR RICHARDSON:

I'd like to go into that. The person you referred to was invited to it and participated in it. So, it seems rather strange that someone who is supposed to have -- and I make -- I cast no comment whatsoever about the individual.

DEPUTY EGRE:

Well, that's what I was trying to avoid.

MR RICHARDSON:

Well, again, I cast no comment. But my only comment is there was a business case which had 28 million, more than that, in total I think the total cost was (inaudible) station, South Hill, Maritime, was 40 million I think. It's a big project, very complex.

SENATOR OZOUF: 34.

MR RICHARDSON: Sorry.

SENATOR OZOUF: 34.

MR RICHARDSON:

Thank you, 34 million, no risk analysis, no risk work shop. I instructed that was undertaken.

DEPUTY EGRE:

We accept the risk -- we accept the risk –

MR RICHARDSON:

We employed -- we employed someone to do it for us.

DEPUTY EGRE:

We're aware of that. And what -- we know about the risk work shop. We've spoken to people who were there. What notes or minutes were taken of that risk work shop?

MR RICHARDSON:

We've got full risk register in the work shop, (inaudible).

SENATOR OZOUF: There's a report.

DEPUTY EGRE:

Can we get a copy of that?

MR RICHARDSON: Yes.

SENATOR OZOUF: Of course. Of course, yes. CHAIRMAN:

Well, we haven't had time to go all the way through. And what of the major risk identified?

MR RICHARDSON:

Have we got it here? We have three big red risks. If I can get it I will come back to it.

DEPUTY EGRE:

I think it's important.

CHAIRMAN: Right, so –

SENATOR OZOUF:

But I hope the panel is getting a picture of the fact that why the Minister's uncomfortable.

DEPUTY EGRE:

We're getting a picture (inaudible) uncomfort.

DEPUTY de SOUSA:

Can I ask what I think is a very important question at this stage? First of all, Mr Richardson, you said detailed analysis. Are you talking about the big (inaudible) fit out?

MR RICHARDSON: No.

DEPUTY de SOUSA:

What were you talking about that in analysis?

MR RICHARDSON: Sorry?

DEPUTY de SOUSA:

You spoke just a few minutes ago about the detailed analysis of the plans. What was that detailed analysis that raised concerns with you?

MR RICHARDSON:

Sorry, that was a detailed analysis of the fit out of Maritime House, in order to accommodate planning environment TTS in the space that was available and the only analysis that was in here was taking the number of people times the square footage, which we allocate 110 square feet per person with an office standard, multiplying that up and saying one times the other equals a figure, area of land available -- area of office accommodation available is that, the two fit, therefore it's okay. The cost estimate was 350 thousand pounds.

CHAIRMAN:

But if you are buying a house, you don't measure it for the curtains before you have bought it.

MR RICHARDSON:

No, but I think you would have a reasonable view if you are going to renovate it and renovate the kitchen and bathroom, you'd have an estimate before you did it.

CHAIRMAN:

You'd have a rough idea. Now, I understand –

SENATOR OZOUF:

I find these -- this is an extraordinary line of questioning, if I may say. We're being tested, quite appropriately –

CHAIRMAN: Challenged.

SENATOR OZOUF: Yes, but –

CHAIRMAN:

But you like being challenged, Minister.

SENATOR OZOUF:

I do, but my officials and I are being tested as to whether or not the level of prudence that we've been exhibiting, with the background of public concern and assembly concern on capital projects, isn't it absolutely right that the treasury Minister and his team is searching and demands answers to questions and I am painting a picture to you that, frankly, the information of which I was being asked to make was a poor standard and was not able to be agreed. Now, the chairman may disagree, because she lobbied me about it, but I have to say that the business case, as in October 2010, was not suitable for my signature. I did not have advice for it and I am pleased and I congratulate the chief executive on not advising me to sign it and the subsequent work by the assistant chief executive have proven that there was a sufficient amount of deficiencies in that plan for us to be concerned. All of our concerns have been borne out by evidence subsequently in that business case and, in fact, the business case eventually agreed being substantially different.

CHAIRMAN: Yes, but Minister, you must be aware that for the last -- since 2005, I have been acutely aware of the necessity to get the office strategy moving.

SENATOR OZOUF:

But not at any risk, chairman –

DEPUTY de SOUSA:

The other very important question that I had, and it was vitally important, is that you have spoken at length, Minister, about the fact that you -- alarm bells rang off and you were very, very concerned about the business case that was put forward.

SENATOR OZOUF: Yes.

DEPUTY de SOUSA:

And very late in the day you were aware that the offer -- an offer had been made, tentatively, way back in March, of 8.75 million, in fact when you did your analysis with your people, the only difference in price was a very small, in the scheme of things, a very small saving in the amount of money in the purchase.

SENATOR OZOUF: Let me be clear, 8.75 was not the price at which we could buy the building, because of the issues that we have documented in this -- in this note about the defects, et cetera. So, we're not just talking about -- this isn't an A or B option, 8.75 or 8.25. The 8.75 never existed because of the issues that we discussed previously. It never existed. It was not a price that could be agreed, as we've discussed.

DEPUTY de SOUSA:

But the price that you agreed on and you instructed people to go ahead and negotiate on was 8.25 million. What I am trying to say is there's not a significant amount of money between what was put forward and you found out about, in a roundabout way, and you –

SENATOR OZOUF:

Well, not a roundabout, the evidence that I had at that stage from my own documentation and the then intense discussions that were going on because of the intensity of the pressure that I was under to sign this off. We're dealing with more than just half a million, deputy. We're dealing with the issues of snagging. We're dealing with the issues of the difference between the 500 -- the 8.75 didn't exist. That's really important to know. And the attendant problem that I had was that I'd been repeatedly petitioned and lobbied of the fact that the valuation should be what you buy for it. And I refer to my comment earlier, which I do want to just try and explore, is that a valuation is a construction of what somebody's willing to buy a building for an investment. And that was based upon a 21 year lease or 15 year lease at 24 pounds a square foot, or whatever, with a triple A rated tenant. And I think it's appropriate, for me as treasury Minister, to question why we were buying a building with the benefit of the State's covenant. It's unusual, we may have good credit references. It's unusual that we buy a piece of land with the benefit of our own credit reference and our own credit rating. And so the issue of valuation, I think there is genuine -- I think there's genuine lack of understanding. I am not a property expert. I have learned a lot in relation to all of this, I have to say, but there is a real difference between the valuation and what somebody's prepared to pay and I think that I would give you an evidence as to the reason why I was probably right to be even concerned about the valuation approach, was that the latest valuation was 8.45 million, not 8.75. And if you have the background of all of this -- of all of this  uncertainty about how this valuation got there, Ministers  not being told, it's unclear, valuation retro fitted, lack of clarity, lack of supporting evidence in the overall business case, you are going to be on the edge of your seat at the point at which you are trying to make the decision.

DEPUTY EGRE:

You have used the term retro fitted twice. What do you mean by retro fitted.

SENATOR OZOUF:

Yes, indeed, I think it's really important.

MR RICHARDSON:

Very important point, the offer letter of 25th of March 2010, 8.75 covered, was not supported by a current valuation. Now, the Minister (inaudible) professional valuation. It was supported by a 19 -- 2007 valuation that had just been up lifted and it was supported by a senior officer in Property Holdings undertaking a two page calculation to determine price. That is all of the substantial evidence that exists to support making an offer of 8.75.

DEPUTY EGRE:

And the other independent valuation?

CHAIRMAN:

But the independent valuation –

MR RICHARDSON:

Yes. I will come to those. Those are the two pages. That's it.

CHAIRMAN: Yes.

MR RICHARDSON:

15th of March, prepared by an officer in Property Holdings, which came to 8.781500, say 8.75. That is -- that's what the -- that's what the offer was made on plus the 2007 up lifted.

CHAIRMAN:

But he is a property professional.

MR RICHARDSON: Well –

SENATOR OZOUF:

But the Director of Property Holdings subsequently said in e-mails that this whole thing was, and I quote, all very messy and totally unsatisfactory.

CHAIRMAN:

He was -- no, let's get this straight, he was referring to the –

SENATOR OZOUF:

Are you defending these people?

CHAIRMAN:

No, I am not, I am trying to find out the story.

SENATOR OZOUF:

Because it sounds as though I am being defending for being prudent and that's the difficult see, I said.

CHAIRMAN:

No, I am about to say that the -- what was the BMP valuation?

SENATOR OZOUF: 8.45.

CHAIRMAN:

No, the BMP valuation.

MR RICHARDSON:

8.8, the BMP, which was then done in June -- May 2010.

DEPUTY EGRE:

Minister, can I just cover points that concern me shall the reaction just there really did concern me, all right? We have -- this is coming towards the end of a week of talking to people who have been giving evidence.

SENATOR OZOUF: Yes.

DEPUTY EGRE:

It's not based on some form of attack and defend. We have got information, which does not square with some of the information that you are giving us at the moment.

SENATOR OZOUF:

But we're giving you what's in our departmental files and you are scrutinising a Minister's decision, that's what you are doing. You are scrutinising a Minister's decision as to whether or not I was right or wrong in my decision making and the underlying issue is that I think that where this is going is that you are inviting me, effectively, to instruct officials to go ahead and purchase Lime Grove at 8.75, which I haven't got –

DEPUTY EGRE:

Minister, (inaudible) really serious point here. We're not instructing -- we're not suggesting any instructions is happening at all.

SENATOR OZOUF:

But that's what I was being lobbied on.

DEPUTY EGRE:

The situation that we have at the moment, which is the reality of the situation, is that we started with a possible purchase of Lime Grove, which appeared to be a key overall strategy.

SENATOR OZOUF: Yes.

DEPUTY EGRE:

Which has now fallen through. It does not, as you rightly put in another area, it does not exist. We don't have Lime Grove and one of the issues that has come out of that is that could cost the State some money, that that was the key issue for the start of a lot of exercise that were going on within the property. So, we -- there is an end game to this, it hasn't happened. So, what we're trying to put together is construct what happened in between that time.

MR RICHARDSON:

Well, that's what I am trying to get to. So, if we follow the valuation side of it through, handwritten valuation in 15th of March 2010, offer letter 25th, acceptance letter under different terms, which meant there was no deal because it was never clarified, which was substantial, could be substantial, a valuation report –

CHAIRMAN: How substantial?

MR RICHARDSON:

Well, can I come to that further on. But significant -- of significant defects and significant issues about the size of electrical supply to that building, which had to be dealt with. Our letter on the 25th of March was that those issues would be put right by the vendor. The vendor's response was 8.75 and we took on liability and responsible for all defects, be they original construction defects and/or wear and tear, both, of which some were significant and I will not cost it. So, we didn't know what liability they were letting us in for and the requirement to upgrade electrical supply to meet modern standards. So, the valuation report came in in June 2010, 8.8. So, that was the first valuation report that we had in -- sorry, this is our second valuation report. The first one was the 2007. Then we had 2010 and then I instructed Mick Heald, when he took over, to get a further one carried out by –

MICHAEL HEALD:

Drivas Jonas in February 2011.

MR RICHARDSON:

In February 2011 for 8.45. So, the valuation is somewhere between 8.45 and 8.8, as the Minister said, the question of valuation versus purchase price. There was no purchase being agreed. There was a price of 8.75, but there was no purchase -- there was no conditions attached. They were completely apart and, all the way through, and I am going to jump to the end for a minute, but I don't -- we'll go back to follow the time line through, when we finally got down to renegotiate with the vendor, one of our sticking points, apart from the 8.25, was did it include or exclude these dilapidation, snagging, et cetera. What we finally have agreement from and the heads of term are written in a specific way, was that there would be an agreed -- there was an agreed statement between our building surveyor, employed by us, a third party private sector employed by ourselves, and the vendor's original architect, who would meet on site and would go through the snagging issues and, from that, we would be able to agree a schedule, which the vendor agreed, that if there were material defects that existed as part of the original construction, which were those that were of concern to us, then he would get them right by his contractor. And I think I am right, Mick, that's right, isn't it?

MICHAEL HEALD:

The vendor would put them right, yes.

MR RICHARDSON:

Put them right. So, that took away a significant element of the risk.

DEPUTY EGRE:

You don't have a deal. What risk was that?

MR RICHARDSON:

Well, we did have a deal at that stage.

DEPUTY EGRE:

I am sorry, the term I used, we don't -- you might have -- we don't have a deal. It's gone.

MR RICHARDSON:

Yes, sorry, you have jumped ahead another couple of months now. At the time -- DEPUTY EGRE:

Well, can I just take you back, because the early -- and I want to get this information as soon as I can, you mentioned earlier, rightly, you put together a risk work shop.

MR RICHARDSON: Yes.

DEPUTY EGRE:

And that there were three red lines that came up. We don't appear to have that. We don't have it. We need it, all right, because those risk elements are important. Because we have -- it's been indicated, in what we have picked up so far, not attack/defend, that the highest risk within that risk work shop was the loss of Lime Grove.

MR RICHARDSON:

I think you are right, I think it was.

DEPUTY EGRE: Right.

MR RICHARDSON:

It was high risk. But there was no deal.

SENATOR OZOUF:

There was a price, but not a deal.

DEPUTY EGRE: We know there's no –

SENATOR OZOUF:

There was a price but not a deal. It's really important.

DEPUTY de SOUSA:

Can I take you slightly forward because of what you have just said? We had a hearing this morning to which the assistant -- sorry, acting chief executive was present and that was with the person that you employed to be the negotiator. You gave him a fixed set --

amount of money to secure it on, but he had the flexibility within other things to come to an arrangement. He told us this morning that, at some date in June, the terms were agreed, everything was satisfactory, he'd gotten a good deal, everything was sorted. You had the 15 day cooling off period, which then took you to the 19th of July. You made a statement in the States to say that, with political support, you had made the acquisition of Lime Grove. What was the delay between then and we know the deal was only signed in August? What was the delay?

SENATOR OZOUF: Very good question.

MR RICHARDSON:

Do you want to answer that.

MICHAEL HEALD:

Yes, of course. We agreed heads of terms which then reached the 15 day rule and we then had a number of issues to sort out. We had acting chief executive had just mentioned that we had to resolve which defects we regarded as material and would be fixed by the vendor, before we went to contract, which (inaudible) terms. All the contract documentation needed to be done, the usual things you do when you purchase a property are obviously bigger. And there were also some issues we'd identified through our title search, which I instructed I think something like February/march, maybe in April 2011, which we needed to address because of the use we're making of the building. Because it was about the rules for using the basement. We were going to use it as a police HQ. So, there were issues what you can use car parking spaces for, et cetera. So, those things had to be dealt with. We tried -- we took steps to line up our people to do it. We tried to move the vendor forward in terms of addressing those things and it's safe to say that, roundabout the 20th of July, I started to get a very cold feeling about the vendor actually pushing these things forward. And the rest of the month is myself, our appointed surveyor trying to get together the architect and trying to discuss moving forward issues on contract and moving forward the defect issues and it's actually we started with the -- we had to get agreement with the owners of the flat who are next door to Lime Grove that they share the basement. So, there was a whirl of activity going on, because there was quite a lot to do to actually get to court. We couldn't have gone to a