Ex-SporTT chairman on Lifesport: We did what government told us to do
Colin Kangaloo. –
FORMER chairman of the Sport Company (SporTT) Sebastian Paddington took the hot seat on September 13 and defended his actions and those of the ex-board members in the failed LifeSport programme.
Paddington and 12 other former directors as well as SporTT’s CEO John Mollenthiel have been accused of negligence and breach of fiduciary duty by the company.
The case against the 14 concerns a $34 million contract to eBeam Interact Ltd which was hired to provide technical, literacy and numeracy services for LifeSport.
It alleged that eBeam did not provide the services for the programme, which aimed to transition unemployed young men to responsible adulthood by providing sport training, occupational skills training and job placement.
It also claimed that Mollenthiel and former board members should be held liable for entering into the contract. The ex-directors have contended in their defence they were following the directives of the government.
Paddington was cross-examined in detail by SporTT’s lead attorney Colin Kangaloo. He agreed he and the board had a duty to act honestly, in good faith and the company’s best interest.
Paddington was questioned in detail on SporTT’s relationship with the Ministry of Sport and the board’s duties under the Companies Act.
He also admitted that the ministry could not control how the board exercised its functions, but could “influence, direct, and recommend its policies and programmes” to be implemented by SporTT.
“We were an implementing arm of the Ministry of Sport. We had a duty of care to implement the ministry’s policies.”
He also said it was his understanding that the ministry was the majority shareholder of SporTT for citizens of TT.
He was asked about the justification for the sole selection of eBeam which came from the ministry, and said he sent it back to the CEO for information from the ministry because “it lacked information.”
Paddington also said he could not say if there was a unanimous shareholder agreement between SporTT and the ministry during the life of the LifeSport programme, but that the Sport and Finance ministries were aware of the eBeam contract and its terms.
He agreed it was the ministry that wanted the programme done and SporTT was its implementing arm.
“If the government provided funding and told us to implement, once it was not illegal or wrong…we had to do it.”
Paddington also said the money given to SporTT, by way of subventions…in eBeam there was no issue with what the money was given (from the ministries) for…It was spelt out from the ministries to the CEO as a line item.
“Both ministries had copies of the contract. They were fully aware of what was going on. Why approve the releases of money if they were not comfortable?”
He was questioned about several board minutes in which the ex-board expressed concerns with the programme. He also said after receiving the justification for the sole selection of eBeam, it was lacking information, so it was sent back for more information.
He also said he expected the Sports Ministry to have done the requisite RFP (request for proposal) and RFQ (request for quotation) and whatever else the state enterprises performance monitoring manual required dictated concerning the contract with eBeam.
“This was an urgent matter the ministry needed to get done so I expected they would have been done. I do not know what the ministry did. I assumed one had been done by the ministry, but we never saw it.”
Paddington said the board was advised by the CEO it was done.
“I don’t know who prepared the justification for sole select, we just received it from a senior person in the ministry.”
Asked specifically about the LifeSport programme, which was expected to benefit 33 communities, Paddington said the board had no reason to doubt that the conditions were not met by eBeam.
Paddington also said it was not the board’s policy to question if contracts had appropriate exit clauses, but when the eBeam contract came to their attention, they asked the question.
He also said the board did not see the contracts for ratification since directors relied on its executive management committee to exercise its judgment. Paddington said up until the board got notice of issues with the programme, they deferred ratification of the second tranche of $17 million to eBeam (which was paid in two tranches).
“Up to that time, the CEO had demitted office, we wanted clarification from the shareholders and the ministry reinforced our understanding of what had been communicated to us.”
On the second $17 million payment to eBeam, Paddington said the board, although advised of major issues with the contract, a recommendation was made to pay or face serious legal consequences.
“I was concerned that if the contract was not fulfilled, why are we paying 100 per cent of the money…”
However, he said his understanding was that SporTT was required to make payments for projects “once everything was in place” as there was full approval from the ministries.
However, he said he was confident eBeam would have been able to finish its obligations if LifeSport was not shut down.
He also disagreed that despite the payout of $34 million, which was provided for by the government, there was little or no benefit from the programme.
“We were advised there was progress on the contract, equipment was secured…They (the ministries) had all the reports on the progress of the contract and I was under the assumption the work progressions but not 100 per cent complete which is why we objected to the second payment.”
Paddington was also questioned about three loan agreements between SporTT and eBeam and two demand loan facilities with First Citizens Bank for $76.9 million and $77.2 million to assist with expenses for LifeSport and shortfalls in the programme.
He admitted the LifeSport programme was “much wider than the contract with eBeam.”
In response to suggestions by Kangaloo, the ex-SporTT chairman admitted the negative coverage surrounding LifeSport was ongoing and he suffered reputational harm, “amongst other things.”
He also denied the board’s actions were unreasonable or that he breached his duties under the Companies Act concerning the eBeam contract.
Paddington also disagreed that SporTT suffered a loss. “The evidence of the expert reinforces that.”
He also said SporTT’s corporate secretary Arlene George never contacted him for information or explanation before the lawsuit was filed.
“I wish she had done that. Nobody contacted me to get information raised in her evidence (witness statement).”
Some of Kangaloo’s questions were not allowed as attorneys objected to them as they related to a central audit committee report that was eventually quashed by the court.
Also giving evidence were ex-directors Cheematee Martin and Reynold Bala. Bala said the board would not have been concerned about funding for the LifeSport programme as it was “well-funded” by the Finance Ministry.
“It was a unique programme. The Ministry of Finance gave the contract to the Ministry of Sports and the only reason they sent us (SporTT) the contract, was because the PS couldn’t spend more than $2 million.
“We were the executing agency. If the chief accounting officer walks through the contract and bring it to us, almost telling you you have to do this, who are we to question? It had to be done. It was an urgent directive from the Cabinet. It was a directive.”
The trial continues on September 16.
About the case:
SporTT’s claim of negligence and breach of fiduciary duty is against its former CEO John Mollenthiel and ex-directors Sebastian Paddington, Chlea Lamsee-Ebanks, Reynold Bala, Morris Blanc, Nisa Dass, Anly Gopeesingh, Sabrenah Khayyam, Cheemattee Martin, Matthew Quamina, Annan Ramnansingh, Kent Samlal, Harnarine Seeram Singh and Milton Siboo.