Abaco Land Deal Exposed
Documents obtained in a Bahama Journal investigation show that Progressive Liberal Party Senator Philip Galanis was an equal partner in a company that requested 100 acres of government land be deeded and conveyed directly to it.
But Mr. Galanis, an accountant, told the Journal last night that he no longer has any interest in the company. The Senator made it clear that there was nothing unethical about his actions, particularly since he is not a member of the Cabinet.
He said that it is not unusual for lawyers and accountants to be named as shareholders in the companies that they are helping to set up.
The company, Island Fresh Dairy Limited, requested the lease of an additional 3,500 acres of land, located South of Spring City between Marsh Harbour and Cherokee Sound, Abaco, estimated to be worth $30.4 million.
The deal was outlined in a letter to Gary Sawyer, president of the company. That letter, dated July 29, 2003, was signed by then Bahamas Agricultural and Industrial Corporation Chairman Sidney Stubbs.
Regarding the company's request for land, Mr. Stubbs wrote, "I would like to confirm to you that in principal, this objective can be achieved."
He also wrote, "In order for you to proceed with this project and for us to provide you with a formal definite commitment from BAIC including specific terms for this venture, we would invite you to formally submit the aforementioned business plan and feasibility study for our consideration. We look forward to working with you on this venture."
At his party's national convention last November, Prime Minister Perry Christie announced that the company was about to carry out a major investment involving Bahamian and American partners in Abaco.
"This major farm initiative is projected to provide dairy products both for the local and export markets," the prime minister said.
A letter from Galanis & Co., dated August 7, 2003, to company principals, shows where the firm billed the company as follows: incorporation fee, $2,000; engagement fee $50,000: expense retainer, $25,000; business plan fee $30,000; and miscellaneous expenses, $1,000 for a total of $108,000.
Mr. Galanis said last night that he would be interested in seeing this breakdown as he could not recall whether it was in fact accurate given that he deals with many transactions.
But he did say the $108,000 did not represent professional fees.
The letter states that the total works out to $18,000 per shareholder. Galanis & Co. instructed that the funds be wired through a New York Bank, Bank One International Corporation, for further credit to Scotiabank Bahamas Limited.
The business plan itself, dated September 2003, lists Mr. Galanis as a founding member of Island Fresh Dairy Ltd., with a 14.167 percent shareholding.
Other principals included Gary Sawyer, who has a 14.166 percent shareholding.
The remaining founders listed are Michael Albury (14.166 percent); Robert Malone (14.167 percent); David P. Sumrall (14.167 percent)- Marcus B. Peperzak (14.167 percent) and BAIC (15 percent).
BAIC reportedly would be entitled to 15 percent of the profits as a result of the transfer of the land to the company.
But Mr. Galanis said as far as he knew, that transfer never took place. He said it was also not unusual for a government agency to gain ownership in a company through the transfer of land.
The executive summary of Island Fresh Dairy business plan said, "The Bahamian government, including the prime minister, is enthusiastically supportive of the project, and is prepared to extend assistance. BAIC has offered to deed IFD with 3,800 acres of high quality crop land with excellent water resources on Great Abaco Island."
A letter, dated September 16, 2003, written to the attention of Gary Sawyer, from James H. Newbold, the government appointed assessor, valued the land at $30.4 million.
The foreign investor Marcus B. Peperzak and David P. Sumrall, along with the other investors were proposing to put $1,050,000 cash into the project, according to documents obtained in the Journal investigation.
Among the list of professionals listed as providing advice to Island Fresh Dairy are attorney Neville K. Adderley, who is also noted in the document as being the Chairman of the Bahamas Development Bank.
The Island Fresh Dairy business plan said that the board has discussed two possible strategies for investor liquidity. These options are: "Based on the growth projections for the domestic Bahamas market, Island Fresh Dairy believes we will reach output capacity within our second year of operation. We can continue to supply the local market at our capped output, or put into place an expansion plan, which could expand the existing farm or create a second operation. In order to do so we would need to raise additional capital. The ideal platform to do this would be launching an IPO through the Bahamas Securities Exchange."
It added that, "The second exit strategy would be to sell the business. Island Fresh Dairy's presence in The Bahamian market will dramatically impact the existing import brands' market share and they will want to explore avenues to recoup that share. The combination of high forage output land, a state of the art dairy operation, and the ability to produce and ship at a significantly lower cost, will make Island Fresh Dairy a most attractive take over target."
As the Journal was carrying out its investigation, the Free National Movement was also uncovering the facts of the deal.
The party sought to link the resignation of Edison Key from the Senate to the Island Fresh Dairy Farm deal.
"With the resignation of Edison Key from the Senate and from the PLP, it has become apparent that an undisclosed grievance is the strong suggestion that influence-peddling and conflict of interest is rife in the government of Prime Minister Perry Christie.
Bahamians are also now satisfied that one of the problems affecting the Christie PLP government is their apparent inability or unwillingness to make their actions live up to their word."
But Mr. Galanis warned that, "The FNM ought to be very careful about the statements that they make because they may find that will end up with a lawsuit for libel."
"They are trying to spread lies and spread political mischief," Mr. Galanis said. "They are grasping for straws."