EDITORIAL: A tale of being too big to fail

Anyone passing the Lee Wind Paints factory in Powells would notice the sign for the upcoming auction of the property. The sign was erected not long after management put staff on notice that they are unable to pay salaries for May and June, and the company was temporarily closings its doors. The letter informing the employees of the situation was signed by the Managing Director Hugh Marshall, Sr. It would appear that temporary has evolved to permanent in a very short period of time.

The tale of Lee Wind Paints is an interesting one. In 2015, the company was in dire financial straits and very close to closing its doors. The government quickly stepped in and deemed that the company was too important to the local economy to be allowed to fail. It wrote-off somewhere in the vicinity of $2 million owed in corporation and sales taxes to acquire more shares in the paint manufacturer and to become the majority shareholder. It would also make cash injections into the company to improve its liquidity and to help pay salaries. It was one of the early pushes into ‘entrepreneurial socialism,’ but a lot of people saw it as nothing more as a generous bailout of some good comrades.

At the time of all the hoopla and fanfare, the then Trade Minister, E.P. Chet  Greene, championed the cause and proclaimed the company would become viable and competitive thanks to the intervention, and it would be looking to expand its product range. Specifically, he said, “The company made government aware of the difficulties it was having … We did the necessary studies of the company and determined it was worthwhile to make an injection.”

Most recently, we have learned that the transaction did not go as planned. The expected transfer of shares from the majority shareholders, Renee Phillips and Cosmos Phillips, Jr., never materialised, and it would appear that those ‘studies,’ used to justify the investment, were not very accurate. Essentially, the government pumped in a lot and got nothing in return. The company continued under the same management, and we have reached this point. It was too big to fail but not too big to fail spectacularly.

We have so many questions and so few answers. Apparently, no one is too keen to talk about this situation, but there are some glaring issues that need to be addressed considering the investment by taxpayers and the company’s failure some three and a half years later. As we stated at the beginning, the company’s property is now up for auction. We understand that the starting bid will be in the millions. So, who gets the net proceeds?

After the bank takes its cut, and the employees get what is due to them, we suspect that there will be more than a few dollars remaining from the sale. As the October 30, 2014 agreement for the transfer of shares was not executed and the government never received its shares, will the majority shareholders of record get the windfall? We agree with the government’s position not to fork over any more money without the shares in hand, but we must ask, what happened in the last few years? The agreement is dated almost four years ago, and it is only now that the government has decided to stop the bleeding because no shares were transferred? We hope that the agreement is sufficiently watertight to prohibit any leakage even though the shares were not transferred.

It is interesting to hear some of the spin masters already weaving a tale of how this is all the United Progressive Party’s (UPP) fault, like we have heard and continue to hear about the Antigua and Barbuda Department of Marine Services and Merchant Shipping (ADOMS) headquarters. But in this case, the fingerprints are all red. The ‘too big to fail’ and ‘entrepreneurial socialism’ arguments were promoted by the current administration, so it would be a real stretch to lay this at the feet of the ‘incompetent UPP.’

That being said, the situation needs to be urgently addressed to ensure that the employees get their severance and the taxpayers get their value, if any is to be had. It cannot be a case where the taxpayers and government get burned while others skim the cream from the real estate liquidation. And beyond that, what went wrong? This entire deal was promoted as a smart investment that would result in healthy dividends for the nation, so what happened? Will the ‘good comrade’ conspiracy play out to be true, with a whole lot of people saying, “I told you so!” or will we receive a full and transparent accounting of what happened to Lee Wind Paints? We will optimistically hope for the latter.

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