'He Said, She Said'

Sat, Sep 17, '05

 

The following is the point-by-point response by the West Indies Cricket Board to the contract inquiry done by its own independent Sponsorship Negotiations Review Committee (SNRC):

SNRC said: The Committee was not provided with any correspondence or minutes of meetings to indicate whether the Board of Directors approved or disapproved of the said commercial agreement. There then ensued a period of silence by the lack of documented communication for the month of November 2003, save e-mails discussing administrative matters.

WICB said: This is incorrect. There was substantive correspondence between the parties on a range of contract disagreements. Board approval was therefore not sought because there was no agreement.

SNRC said: On December 5, 2003, (the date on which the 10 month period ended) the CEO of the WICB wrote to C&W and advised them that they ?now invoke clause 14.2 and will forthwith enter into negotiations with other interested third parties for the grant of sponsorship rights?.

WICB said: The SNRC incorrectly states that the 10-month period expired on 5 December 2003. The key date was the commencement of the period, which is 1 September 2003. The 10-month period referred to in the then existing contract is one that gave the WICB the right to seek alternative sponsorship if there was no agreement between the parties. That period was counted from the end of the existing contract, 30 June 2004, backwards.

SNRC said: The committee requested evidence from the WICB to illustrate the additional cost of $1 million. The committee was provided with a document prepared by the WICB indicating discrepancies between the redlined version of the contract and the commercially agreed terms, but it did not conclusively show that the cost was close to $1m.

In the committee?s view, the report was not specific and detailed enough to clearly illustrate that the variance between the commercially agreed terms and the redlined version of the C&W contract was $1m.

It is important that we highlight this matter as this variance was then used to inform the Executive Committee of the WICB that they had reached a stalemate with C&W and they will be advising C&W that they will invoke Clause 14.2.

WICB said: Our cost analysis was based on the collective experience of the negotiating team. We accept that the figures should have been a part of the document presented to the Executive Committee. It should be noted the SNRC was presented with a spreadsheet detailing the affected areas.

SNRC said: On December 17, 2003 following the meeting of December 15, C&W set out in a letter its position stating inter alia that it remained gravely disappointed that the WICB remained committed to its stated course of action thereby invoking the provisions of clause 14.2 of the agreement that then existed. In that letter C&W reiterated that it had repeatedly requested the areas of disagreement in the redlined draft contract be explained but none was provided until the meeting of December 15, 2003.

WICB said: We disagree. The facts are that WICB reviewed and got back to C&W within 32 days of receiving C&W?s ?further revised contract? on November 3, 2003 compared with the 45 days that it took C&W to present the ?further revised contract.? Given the need for reassessment in the light of new requirements this was not unreasonable.

SNRC said: In our view, the WICB was not proactive in discussing the new terms. It is therefore not unreasonable to conclude therefore that the WICB had every intention of going to the market even though C&W had conceded in on all areas of contention.

WICB said: We disagree. WICB had indicated to C&W as early as September 2003 that it was considering the option of going to the market.

SNRC said: The Committee inspected the corporate records at the registered office of the Board and found that there are no minutes on record to support the claim that an executive decision had been recorded. The Committee saw no evidence of minutes that the decision to go to market were confirmed by the Executive Committee. They were informed. There is no evidence to show that the decision was circulated to other members of the Board.

WICB said: We agree that the decisions should have been minuted. Nonetheless it must be emphasised that the Executive Committee was however advised by e-mail of 4 December 2003 from the President that clause 14.2 would be invoked.

SNRC said: The CEO of the Board received an offer. A presentation was made to the Board, the Executive, and his committee (Marketing Committee) came in, as he put it, "at the back end". The Committee was not shown any written presentation to the Board. Further an inspection of the Minutes of board meetings makes no reference whatever of any presentation to the Board. The Committee noted that we saw no minutes or records of the meeting from the WICB.

WICB said: The complications of communicating with executive directors in six different countries require frequent teleconferences and this matter was discussed by teleconference on several occasions. We agree the proceedings should have been minuted.

SNRC said: C&W was being granted the first right of refusal to match the offer from SBI. It is important that we note here that SBI was a company used to mask the identity of ISM.

WICB said: The involvement and role of SBI was a matter between ISM and SBI but we did not object at the time. We should have looked more closely at the proposal.

SNRC said: The key difference therefore is the commission agreement. The WICB represented to C&W that they were potentially receiving the full amount of the offer. There was however a commission of 10% payable on all amounts received by the WICB from Digicel. As disclosed earlier, a commission agreement with ISM was signed on February 23, 2004. At the lowest end of the range, the WICB was receiving at least $1.975m less than the offer. In the Committee?s view, the $1.975m is considered material as it represents 10% of the minimum contract receipts. In our opinion therefore, C&W were not treated fairly in this particular instance as there was a difference of at least $1.975m between what the WICB ultimately received and what C&W was asked to match.

WICB said: We accept that C&W should have been informed of the 10% commission on the total presented and this is regretted. Our overall assessment at the time was that the deal on offer remained superior even after considering the commission.

SNRC said: The question for the Committee is to determine whether C&W was treated unfairly because the identity of the rival bid was not disclosed. The Committee is of the view that an integral part of any offer is the identity of the person making it. In contract law, it is not only the terms which are agreed upon between the parties, but fundamentally thereto is the identity of the parties agreeing.

Since full disclosure was not made, and the basic principles of administrative law were not adhered to, C&W in our view were not treated fairly by the WICB in the negotiating process and C&W?s position was materially and adversely affected thereby.

WICB said: We disagree. The action of the Board in refusing to submit the identity of the rival bid was taken on the express advice of its legal advisors.

SNRC said: Mr. Austin went on to say, "On Monday March 29th, 2004 I called Mr. Griffith and made an offer of $4 million for the Home series only. He indicated that he had already met with the potential new sponsors and that there was a 21-day exclusive discussion agreement with this party, so he would not be able to consider our offer at that time. Later that evening, there was a function for the cricket team which was attended by Mr. Roger Brathwaite.

I took the opportunity to draw Mr. Brathwaite aside and indicated to him that the offer made by Cable & Wireless to the WICB was now $4 million for the Home Series only and that Cable and Wireless was interested in closing the deal. He responded that Mr. Griffith had spoken to him but that it was not possible to consider the offer as they were in a 21 day period exclusive review with the potential new sponsors."

In respect of the 21-day exclusive review period referred to by Mr. Austin, the Committee has not seen any evidence of such an agreement at that time. The Committee questioned Digicel (Mr. McDermott) about this exclusive agreement, and this is what he submitted to us in writing: "The Review Committee referred to a ?21-day exclusivity letter? signed at the end of the meeting in March 2004. No exclusivity agreement was signed at the end of that meeting. An exclusivity agreement was however signed at the end of May 2004."

WICB said: During March of 2004, Mr. Austin, President of C&W (Barbados) Ltd. telephoned the then President of the WICB on two occasions around 17 March and 29 March. Prior to that telephone call, Mr. Austin played no part in the negotiations. During the first call, he inquired whether the Board would be open to an increased offer of $0.3 million annually.

Mr Austin was informed that the Board had received communication from C&W on March 16, 2004 and would shortly be holding discussions with a potential sponsor but had not yet made a commitment. Mr. Austin indicated that he would put his proposal to his regional colleagues who would be required for financial support of the increased offer and would come back to the President within a week.

Mr Austin?s second call was on 29 March and he made no offer of US$4.0 million. He repeated what he had said during the first call and wished to know whether WICB would re-open discussions on this basis. This was declined given that the discussions with the potential sponsor were underway and there was no substance to Mr Austin?s ?offer?.

The President informed the CEO that same afternoon of the discussion. The detailed explanation of this matter can be found in the letter of former President Mr Teddy Griffith (PDF file).

The 21-day exclusivity agreement had been undertaken verbally ? a gentleman?s agreement - on the night of March 23 during a discussion involving the President of the WICB, the chairman of Digicel, Mr David Brookes of ISM, the chairman of the WICB Marketing Committee and the CEO during dinner in Miami. Mr Liam McDermott was not present at the meeting.

SNRC said: The Committee would have thought that the CME would have been brought in at a much earlier stage in the process.

WICB said: Noted. However the Confidentiality Agreement signed allowed the information on the client/negotiations to be made available only to the CEO and to Messrs. [Teddy] Griffith, [Val] Banks, [Richard] De Souza, [Stephen] Alleyne and [Chetram] Singh, in their capacity as members of the Executive Committee.

SNRC said: Regarding the commission agreement, the CME?s responses were "I never knew that there was a ten per cent commission for a firm, SBI, in the negotiations." When shown the Commission agreement of the 23rd of February, the CME said that it was something to be raised with the CEO. It was the first time he was seeing that commission agreement and did not know, when negotiating, whether such an agreement existed. He also stated: "I know there was a commission payable but my understanding was that it was for bringing the deal, like a finder's fee, and that was it. During the course of this tour I was informed that it was paid on what the players get and that kind of thing." The Committee is surprised therefore that a commission agreement was signed and the CME was not aware of it.

WICB said: See note above.

SNRC said: Looking at the question of fairness, C&W was not given an opportunity to respond before the ten-month period had ended.

WICB said: We disagree. The SNRC has failed to understand that the 10-month period began on 1 September 2003 and from that date the Board had the right to invoke clause 14.2. It did not do so until December 2004. Once an offer was received, the WICB referred it to C&W to match it. This was done on 2/3 March 2004. C&W declined to match it via letter of 16 March 2004.

SNRC said: On 13th July 2005 the Committee examined the Board minutes and resolutions of the WICB, which are kept at its registered offices at St. John?s Antigua. This was an attempt to verify whether there were resolutions by the Board and or minutes which gave authorization to any committee and or individuals to sign the sponsorship agreement on behalf of the WICB with Digicel. The Committee found no such minutes or resolutions.

WICB said: Given the unanimous agreement of the Board that the Letter of Intent should be executed and the clearly stated authority to conclude a definitive agreement, it was not thought necessary to go back to the Board for further approval. The decision should have been minuted.

SNRC said: a) There is a clear conflict of interest for ISM/SBI if as it appears, these companies represented both sides. Further, the WICB is carrying the full commission cost.

b) The WICB is not being paid directly by Digicel. Clauses 1 & 2 of the amended agreement signed by the President of the WICB, allows for the Board sponsorship funds to be paid to ISM/SBI for the deduction of their commission before the WICB receives its share. In the view of the Committee, this is unacceptable.

c) Our review of the minutes revealed no evidence that the board was asked to approve the commission agreement.

d) Why did the WICB commit to such an agreement whereby it excluded itself from potential new and better offers from that period, if it did?

e) Why did the Board sign the new agreement when there was a potential new and better offer on the table from a company with whom the WICB had an 18-year relationship, if it did?

f) Why did the CEO not go back to Mr Austin after the 21-day agreement to verify the offer was still available?

g) It is worth noting however, that clause 17 of the commission agreement dated February 23, 2004 which CEO signed states ?The agreement shall be governed by and constructed in all respects in accordance with the laws of England, and each party should submit to the non-exclusive jurisdiction of English courts?. The WICB and Digicel, the contracting parties are registered in Antigua and Jamaica respectively, why is the agreement governed by English law?

WICB said: a) We disagree. ISM did not represent the WICB but brought a proposal to WICB on behalf of its client. This is a common market practice substantiated by precedent.

b). All parties have subsequently agreed that the Sponsor will make payments directly to the Board.

c) This should have been formally recorded. Nonetheless, it must be noted that the 10% commission charge was discussed in correspondence between the President, CEO, the Executive Committee and the Chairman of the Marketing Committee.

d) The agreement was a general commission agreement and did not bind the Board to accepting any offers. It should be noted that Commissions of this nature are not unusual and have been paid by the WICB before.

e) The Digicel proposal submitted by WICB for matching by C&W was superior to the proposal made by C&W on 17 September 2003. There was no other offer on the table at any time from C&W or anyone else.

f) The Board was under no obligation to go back to Mr Austin as the discussions with Digicel were proceeding satisfactorily.

g) English law is generally accepted in international contracts of this nature. WICB is in fact registered in the British Virgin Islands and ISM in England. Digicel was not a party to the contract.

SNRC said:

That is, they have an agreement with Digicel where for 21days the WICB could not speak to any potential sponsor. The following questions arise:

a) Why did the President discuss the said offer on March 17, 2004 when Mr Austin made the offer of $4 million, which the President said they could accept if Mr Austin?s testimony is correct? Is it that the President was not aware of the 21-day agreement? If he did not know, how could the President be excluded from such an arrangement?

b) The evidence presented to this committee shows that Mr Austin/ C& W might have been misled by the CEO of the WICB, because in fact no such agreement existed at that time the CEO was approached. The only arrangement of this nature was signed in May 2004.

c) Finally, in respect of the contractual conclusions, why the indecent in haste having the agreement hammered out and concluded ? all cut and dry - over a period of 18 hours (as per evidence from Mr. Darren Millien).

d) The final effect is that the resultant agreement failed to comply with certain fundamental requirements of The Companies Act in general and in particular, The Memorandum and Articles of Association of the WICB. Consequently, the agreement is legally flawed. That view has been confirmed in the opinion of both junior and senior legal Counsel which the Committee sought on the point.

e) On the totality of the evidence both oral and documentary, the Committee is satisfied that the circumstances surrounding the negotiation relating to the sponsorship agreement leaves a great deal to be desired and having regard to all that transpired; the entire procedure adopted undermines public confidence in the WICB and cannot therefore be in the best interest of West Indies cricket as a whole.

WICB said: The questions posed are germane only if the exclusivity agreement was in place on 17 March ? it went onto effect on the 23 March; and if the President had testified that he had accepted Mr. Austin?s offer of $4 million and therefore corroborated Mr. Austin?s assertion.

a) There was no exclusivity agreement in place on March 17 neither did the President make any allusion to such an agreement on that date during the conversation with Mr Austin.

b) We disagree. The President did not represent that such an agreement was in place and the President did not inform Mr. Austin that the Board would accept $4 million.

c) We disagree. There was no ?indecent haste? in hammering out the agreement. The existing sponsorship agreement was expiring and it was considered imperative to conclude the new one.

d) The legal advice received from eminent counsel in the BVI where the WICB Inc is registered says that there may have been internal deficiencies in the Company?s official procedures leading up to the execution of the contract, but these do not affect either the legality or the validity of the contract. The advice goes on to say that even if there were matters which potentially had that effect, the parties have acted for over a year on the basis that the contract is in full force and effect. A Court would not allow either party to withdraw from the contract because of any such deficiency.

e) Very few companies conduct negotiations of this nature in the public domain, even those registered as public companies. Where procedural errors were made these flowed from the imperatives of decision-making through teleconferencing and steps will be taken to avoid such occurrences.

SNRC said:

The evidence seen by the committee and the practices of the Board and Digicel in our view does not lend itself to an optimal level of accountability and transparency. Throughout the negotiation of the new agreement, according to the testimony of several Board officials, they were uninformed in respect of the details of the new sponsorship agreement with Digicel.

Board members were told that in order to protect the identity of the new sponsor, they were not advised about the identity of the new potential sponsor until the deal was almost consummated. This behaviour in the committee?s view was not in the best interest of transparency and accountability.

These are a few instances where transparency and accountability may be questioned: The only Board members who have seen and examined a signed copy of the new sponsorship agreement are the President and Mr Dave Cameron who did so as a part of the negotiating team and chair of the marketing committee.

The information presented to us revealed that the no member of the Board was aware of a Commission Agreement signed by the President and CEO, which allows for a 10% commission to be to ISM/SBI.

The players have not been told that their bonuses are subject to a 10% commission.

WICB said: We disagree. The Executive Committee of the Board was aware of the Commission Agreement which allows for the 10% commission to be paid to ISM.

The Board was briefed on the negotiations and signed off on the letter of intent. We agree that formal approvals for signing the contract should have been received.

Discussions are being held on the matter of waiving the 10% commission being paid on players? bonuses as well as the development fund.

SNRC said: The CFO was not aware that there was a 10% commission payable to ISM/SBI .The agreement also commits the Board to a commission on players? bonuses and other benefits; this agreement has serious financial implications for the Board and West Indies cricket in general and the CFO had no say in it. Effectively, the CFO cannot directly obtain WICB fees from the sponsor due to the commission agreement.

We have raised our concerns about all the above points with Mr Roger Braithwaite in two separate interviews, and on both occasions we were told that in his view there was no need to involve the CFO in these matters as the marketing department was sufficiently qualified to do this.

WICB said: All parties have agreed to a new mechanism for the Sponsor to make payments directly to the Board.

SNRC said:

In respect of payment to players, C&W through the WICB had guaranteed to fund payment to players to the extent of $390k per annum. Since the players are still entitled to that guarantee from the WICB, the WICB are now funding the $390k from the base fees from Digicel.

WICB said: This is incorrect. That sum was covered under the expired C&W agreement. WIPA and the Players are aware that there is no such remaining entitlement.

SNRC said:

In summary, the Sponsorship Agreement with Digicel raises legitimate questions and concerns as to whether in the best interest of WICB and Cricket development in the West Indies, which will only be determined in future. The new sponsorship agreement is in its infancy, and to pass a final judgment would be premature. However, the evidence presented to the committee clearly indicates that on some stipulations of the new arrangement may not be in the best interest of the WICB and cricket development in the West Indies.

WICB said: The Digicel proposal was superior to the proposal made by C&W. Their plans for supporting the sponsorship and for marketing the game were far superior to any previous sponsorship arrangement with the Board.

SNRC said:

Mr. Cameron verified that he was President of the Kensington Cricket Club and that Digicel did in fact finance the renovation of the Ground of the Kensington Club.

In light of his role in the negotiations of the new sponsorship agreement, the committee felt that there were legitimate concerns which required examination. In our view Mr. Cameron?s approach to Digicel was ill advised because it could be reasonably perceived as a conflict of interest. It should be noted that Mr. Cameron stated that several potential sponsors were approached to finance the Kensington Cricket Club renovation, including C&W, but no other sponsor was willing to assist.

WICB said: The renovation of the Kensington Cricket Club in Jamaica, was undertaken in a successful attempt to earn the right to host matches in the Carib Cup competition.

The Club invited a number of firms, including C&W and Digicel, in December 2004 to provide funding to upgrade its facilities. Digicel were the only firm that responded to the request and funded 50% of the renovation. It is worth noting that the Sponsorship Agreement with Digicel and the WICB was signed in July 2004.

SNRC said:

1.There must be strict adherence to the provisions set out in the Memorandum and Articles of Association of the WICB Inc.

WICB said: Accepted.

SNRC said: There must be transparency in all matters in which the shareholders have an interest.

WICB said: Accepted.

SNRC said: There must be accountability to the Board and its members and the members to the territorial Boards.

WICB said: Accepted.

SNRC said: Records, minutes of meetings and resolutions of the Board at meetings must be kept in accordance with the articles of Association of the WICB.

SNRC said: There is the need for the establishment of the post of executive corporate secretary to the Board with specific authority.

WICB said: Will be considered in the context of affordability and an organisational review currently underway.

SNRC said: Board members must be conversant with the Memorandum and Articles of Association. They must be informed of their fiduciary duty to the Board and to the shareholders.

WICB said: Accepted.

SNRC said: Consideration should be given to appointing nominated members with expertise in relevant fields e.g. Law. Administration and Finance.

WICB said: Will be considered in the context of an organisational review currently underway.