Lucky Part 3: An Improper Relationship?

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CHAPTER 3: Does an improper relationship exist between the WICB and Digicel?

By definition, the terms improper means "Not suited to circumstances or needs; unsuitable or lacking in propriety", Webster's Dictionary. It should be noted that in the case of Digicel and the WICB, it is all about the propriety of a business arrangement. The propriety of the relationship should be judged on the principles of Company Law, the WICB Memorandum and Articles of Association and the fairness or balance of the commercial terms negotiated and agreed. It is important that both parties are seen to be treated fairly, not only in form but in substance as well.

It is crucial in determining whether a relationship is improper, that the means by which the agreement is achieved is clearly examined. In the case of the WICB and Digicel it is easy to understand the reason for the establishment of a relationship, it is difficult however, to fully comprehend the rationale behind some aspects of the relationship and the propriety of it all; from a legal perspective in particular.

IS THE WICB SPONSORSHIP AGREEMENT APPROVED IN ACCORDANCE WITH THE WICB'S ARTICLES OF ASSOCIATION?

Clause 68 Of the Memorandum and Articles of Association of the WICB states as follows: "An action that may be taken by the Board of Directors or a committee of the Board of Directors at a meeting may also be taken by a resolution of the-Board of Directors or a committee of the Board of Directors consented to in writing or by facsimile or other written electronic communication by all members of the Board of Directors or all members of the committee of the Board of Directors as the case may be, without the need for any notice or meeting."

Clause 69 of the WICB states as following:

The Board of Directors shall cause the following corporate records to be kept:

69.1 Minutes of all meetings of the Board of Directors, committees of the Board of Directors, Members, and committees of Members;

69.2 Copies of all resolutions consented to by members of the Board of Directors, committees of the. Board of Directors, Members and committees of Members; and

69.3 Such other accounts and records as the members of the Board of Directors by resolution of the Board of Directors consider necessary or desirable in order to reflect the financial position of the Board.

69.4 The books, records and minutes shall be kept at the registered office of the Board or at such other place as the Board of Directors shall determine.

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.

Clause 102 of The Memorandum and Articles of Association of WICB states that: "The Board of Directors for the time being shall not be under any duty or responsibility in respect of any contract, act or transaction whether or not made, done or entered into in the name or on behalf of the Board, except such as are submitted to and authorized or approved by the Board of Directors".

If the sponsorship agreement (Digicel Contract) was not submitted to members of the Board, and authorized or approved by it, no Director can be held accountable. So it is essential that all Directors should be involved in the decision making process and if they were not, the relationship may be deemed improper.

Our review of the evidence show that the above statutory requirements were not complied with by the WICB. Further, there was no recorded resolution or minutes indicating that any vote was taken by the Board to approve the contract or authorising WICB officials to sign the contract.

The Committee has sought the opinion of Counsel on this matter, who has advised that the failure of the WICB officials to adhere to the statutory provisions clauses 68, 69 and 102 of the WICB Memorandum and Articles and the Companies Act 1995, would in all probability render the sponsorship agreement between the WICB and Digicel "Null and Void".

Accepted Company law and practice and the stipulations of clause 68 and 69 of the Memorandum and Articles of Association of the WICB provides for the Board's input prior to the signing of the Digicel sponsorship agreement. In addition, the proposed contract (sponsorship agreement) should have been examined and explained where necessary to all Board members involved; whether Board members assembled or participated in a meeting electronically. After the full consideration of all Board members present, a vote should have been taken to approve or reject the sponsorship agreement; and the result recorded in the minutes of the WICB.

If the members agreed to accept the agreement, a resolution should have been passed thereafter by Board members, authorising specific Directors to sign the contract (sponsorship agreement) with Digicel on the WICB's behalf. The said resolution should have been recorded and reflected in the minutes of the WICB as well. The Committee has interviewed several Board members who have testified that they had not seen the contract, and that they were not fully briefed on the contents of the Contract. The Committee is of the view that, that this was a breach of the WICB's statutory provisions of the WICB Articles of Association.

WHO DID THE AGENTS REPRESENT?

Another area of the relationship with Digicel, which we examined, was the way by which the parties were brought together. The relationship was established by third parties according to the testimony of Board officials and Digicel. The companies involved were International Sports Management Limited (ISM) and Sports Bureau International Limited (SBI), both English registered companies. It should be noted however, that SBl was established in 2004 after negotiations began with the WICB.

We were told by Mr David Brookes a Director of ISM who brokered the sponsorship agreement on behalf Digicel, that SBI was established to mask ISM's identity. This was also stated in Mr Dave Cameron, Chairman of the WICB marketing committee in his testimony on the 15th July 2005.

We were told by Mr Roger Brathwaite that he was contacted some time in 2003 by a representative of ISM with respect to the potential sponsorship of the West Indies Cricket team, however he told the representative of ISM that they were still under contract and so he could not negotiate at that time. He further told ISM representatives that he could not discuss any sponsorship agreement until after the (15) fifteen month period referred to (TOR 1) had passed, which would have ended December 2003.

We were told by Mr David Brookes in his testimony of 30th July 2005 that he had his first meeting with the CEO in August 2003, but they discussed other potential sponsorship relationships, not the sponsorship agreement which was subsequently signed. Mr Barry Thomas the CFO of the WICB in his testimony stated that he was introduced to ISM representatives on or about January 19th to 23rd 2004 in London, where he had gone on WICB business with the CEO. He said he was introduced to two gentlemen, one of which was Mr. Neil Fairbrother a former England Test player and Mr David Brookes, an ISM Director; he was told by the CEO that they were representatives of ISM who he had been in contact with.

So there is clear evidence that Digicel's representatives were in contact with the CEO of the WICB prior to the expiration of the fifteen (15) month period, however we have no evidence that the new sponsorship agreement was being negotiated. Another aspect of the relationship or the establishment thereof, which is also unclear is, who ISM/SBI actually represented in these negotiations? Was it Digicel, was it the WICB or both the WICB and Digicel?

We were told by Mr Liam McDermot, Business Development Manager of Digicel in his interview of Wednesday 27th July 2005, that ISM was selected to represent their interest in negotiating the sponsorship agreement. He said they had established a professional relationship, and they had done business, before, including the management of a Golf tournament in Jamaica, which Digicel sponsored.

Another Digicel representative, Mr Ben Atherthon, Digicel's senior commercial manager was asked why they choose ISM to represent Digicel. In response he said they wanted professional negotiators to represent them during the sponsorship negotiations.

In a letter dated 2nd March 2004 from SBI's Managing Director Mr Rob Mason to the CEO, he wrote: "Following on from our various meetings with your representatives, please find attached my client's sponsorship proposal/offer". Attached was a schedule of Digicel proposed sponsorship fees. (Exhibit -) Mr Mason refers to meetings with your representatives, it is clear that ISM/SBI and Digicel were on one side and WICB representatives on the other. It is pellucid from Mr Rob Mason's letter that Digicel was ISM/SBI?s client and they were Digicel's agent, not the WICB.

So this therefore begs an obvious question, why was the WICB paying a commission to Digicel's agent? The CEO told us that it was because ISM/SBI brought the sponsor. It should be noted that:

i) ISM/SBI approached the WICB according to the CEO, he said that they approached him.

ii) According to Mr Brookes, he knew that their client Digicel wanted to market itself so they; approached Roger Braithwaite to explore the possibility of sponsorship.

iii) Under the Cable and wireless agreement, no commission was paid.

iv) It is clear, that ISM/SBI ultimately represented both sides, and that all the commission is being paid by the WICB. In his testimony, Mr Brookes said that Digicel has not paid him any fees on this arrangement.

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.

The two commission agreements dated 23rd February 2004 signed by the CEO and a subsequent agreement dated 6th July 2004 signed by the President of the WICB, commits the WICB to the payment of a 10% commission to ISM/SBI. Under the agreement signed by the CEO dated 23rd February 2004, clause (5) five states the following:

"The WICB shall pay to ISM a commission equal to 10% (ten percent) of the aggregate value of the sponsorship agreement (in money or monies worth and including, without limitation, any bonuses or incentives) paid or received by the WICB under or pursuant to a sponsorship, agreement (relevant consideration)". So not only does ISM get a 10% commission on the base fees, but even the players bonuses negotiated under the contract.

The committee has interviewed sports management professionals, whom have all stated that they are not aware of any sponsorship agreement where commissions are paid on Players? bonuses.

The following questions arise: Why did President and CEO not insist on the Board's money coming to the Board as well? This was like a salesman who works on a commission telling the company's customers to make cheques payable to him or her and not the company. So the company who has the majority of the cheque has to wait on the sales representative to pay the company its majority share from his or her personal account.

This is not only highly unusual but also potentially dangerous and could result in serious financial losses to the WICB. For example, should any Creditor or the Government of the United Kingdom appoint a Receiver/liquidator to ISM shortly after funds have been transferred from Digicel for subsequent transfer to the WICB, those funds as well as future cash flows could end up frozen.

* In part 4, the committee will continue to answer the question of whether an improper relationship exists between the WICB and Digicel.