It’s interesting to see that Iain Dale has finally picked up on a story that’s been bubbling under the media’s radar for at least the last twelve months…

I wonder if THIS threatens to become a big story during August. Apparently Britain is imposing direct rule on the Turks & Caicos islands and suspending its constitution. Last week, the former PM of the Turks & Caicos, Michael Misick launched a legal challenge to the government’s decision. It has all arisen after a corruption investigation revealed “a high probability of systemic corruption and/or serious dishonesty”.

As a quick synopsis of the situation that’s a pretty fair reflection of the events that have taken place over the last couple of years.

Serious concerns about the possibility of systematic corruption in the Turks and Caicos Islands first emerged in 2007 during the course of a parliamentary review of the UK’s remaining overseas territories, prompting the Foreign Affairs Committee to issue a call for a formal inquiry into the stream of allegations it received from concerned islanders.

196. We are very concerned by the serious allegations of corruption we have received from the Turks and Caicos Islands (TCI). They are already damaging TCI’s reputation, and there are signs that they may soon begin to affect the Islands’ tourism industry. There is also a great risk that they will damage the UK’s own reputation for promoting good governance. Unlike the Cayman Islands, where the Governor has taken the initiative in investigations, the onus has been placed on local people to substantiate allegations in TCI. This approach is entirely inappropriate given the palpable climate of fear on TCI. In such an environment, people will be afraid to publicly come forward with evidence.

We conclude that the UK Government must find a way to assure people that a formal process with safeguards is underway and therefore recommend that it announces a Commission of Inquiry, with full protection for witnesses. The change in Governor occurring in August presents an opportunity to restore trust and we recommend that the Commission of Inquiry should be announced before the new Governor takes up his post.

Uppermost in the committees thinking at the time was its finding of a pervasive ‘climate of fear’ on the islands in relation to free speech and public criticism of the-then government, one based on all the usual totalitarian ‘favourites’, i.e. direct government interference in the media, intimidation of opposition politicians and putative whistleblowers, etc.

The committee even reported that a pro-government newspaper on the islands ‘radically misreported comments made during one of our [the committee's] evidence sessions’ before going on to note that the same newspaper had, after their visit, published an advertisement that threatened opposition members who had written the committee in the course of their inquiry.

The upshot of all this is that the government accepted the committee’s recommendation and, last year, initiated a formal inquiry ‘into possible corruption or serious dishonesty in recent years of past and present elected members of the legislature’, the final report of which can be accessed from the Commission of Inquiry’s website, albeit that some of its content has been redacted as a result of legal action.

However, as you might well expect, an unredacted copy of the report can be accessed via Wikileaks despite an attempt to suppress the full report with what it, perhaps, one of the most bizarrely Orwellian injunctions even granted, one that actually sought to prohibit any mention of the words ‘corruption report’ and ‘Wikileaks’ in the same sentence.

[Note: This ruling has since been overturned by the Island's Supreme Court]

As a consequence of the inquiry’s findings, specifically those contained in an interim report published in March 2009, the UK government has taken the Turks and Caicos Islands back under direct rule and has suspended parts of its existing constitution until this whole sorry mess is cleared up. The suspension order lasts for an initial two year period and, at the time of writing, its expected that fresh elections will be held in 2011 leading to a restoration of autonomous government in the islands.

It is this decision that TCI’s former Prime Minister, Michael Misick, proposes to appeal.

An undisclosed interest?

There’s also the matter of an indirect interest in this particular story – Lord Ashcroft.

Lord Ashcroft is, of course, a key investor in Iain’s ‘Total Politics’ magazine and, one would presume, in his new publishing venture. Ashcroft is also a ‘belonger’ of the Turks and Caicos Islands, where he has fairly extensive business interests via an offshoot of his Belize Bank.

The Guardian noted in this 1999 report:

Mr Ashcroft, having made millions by helping set up a bank in Belize and an offshore tax system, had been trying to expand into the Turks and Caicos, a British dependency.

This was a cause for concern among British diplomats in the region. Leaked foreign office papers in recent weeks revealed that Charles Drace-Francis, a diplomat, writing two years later, suggested Mr Ashcroft was becoming increasingly frustrated over British restrictions on his plans for the Turks and Caicos. ‘He threatened to get the politicians in the TCI to stir up trouble for us,’ Mr Drace-Francis said.

The British government gave him permission to open an offshoot of his Bank of Belize on the islands but refused to let him set up a new bank.

I should make it absolutely clear that there is nothing in the TCI Inquiry report whatsoever suggests any involvement in any of the corruption uncovered by the inquiry on the part of Lord Ashcroft, the Belize Bank or any other direct business interests he might have in the Turks and Caicos Islands.

Nevertheless, there are one or two aspects to this story that could generate a bit of mildly embarrassing media attention.

1. During the course of the inquiry, for example, it emerged that, despite having a recorded annual income of only around $200,000 a year between 2002 and 2008, the now former Premier, Michael Misick, was able to secure more than £20 million in personal loans to finance property and other business deals, $5,860,000 of which came from Ashcroft’s Belize Bank.

2. It appears that bank accounts at Ashcroft’s Belize Bank were used to circumvent TCI’s parliamentary regulations on the declaration of political donations and the registration of interests, conceal sizeable donations from other members of the PNP and, it seems, finance the rather lavish lifestyles of a small number of senior party members.
[See sections 4.118 to 4.220]

Occupational Hazard for Lord Ashcroft
I guess you could consider this to be one of the main ‘occupational hazards’ of offshore banking in the sense that the same culture of secrecy and opacity that legitimate businesses use to create their complex array of tax shelters can also readily be exploited to facilitate criminal corruption and money laundering if a particular individual, company or organisation has a mind to use the system in that way.

It’s certainly a problem that Ashcroft has run into on a number of occasions during the 1990′s, as the Guardian discovered in 2001 using documents obtained under the US Freedom of Information Act.

US documents obtained by the Guardian reveal for the first time why the drug enforcement agency and other US authorities were so concerned about millionaire Tory treasurer Michael Ashcroft’s offshore world in the 1990s…

The original discovery that references to the Florida-based Tory donor existed in DEA files led to controversy two years ago. Mr Ashcroft issued a libel writ against the Times, which published a correction, and he declared there was nothing to support “allegations that I am a drug runner and money launderer.”

Mr Ashcroft was correct. No evidence exists to implicate him in committing crimes. Nor was he investigated on suspicion of doing so. What worried the Americans was that the Ashcroft-inspired tax haven in Belize in central America was, as a side-effect, encouraging fraud, money laundering, drugs and bribery in a small, poverty-stricken jungle state with corruptible officials.

To be scrupulously fair to Ashcroft, while both Belize and the Turks and Caicos Islands were amongst the 35 countries cited by the OECD as having ‘harmful tax practices’ in 2000, both countries have cooperated fully with the OECD in committing to and implementing its international standards for banking transparency and the exchange of information.

The TCI Journal takedown
As occupational hazards go, this is one that still seems to rub Lord Ashcroft’s rhubarb up the wrong as the independent TCI journal discovered on the 30th March this year.

Two weeks after the House of Commons was informed of the government’s decision to institute direct rule in the islands, a legal team from Harbottle and Lewis, acting for Lord Ashcroft, marched into the data centre/offices of TCI Journal’s UK-based webhost, Cyber Host Pro, and demanded the removal of four articles from the Journal’s website on the basis that these articles [allegedly] contained defamatory material which suggested that Ashcroft was somehow corrupt and/or personally involved in the corruption uncovered by TCI Inquiry’s interim report. As so often happens in such cases, the webhost panicked, took down the TCI Journal’s entire website and then, a day later, notified the Journal that it could no longer host its website.

One of the four articles about which Ashcroft’s lawyer specifically complained was a reprint of an article that I had written and published over at the Ministry, in July 2008.

Foreign Office
If anything, it seems to me that, far from proving to be a bit of banana skin for the government, there may well be more in this story for the Tories to be worried about.

In the same year that the Foreign Affairs Committee launched it review of Britain’s Overseas Territories (2007), both William Hague and Andrew Mitchell made official visits  to the Turks and Caicos Islands in the respective roles as Shadow Foreign Secretary and Shadow Minister for International Development – with flights (by private executive jet) provided by Ashcroft’s Flying Lion Ltd on both occasions.

And yet neither appear to have noticed the ‘climate of fear’ that was evident to members of the Foreign Affairs Committee during their visit only a year or so later, and if they did, it doesn’t appear to anything they’ve chosen to comment on publicly, not even within Parliament.

[A longer version of this article is published over at the Ministry]

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