The banking of the US$18M signing bonus: Is it really an Escrow Account?

– the inexcusability of the series of contradictory
excuses in its justification attempts

The issue of the Government of Guyana receiving a ‘Signing Bonus’ from the multnational oil company operating offshore Guyana was first brought to light by one of Guyana’s most prominent financial analysts. As this revelation was made, the press did not hesitate to grill two of the key ministers of Government responsible for the emerging oil and gas sector.
To that end, the respective ministers denied knowledge of such in the first instance, to the extent that one of the ministers, when the matter became exposed publicly, attempted to engage in something called ‘playing with words’ in his response. Then, as it became exposed, it was said that it was not disclosed because of the purpose for which it was intended to be used; that is, for national security reasons.
The Head of State himself stated that all the ministers were not aware of the transaction, but the Minister of Foreign Affairs subsequently revealed in his budget presentation that the entire cabinet knew of the signing bonus.
All of these positions are, of course, contradictory positions in the truest sense of the word, and this matter is undoubtedly the most highly embarrassing predicament which the Government has encountered — or any Government, for that matter — in the history of Guyanese politics.
The manner in which these events unfolded is a clear indicator of grave concern with respect to the internal governance structure of the current Administration. Clearly, there was a breakdown — and to a larger extent mismatch — in communication at the Cabinet level; and some very unintelligent responses were proffered on the matter.
With regard to the legality of the process in which the transaction was handled, first of all, the evidence revealed that the Government was in receipt of this fund since September/October, 2016. This means that the accounts for the Government and both National Budget estimates for 2017 and 2018 were understated by US$18 million, since this sum did not form part of the estimates. And therefore this in itself is a gross error on the part of the Government. The act could also be interpreted as being illegal from a fiscal management standpoint. It is worthwhile to note that there is no evidence of anything of this sort that had ever occurred in the history of Guyana’s political economy and fiscal management practices.
The Government should have at least informed the National Assembly of the receipt of this fund, in keeping with the constitutional requirements of transactions of this nature, and also in the interest of fiscal transparency. Obviously, this was an unfortunate and miserable failure on the part of the Government. The Head of State, along with the Minister of Finance, nonetheless contended that the funds are kept in an escrow account with the Bank of Guyana. But is this really so? Is the account in which the funds are held an escrow account? The answer is an outright no.
An escrow account consists of funds held by a third party; who collects, holds and disburses the funds pursuant to a contract or an obligation between two parties. For example, an escrow account for a home mortgage is held by the organisation that services the mortgage. The funds are paid into the escrow account by the borrower, and are disbursed by the servicer to pay local real estate taxes, hazard insurance premiums, and mortgage insurance. Payments to the escrow account are made by the borrower to the servicer, along with the monthly debt service payments, and the servicer makes timely disbursements of the funds to tax collection agencies etc.
In the case of the US$18 million signing bonus, first of all, it is an established fact that there was no reference to any contract or arrangement with regard to the funds being, presumably, held in an escrow account. Dissecting this situation, the leaked letter to the Central Bank which is in the public’s domain, the subject with which it was addressed did not explicitly state that the Ministry of Finance wishes to open an ‘escrow account’. In fact, the letter merely stated as the subject, “Signing Bonus Granted by ExxonMobil – Request to open Bank Account.” So it should be emphasized that nowhere was a request made to the Central Bank officials to open an escrow account, which is in fact a special account.
Secondly, the letter of instruction stated thus, “This account should not be treated as part of the bank’s reserves. Instead, the proceeds should be held in the currency of the deposit, that is, United States dollars, and invested in secured-interest bearing securities.”
Henceforth, the fact that the Government declared to the public that the signing bonus is for the payment of legal fees for the Guyana/Venezuela border issue is in contradiction to the instructions contained in the letter with regard to the operations and use of the funds. It is against these backgrounds that the Government egregiously misled the public — as it is not an escrow account. There is absolutely not a single feature on the entire matter to validate the claim that it is an escrow account. This is thus a serious adverse political matter – something is most certainly amiss.

*The author is the holder of a MSc. Degree in Business Management, with concentration in Global Finance, Financial Markets, institutions & Banking from a UK university of international standing.