DID JEROME KENNEDY BITE HIS TONGUE?

If the
departure of Jerome Kennedy, from the Cabinet, had been marked with the silence
that normally follows any Minister’s return to private life, who would want to invoke
his name now? 

Well, it
seems Mr. Kennedy did not go silently; he seems to have ‘bitten his tongue’ as he left
Confederation Building.  His name still
resounds within the halls of high office. 
As his vehicle left the parking lot, very senior people acknowledged, to
each other, that he ought to have explained himself differently than he had.

That comment
strikes at the heart of the question: why did Mr. Kennedy resign? 

Source: The Canadian Press
Whether certain
disturbing issues weigh heavy on him, only he can answer.  If the information this scribe has received, is
correct, which has been corroborated by three additional sources, Mr. Kennedy may
wish to re-consider anything he may have omitted from his exchange with the
media, justifying his departure.

What is the
issue?

It seems that Mr. Kennedy’s resignation was occasioned, less by a
desire to return to his law practice, than to deeply felt concerns over certain
financial aspects of the Muskrat Falls Project, specifically involving Nalcor.  Just two years ago he sought election for a full term.

At the
center of his resignation maybe the refusal by the Premier to accede to demands Kennedy made of her
to protect the public interest, his officials and himself. 

Here is the
sequence of events as best as I have been able to ascertain, so far:

 

1.     
Over
the last number of months Kennedy had grown weary of Nalcor’s secrecy. He was
frustrated that his own officials could not get sufficient information to confirm Nalcor’s
numbers or perform their own analysis. His Department was expected to accept
Nalcor’s information entirely on its face. 

 

2.     
Mr.
Kennedy wanted his own staff, supplemented by outside experts, to comprise an
“Oversight Committee” for the purpose of conducting the Finance Department’s
independent analysis of Muskrat Falls Project costs.  Evidently, he was no longer prepared to
defend the Muskrat Falls Project without the verification of independent
scrutiny.

 

3.     
Mr.
Kennedy went to the Premier with two demands: firstly, that she order Nalcor to
release the information referred to and, secondly, that his Department of
Finance be permitted to assemble a “Muskrat Falls Oversight Committee”.

The Premier
and Kennedy apparently had several “dust-ups” or serious confrontations over these issues,
in the Confederation Building as well as in China, from where Mr. Kennedy was
reported to have left the Delegation and returned to the Province, only a day
or so after their arrival in that Country. 

The Premier
evidently steadfastly rejected both Mr. Kennedy’s demands and
Source: The Canadian Press
following
the final “dust-up” with the Premier, Kennedy informed her that he would tender
his resignation from Cabinet.

Now Kennedy should have become
concerned over the problem of obtaining information from Nalcor regarding the
matter of cost overruns.  He should certainly have been
alarmed that the increased costs, for which the Province would also be on the
hook, might imperil the economic rationale on which Project Sanction is based.

Kennedy no
doubt had his own private industry sources that would have conveyed the latest
from the site itself – massive cost overruns are being incurred.

Kennedy
would have known that NL was on the hook for 100% of the cost-overruns on the
Generating Plant, on the Labrador/Island Transmission Link and 80% of the cost
overruns on the Maritime Link. 

The 80% exposure
on the Maritime Link alone would likely to see Nalcor cut Emera a cheque exceeding
half a billion dollars. 

Kennedy
would have known the requirement that the DG-3 cost estimates, on the
Maritime Link, due under the original Emera contract to be submitted on October
1st, 2013 were delayed until the end of this year, without public
explanation. Worse, the Premier recently announced an agreement with Emera regarding
the UARB’s demand for all the surplus power, without Nalcor even knowing the
DG-3 cost estimates on the Maritime Link.


On the North Spur, even if he didn’t know the precise amount, he would have known a big bill was coming due for Nalcor’s plan to try and fix the stability problems which plague that section of Muskrat Falls.  


Nalcor’s myopic determination to award a billion dollar contract
to the Italian Contractor, Astaldi, in spite of not having financing in place
and the project’s many other major unsolved problems, must have been equally troubling.  An announcement on the
contract occurred within a few days of Mr. Kennedy’s walk down the steps of
Confederation Building.

Noticeably,
Nalcor provided no disclosure of the cost variance between Astaldi’s bid price
and Nalcor’s DG-3 Estimate.

The Italian contract
should be exposed as the most irrational act of the Dunderdale Government.  It
can only be explained as a “come hell or high water“ move, to put the project
beyond recall.   

These issues
are all very serious and the consistency of
the narrative, now flowing from Confederation Building is equally disconcerting.


By any
standard, with so many billions of dollars at stake and the economic basis of
the Muskrat Falls Project fundamentally flawed, the public interest would be
best served if Nalcor’s assumptions, cost estimates and cost increases were
required to undergo the test of independent scrutiny.

We might
remember that while awarded contracts now represent very large expenditures, they
constitute only the first indication of cost overruns.

The concerns
ascribed to Kennedy underscore an even deeper problem. 

That an
Agency of the Government could send demands for money, to the Cabinet, without question
or review by Finance Officials, (the very people who construct the annual
Budget Estimates and manage the finances of the Province), constitutes a
deficiency of management unparalleled in Canada.  It is unthinkable that Moody’s or another
Bond Rating Agency has not taken notice.


Mr. Kennedy’s
zeal to be one with the Premier and an enabler of Muskrat Falls is all a matter
of public record.  He helped create a
monster; one that cost him his political career. But, as one who has earned the
esteem of his colleagues, both in Government and in the legal profession, he must
have known that the evolution of a Project, as complex and economically shaky
as Muskrat Falls in the hands of an Agency as secretive and arbitrary as
Nalcor, would  inevitably cause new questions
to be raised.

Given all
that has been said, before normalcy embodies his return to private life, he may
wish to re-think the message he described upon his departure.  For certain, the public needs to hear from
him one more time.

Let me state
my final comments to Mr. Kennedy directly:

The
senior officials who counted on you to protect them from failure by implication
in a fiasco-in-the-making no doubt still want you to deal with matters they are unable
to influence.

If you have information that suggests Nalcor
is not acting prudently or with due regard for the public interest, if you
believe that the financial well-being of the Government may be imperilled by
Nalcor’s actions, or that our long awaited prosperity is being jeopardized by
that Agency and the Muskrat Falls Project, please speak to us now! 

We ask that
you cast aside your partisanship and any allegiance you may feel to the Premier
or to her predecessor. 

While your
critics and you have sparred over specific matters of public policy, we need to
put these disagreements behind us. What is past is past. The question is: do
you possess critical information which, with the help of the public, can change
the future for the better? 
Muskrat Falls Sanction Ceremony (Source: The Telegram)

We need to
know, in your own words, any warnings that you placed in front of the
Premier which she
apparently rebuffed. 

Think of the people, Sir.  More than any senior official, more than the
Premier or the Cabinet, they are the ones in whom you must have faith, in whom
you must confide. They are the ones who will pay for Nalcor’s and the Premier’s
mistakes.

How will you
be compensated for your courage and your wisdom? 

Like all
citizens who push back against those who are reckless with consequence, who set
their wits against the unwise, who, at any price do battle against those who
possess the capacity to cause irreparable harm, inadvertently or callously, you
too, Sir, will receive our respect and gratitude.   

Alternatively,
Sir, you may give a repetition of the counsel you offered on September 30th.
 Confirm for us, if you wish, that the
matters I have raised are untrue or that my sources have exaggerated the dangers described and that all
of us have nothing to worry about.
Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.

THE PROOF MUSKRAT FALLS IS NOVA SCOTIA’S PROJECT

The substance of Hydro’s mission is to satisfy the contracts with Emera to get large amounts of power flowing into Nova Scotia for the betterment of that province and its ratepayers.  The Island could easily live without the Muskrat Fals project and in fact, other than for the onerous Emera contracts, NL ratepayers would be best off if it was abandoned and left to rust.

FIRST YEAR OF OFFICIAL ENERGY DELIVERY NOT QUITE WHAT EMERA BARGAINED FOR

PlanetNL52: Happy Anniversary Emera on 1 Year of Official Energy Delivery Not Quite What Emera Bargained For Despite all the bad news related to Labrador Island...

GROUP SEEKS PUBLIC SUPPORT FOR CABOT MARTIN RESEARCH AWARD

Cabot Martin’s sudden passing, in September, has stirred his friends, colleagues, and others familiar with his work, to honor him and encourage continued work in applied research and public policy development.

8 COMMENTS

  1. If this is only partially true then it is very concerning. The Premier, the Minister if Finance and the Deputy Minister of Finance should have ultimate responsibility and accountability for public funds which are transferred to Nalcor. It should be entirely reasonable and expected that the Finance Department should provide some level of oversight of Nalcor, to represent the shareholder. If the premier stopped this request borders on negligence, as it prevents the deputy minister of finance from fulfilling their judicial responsibility under the Finance Administration act.

    why would the premier do this? more importantly why does this oversight committee not yet exist? In the absence of a federal loan garuntee is the Provincial Government underwriting these expeditures?

    many questions…. We need answers now.

  2. As we know, Kennedy says he looks into his "crystal ball". And what he saw 6 months after sanction of MF was likely very different from before. Now the Premier's crystal ball ran the same old picture. Crystal balls…..not exactly evidence based approach, but that's the basis of this 10 billion monster.

  3. People may get caught up in the politiics of this narrative. However, we should look past this and consider the idea of a independent oversight committee on the spending being completed by Nalcor. I am very concerned that Nalcor are about to commit to a 1 Billion dollar contract. This combined with the 400 million in pre sanction costs, and the 200 million spent since sanction will put the value of the committments near the 2 Billion mark. This is an incredible amount of money, and too my knowledge has never been approved in its current form in the House of Assembly. When I reference the current form I talk about the current uncertainities (1) UARB condition which will likely raise the rates to NL'ers (2) The HQ court challenge and (3) the lack of a federal loan garuntee. Without these items being resolved this government and Nalcor have NO mandate to continue with this project. We should be demanding an Department of Finance oversight committee.

    Kennedy is not the issue… the issue is that the money is being spent without the proper controls in place. Plain and simple. If this 1 Billion dollar contract gets signed, without the proper mandate and oversight which is both public and transparent then the Premier should be considered negligent.

    Ed Martin needs to be reined in. Lets not kid ourselves in a real business this would never happen. As CEO he is about to committ into a contract which is 2 x his annual revenue. This would never happen in a real business without a shareholder revolt. It is about to happen here because Newfoundlanders are not engaged.

    This is a unfolding disaster. We are in the back seat, quite and oblivious, just as the Premier and Ed Martin are driving us over the cliff.

    Kennedy got out of the car, to save his own hide. Unfortunately the entire province are still in the car.

  4. Jerome Kennedy may very well have had his fill of the garbage emanating from government and the lack of transparency from NALCOR. My concern is simply this: a project of this magnitude has the potential to reduce us to third-world status and allow ever more control of our economy from outside interests.

    It is incumbent upon Mr. Kennedy to "clear the air" and either confirm or refute the rumours now floating around. All of us who hope there is truth to them would feel more respect for him were he confirm what we already know. It is difficult for opponents, given the lack of proprietary information available to us, so Mr. Kennedy should be more forthright now that he is out of government.

    I again call upon Mr. Kennedy and current members of the government to start speaking up about their concerns…..because it is impossible that they don't have any. The myopia of Paul Lane, Steve Kent, and a few others, is surely not the mindset of all members of this administration. If Crosbie and Wells could defy Joey in the late 60's, then surely these members are more than capable of rational thought. The common good is greater than the solidarity of caucus. Furthermore, the destruction of the PC administration is assured as long as they continue to function in a vacuum.