£400m foreign aid fiasco in paradise

Published by The Mail on Sunday (17th May, 2015)

Sean McLaughlin had a simple dream – to build a new life in paradise while helping the island community of his wife’s family recover from devastating natural disasters.

But this week he will bid farewell to the Caribbean idyll of Montserrat. He is flying back to Britain for heart surgery, then moving in with his parents at the age of 38 and signing on for benefits.

It is the culmination of a nightmarish eight months during which McLaughlin lost his job, fell into debt, was forced to put his beautiful home on the market, found his job prospects blighted worldwide and saw his health shattered by stress.

So what caused this terrible spiral of events? Incredibly, he claims it was the result of whistleblowing to the Department for International Development (DFID) over the suspected misuse of funds on one of Britain’s most cherished aid beneficiaries.

His name was leaked instantly and life made impossible in the close-knit community. ‘I’m now unemployed, have seen my savings wiped out, and have to sign on for the first time in my life,’ he said. ‘I have always worked very hard and to lose everything is so frustrating, especially when you do the right thing and end up getting thrown to the lions.’

Mr McLaughlin disclosed his distressing story for the first time as he prepared to take his case for compensation all the way to the Privy Council. His sorry saga raises fresh questions over the laxity of controls on Britain’s soaring aid budgets around the world.

The UK has given almost £400 million to Montserrat since a massive volcanic eruption 20 years ago – yet its 4,900 residents still do not have a proper port, their temporary hospital is stuck in a former school, and families that fled to Britain cannot return because of a lack of housing.

A Mail on Sunday investigation found Mr McLaughlin’s allegations supported by evidence of financial impropriety and farcical waste and showed widespread concerns over the apparent misuse of funds.

One internal DFID report into Montserrat government procurement policies – obtained by this newspaper – found ‘an abundance of red flags’ with warnings over possible fraud, bribery, kickbacks, nepotism, political interference and conflicts of interest.

Among the completed projects are a cluster of four beach bars costing £420,000, and a mangrove swamp filled in for development into a new capital city last year that a new government now wants to see returned to nature.

Mr McLaughlin, a chartered surveyor from Staffordshire, arrived 18 months ago with his wife Sadie on the stunning island, which is only 12 miles long. It is one of 14 remaining British Overseas Territories.

He had been appointed as the £72,000-a-year director of infrastructure for the Montserrat Development Corporation (MDC), a local quango given almost £5 million more than three years ago by DFID to aid the island’s renaissance.

The desire to help was fuelled by his British-born wife returning to the island that her close family had left more than half a century ago. ‘This was a fantastic opportunity to start a new lifestyle while doing some good,’ he said.

They quickly settled in, spending £150,000 on a decrepit house with glorious views that had been owned by a jailed drug smuggler. They planned to convert it into a family home combined with a fitness studio and guest rooms so that Sadie could establish a ‘wellbeing centre’.

Like others, they hoped Montserrat might revive its glory days. Before the volcano erupted it was a Caribbean hotspot, popular with celebrities and famed for a recording studio founded by Beatles producer Sir George Martin. Among the many stars who recorded at Air Studios were The Rolling Stones, Michael Jackson and Sting.

But Montserrat was struggling to recover from the eruption, which forced nearly two-thirds of the population to flee, left the capital an ash-covered ghost town and parts of the island an exclusion zone. The disaster came just six years after a hurricane damaged most buildings.

Soon after starting work, Mr McLaughlin became concerned over lax project controls, lack of contracts, improper use of funds and close links between political and commercial figures on the island. ‘I was told not to tender and to use certain specified people,’ he said.

Mr McLaughlin claims DFID money earmarked for the MDC’s running costs was wrongly used to build an £820,000 sports centre, though the corporation denies any impropriety. He feared it was being rushed through ahead of last year’s election – a suspicion that was shared by opposition politicians.

Houses were rented to staff by John Ryan, the MDC chairman and former government financial secretary, while some cars were insured through his wife’s company and obtained through a business partner’s Toyota dealership. Mr Ryan told me all the deals were done properly and denies any wrongdoing.

Mr McLaughlin also inherited a bizarre project to build seven beachfront bars named Marine Village, designed to anchor a planned new capital city and port in Little Bay. The funds had been blown on the first four, but he was told to carry on since money ‘would be found’.

When I visited the simple thatched bars last week, only one of the four was in operation. Yet later I met the foreign-born owner of a thriving new cafe elsewhere on the island who told me their bid to use one of the sites had been rejected.

Nearby an MDC sign proclaims, ‘You are entering Montserrat’s new capital’, complete with an artist’s impression of a swanky marina development – although in reality there is just a piece of ground levelled off at a reputed cost of half a million pounds.

Many locals were angry that a mangrove swamp rich in wildlife was bulldozed. The new government, elected last year amid public anger over such projects, has abandoned the grandiose plans and would like to see the site returned to its former state.

McLaughlin’s concerns intensified last September when two junior staff came to see him and Ayiesha de Coteau-Sammy, director of investment, making allegations of expenses abuse by their bosses.

Mr Ryan and chief executive Ivan Browne were on a two-and-a-half week trip seeking investment in Shanghai, although none materialised, and collecting a development award in Los Angeles. The pair paid for their wives to join them.

So Mr McLaughlin and Ms de Coteau-Sammy raised the issues with another board member, who allegedly was uncooperative. They then contacted DFID’s whistleblowing department. They were assured of confidentiality but it was soon known across the island that Mr McLaughlin had made a complaint. DFID denies being the leak’s source.

The two junior staff withdrew their claims and Mr McLaughlin says he was ostracised by former friends, his wife lost work with her fitness business, and staff sent abusive emails to him.

‘I became a bit of a social pariah,’ he said. ‘People would just turn their back on us. There were little things like not getting invited to the Governor’s house any more for events like the Queen’s birthday party.’

After a tense meeting with his bosses after their return from the US, Mr McLaughlin was signed off from work with stress and appealed for help from DFID over his claims of harassment. He says he was rebuffed, with officials saying the MDC was a Montserrat government responsibility.

The following month, DFID sent out an auditor, whose report led to suspension of financial support for the MDC in December. There were no signs of fraud, said a DFID source, but there was ‘evidence of poor financial governance’.

Five months earlier DFID had praised the MDC’s performance in an annual review.

The quango was finally killed off last month after an inquiry by the new government found ‘wide-ranging concerns with corporate governance and management arrangements’.

Mr McLaughlin believes he stumbled on DFID problems that go much wider. ‘If this is an indication of what they do, it’s terrible – they have no control over spending,’ he said. ‘They’ve got a temporary hospital, the school’s decaying and roads are in poor condition – which 20 years after the volcano is surprising with so much aid.’

When I visited the tiny hospital, a nurse told me: ‘They’ve been promising a new hospital for years.’

Since the volcano, British aid has propped up the beleaguered island and still provides two-thirds of the annual budget. ‘We are a small country to show how aid could deliver, said Delmaude Ryan, Montserrat’s deputy premier. ‘So far it has not worked.’

Yet the problems have been apparent for a while. In 2013, the UK aid watchdog criticised the building of an airport based on bungled assumptions about tourism and botched plans to end transport subsidies.

Its report concluded that ‘DFID does not yet have a firm view on what Montserrat’s reasonable needs are, nor what self-sufficiency means for the island’, saying officials made ‘poor decisions’ and did not demonstrate ‘a capacity for joined-up thinking across projects’.

Britain briefly suspended a road project due to improper accounting. Then last year DFID took control of government procurement using its £32.6 million annual aid donations after a secret internal audit.

The 25-page document – marked ‘Official Sensitive’ – is damning. It highlights an astonishing 37 areas that merit a ‘red flag’ for suspected fraud including lack of records, inflated prices, specification skewed towards specific suppliers and undeclared conflicts of interest.

And it condemns the lack of audit trails, found ‘a high incidence of anomalies’ and concludes: ‘Our review identified evidence that suggests bribery and kickbacks could be present in the GoM [Government of Montserrat] tendering processes.’

The report found ‘the island continues to create a disproportionate number of fraud and whistleblowing complaints’, blaming ‘suboptimal’ procurement practices. Unsurprisingly, it adds there is ‘high risk that value for money is not being achieved’.

Yet Mr McLaughlin had to abandon hopes of a new life helping rebuild his wife’s homeland – all because he raised similar concerns.

He lost a similar job on another Overseas Territory after they discovered his whistleblowing – and now fears no one will employ him.

He has spent a six-figure sum on legal fees seeking compensation after being revealed as a whistleblower. International Development Secretary Justine Greening pledged to help resolve his case, but there has been no settlement yet.

Little wonder he feels betrayed by DFID and is preparing court action over the failure to protect him. ‘I didn’t accuse anybody. I just raised concerns that had been made to me about their money going astray and followed the process. I feel totally let down,’ he said.

Meanwhile, Ms de Coteau-Sammy returned home to Trinidad last week, unemployed and with a new baby. ‘I thought DFID would look after whistleblowers but they failed,’ she told a friend.

DFID argues they are not whistleblowers since they were not directly employed. A spokeswoman said: ‘Value and results for taxpayers’ money are at the heart of everything we do.’ She added: ‘Where there are concerns, we take swift and robust action – as we did when we suspended support for the MDC.’

The two top MDC executives said they were following plans agreed by the government in promoting development for Montserrat and had acted with the utmost propriety. ‘I have no qualms about my tenure or my integrity,’ said Mr Browne.

Mr Ryan claimed that Mr McLaughlin sought to destroy the MDC for personal reasons, backed by politicians seeking to advance their cause and a donor terrified of domestic criticism. ‘You have to check people’s motivations behind whistleblowing,’ he said.

He stressed that no fraud had been discovered and no one charged, while claiming development projects had ground to a halt as a result of the MDC shutdown.

When I asked Mr McLaughlin for his advice to whistleblowers, he said: ‘Keep your mouth shut, don’t rock the boat – that’s a phrase used a lot in Montserrat. Don’t ever rock the boat.’

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