By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Pension fund trustees are ‘split down the middle’ over the hotel union’s failure to pay $1.5 million worth of contributions on behalf of its staff, Tribune Business can reveal.

Documents obtained by this newspaper disclose that the seven-year debt owed by the union has divided the Bahamas Hotel and Allied Industry Pension Fund trustees equally between those representing sector employers and those nominated by the union.

The situation has even resulted in a court battle between the two sides, which has left the Fund’s chairman, ex-finance minister, Sir William Allen, caught squarely in the middle.

Justice Ian Winder, in a March 27, 2015, ruling obtained by Tribune Business, declined to grant two of the reliefs demanded by the trustees representing the Bahamas Hotel and Restaurant Employers Association.

The employer trustees had sought the court’s guidance on whether the Fund should either begin legal proceedings against the Bahamas Hotel, Catering and Allied Workers Union (BHCAWU) for failing to pay the due contributions, or grant its request to reduce the contribution rate.

They had also sought a Supreme Court Order to bar the union-appointed trustees from voting on whether the Fund should begin legal action against the hotel union.

Justice Winder refused to grant either of these declarations or Orders. However, he did agree to the employer trustees’ demands for an Order that “the accrual of pension credits” to hotel union employees be suspended until the $1.5 million debt was repaid.

Those most impacted by this situation, which remains unresolved, are the hotel union’s employees - such as Workers House staff. The non-payment of pension contributions on their behalf places their retirement income and savings in jeopardy, as does the Order to suspend their ‘pension credits’.

Hotel union members, and their retirement income, are unaffected by this battle as their pension contributions are paid on their behalf by their resort employers - not the union.

Yet the divide between employer and union trustees also does not bode well for the Fund, which is the largest private sector pension fund in the Bahamas. It holds the majority of the $350 million in assets under administration that are split between itself and the Hotel Management Pension Fund.

Sir William told Tribune Business that the hotel union’s pension contribution debt had “not yet” been resolved, although a meeting had been scheduled to address the matter.

“We have not resolved it yet,” he confirmed, “but are about to have a meeting to resolve that in a couple of days.”

Darren Woods, the hotel union’s general secretary, who gave evidence on its behalf in the court action and is one of the Fund’s trustees, did not return two cell phone messages seeking comment before press time.

In declining to grant the first two relief options sought by the Fund’s employer trustees, Justice Winder said he was “not satisfied that there has been misconduct on the part of the union trustees”.

He ruled: “Such conflict as may be apparent appears to have been contemplated by the trust deed itself, and reflected in the structure of the Board of Trustees which was chosen.

“The structure expects a deadlock to be determined by the independent chairman. I am not satisfied that there is not a good faith effort on the part of the union to provide solutions to the debt issue, and ultimately allow the chairman to conclude his decision-making process in achieving a resolution.

“Disqualification of the union trustees from voting would skew the voting process in a manner which was not contemplated by the Trust,” Justice Winder said.

“The evidence is conclusive that the continued indebtedness of the union will have a drain on the fund, and does not lead me to support a position to permit the relocation of the union’s monthly contributions.”

He was more amenable, to the third relief pleaded by the employer trustees, given “the threat faced by the Fund” and the Supreme Court’s “overriding duty to protect the assets of the Fund for beneficiaries who are ‘contributing’.”

Justice Winder concluded: “I will accede to the request that there be a suspension of pension credits accruing to employees of the unions whilst the contributions remain outstanding.

“The accrual of any pension credits to union employees insofar as they are assessed based on the unpaid sums, ought to be suspended.

“Such benefits are to be readjusted and restored as and when the unpaid contributions have been paid. To permit such credit to accrue against monies which have not been paid into the trust would result in the assets of the Fund being depleted by persons on whose behalf there are no contributions.”

Justice Winder said the hotel employer trustees initiated the action to obtain the court’s advice over the hotel union’s failure to pay pension contributions on its staff’s behalf.

He referred to an affidavit by one trustee, Michael Reckley, which raised concerns over whether the trustees might “become liable for the Fund’s inaction in failing to diligently pursue contributions due from the union, which have been outstanding for seven years and amount to sums in excess of $1.5 million”.

The hotel union is obliged to pay pension contributions on its staff’s behalf via the terms of a 2009 Participation Agreement. It is supposed to pay a sum equal to 6 per cent of an employee’s wage into the Fund, and 2 per cent into the associated Health and Welfare Fund.

Mr Reckley’s affidavit alleged that the hotel union had been “delinquent” for several years, and that this had persisted despite efforts by the Board of Trustees to resolve the matter.

By December 2008, the sum owed had built up to $1.001 million, and the Fund trustees agreed on a payment plan with the hotel union that reduced the interest owed on the delinquent contributions by 50 per cent.

Mr Reckley alleged that the hotel union failed to maintain that agreement, and its indebtedness “has ever since been an issue of much debate” at Trustee Board meetings.

The Fund’s US actuaries said it should not agree to the hotel union’s request for a reduction in contribution rates. and by November 22, 2012, the debt owed had climbed to $1.416 million.

Mr Woods, though, suggested in his affidavit that the employer trustees were being hypocritical, as the union had never objected to their requests - which were granted - for reductions in hotel contribution rates on behalf of their employees.

The matter came to a head at a Special Meeting of the Fund’s trustee Board on January 23, 2014, which debated the proposal to launch legal action against the hotel union to recover the $1.5 million owed.

This resulted in a “deadlock vote”, and was the point at which Sir William became embroiled, as he declined to use his deciding vote to break it.

Sir William alleged he decided not to use his vote because he believed the trustees had “not explored all of the options to rectify the issue”.

He added that a subsequent exchange of letters, and meetings, with hotel union executives had left him “confident that we are developing a proposal” that would satisfy the entire trustee Board.

Mr Woods had suggested in his affidavit that the hotel union was in talks with Bank of the Bahamas to “release” some of its vacant land worth $30 million, which would be used to satisfy the pension fund debt.

He indicated, though, that the employer trustees had raised questions over whether the hotel union could deliver good title to that real estate, and had “exhibited other debts owed by the union to justify their reasoning”.

Justice Winder in his ruling said the land in question “appears to be encumbered”, although efforts were being made to remove these.

The employer trustees named as plaintiffs include ex-Atlantis executive, J Barrie Farrington; Baha Mar’s senior vice-president of government and external affairs, Robert Sands; Bahamas Hotel and Tourism Association (BHTA) president, Stuart Bowe; and Donald Archer.

Apart from Sir William and Mr Woods, the defendants included hotel union president, Nicole Martin, and numerous other union executives.