AN analysis of current political and economic conditions in Bermuda posted at the Offshore/Alert web site concludes that Government's handling of the Berkeley Institute fiasco has left the island "a hair's breadth away from anarchy".

The "Letter From Bermuda" is a regular feature at the web site, which covers developments in off-shore financial centres around the world including Bermuda, the Caribbean, the Isle of Man and the Channel Islands. It is widely read by professionals in the international financial services industries and is known for its investigative reporting and no-holds-barred approach to scandals in off-shore jurisdictions.

The web site (motto: "The pen is mightier than the fraud") is owned and operated by former business reporter David Marchant, who is now based in Miami.

"Our Government believes that it can refute any criticism by accusing its critic of racism," says the most recent Letter From Bermuda. "The racism accusation then relieves the Government of the responsibility of addressing the mistake (or crime) it has committed.

"This leads us to believe that we know one thing for sure: The rule of law, an internationally accepted system by which governments and ministers are limited to behaving in the manner prescribed by law, means nothing to the Minister of Works & Engineering or the Minister of Tourism and very little to the former Minister of Housing, Nelson Bascome. The views of our Premier, who has made no comment on any of these matters, are unknown, but she has refused to (publicly) disagree with her obviously out-of-control ministers. Her inaction brings us a hair's breadth away from anarchy."

The Letter says the greatest achievement of Bermuda's first experience of a Progressive Labour Party Government was intended to be the $68 million construction of a new secondary school, the Berkeley Institute, and points out the school produced almost the entire professional cadre that runs the Civil Service and the Government.

"The new school was supposed to be a lasting testimonial to the party's ability to manage the economy and provide public education, but those hopes now lie shattered, along with the notion that the PLP has any right to run a country club, let alone a British territory, " reports the Letter. "Perhaps it needs another 40 years in Opposition, this time watching those who believe in the law, to see how it is done.

"Before the events of November and December 2002, the new school was already mired in controversy. The building site had been declared off-limits to the media, but this summer our daily newspaper commissioned a helicopter to fly over the site and found that the basic steel structures were nowhere near finished. Hardly any building has started at all. Construction was obviously way behind schedule."

The Letter goes on to report that Bermuda has no money for such a project and "every cent" that the building finally costs will have to be borrowed.

"The Ministry of Works and Engineering manages public construction projects," it says. "Back when the project was first announced, civil servants from that ministry assessed those who had entered bids to build the new Institute, and recommended a firm with considerable experience in the field. For reasons he has not explained, the Minister of Works & Engineering rejected their recommendation and granted the contract to a company that had not yet been formed.

"Ren?e Webb, the Minister of Tourism & Telecommunications, subsequently explained with great pride - her stated agenda is to 'redistribute the wealth to black people' - that Pro-Active, the company that was awarded the contract to build the new school, had black management, which was all they had, and all they needed. They had never constructed so much as an outhouse, but we entrusted them with the largest public works project in years."

The Letter From Bermuda reports that by law, such construction projects require the builders to take out a bond worth ten per cent of the estimated construction cost. But because Pro-Active had no experience, no such bond could be arranged.

"Enter the Bermuda Industrial Union (BIU), the island's trade union association, whose president Derrick Burgess is an elected PLP Member of the Parliament," continues the Letter. "The BIU offered to form an insurance subsidiary to issue the performance bond to cover the first $6.8 million of cost overruns on the project. What the BIU knew about insurance, never having been in the business, that every insurance company in the world did not know, was never explained. The Government promptly accepted the offer and paid $700,000 for the bond, which was issued 11 days before the BIU subsidiary was formed, almost certainly making the bond invalid.

"We are told that the BIU subsidiary, when formed, had limited liability. In contravention of the law, the BIU has not filed financial statements since 1999, so we have no way of knowing what the assets of the new insurance company, or its parent, might be. The Minister of Works & Engineering simply refuses to produce the bond for public inspection. Mr. Burgess admits to receiving the money, which may not be true, and which he will almost certainly regret admitting before this is all over."

The Letter says at this juncture the Auditor General stepped in to investigate the Berkeley Institute contract, concluding among of things that the building would indeed be finished late.

"The Auditor General's report, which largely praised the Ministry of Works & Engineering, produced the most stunning consequences," continues the Letter. "Both the Minister of Works & Engineering, Alex Scott, and Mr. Burgess - and later Ms Webb, who is not even remotely involved - dismissed the report's findings out of hand and accused the Auditor General of acting on the belief that 'those of African descent are living in darkness and chains'. As an aside, the ministers point blank accused the Auditor General of a lack of professionalism.

"Mr. Scott added that the Auditor General, the Commonwealth's longest-serving official in that capacity, is to be fired and the office discontinued. Ms Webb agreed with the first part. 'He is auditing himself,' she claimed, which is nonsense, indicating that she has no idea what the word 'auditing' means. Under the Westminster system of collective responsibility, the words of every government minister bind the government, unless refuted. Our Premier has not intervened, so Mr. Scott's comments are now Government policy.

The Letter From Bermuda points out that while the Berkeley drama has yet to play itself out, the following is already known:

"The new school will not open on time. In the world of education, that means a delay of at least a full school year before the children will have a new building in which to go to school. Since Mr. Scott has refused to accept the report's findings, no preparations are being made to help the children find alternative schooling.

"The new school will cost more than was budgeted, although we have no way of knowing if the performance bond will cover the first $6.8 million cost of the overrun, or whether the taxpayer will have to foot the entire cost. No receipt was issued for the payment of the $700,000 bond, which is unlikely to be valid, since it was issued by a company that was not in existence.

"Accusing the Auditor General of a lack of professionalism is actionable - i.e., no specific damage need be proven, the accusation itself being damage enough - but the Auditor General has magnanimously said that he will not pursue his legal rights in the matter.

"The Berkeley catastrophe has come hard on the heels of the financial scandal at the Bermuda Housing Corporation, in which millions of dollars were allegedly given to close friends of Members of Parliament without receipts, and without relation to the work they are supposed to have carried out. Despite the largest fraud investigation in the history of Bermuda, and the passage of months since the scandal broke . . . no money has been recovered."