AUDITOR General Larry Dennis yesterday answered his critics with a defiant riposte and said he would wear the accusations made against him this week as "a badge of honour that indicates the lengths that officials will go to escape accountability".

And he said those who claimed his damning report on the new Berkeley Institute project was motivated by racial factors were using emotional language to obscure the truth.

Bermuda Industrial Union leader Derrick Burgess had accused Mr. Dennis of sharing "the all-too-common belief that people of African descent are illiterate and chained in darkness" after his Berkeley audit report was published last Friday.

"If officials of the Bermuda Industrial Union or of any other organisation think that by playing the race card I am going to duck and cower into some dark recess, they are mistaken," Mr. Dennis said in a ten-page statement released yesterday.

"I am not impressed. I am not embarrassed. I am not intimidated.

"I shall wear the outrageous and off-the-subject accusations as a badge of honour that indicates the length that officials will go to escape accountability when they have no legitimate answer to legitimate questions. The scandalous comments say more about those making them than they do about me."

In the Berkeley report, Mr. Dennis concluded that the school would not be completed in time for the target opening date of September, 2003, or indeed for most of the following school year.

And he questioned the validity of a $6.89 million performance bond provided to general contractors Pro-Active Management Systems Ltd. by Union Asset Holdings Ltd., an insurance company owned by the BIU.

The comments by Mr. Burgess had been littered with "siren statements" designed "to play to the emotional impulses of human nature and thereby, hopefully, to obscure the truth", said Mr. Dennis.

He added: "In the modern exercise of this tragedy in Bermuda, it is used as a last refuge of those who wish to escape accountability. As such. people who would employ such methods jeopardise and demean the aspirations and legitimate claims of those they purport to represent and, to put it bluntly, they insult the trials and steadfastnesss of those who went before."

Mr. Dennis also hit back strongly against Mr. Burgess's suggestion that the Auditor General had not contacted the BIU during his audit as he believed "the BIU are descendants of slaves and have no right to expect courtesy of consideration".

Mr. Dennis responded: "I didn't contact the BIU because the only reason I would have to contact the BIU would be if, during my examination of the assessment documentation, I discovered that the assets of the BIU were placed as collateral to cover the $6.8 million bond given by its subsidiary.

"Since I have not yet been given the assessment documentation, I would not know whether there is this connection.

"Furthermore, if I did determine that I needed to know more about the BIU's financial situation, the first thing I would do would be to examine the Union's financial statements that are supposed to be on file with the Registrar General. As I noted in my special report, the BIU has not filed statements since 1999."

Mr. Dennis added that the finances of the BIU were required by law - the Trade Union Act - to be a matter of public record. And he said BIU officials were showing disrespect to members by not making themselves accountable for their stewardship of members' assets.

Mr. Dennis also rejected the BIU claim that Berkeley was "the first time in the history of Bermuda" that the Auditor General had carried out a management control systems audit on a major capital project.

The Auditor General, who has been in his post for 24 years, detailed projects he had audited including Westgate Prison, CedarBridge Academy, Tynes Bay Incinerator and the National Stadium.

The BIU also criticised Mr. Dennis for questioning the ability of Union Asset Holdings Ltd. to meet claims that could arise from the performance bond, drawn up to protect the taxpayer from the consequences of the contractors failing to live up to their side of the deal.

Mr. Dennis retorted: "Yes, I do question the ability of the BIU subsidiary, Union Asset Holdings Ltd., to meet the claims of up to $6.8 million under the bond if called upon to do so.

"Why? Because proof of the ability of Union Asset Holdings to meet its claims if called upon to do so should be in the files of the Ministry of Works & Engineering. It is not.

"In addition, the length of time it is taking to get thereafter repeated requests is unnerving, to say the least. It is an axiom in auditing that it is not the responsibility of the auditor to prove the organisation correct; it is the responsibility of the organisation to prove that it is correct.

"Inconsistencies and delay heighten professional scepticism and, if they continue long enough, they begin to taint the audit environment."

Mr. Dennis said his doubts that BIU assets would be available to meet claims arising from the bond were due to the status of Union Asset Holdings Ltd. as a separate corporation enjoying limited liability.

"In this situation, the parent organisation's assets would not normally be available to satisfy the debts of the subsidiary," said Mr. Dennis. "Further, why would the BIU go through the trouble of setting up a limited liability company if it were not going to take advantage of the limited liability benefit?"

In Monday's BIU press conference, Mr. Burgess, a Government MP, said Mr. Dennis believed that it was "impossible for a working class organisation to have enough assets to guarantee such a bond required for such a project".

Mr. Dennis responded: "I shouldn't have to think whether or not a working class organisation has enough assets to guarantee such a bond. In this case the fact should be a matter of public record. It is not.

"What stunned me in the officials' above statement is that it implies that the union did guarantee the bond. This is the first time I have come across any indication of this fact. I'm sure I shall come across the guarantee as soon as I am given the files pertaining to the assessment of Union Asset Holding Ltd.'s ability to cover the $6.8 million bond, an exercise which the Ministry of Works & Engineering is required to do in accordance with rules, regulations or instructions, and the evidence of which I have the right to examine in accordance with the Audit Act 1990 and the Constitution."

Mr. Burgess said yesterday that he had "no comment whatsoever" to make on Mr. Dennis's statement.