Government’s quickie divorce from unlicensed debt collector revealed
A company hired to gather taxes on behalf of the Government was fired a week after The Royal Gazette asked questions about whether it had a debt-collection licence, newly released records reveal.
Tax Commissioner Derek Rawlins wrote to Gina Stableford, founder and president of Oarrs Inc, on April 1, 2021, with a “heavy heart” to tell her the firm’s contract was being terminated, but did not tell her why.
“I would like to thank you for all the great work that you have done on behalf of the Office of the Tax Commissioner up to this point …” he said in an e-mail, adding that he would follow up regarding the “outstanding payment amounts due to” Oarrs.
The termination notice was sent a week after the Gazette asked the Tax Commissioner if Oarrs had a debt-collection licence, as required by a law passed the previous year.
There was no initial answer to the press query and, 2½ years on, the Government has still not revealed the outcome of an inquiry it claimed to have launched into the affair.
Oarrs, which collected $13.5 million in unpaid land tax for the Government, went on to sue the OTC for not paying it for its services, telling the Supreme Court that its three Bermudian employees lost their jobs as a result.
The OTC initially defended the civil lawsuit, claiming the company committed a crime by collecting tax without a licence, before eventually secretly settling the matter for an undisclosed sum.
The letter from Mr Rawlins is included in a batch of 20 records finally released under public access to information by the OTC, in the wake of a decision from the Information Commissioner.
The majority of the records were redacted, but the letter and the six-page contract between Oarrs and the OTC were disclosed almost in full.
They help to flesh out the perplexing timeline of a saga which began in 2018, when Parliament approved legislation requiring debt collectors to obtain a licence.
The Debt Collection Act came into force on January 31, 2020. The new Pati disclosure shows that the Oarrs contract was agreed just five months later, on July 3, and that it detailed the debt-collection duties of the consultant, including interviewing “debtors to obtain payment” and managing the “debt-collection process”.
After the Gazetterevealed that Oarrs did not have a debt-collection licence to carry out such work, two Progressive Labour Party senators, Lindsay Simmons and Ernest Peets, claimed in the Upper Chamber that the company was not a debt collector at all.
But their comments were contradicted in a defence the OTC filed in the Supreme Court two months later, in response to the civil lawsuit from Oarrs.
In the court filing, the OTC claimed the contract it had with Oarrs could not be enforced because the firm carried out the debt-collection service without a licence and therefore “committed a criminal offence”.
Oarrs founder Gina Stableford countered in an affidavit that it was established during calls and e-mails with the Tax Commissioner in December 2019 and February 2020 that “Oarrs would act as agent to the Tax Commissioner and, on that basis … Oarrs did not require a licence …”
On April 26, 2021, a government spokeswoman told the Gazette: “The Ministry of Finance is reviewing this contract, and the matter is being investigated by [the Department of] Consumer Affairs, as the authority responsible for debt collection.”
She did not disclose that Mr Rawlins had already sent out a termination notice on April 1.
The outcome of the investigation by the Department of Consumer Affairs remains unknown, as does the amount paid to Ms Stableford to settle the lawsuit in May 2022.
The contract Oarrs had with the OTC was for 15 per cent of all land-tax arrears it recovered, meaning it would be owed more than $2 million if the agreement was upheld.
Debt collection company Oarrs Inc was awarded a multimillion-dollar contract to recoup unpaid land tax for the Government without a competitive bid process.
Records released by the Office of the Tax Commissioner under public access to information show how it instead used a “competitive negotiation” or “direct contracting” approach when it hired the firm in 2020 and then sought approval from the Office of Project Management and Procurement.
An August 20, 2020 e-mail from the acting director of OPMP to Tax Commissioner Derek Rawlins detailed the decision and said the Financial Secretary, the late Anthony Manders, “agrees with the potential benefits”. The e-mail referred to the contract with Oarrs and one with professional services firm PwC.
“We have reviewed the content and based on the information presented, we understand this could assist the Government in collecting the debt and, at this time, it may not be practical to undertake a full competitive bidding process,” wrote the OPMP acting director.
She said the office understood that the two agreements were “to contract a firm with a specified set of references for qualified personnel for a period and not to contract with individual consultants. We also noted that said consultants, Oarrs and PwC, have already signed these contracts but they have not yet started the work.”
The acting director wrote: “We realise the department has tried to collect these debts with limited success and that a price must be paid; either Government loses 100 per cent or a percentage (eg, 15 per cent) to manage and collect these debts. However, when we are speaking of large debts, 15 per cent may be quite a substantial loss to Government still.”
The acting director recommended that the office develop its requirements and “new procurement strategy and process” before the end of the contracts.
She told the Tax Commissioner: “The next time you are going to undertake an immediate or high-dollar-value procurement process, please contact us sooner [before you approach the vendor] so we can help you plan the procurement strategy from the beginning.”
Mr Rawlins told the Gazette in July 2021 that the pandemic was expected to result in a “major decrease in tax revenues for the Office of the Tax Commissioner/Bermuda Government” and there had been “an urgent need for competitive negotiations for the procurement” of services to recoup unpaid taxes.
He said his office wrote to the OPMP seeking to engage in competitive negotiations with Oarrs and PwC under section 23.1 (a) (Competitive Negotiations) of the Government’s Code of Practice for Project Management and Procurement.
Outstanding land tax owed to the Government in July 2021 stood at almost $71 million, with $57.3 million of that being more than 90 days in arrears.
Oarrs collected $13.5 million in unpaid land tax between September 2020 and June 2021.
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