Mr Fargher was emphatic that, whatever the public may have been led to believe, the MEA was “not out of control” and that he and his colleagues were not “nodding dogs”. The truth, he claims, is that the MEA was a “well governed and managed organisation, led by an extremely capable and effective senior management team”

Former Manx Electricity Authority Board member, Charles Fargher informed the Tynwald Select Committee, investigating the ‘loans affair’, he has “been let down by others of whom I would have expected better”.

Speaking about the reaction to the ‘discovery of the loans’, in early November 2004, he said: “It is with great regret that I have to say that I have been shabbily treated. This is something I shall never forgive nor forget”.

He, like other former members of the Board, was speaking publicly for the first time, since news of the additional £120m of loans was revealed, as he, and the others, had been requested, in early 2005, by former Chief Minister, Donald Gelling not to make any statement to the media.

Mr Fargher, like Mr McCallion, the former Chairman of the MEA Board, is clearly bitter about the experience and does not believe he and his former colleagues have been given a fair hearing so far. It appears they believe their adherence to Mr Gelling’s request has harmed their reputations and allowed their integrity to be impugned during their period of silence.

Mr Fargher’s opening statement was initially quite hesitant, with a sense of stress in its delivery, but he relaxed as he got going and became more confident as he went along. However, later on, when other former colleagues were giving their evidence, further signs were noticeable that he found the whole experience unsettling as he spent quite a bit of the time wringing his hands.

Mr Fargher was emphatic that, whatever the public may have been led to believe, the MEA was “not out of control” and that he and his colleagues were not “nodding dogs”.

The truth, he claims, is that the MEA was a “well governed and managed organisation, led by an extremely capable and effective senior management team”; and that the former Chief Executive, and his team, had been “rigorously challenged by the Board”.

He expained he had been informed, to the extent he would expect, of the difficulties created by the MEA’s view some of the capital procedure notes (CPN) did not apply; and that action was being taken to address the situation.

Mr Fargher claims the former Chief Executive had the full confidence of the Board; and that senior politicians and civil servants shared his view Mr Proffitt was just the man for heading up the largest capital project the Island had undertaken.

He maintains that on the day Treasury claimed they first knew about the loans he made it clear he understood that Treasury was aware of them previously; a view he holds even to this day.

Mr Fargher said PKF conducted a thorough and independent review of the MEA’s business and found “no impropriety” and believes if willingness had existed to talk about the issues with the Board, all the matters could have been resolved. However, he added no invitation was ever made.

Up until 5^th November 2004, he said he was proud to be a part of the MEA but not from that date onwards.

Having been given the opportunity to make an opening statement, with the exception of Mr Ferrer, each former Board member was posed the same set of questions to answer; which they had been provided with in advance, so they came with prepared answers.

The first question related to their knowledge of the requirement of the MEA to operate in accordance with Financial Regulations.

Mr Fargher replied he was aware of the regulations and CPN, but he was also aware that there were difficulties in applying them to the MEA; and so a separate protocol was being devised.

He wasn’t able to comment on the evidence of Paul Dewar, the MEA’s internal auditor, he was excluded from viewing financial figures for the Manx Cable Company (MCC) and the building of the power station.

However, he was able to confirm, for Clare Christian MLC, he was aware discussions had been ongoing for several years with Treasury over financial information; probably dating back to the building of Peel Power Station. He considered the issues to be complex but all that was wanted was something suitable to provide the information Treasury needed. He had not been aware there had been difficulties in progressing a solution.

Mr Fargher picked Mr Rodan up, on a point he was trying to make, by stating he was quoting from draft board minutes and that he had a copy of the signed version which gave a different story. He pointed out a meeting had not been arranged to discuss the issue but it had agreed, by the board, the matter would be dealt with by correspondence.

Turning to the issuing of the Treasury ‘direction’, in June 2002, Mr Rodan wanted to know if the board had been advised, by Mr Proffitt, of Treasury’s concerns; and Mr Fargher said they had to the level he expected.

So had it not caused him, inquired Dudley Butt MLC, as a ‘director’ of the board, concern that Treasury always seemed to want more information.

No, he replied, it hadn’t caused him concern, as he was aware of some “difficulties” and, as he had said before, he knew all he needed to know about the matter.

Anticipating further questioning on the subject he reiterated that the board had rigorously challenged Mr Proffitt; and he pointedly reminded the Committee, in respect of the inference there was no evidence to support his assertions, meeting minutes do not include the details of discussions, just the decisions.

This point presumably would not have been lost on Mr Rodan, as another Committee, of which he was Chairman and has just reported, stated “minutes should only reflect decisions made” (para 22.10, page 81 SCT Report ‘Affairs of Braddan Parish Commissioners’).

Without really acknowledging the point Mr Fargher had made, Mr Rodan wanted to know, following a board meeting in July 2002, if he had held the suggested meeting with Colin Kniveton at Treasury.

Mr Fargher couldn’t recall the specific meeting but confirmed he had met with Mr Kniveton, as he knew him well, and he wanted to see if he could facilitate an improvement in working relations between the MEA and Treasury. However, he admitted he, personally, had not found a solution to the problems; but he didn’t believe it was his job to do so anyway.

David Callister MLC wondered if he had thought relations had then improved; and Mr Fargher thought they had, although he acknowledged some difficulties continued. He added his motivation in trying to improve relations was down to not wanting another “skirmish” with Treasury; following an incident, sometime previously, over the treatment of interest payments in the accounts.

Mrs Christian inquired what the board’s perception had been of the reason why Capital Projects Unit (CPU) wanted the information they sought; but Mr Fargher said he couldn’t answer for the board.

He did, however, offer the view that perhaps Treasury did not understand the complexity of contractual issues they were dealing with; and perhaps it was just a case of a misunderstanding of what was necessary or appropriate.

Mrs Christian put it, to Mr Fargher, CPU’s role is to provide an overview of capital projects, and how they are progressing, so government can forward plan various issues.

Mr Fargher didn’t disagree with this and said he knew they needed to be provided with information.

Mr Butt pointed out construction of the hospital and the incinerator, which he stated were also big projects, had followed CPN and asked him for a comparison with the MEA’s projects; but Mr Fargher said he couldn’t comment on those projects.

What he did know though was the MEA had a “job to do and contract to complete”.

So was the approach different because the MEA was more “commercialized” responded Mr Butt.

“No” was Mr Fargher’s reply; and he suggested the CPN may be right for one part of government but not necessarily right for another. “There was no ulterior motive” he rather exasperatedly stated.

Changing subject slightly, Mr Rodan said they had heard evidence of the board threatening to resign, in 2002, and asked had this been the case; but Mr Fargher was adamant it had not. Mr Rodan followed up by saying Mr Proffitt had said the Treasury ‘direction’ came as bombshell; but Mr Fargher maintained it had not been an issue for the board and it had been a “total over reaction” by Treasury. He thought Treasury’s action was inappropriate and the issues could have been resolved by continuing with dialogue.

Moving on to a meeting in 2003 with COMIN, Mr Rodan wondered why nobody had mentioned the loan of £70m, signed off on the same day.

Mr Fargher said he wasn’t at the meeting so he didn’t know and couldn’t possibly comment.

But did he believe Treasury needed to give approval for the loan or had it given approval for the loan, asked Mr Rodan.

In Mr Fargher’s opinion, as the loan was taken out by MCC, prior approval wasn’t required, in the same way the earlier £35m loan from HSBC had not been approved. In that instance, he explained, Treasury and Tynwald had known about it and never objected; nor were any questions raised about it at the time.

So the precedent had already been set in 1999, suggested Mr Rodan; and to a certain extent Mr Fargher agreed. He pointed out the auditors, Treasury etc had all known about it in that case; and so the same procedure was followed. He said he well understood the need for people to be aware of the loans and he thought they were aware of them.

Mr Rodan referred to John Cashen’s evidence about the 1999 loan, and it not being an issue and Mr Fargher agreed.

Mr Callister suggested his view Treasury was aware of the loans was based on assumption; but Mr Fargher said he thought it was more than that due to the amount of information provided to them.

Had he ever mentioned them in conversation with Mr Kniveton, inquired Mr Rodan; to which he replied he couldn’t recall as they discussed so many things.

Mr Butt wanted to know when Mr Fargher had become aware of the loans and had it come about as a result overspend on the £185m. Mr Fargher, said he knew from the beginning and of course it was related to the need to have the money to complete the project.

Mr Butt reminded Mr Fargher Richard Corkill had informed Tynwald £185m was all the MEA needed, so why had they not gone to Treasury and COMIN when they needed more; but he replied he had already said he thought they had been informed the MEA had spent more than £185m.

But hadn’t it been “his duty to let Government know the £185m had been exceeded” asked Mr Butt; to which Mr Fargher replied yes, but again stated prior approval wasn’t needed. He also suggested, and it came across as a bit of limp excuse, the loan was only “short-term borrowing”.

So had it come as a shock to him when Treasury claimed they did not know; inquired Mr Rodan. Mr Fargher more-or-less repeated his evidence from his opening statement that on the 5^th November 2004, when he was phoned about the loans, he confirmed he knew about them, he was told they didn’t; but he thought they had been.

Mrs Christian wondered why the MEA hadn’t taken out the loan.

Mr Fargher explained the MCC was a wholly owned subsidiary, with the assets ring-fenced - and it would have been imprudent not to have done so, he said – and so they had the means to take out the borrowing. It had commenced with a discussion at a board meeting how to structure the business, the assets and borrowings, and it followed on from there.

So why didn’t they approach government to get the borrowing more cheaply, was Mrs Christian’s next question.

Mr Fargher remembered going to the meeting in London regarding the £185m bond and said it had been at the back of his mind the figure was just a working figure and at some stage they may need to ‘tap’ the bond for more. He knew there had been discussions at previous evidence sessions about a ‘budget’ or an ‘estimate’ but the reality was the project had cost more. He again said what had been done was to “protect the MEA” and there was “no ulterior motive” in their actions.

Mr Callister, acknowledging they had wanted to complete the project, wanted to know was it legal what they had done.

Mr Fargher said it didn’t matter as it is all the same group, and in the end the accounts are consolidated. They had a job to complete, and it didn’t really matter which part borrowed the money. However, to him, in short, the important issue was to protect the power station, the cable and the pipeline from “commercial attack” and this was done by having them set up as companies. We would have considered the structure again at the end of the project, he stressed.

Mr Rodan referred him to a joint statement, issued by the board members, in 2005, in which they had said very serious questions of competence arose if Treasury claimed they did not know of the loans; and asked Mr Fargher if he wished to comment.

He said in his view they were aware and if not they should have been; to which Mr Rodan inquired if he was suggestion incompetence at Treasury and Mr Fargher reiterated they should have been aware.

Mr Rodan then referred to a letter from Mark Moroney, and the issue of whether they had evaded or avoided Treasury approval, and it could be viewed they deliberately used MCC, as device, so they didn’t need to make Treasury aware of the loans.

Mr Fargher said a statement would be sent in respect of this issue but reminded Mr Rodan of the Attorney General’s view that this part of the letter does not say what he was implying. As for his own personal view, he denied it had been so and stated the extract was being “clumsily taken of context and misconstrued”. He said the “suggestion is an insult”.

Mrs Christian again put it to Mr Fargher the only way the Treasury would know was if they were supplied with the information by the MEA; and, whilst agreeing, he put it to her the routes were open to supply the information. He again stated he personally tried to get everybody to sit down and sought out the problems; and if they had, as he had suggested, then they would “not be here today.”

So had he felt he had been forced to resign, asked Mr Callister; to which Mr Fargher responded, “Yes and no”. He went on to say their “position became intolerable”, they had “done nothing wrong” yet they ended up being “hounded out”; and so they were “best of it”.

He claimed he was quite enjoying talking to the Committee but wanted them to know “I have been insulted by the way I have been treated”; and, for some reason, pointed out three of the Committee knew him well.

Returning to the acquisition of the bond, Mr Butt asked if he had been part of the process; but Mr Fargher said he hadn’t been involved; and added the “beauty parade” was the only bit in which he had had an involvement.

Mr Butt wanted to know how it was sustainable to pay at a rate of interest of 5.5% on £185m, which equated to £10m a year, but Mr Fargher said the MEA business plan covered that point.

But Mr Butt didn’t appear to believe, when they added the interest payments of another £120m of loans on top, they could be sustainable; but Mr Fargher dismissed his concern by saying the payments are spread over a 35 year period and are sustainable. He conceded in the early years they projected losses but said over the years, with increases in tariffs etc, it would turn to profit.

Mr Butt got one final point in before Mr Rodan brought the questioning to an end - the session having already over-run the allotted time by a large margin – by stating when the borrowing is now costing £15m a year the Treasury should have been informed; to which Mr Fargher said the short answer was yes, but added, again, he thought they knew.