Again stating he was not looking for excuses, Mr McCallion said they had “a machine ready to fire up” and nearly had contracts signed that would have generated “millions of pounds in revenue”. He claimed they could have provided a far superior service to Manx Telecom, using their copper wires, and he had seen it work in Singapore. Local calls would have been free with a much lower tariff for other calls.

Former Manx Electricity Authority (MEA) Board Chairman, John McCallion told the Tynwald Select Committee, investigating the MEA’s non-compliance with financial regulations, he never expected to end up sitting before a Select Committee when he accepted the position on the Board.

It was clear from the tone of his opening statement, delivered to the Committee on Thursday (28^th May, 2009), he found the experience demeaning; and he feels bitter in the manner in which he is, and his former fellow Board members are, being portrayed as the villains in the affair.

Mr McCallion began with some justified criticism of the Committee for not having an adequate P A system in operation so members of the public - such as himself, who have hearing problems - could hear proceedings properly. Even sitting closer to the Committee he, at times, had difficulty in hearing some questions from some of the more softly spoken members of the Committee; most notably Clare Christian MLC who resorted to almost shouting at one point.

Committee Chairman, Steve Rodan apologised to Mr McCallion and said he had noted his complaint.

(The Manx Herald attends many Select Committee sessions and this is a frequent problem for members of the public; but, it seems, whenever attempts are made to turn up the P A system it invariably causes a feedback problem with the recoding system or some other problem. However, it is a problem that needs to be sorted out by the Tynwald office, as a priority, as the public sessions of Select Committees are a very important part of the democratic process; and should be conducted in a clear and audible manner – Ed.)

Having referred to his own long and distinguished career at Shell, Mr McCallion said, when he had been appointed to Chair the Board of the MEA, he had recognised the challenge in dealing with the electricity infrastructure of the Island; but, from the outset, he had noted Tynwald had appointed a group of very professional people to sit, with him, on the Board

He explained he had discussed his new role with the then Minister and the CEO of the Dept. of Trade and Industry (DTI), David North and Ken Bawden; and pointed out they had been the “front runners” for developing the potential of the optic fibre cable and natural gas.

He said, although they had been very supportive, they were not hesitant in being critical when they thought it was appropriate.

Matters had progressed well in the early years but relations with government began to deteriorate, particularly from 2003, leading up to the Board’s resignation in June 2005.

He suggested the manner in which the resignations came about was not quite in the way the matter had been reported. What had actually happened was the Attorney General turned up at a Board meeting and informed them it would be “prudent” for them to have “their resignations ready by 4.00pm”.

He said he could see the AG had a piece of paper with the names of the replacement Board members, which included a politician; and so they felt they had no option but to resign.

Returning to the earlier period of office, he explained the DTI had encouraged the MEA to pursue the telecom project - as they did not have the expertise themselves - and the legislation was being prepared to allow them to operate in this area.

However, he claimed, the Director of Communications (suspected to be Anthony Hewitt, who was appointed in 2001 – Ed.) had informed them he would “never issue the MEA with a licence to operate”.

As for the issue of complying with financial regulations and the loans, and comments made in the public domain, he stated the Board had been acting in “good faith” all along; but a “trawl”, through their activities, had been conducted in an attempt to discover some impropriety – but “there is none”.

Everything they had done, he went on to say, was to provide a “first class electricity generation system and infrastructure.”

He remarked that friends of his had told him he should never have taken the job; but he disagreed with them. Even though he, and his colleagues, had never received any thanks, he said he derived a lot of satisfaction from what had been achieved. He had met, and worked with, some great people; including the workers, who went out in all weathers to restore the power to the public.

He put it to the Committee his Board had put a lot of effort into their work, and met, formally, more frequently than the previous Board; and many more times informally.

He closed by stating people have said the IOM has “one of the finest power stations in the world”.

Mr Rodan commenced questioning by putting to Mr McCallion given financial regulations applied to Statutory Boards how much was he aware of this.

Mr McCallion replied he had been made aware in 1997 when the CEO of the time, Brian Machin, had informed him of the position; and he had concurred with this view.

It was his understanding, at the time, what the MEA was providing at the time satisfied the Treasury and they had a good relationship.

So what had his reaction been to the issuing of the Treasury ‘direction’, inquired Mr Rodan; and what action did they take in response?

It had been “total disbelief”, stated Mr McCallion, they thought things were progressing ok - other than they were trying to build a power station but with every obstruction possible being placed in their way by Treasury - so the Board needed to know what the true position was.

So who had been firing off the “torpedoes”, asked Mr Rodan; “Mary Williams”, said Mr McCallion.

Mrs Christian pointed out there had been a lot of concern expressed within the Treasury, including Internal Audit, of non-compliance, and correspondence with the MEA; and had the Board been aware of what was being discussed.

Mr McCallion said he had been aware, since 1997, at a low level in Treasury, there were grumbles about wanting more information from the MEA. Although the grumbling may have increased he had not foreseen a letter of this level coming.

So why did he think Capital Projects Unit (CPU) would want the information, or did he just think it was just part of their job, she asked.

Mr McCallion replied the latter; and added, in his opinion, there was a “deep down resentment” at Treasury of the MEA.

Why was this, was Mrs Christian’s next question; to which he replied, “I think because of the project success”. He went on to say the fact nobody had been killed having built a major power station and gas pipeline demonstrated the level of ‘Health & Safety’ operating on the project. He was very proud of it.

Mrs Christian said it was acknowledged a good electricity generation system had been provided, but the Committee were more concerned about the level of communication between the Treasury and the MEA.

In Mr McCallion’s opinion they were just making "an issue out of an issue".

David Callister MLC, asked him if he thought the issue was more about personalities; to which Mr McCallion agreed he did.

Asked to elaborate, he wondered whether he should; but he was reassured he was covered by privilege. He said he thought it was more a personal issue between Mrs Williams and Mike Proffitt (former CEO of the MEA). He suggested Mrs Williams was at the time considering her candidacy for the job of Chief Secretary and she was worried Mr Proffitt would “throw his hat in the ring” and so he was a threat to her ambitions. Therefore, if she could “take down” Mr Proffitt it would enhance her reputation and chances of the job.

Mrs Christian seemed surprised by the suggestion and put her own suggestion to Mr McCallion; she was responding to a Treasury direction and not acting of her own volition.

He shrugged and replied “if that is so”.

Mr Rodan put to him there is a file of evidence at Treasury, in respect of the non-compliance issue, and any action she was taking was in her role as Chief Financial Officer and did he accept she was not being motivated by her own interests; but Mr McCallion said he found it difficult to say any more on the issue.

Changing tact slightly, Mr Rodan asked if he had been happy with the level of information provided and had Mr Proffitt alerted the Board to the concerns of the Treasury.

As far as he could remember - after all it was 5 – 6 years ago the events, being discussed, had taken place - the answer was yes.

So how had the Board reacted to these concerns; to which Mr McCallion replied the Board wished for the “divergence” to be brought together. He believed Mr Proffitt had put in place something to achieve this, with the full agreement of the Board, which included more meetings and information, but he couldn’t categorically state that it had been put in place.

Mr Rodan then inquired why the ‘direction’ had been thought “vexatious”; to which Mr McCallion said he thought an earlier response had covered the reason. They had been told to build a power station, diversify the power supply etc, but then they had put many hurdles in the way.

Mr Rodan wondered if thought the requests for information was one of the hurdles.

Mr McCallion snapped back that he had not said that; although, in his opinion, they were asking for information which they couldn’t supply. He went on to say they had thought they had given enough for them to sit down and do the analysis.

So if he had thought they had got the right amount of information why did he think the issue rumbled on for so long, wondered Mrs Christian; but he didn’t know.

But he was aware it had been going on a long time, queried Mrs Christian; and Mr McCallion said yes, but at a low level, and things suddenly “exploded”.

It was very negative reaction from the Board, suggested Mr Rodan, and inquired what had been discussed with Donald Gelling (former MLC and member of Treasury) when he came to see him.

Mr McCallion could clearly remember meeting him with Mr Proffitt and discussing the “divergence” between the Treasury and the MEA. He recalled saying they wanted to reduce the tension so they could get on with things; and Mr Gelling saying, before he left, he would do what he could to help.

Mr Rodan tried to get Mr McCallion to say whether he had gained the impression Mr Gelling had supported the ‘direction’; but he couldn’t remember. He added, he wasn’t trying to avoid giving an answer, but because he was on oath he wanted to be sure and he couldn’t be.

Mr Rodan inquired if he had threatened to resign if the direction was not retracted; to which Mr McCallion emphatically replied “no”.

However, he recalled when he had taken the job in 1997 he had made it clear to Mr North, and the DTI, if he ever lost the confidence of his “stewardship” of the MEA he would “stand down”. He pointed out he didn’t have a contract - so there would be no notice period or any complications of that type – so he had felt he had to make it clear, then and there, he would resign; but it was not a threat the way it was said.

So, if it wasn’t a threat, said Mr Rodan, had he reminded people of his original stance; and Mr McCallion said he probably had. He pointed out this is what then happened and reminded the Committee replacements had already been lined up.

Mr Rodan put to Mr McCallion after the meeting with Mr Gelling ‘operation fresh start’ was to commence, and referred to an exchange of correspondence, regarding the matter, in which it said he would act on the matter; so what had he done to keep to the commitment.

He had passed it on to his CEO and he believed it did start, including the holding of meetings, and he recalled that an MEA secretary, Mrs Cottier, was keeping a record.

He also recalled that a chair was always made available for a Treasury official at meetings but “invariably it was never filled” he stated.

He went on to say Mr Proffitt had made arrangements to meet with Mark Shimmin, who had replaced Mrs Williams as CFO at Treasury, but after two meetings he stopped coming, and when efforts were made, by Mrs Cottier, to arrange more she drew a blank.

So it was incorrect of Treasury making out your unwillingness, suggested Mr Rodan.

“Yes, totally incorrect”, replied Mr McCallion.

Mr Butt put it to Mr McCallion if Mr Proffitt had set up the meeting – which as far as Mr McCallion was aware he had – why had an allegation been made that Mr Proffitt had said to Treasury, “while I am CEO you will not get any financial information”?

Mr McCallion didn’t believe he would have.

Moving on to a different subject, Mr Rodan put to Mr McCallion that on the day they had a meeting with COMIN, 4^th July 2003, he had signed the loan papers for £70m from Barclays.

Mr McCallion didn’t recall it being the same day but, if Mr Rodan said it was, he would accept it.

So why hadn’t they said anything about it, inquired Mr Rodan.

Mr McCallion said he had reviewed the papers so he was clear with what he would say. He explained the meeting was to deliver their 5 year plan, all aspects of it including the telecoms proposal – which he stated could have taken off quickly and earned “enormous sums of money” – and not to discuss Manx Cable Company (MCC) business.

Mr Rodan appeared less than convinced and suggested to Mr McCallion planning for the loan had been ongoing for months and surely it was important to the MCC; and thus to the MEA’s 5 year plan.

Mr McCallion said he could only assume the reason why it wasn’t mentioned was because they assumed the Treasury already knew.

“Why” asked Mr Butt; to which Mr McCallion responded along the lines, in an Island this size, with all the talk and interaction between the finance sector and the government, they must have known.

Mr Butt countered this by saying a letter from Moroneys advocates said the loans had been taken out deliberately by the MCC to avoid the proper procedure; but Mr McCallion disagreed. He added even the AG has said the letter has been misread and misinterpreted; and there is a record of someone saying COMIN had misunderstood it.

Mr Butt sought confirmation Moroneys had been their advocates; but Mr McCallion maintained the letter had been misread and there had been “no devious intention” in respect of the loans, and added, “How on earth did they think they could hide them?”

Mr Butt put it to Mr McCallion Moroneys said they did, although he had compared it to avoidance rather than evasion; but Mr McCallion reiterated they didn’t.

Mrs Christian seemed surprised by the suggestion the Treasury should have known about the loans through “gossip”; and wanted to know if he agreed Treasury was required to give approval.

Mr McCallion replied no, not for MCC it was a trading company and never part of government.

Mrs Christian was not satisfied with the response and asked something about the purchase of the 50% share owned by the National Grid in the inter-connector cable; but Mr McCallion said he didn’t follow the question.

Mrs Christian tried a simpler question and put to him, you believe the MCC didn’t require Tynwald approval; and Mr McCallion replied she was correct, and Mrs Christian asked if the MEA had the use of the money.

Mr McCallion replied there had been the huge cost of the gas pipeline, a pressure reduction station that had supposed to be the responsibility of BGE, but ended up being the MEA’s – along with another one to satisfy the low pressure required by Manx Gas customers, which had been the wish of the government, not the MEA’s, but they hadn’t stood in the way of this wish – and consequently all these added costs built up.

He explained, once they had the sub-sea optic fibre cable, it had been the plan for MCC to become the Manx Cable and Pipeline Company, for trading purposes. Moreover, they had sought, by using the MCC, to protect the IOM government against unlimited liability in the event of an accident with the gas pipeline.

So all this extra cost fell on the MEA, which had been imposed by government, said Mrs Christian; so why didn’t they seek government assistance, she inquired.

He didn’t give a particularly direct answer and said they could have gone down a different route with the pipeline, with the government paying all the direct costs but that wasn’t what was asked for.

Mrs Christian asked again why they hadn’t asked government; but he replied he thought he had already answered the question before, they would get all the costs “in one pot” and then “tap into the bond” for the long term. He said they decided they would not go tapping the bond in “dribs and drabs” and, acknowledging he isn’t an accountant, he said he was told that way was not cost effective; so they went the way they did.

Mrs Christian said the loans are seen as overspend, and asked was the Board aware they were going over the budget.

Mr McCallion said they were aware of the costs but denied they were working to a budget. He conceded, perhaps, the power station had the nearest thing to a budget, but overall they did not.

He gave a bit more explanation of this saying the actual structure of the building, the turbines, the generators etc could be priced, and a form of budget set; but not for all the ancillary costs.

Not giving up on this line of questioning, Mrs Christian again asked why they had not gone to Tynwald when they had over spent the £185m.

Mr McCallion thought they did, and thought a meeting with the CPU had resolved this issue. Mrs Christian didn’t agree and suggested it was why the Treasury took the action they did; but again he thought it had all been about a “personality issue”.

Mr Callister put it to Mr McCallion the PRS may not have been foreseen but the demolition of the old power station should have been.

He replied he thought some costs had been included, but not the contaminated soils; for which they had to charter a ship to take it to Antwerp for incineration.

Mr Callister said he wasn’t talking about the soils and stated Mr Proffitt had said they had not allowed any costs for the demolition of the old station.

Mr McCallion said he could not say if that was correct; but he knew when they came to take the old chimney down they couldn’t believe how strong it had been built.

Mr Callister again put it to Mr McCallion they should have made some allowance for this; but he replied he thought they did, but Mr Callister maintained it wasn’t what they had heard so far.

Mr Rodan put to Mr McCallion the ‘on time on budget’ mantra, which has oft being heard during these sessions, had been claimed, by Mr Bell, to have been said at a meeting.

Mr McCallion said it was a meeting he remembered with “clarity”. His P. A. had received a message that Mr Bell wanted to see him. With all his business experience, he thought it strange, and unusual, that it was proposed he would be meeting with Mr Bell, on his own, without any secretaries present or an agenda. He remembered some of the discussions but he certainly didn’t remember discussing the power station. He did recall Mr Bell saying there was a good relationship between Colin Kniveton and the MEA; and this had surprised him. He explained Mr Kniveton had been a candidate for the Finance Director’s position at the MEA but they had appointed Clive Wilcox, as he was the best candidate; so he was glad to hear Mr Bell say he was on good terms with the MEA.

He recalled Mr Bell asking what the Board intended to do with the tariff for the next year; and saying the Board would do its best to keep it the same.

He said it had been part of his training in the company he worked for, if a meeting was attended without secretaries or minutes, to make a note of the meeting. Turning to his legal representative, Miss Holt, he checked they had submitted a copy of it to the Committee; and it was confirmed it was in the submitted pack.

Referenced 04/07, and signed by him, he knew it had been included in a Board pack so he could advise them of the meeting.

It was suggested by Mr Rodan, for the record, it was read out; and Mr McCallion did so, with some commentary as he went along.

Among the comments, he read, was no agenda needed as main issue to discuss was annual report 2002/3, a rejection of the suggestion of an officer in attendance, a reference to the “excellent co-operation” between the parties, a discussion about the standing charge, the position of telecoms – the MEA becoming more and more concerned they had a “money making machine” but were not getting the go ahead - and entries in the annual report.

So what Mr Bell had stated, in his evidence, did not accord with his recollection, asked Mr Rodan; and Mr McCallion confirmed it was not his recollection, unless it had been mentioned during the discussion on the annual report.

And the loans, inquired Mr Rodan; but Mr McCallion was surer the subject hadn’t come up. This was partly why he had wanted to take someone with him, and he said Charles Fargher would have gone if he had been invited.

Was the fact the loans were not mentioned by Mr Bell an indication he did not know of them, wondered Mr Rodan; but Mr McCallion said “no” it was more a case of it not forming part of the discussions.

Mr Rodan returned to whether he thought he needed Treasury approval; but Mr McCallion again repeated his stance regarding MCC, and it had suited government to have this arrangement when MCC was set up to limit liability. He went on to say if the area around the gas pipeline, where it came ashore, “blew-up”, 250 square miles could be devastated and the government would be “landed with a bill so big” it would be crippling. So the MEA had done all the due diligence and did what they did.

Mr Rodan put to him, in 1999, when they had taken out the HSBC loan, John Cashen had said Treasury didn’t require to give express approval, as they were borrowing through a company; so was this the precedent for not seeking Treasury approval he asked.

Mr McCallion replied “without looking for excuses”, yes he was correct, the precedent was set.

So it had not been to “circumvent procedures or consequences” of following the correct route or to “avoid bureaucratic steps” to get the money more quickly; and Mr McCallion concurred with Mr Rodan’s summation.

Mr Rodan put another supposition forward: so had the “viable money making machine”, the making of the MEA business model more robust, and a predicted rapid increase in the income stream, made it, in retrospect, a case of “the ends justify the means” and justify the overspend. Or to put it another way, he added, you are thinking at the “ultimate end” the amounts earned would make the overspend “pretty academic, pretty trivial?”

Again stating he was not looking for excuses, Mr McCallion said they had “a machine ready to fire up” and nearly had contracts signed that would have generated “millions of pounds in revenue”. He claimed they could have provided a far superior service to Manx Telecom, using their copper wires, and he had seen it work in Singapore. Local calls would have been free with a much lower tariff for other calls.

So if it had transpire they would have been able to repay the loans “in a fairly short time”, asked Mr Rodan; to which Mr McCallion replied they had “not been putting all their eggs in one basket”.

So it had been a “shock” not to get support, inquired Mr Rodan; and Mr McCallion said it had been more than a shock, they hadn’t even been given a reason. They had been told to get ready for the appointed day order for the new Act and then it all stopped.

Mr Callister popped up with a further question, and referring to a letter from Miss Holt, he said it said “vested interests” had prevented the telecoms project going ahead and wondered how that had affected their plans.

Checking first he was still protected in what he said, he alleged various people in “high office” had prevented the project proceeding: people on the boards of Manx Telecom and other companies, he said.

They either had a good reason or had vested interests to make sure it didn’t proceed, he repeated. He explained the MEA wanted to buy Manx Telecom, and that Mr Proffitt had got the agreement of the DTI to speak to O₂, and do due diligence; but for some reason it was stopped. He said they had told government O₂ was not going to keep MT, and it ended up being bought by a Spanish company, and now all the profits go off Island; when they could have gone to the Manx government.

Another issue was a “fairly funny” meeting regarding Manstar - corrected to ManSat by Mr Rodan - with Richard Corkill, Mrs Williams, and Mr Stott of ManSat – during which Mr Stott said he was going to sue Mr Proffitt as he felt he had ‘stolen’ some of his customers – when they were asked to buy a ManSat facility near a school (Braddan – Ed). He explained as they would still be required to make payments to MT there was no advantage; and, furthermore, after due diligence having been conducted by an independent body, it was decided it was “not worth a bean” so they rejected the proposal. Thereafter MT became an “activist”, he claimed.

Mr Rodan thanked him for his comments, and pointed out the Committee had introduced this topic, although “telecoms is a further phase of our investigations”.

He inquired if any Committee members had any last questions on compliance and Mr Butt said he did.

He pointed out to Mr McCallion that in addition to the meeting Mr Bell claimed the “on time on budget” statement had been made, at about the same time, it had been made at a presentation and in public; so could he account for that.

Yes he could, it was in the annual report, and he had also been asked later about the power station and he remained adamant it had not gone over budget. He admitted they had not known what the extra costs would be, but the generators etc they did. He acknowledged the cost of the glass front had been criticized, but as the power station is going to be there a long time they wanted to make sure it wasn’t a hideous sight.

So as Mr Proffitt said, the £185m was always an indicative cost, suggested Mr Rodan; and back came the short answer “Yes”.

So what was the cost of the power station, asked Mr Callister again, as though he was having difficulty keeping track of the figures; and he got the answer “£92m”.

So it was only through the “jungle drums” Treasury was expected to find out the rest of the cost, said a sarcastic Mr Callister.

As far as Mr McCallion was concerned this was not the case as he believed Ashton Lewis must have given some insight to Treasury. He then, almost as an after thought, added “you don’t get something for nothing”.

Bringing the session to a close he asked Mr McCallion if he had anything else to add; to which he said “no”, before adding as a final parting shot, “I think we did everything in an honest manner – there was no intention to deceive”.

The next session is scheduled for 19^th June, when his former colleagues on the Board are due to give their evidence.