By Caribbean News Now contributor
BASSETERRE, St Kitts — Following a series of reports by Caribbean News Now regarding rampant fraud in the St Kitts and Nevis citizenship by investment programme (CIP), which were recently picked up by Gulf News – a widely read publication in the Middle East – the government has been engaged in an ongoing damage control exercise, in the midst of which an article critical of the failure of supervision recently published by WIC News has since mysteriously disappeared from the publication’s website.
Of particular concern to existing and potential citizens is the threatened revocation of St Kitts and Nevis citizenships obtained through illegally discounted real estate acquisitions.
The opposition St Kitts-Nevis Labour Party has issued a policy statement to the effect that citizenships fraudulently or illegally obtained by means of underpayment for qualifying real estate will be revoked.
The deleted WIC News article entitled “Better oversight and regulation: A comment on real estate under CBI” questioned the ability of Caribbean Galaxy Real Estate Corporation to complete its long delayed Ramada Resort in St Kitts that began construction in 2014.
Les Khan, CEO of the Citizenship by Investment Unit, was criticised for allowing the persistent illegality to happen without immediate corrective action.
Attorney General Vincent Byron also came under attack for his failure to ensure that project funding generated by the CIP is not used for other purposes.
The full text of the removed article appears below:
St Kitts and Nevis Ramada Resort has become the subject of concern over whether the developer, Caribbean Galaxy Real Estate Corporation, has sufficient financial resources for its completion. Given that the project is financed entirely through the Citizenship by Investment (CBI) Programme, the matter raises questions as to how those responsible for overseeing the Programme, and, crucially, the CEO of the Citizenship by Investment Unit Les Khan, could have allowed this to happen.
The Ramada Resort is scheduled to be completed in two phases. Under Phase One, 273 units are to be sold and built. 273 units have been pre-sold, but construction is far from being complete and a mere skeleton currently stands on the resort’s eight-acre site. Despite this, the Government has approved the commencement of Phase Two.
Construction industry experts have indicated that, as the Ramada Resort is intended as a high-end, luxury property, the majority of the cost will be incurred after the basic structure is complete – i.e. the ‘finishing’ touches (ranging from external facings, to joinery, flooring, fittings, and utilities). The table below simplifies this:
Typical Construction of High-End Property
Basic structure 20% of total cost
Finishing touches 80% of total cost
The Ramada Resort’s basic structure has largely been finalised. Yet the ‘finishing touches’ – that is, those elements constitute the remaining 80% of the entirety of the cost – haven’t even been started. Ex-civil servant Nigel Faron says this raises questions: “why has the Government approved Phase Two of the project when there remains vast work to be completed under Phase One? And, why hasn’t more of the project been completed even though all 273 units were sold (therefore providing the necessary funding)?”
Mr Faron posits that, since the funds from the sale of the 273 units have not been used for the Ramada Resort, they must either be lingering in the developer’s escrow account in St Kitts and Nevis, or have been moved elsewhere. “Has the Government examined the account to ensure the funds paid into it are still there? If the answer is yes, then has the Government sought an explanation for why the money is not being used to pay for Phase One? If the answer is no, where is the money, and who is managing it? Is it – worrisomely – beyond the reach of the authorities of St Kitts and Nevis?”
Mr Faron is also concerned that the Government has not used all the means available to it to tackle fraud allegations under the Citizenship by Investment Programme’s real estate option. “Why, when there is potential evidence of widespread fraud, has there been no indication of an extensive police investigation? The matter is serious, and reflects upon the CBI Programme and the nation as a whole.”
Mr Faron points an accusing finger: “It is certainly the responsibility of the Attorney General, as the guardian of the rule of law in this Federation, to ensure that monies intended for investment in Government-sanctioned real estate is not used elsewhere. Equally, it is also the responsibility of the Unit CEO to monitor those who operate under the Programme, ensuring that they exploit the Programme to the detriment of St Kitts and Nevis.”
Evidence of abuse of the real estate arm of the Programme has surfaced over the past months, with two principal incentive schemes being identified.
First, developers promise investors rent returns ‘upfront’ rather than upon the rent being paid by third parties. They then use the money provided by the investor to pay these ‘upfront rents.’ “Even if this were legal, rent returns count as income. Is the investor declaring this income to the relevant authorities in St Kitts and Nevis? And is the investor further declaring this income in his or her tax residence jurisdiction?” asks Mr Faron.
Second, developers promise ‘funding’ for the investor – ostensibly sponsoring part of a real estate investment in return for a benefit, such as the investor waiving rights to investment returns. It is, of course, likely that the applicant never actually receives funding, but rather is merely given a ‘discount’ on the property. “Yet even where funding is provided, is there any investigation on the part of the Unit that developers have applied, and received, a funding licence? If not, they are breaking the laws of the Federation – much like a bank would be breaking the law if it started handing out loans without the proper permits,” continues Mr Faron.
It is this lack of effective oversight by Mr Khan that led to former Prime Minister, the Hon. Denzil Douglas, to call for a closer assessment of the real estate investment option at the end of last year. The leader of the opposition insisted that a retrospective investigation be made on all recent real estate investors, and vowed to strip citizenship from those who had paid less than the legal amount.
“Credibility and integrity are cornerstones of the CBI Programme, and the Unit must be held accountable when there is a failure to uphold these essential values,” concludes Mr Faron.