SPECIAL REPORT
Last fall, government was faced with a seemingly insurmountable task: disposing of unprecedented mountains of garbage left over from Hurricane Irma.
But officials did not launch a tender process or turn to the private recyclers who have been operating in the territory for years.
Instead, they made a deal with Kausina VI, an unregistered firm without a trade licence, whose Hawaii-born founder and CEO currently owes some $500,000 to a disgruntled United States investor who successfully sued him, alleging that he attempted to use shell companies to avoid responsibility for debts related to other companies he owns, according to interviews and documents.
Without signing a formal contract or asking the Finance Ministry to conduct a due-diligence process, government has provided Kausina with work permit exemptions, the use of Department of Waste Management machinery and personnel, and shared office space, according to interviews with Kausina VI founder Walter Parker and public officials.
In exchange, they said, the firm is to partner with the DWM and the Ministry of Health and Social Development over the next two years to collect large storm debris, send heavy metals off island for recycling, and process up to 100 tons of combustible trash per day in a “gasification” unit in Coxheath, which would rival Pockwood Pond’s 100-ton-per-day incinerator.
HSD Minister Ronnie Skelton acknowledged in a February interview that he and ministry officials did not know about the US lawsuit, or that Kausina VI had been struck off the territory’s list of registered companies, but defended the government’s decision to use the firm.
Because Kausina VI is not getting paid directly — rather, it plans to earn money from the recyclables it ships away — a formal contract was not necessary, justified the minister, who, like Mr. Parker, described the US lawsuit as a standard business inconvenience.
“I know that if you’re in business you will be sued, especially in America. You will be sued,” Mr. Skelton said. “And if you don’t live up to your obligation, it’s not like in small countries: You will be sued.”
Financial Secretary Glenroy Forbes said his office was never asked to conduct due diligence on Kausina.
“I cannot recall having any knowledge of the company Kausina VI,” he said.
Though the website of Kausina VI’s holding company depicts a firm that is executing multiple large-scale projects in the Caribbean and South Pacific, Mr. Parker and his partners declined to provide specific details about any of them, and the Beacon was unable to independently verify their existence.
Meanwhile, Kausina VI began work here in early February, with Coxheath and Pockwood Pond as the nexus points of “Operation Clean Sweep,” according to Mr. Parker.
And as of April 2, labourers had begun sorting and processing waste at Coxheath, he said.
“When the hurricane hit, I personally felt it was like a moral obligation,” Mr. Parker said. “And when the government and I first started engaging on this, it was — just as it is now — a very collaborative, team way of how we work through the process.”
Starting in the VI
“Operation Clean Sweep” is the only project Kausina VI has taken on since its creation in 2015.
Mr. Parker said he formed the company with local partners in the territory, including Allen Wheatley, who described himself as a “professional consultant.” Kausina first contacted him because of his background in alternate energy initiatives, Mr. Wheatley said, but did not provide further details about those projects.
“The government had its initiatives going off into alternative energy and it’s the way of the world, so it was a sort of natural progression going into it,” said Mr. Wheatley, a former financial secretary who, in 2004, was sentenced to nine months in prison after pleading guilty to corruption-related charges.
Kausina’s initial goal was to build a waste-to-energy plant in Pockwood Pond, Mr. Wheatley and government officials confirmed (though Mr. Parker declined to speak about the proposed plant in two interviews).
Essentially, the facility was to generate electricity by combusting waste. The company hoped to be able to sell that energy and charge government tipping fees, or costs for processing each amount of trash.
Kausina’s plan was never given a green light, however.
“Those discussions weren’t finalised in terms of waste-to-energy because there was a lot of research that needed to be done,” Petrona Davies, HSD permanent secretary, said in a February interview. “Even now, there needs to be a fresh waste classification study to be able to pin down most precisely how viable such an operation would be.”
Then, during the ongoing discussions between government and Kausina, Irma hit.
Suddenly the DWM and HSD were grappling with much bigger waste disposal problems.
‘No net cost’ to gov’t
Coxheath, large portions of which are owned by Premier Dr. Orlando Smith, was set aside as an emergency “debris management hub” for hurricane wreckage in September.
Greg Adams, the chief planner at the Town and Country Planning Department, said that no application was submitted for that site to be used as a waste centre.
He speculated that was due to the territory being in “a state of emergency” after Irma, and referred the Beacon to the Department of Waste Management for more information. DWM Manager Greg Massicote could not be reached for comment on that point.
Nevertheless, Coxheath soon became an unofficial catchall for general waste.
A growing ridge of garbage as high as 40 feet still runs along the seaside highway, prominently displaying rusted-out washing machines, a cornucopia of car parts and mangled tree limbs.
“We were at the edges of what we could handle,” Mr. Skelton said.
Two years worth of garbage was collected in just three months, DWM reported.
“After the storm hit, we were approached by several parties who mainly had an interest in scrap metal removal, and they came and said, ‘Can we assist you to clean up the island?’” Ms. Davies said, adding that Kausina VI was one of the companies offering to help manage the huge piles of waste and export recyclables.
However, with every initial proposal — including Kausina VI’s — government was being asked for some sort of payment, the permanent secretary said.
“Even to get started, for them to come out and assess, there was a cost attached,” she explained.
Kausina was the only company that eventually said it could conduct a recycling and cleanup operation without direct payment, Ms. Davies said.
Instead, government agreed to support the project in other ways, like giving access to certain areas, providing machinery and personnel from DWM, and collecting hundreds of derelict vehicles from around the island for Kausina to export.
“There’s not a net cash cost to government, but there are in-kind contributions,” Mr. Parker said. “[Those contributions] don’t equate to cash, but they’re helping.”
No tender process
Government selected Kausina’s proposal — a decision that Mr. Massicote, the DWM manager, first confirmed to the Beacon in mid-December — and negotiations were finalised later that month.
Kausina VI employees had already been on the ground “assessing” debris management sites throughout the month of December before Mr. Skelton made a public statement about the project, briefly detailing that work.
Ms. Davies and Mr. Skelton both stressed in the February interview that because government is not paying Kausina in cash, a public tender process was not necessary.
“In these times you cannot really talk about tendering contracts, because then all of the work that has been done so far for the whole recovery of the country, … we’d have all the garbage out on the street,” Mr. Skelton added.
“So none of the whole collection process was tendered, so to speak. Prices were negotiated.”
Floyd Stoutt, who for years was the main car crusher and private recycler on Tortola, said in February that he had not yet been contacted by Kausina VI to work with them.
Mr. Parker said the opposite.
“We’ve been in discussions with Mr. Stoutt and, like I said, I think everyone is acting very much in concert,” he said in Januay.
Last week, Mr. Stoutt said Kausina finally reached out to him about two weeks earlier. The recycler said he hopes to work with the company to compact cars and garbage, but specifics have not yet been finalised.
One of the primary recyclers on Virgin Gorda, Julie Swartz, said she didn’t receive a call from Mr. Parker until March.
“Later is better than never,” she said. “I’m hopeful as always.”
Ms. Swartz added that although it’s “hard to guess” how her company, Green and Clean VI, will be incorporated into Kausina’s plans, she would like to become a local end market for its recyclables.
She does wish, however, that a government tender process could have happened in the first place.
“That opportunity was cancelled with a stroke of a pen,” she said.
No trade licence
Though Kausina VI is now about two months into its operation, the company is not officially registered in the territory and does not have a trade licence, public officers confirmed.
Officials at the Department of Trade, Investment Promotion and Consumer Affairs said last Thursday that no licence has been issued for Kausina VI or for Walter Parker, nor does there appear to be any licence pending.
Documents obtained from the Registry of Corporate Affairs also show that the last and only time annual fees were paid for the firm was on Sept. 14, 2015 — the same date Kausina VI was incorporated.
It was formally struck off the list of registered companies for non-payment in May 2017.
Once a company has been struck from the register, its directors and members may not “carry on any business or in any way deal with the assets of the company,” according to the BVI Business Companies Act, 2004.
Kenneth Baker, the deputy managing director of regulation at the Financial Services Commission, explained that whether or not Kausina is acting illegally would be “up to legal interpretation” of the act.
Mr. Parker chalked up his firm’s lack of registration as an administrative issue. Some logistical to-dos could have fallen by the wayside because the current waste disposal project has “evolved so rapidly,” he said.
“I will have to inquire with my partner on that. I knew that we had some fees to be paid. I wasn’t sure what those all were,” he said in late February.
As of April 11, however, Kausina VI was still not in good standing, according to a search at the Registry of Corporate Affairs. Mr. Skelton and Ms. Davies said they were unaware that the company is unregistered.
“I don’t think that’s a major, major issue,” Mr. Skelton added. “It’s something that happens that people do for different reasons.”
Ms. Davies was also undeterred by Kausina’s lack of trade licence.
“A trade licence is not required for the ‘cleanup’ operations (i.e. debris collection and processing) conducted by Kausina VI at no cost to the government,” she wrote in an e-mail, adding that the company would need to supply a current licence if government were to conduct “financial transactions or other business operations” with it.
Mr. Parker has not commented on his company’s trade licence situation, despite inquiries from the Beacon.
Minister Skelton and Ms. Davies said other due diligence methods would be taken if government were to enter into a formal contract with Kausina VI in the future, including checking company registration, reviewing social security information and reviewing financial standing.
“The way we see it, we are not paying them for anything,” Mr. Skelton said. “We are not loaning them any money. They will not get any money from us.”
Karia Christopher, director of the trade department, could not be reached for comment, and Deputy Director Maxwell George declined to answer questions about the fact that Kausina does not have a trade licence.
“I would much prefer not to discuss that at this point in time,” Mr. George said.
Work permit exemptions?
Though the Finance Ministry did not conduct a due diligence check on Kausina VI, Ms. Davies said the firm had satisfied them that “proper arrangements” were in place and that it can properly dispose of the huge volume of garbage.
A waste management advisor for the United Nations Development Programme, Dr. Tim Walsh, also reviewed Kausina VI’s proposal and gave government advice on the viability of recycling markets, Ms. Davies said.
Dr. Walsh could not be reached for comment on his findings.
Other than receiving labour and machinery from the DWM, Kausina has benefitted in other ways from its collaboration with government.
Mr. Parker said all labourers on the project — dozens have been working from East to West End to collect garbage, load it onto trucks and bring it to Coxheath — are hired locally. But logistical advisors have also been sourced from other Caribbean countries and the United States, he added.
Every person brought in for the project is work-permit exempt, Mr. Parker said.
“[Work permit exemption] is one of the things that the government has been very helpful with regards to making it easier to help them,” Mr. Parker said. “So also things like bringing in equipment through customs, we’ll ask for their support to make sure things don’t get caught up in customs.”
No exemptions have been listed in the Virgin Islands Official Gazette since Irma. Attempts to reach Labour Commissioner Janice Rymer and Ronald Smith-Berkeley, the permanent secretary of the Ministry of Natural Resources and Labour, were unsuccessful.
Kevin “OJ” Smith, a former National Democratic Party candidate for Third District representative, has been working to make things easier for Kausina VI as well. Mr. Smith, now a self-described “consultant,” said his cousin, Allen Wheatley, first connected him with the company.
On this project he has helped Kausina find labourers to work in Pockwood Pond and used his contacts to ensure the firm can access certain lands for waste collection.
“It makes sense to have someone on the ground who knows people,” he said.
Kausina is also “cohabitating with government” in some of their office spaces after its own office in Port Purcell was destroyed by Irma, Mr. Parker said.
US lawsuit
Kausina VI is not the first company within the energy or waste management sector that Mr. Parker has created.
He helped start four in the United States — Parker SciTech Group, Parker Capital and Holdings, JWP Energy, and Kausina Energy and Environment — between 2008 and 2012.
The main purpose of some of those companies was to improve on the efficiency of existing gasification systems, Mr. Parker said.
But when he and his partners couldn’t mature the technology any further, he explained, the companies were dissolved.
“We were trying to do something very revolutionary,” Mr. Parker said. “But we got to the point where it required more development, and just like software, just like any kind of technical gadget, you get to a point where you go, ‘Eh, we can’t really see the end of the
road on the development side.’”
One investor in both Parker SciTech and Kausina Energy and Environment, though, didn’t just walk away.
California resident Stephen Paap invested $120,000 for a three percent interest in Parker SciTech and also loaned Mr. Parker $36,000 towards the company in 2009, he alleged in San Diego Superior Court documents.
Again in 2014, he claimed, he loaned Mr. Parker an additional $108,060 towards Kausina Energy and Environment.
Mr. Paap sued Mr. Parker and those two companies the following year, saying he was never paid back any portion of the loans and never saw any return on investment. He argued in court documents that Mr. Parker was using various companies as vehicles to avoid personal liability.
“The Parker entities constitute the alter egos of defendant Parker in that they have been organised and are being operated as mere shells without sufficient capital and assets and in fact were organised and operated without sufficient assets put therein by Parker,” the documents allege.
“[They were] intended and used by Parker as a device to avoid individual liability and for the purpose of substituting financially irresponsible entities in place and stead of the individual defendant. Adherence to the fiction of the Parker entities’ separate existence would, under the circumstances, sanction a fraud and promote injustice.”
Mr. Parker did not appear in court to respond to the claims, according to court documents.
In a default judgment, he lost the suit and was ordered to pay almost $400,000.
“Plantiff has submitted documentary evidence to the court to prove up the claims against the Parker defendants,” the judgment against him read.
As the years ticked by and interest grew on the mostly unpaid judgment (Mr. Parker paid $13,500 of what he called “good faith funds”), that number had ballooned to over $460,000 as of last September.
Mr. Paap and his attorney Treg Julander could not be reached for comment. Mr. Parker had not responded to Mr. Paap’s allegations as of Beacon press time yesterday afternoon.
Court sanctions
Even as Mr. Parker works in the territory, he is being slapped with thousands of dollars in sanctions for not complying with court orders related to the 2015 lawsuit.
And on March 2, Mr. Parker and Kausina Energy and Environment were ordered to show why they should not be found in contempt of court, though no decision has yet been published by the court on that point.
Asked how the suit has stretched on for so long, Mr. Parker said his lawyer has been working to settle it.
“That particular case is a little bit frustrating in the sense that it was probably the smallest investment but caused the most consternation as far as having to arbitrate this; it’s been challenging,” he said.
“I don’t personally get involved with it that much — the attorneys handle it — but the fact is that on their part it could have been settled a long time ago and it just wasn’t.”
To be able to fund its current project, Kausina VI has taken on private funding and investment flowing from “affiliates, supporters and the like,” Mr. Parker said. He confirmed that the company has also met with two private investment firms, but declined to provide specific details.
Mr. Parker stressed that while he is still dealing with the legal ramifications of previous investments gone sour, those issues will not affect revenue streams for this project — income from selling recyclables — which he said is supplemented by private funding.
He created Kausina VI in September 2015, about six months after he was sued in San Diego, but said the local company is technically separate from Kausina Energy and Environment.
He described the latter as “like a holding company of sorts” under which there are several “project entities” in the Pacific Rim and the Caribbean, including Kausina VI.
Over the course of two interviews, Mr. Parker declined to give further details about exactly where the other entities are or what those projects entail, instead saying that some are under government contract.
The Beacon could not independently find any information confirming the existence of the projects.
“[Kausina Energy and Environment] is a completely separate company and the business line was somewhat similar, but different altogether. It was more of a technology-based firm when that investment [from Mr. Paap] came in,” Mr. Parker said. “But [Kausina VI] is a project-based entity, and that’s where the company has really shifted and that’s where this company here is almost exclusively operational — project operational.”
Like the registration status of Kausina VI, Mr. Skelton and Ms. Davies were not aware of ongoing litigation involving Mr. Parker.
After being given basic details about the nature of the case, Ms. Davies said: “So we don’t know that statement that you made is true.”
“Even if it’s true,” Mr. Skelton interjected. “Any company that is not here that we can do business with, if you go and do your research there’s always some case pending in some place.”
Money in recycling
For dozens of Kausina VI employees and labourers working throughout the island, concerns about lawsuits or company registration are likely distant.
On a morning in early February, more than 20 locally hired men worked by the baseball field in East End, pulling wooden pallets and pieces of plywood from a ditch.
Many of the young workers, including the “team leader” for that site, said they heard about the job through friends or Facebook. They were now tasked with clearing combustible waste from public areas, school campuses, main roads and other locations.
Rumbling close by, a waiting truck already contained large household appliances and dozens of pieces of galvanised roofing.
The labour-intensive collection process is step one for Kausina, and part of a roughly 18-to-24-month operation, according to Kausina and government officials.
Workers are gradually making their way through East End, the Ridge Road, Road Town, West End and finally the beaches on the North Shore, loading trucks with garbage.
The trucks are then taking their stash to Coxheath, where debris are separated by type, metals will be processed, and combustibles eventually will be gasified, according to Mr. Parker.
The gasification unit is “transportable” and compliant with US Environmental Protection Agency guidelines, Mr. Parker said, adding that it will initially process about 75 to 100 tons per day of shredded combustible waste in Coxheath. That workload would rival the incinerator in Pockwood Pond, which has a capacity of 100 tons per day.
Mr. Parker did not specify when the gasification system will arrive or when it will begin processing waste, even after a specific request for comment via WhatsApp on Friday.
In the case of another storm, Mr. Parker also said Kausina will deploy the “latest landfill tarp system” at Coxheath to prevent trash from scattering in high winds.
Recyclables will later be brought to Kausina VI’s staging site in Pockwood Pond, where they eventually will be exported on barges to various buyers, Mr. Parker said. Derelict vehicles are also brought to the location directly by the Department of Waste Management.
Louis Espinal, a former member of the US Marine Corps, is the operations director for the project and oversees most of the processes.
“At the end of the day, it’s going to be an ongoing project to help out the people of Tortola,” he said in a February interview.
The search operation for garbage around the island is being funded, in part, by the revenue made from recycling metal, Mr. Parker said, though he has declined to give specific information about the end markets for that metal and has not responded to questions about how much, if any, has been shipped away as yet.
But Mr. Parker and private recyclers in the territory said recycling is not inherently a hugely profitable business.
“None of this is cost effective,” Charlotte McDevitt, the executive director of nonprofit Green VI, said in December about the recycling industry in the Virgin Islands. “This is what the fallacy is about recycling: … That there’s money to be made in it.”
Mr. Parker said the amount of money that goes into recovering metal debris, processing it and shipping it off island will be substantial.
“There’s kind of a potential misperception that people see all this metal around,” he said. “Well, that’s great, but the net on that isn’t what people think. The cost side is extraordinary.”
Private funding is used to fill the gap in that revenue stream, Mr. Parker said.
“It’s kind of hard to say to the degree we’d be able to [fund the project] without the investment capital coming in,” he said. “There’s also some similar, I guess, sources, just not investment capital — it’s private funding that we have access to, that have shown an interest in it.”
Mr. Parker did not specify exactly what kind of private funding that might be.
Waste-to-energy plans
When this project is completed, Kausina VI will likely look at resurrecting its waste-to-energy plans, according to Mr. Wheatley, the VI consultant associated with the project, and Mr. Espinal.
“Around here, [recycling] is not a big business by any stretch of the imagination,” Mr. Wheatley said. “Our main focus is waste-to-energy, so we don’t veer too far outside of that.”
Building a plant is one of the main reasons Kausina VI took on the hurricane debris removal project in the first place, Mr. Espinal added.
“It’s about building relationships — building relationships with the government, saying: ‘Hey look, we want to establish this plant here, turn waste to energy, which is gonna benefit you. But here’s something else we want to do to basically show you our commitment to the country,’” Mr. Espinal said.
“And that’s why we’re doing this. At the end of the day this is more like humanitarian disaster relief than it is a profitable business.”
Mr. Parker, however, said he did not take on “Operation Clean Sweep” merely to curry favour with government officials.
“Are we winning favour and gaining confidence with the government? I would hope so. But it’s not related to the waste-to-energy project,” he said. “The Honourable Skelton, you know, we have a commitment to him and the Department of Waste Management. And we’d like to maintain that confidence and that good faith.”
Meanwhile, Mr. Skelton seemed unfazed by information about Kausina VI and its affiliates’ corporate past.
At the end of a recent interview, he acknowledged that there are undoubtedly individuals looking to make money from the Virgin Islands in the aftermath of Irma, a trend he described as “disaster recovery capitalism.”
“There’s always somebody with a bright scheme. It’s not going to be perfect. I’m not going to tell you I’m gonna catch every one — I will not,” he said. “I think we’ll do our best to make sure that, whatever’s happened, that the end result for us is cleaning our country and getting the garbage out of the way.
“And if we can get that accomplished and there’s one bad actor that did it, I will accept whatever punishment.”
Conor King Devitt contributed to this report.