Governor sacks Commissioner Kernohan

Stuart Kernohan Police Commissioner

H.E. the Governor Stuart Jack, in an uncompromising 18 November statement, has sacked Police Commissioner Stuart Kernohan -- accusing him of an “unauthorised absence” and “inappropriate action” -- and announced an immediate search for a replacement.

The statement came just 24 hours after a spokesman for Mr Kernohan released a 9 October letter from the commissioner to the governor, recalling the 14-month anti-corruption probe by Mr Jack’s Special Police Investigation Team, including his own 15 May suspension, and demanding within seven days an apology, an end to the investigation of his own conduct and unspecified damages.

The letter sent on behalf of Mr. Kernohan on 9 October was released to the press Monday afternoon by a spokesman. That release came more than five weeks after it was sent. Attorneys from the Campbell’s law firm, which is representing Mr. Kernohan, said they had received no response from Governor Jack.

“We…require you, within seven days, to confirm in writing that any investigation against Mr. Kernohan is at an end, to reinstate him to his position within the Royal Cayman Islands Police Service, with a full public apology, a full indemnity against his legal costs and payment to him of a sum (to be agreed) in relation to the damage that you have caused to his reputation by way of damages for breach of contract, malicious prosecution and/or slander and/or libel, failing which Mr. Kernohan’s rights are fully reserved,” the 9 October letter stated.

Said Governor Jack, “I can now advise that after reviewing all the circumstances of Mr Kernohan’s conduct as it relates to the terms and conditions of his employment, including his continuous unauthorised absence from the Islands, I am left with no option but to accept that he has unilaterally severed his contract with the Cayman Islands Government, and I now therefore treat it as at an end,” the Governor said in a five-paragraph statement late on Tuesday, 18 November.

“I am advised that the termination of the contract [will] not in any way affect the ongoing Police investigation against Mr Kernohan, whom I understand the police intend to interview shortly,” the governor wrote, after calling on the Portfolio of Internal and External Affairs “to immediately commence the recruitment process for a new full-time Commissioner”.

Until Tuesday’s statement, the Office of the Governor had neither acknowledged receipt of the letter nor offered a response.

Mr Kernohan, Chief Detective Superintendent John Jones and Deputy Police Commissioner Rudolph Dixon were all placed on “required leave” on 27 March by the Governor and Martin Bridger, Senior Investigating Officer of Mr Jack’s Special Police Investigation Team, as part of an anti-corruption probe of the Royal Cayman Islands Police Service.

On 15 May, Mr Jack and Mr Bridger placed both Mr Kernohan and Mr Jones under formal investigation, while arresting Mr Dixon on charges of obstructing justice and misconduct in public office.

Neither Mr Kernohan nor Mr Jones has been charged with any offence, nor have they been questioned by the investigation team.

Also on Tuesday afternoon, new Acting Police Commissioner Royce Hipgrave was scheduled to arrive, replacing outgoing Acting Commissioner David George, who is set to leave in late November after eight months in the position.

In his Tuesday statement, the Governor lamented Kernohan’s Monday release of the 9 October letter: ”I am personally disappointed that Mr Kernohan would publish private correspondence sent to me at a time when we consider potential disciplinary acts against him. Not only was this an inappropriate action, but the letter also contains groundless allegations which I categorically refute,” he wrote.

The reference to “potential disciplinary acts” refers to Mr Jack’s 10 September move to pursue sanctions against the commissioner after three fruitless orders in July and August that Mr Kernohan should return to George Town from the UK, where he had been since late April looking after his ailing father.

“Groundless accusations” are a reference to Kernohan’s 9 October charges of “an unlawful and irrational exercise” of executive power by Mr Jack, who deprived the commissioner of his job “for no good reason”, and acted “in bad faith and maliciously”, prolonging a “wholly pointless and expensive police operation to the disrepute” of Mr Kernohan and the people of the Cayman Islands.

Closing his 18 November “Update on Commissioner Stuart Kernohan”, Mr Jack said he would “continue to ensure that the public is kept up-to-date as developments take place”.

Mr Jack’s office did not respond to a list of questions by press time, leaving unanswered whether the move meant an end to all disciplinary sanctions against the commissioner and if Mr Jack anticipated legal recourse by Mr Kernohan.

The Ascent of Money, is the Cayman Islands' first-ever TV sponsorship deal

Cayman's Revolution Will Be Televised

Parmy Olson

A TV series that explains the origins of the financial crisis has a surprising sponsor: the Cayman Islands.

What television lacks in entertainment it makes up for in irony these days. A new show that aired in Britain on Monday and claimed to unravel the mysteries behind the global financial crisis, may look a little awkward once it gets to the bit about tax-evasion and dodgy, off-balance sheet funds. Its main sponsor? The Cayman Islands.

The British overseas territory isn't only a popular off-shore tax haven--it is also where many large banks parked the toxic debt securities in the last few years before the credit crisis erupted, leading to huge write-downs, losses and now, layoffs.

The six-part television series on Channel 4 and titled The Ascent of Money, is the Cayman Islands' first-ever TV sponsorship deal and worth "a six-figure" sum, the Islands' department of tourism said in a press release. It added that "the followers of the series present exactly the right profile and demographic of visitor who will want to book a holiday to the Cayman Islands."

Till now, some of Cayman's most popular tourists have been financiers: its light-touch regulation has led around 80.0% of the world's hedge funds to incorporate themselves there, and the secrecy it provides on off-shore accounts has spelled $400.0 billion in lost tax revenue from individuals and corporations, according to Richard Murphy of U.K. consultancy Tax Research.

More significantly, many of the world's large banks, including Citigroup (nyse: C - news - people ) and HSBC (nyse: HBC - news - people ), parked billions of dollars worth of credit derivatives off their balance sheets and into funds known as structured investment vehicles (SIVs), which were also incorporated in Cayman to take advantage of their lax regulation.

Most of these SIVs have now been shut down after failing to roll over their commercial paper last winter because their assets were largely American subprime mortgages. The SIVs had to be brought back onto banks' balance sheets, leading to huge write-downs, losses and the drying up interbank lending that led to the global credit freeze.

Citigroup, which announced Monday that it was cutting 53,000 jobs, once had around $80.0 billion parked in SIVs that were incorporated on the Cayman Islands. (See "Black Hole Banking.") In December last year, the bank had to put $49.0 billion worth of assets from those SIVs on its balance sheet, leading to the big write-downs of 2008.

Channel 4 spokeswoman Jenny Cummis denied that the Cayman Islands could have influenced the content of The Ascent of Money because the show had been made before the sponsorship deal was struck.

While its choice of the program is odd, Cayman is clearly seeking to change its image. The SIVs are gone and more laws are being proposed that are moving toward cracking down on the secrecy that Cayman offers. "These places actually have two choices," said Murphy. "They either sell real financial services that can survive under the glare of transparency, or they find something else to do."

In a choice between balmy Caribbean weather and credit derivatives, it is probably a lot easier to sell the former.

Hurricane Paloma Update: Cayman Brac Suffered the Most Damage

Grand Cayman was luckily outside the eye of the storm. As was Little Cayman fortunately for them.However, Paloma did to Cayman Brac what Ivan (2004) did to Grand Cayman. The Brac will need all the help it can in rebuilding.

(From left) Maxine Moore and her mother, Mary McCoy in
front of Mrs Moore’s devastated Little Cayman home.

Cayman Islands bracing for Hurricane Paloma

Cayman Islands braced on Friday for Hurricane Paloma, a strengthening storm expected to make landfall within hours.

Paloma grew into a Category 3 storm Friday evening with winds near 185 km/h, according to the U.S. National Hurricane Centre in Miami. It said the storm is expected to keep growing as it nears the affluent British territory.

The government has drawn up evacuation plans for residents in low-lying areas and coastal regions.

"We have asked everybody to come off the streets and to be home and safe right now," said hazard management director Barbara Carby.

The Cayman Islands government asked all hotels to remove guests from the ground and first floors.

Rainfall up to 15 inches was expected over parts of the Cayman Islands and its national weather service forecast waves rising up to 30 feet, which would cause dangerous coastal storm surges.

Water service across Grand Cayman was turned off, and power likely will be cut as the storm nears, hazard management director Barbara Carby said.

"We have asked everybody to come off the streets and to be home and safe right now," she said.

Stranded tourists watched dark clouds gather from their hotels or beachfront restaurants.

"It was a real surprise," said Rick Douglas, a 50-year-old from Toronto who checked weather Web sites before flying to the Caribbean. "It just said there was a tropical depression starting, but I didn't think it would turn into anything serious."

His wife, Susan Douglas, was confident they would be safe as long as they follow orders. "Grand Cayman has been there and done that, so they are prepared," she said.

The government has also ordered the airport closed, Tourism Minister Charles Clifford said Friday, adding that extra flights were added Thursday for those looking to leave.

"I hope I'm right, but I don't think this will be a major event," said Clifford.

The centre of the storm was about 50 kilometres south of Grand Cayman, the largest of the islands, at 7 p.m. ET. It is expected to reach Grand Cayman later Friday or early Saturday before hitting the coast of central Cuba by Saturday afternoon, the forecaster said in an advisory.

Still recovering from the havoc wreaked late in the summer by hurricanes Gustav and Ike, Cuba could be hit even harder than the Caymans.

The storm appeared to be en route to the central-eastern city of Camaguey, which was badly battered by Hurricane Ike in September.

Cuban official newspaper Granma said Friday that Paloma poses "a potential danger for the island." A tropical storm warning and a hurricane watch are in effect for several Cuban provinces.

Cuba's government has deployed the early stages of its civil defence system, advising people in central and eastern parts of the country to be prepared to evacuate should conditions worsen.