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Lieutenant Governor Defends Questioned Contract

Feb. 22, 2005 – Certain details of the American Eagle contract still have not been revealed to the V.I. Senate.
At a press conference Tuesday, Lt. Gov. Vargrave Richards said he supplied the Legislature with a copy of the contract Friday. However, the copy he delivered to the Legislature still had blackened-out portions, which Richards referred to as trade secrets, despite the Senate's subpoenaed request that he send a copy without darkened portions.
The press conference, held in the rotunda of the Lt. Governor's Office on St. Thomas, was the result of the subpoena issued to Richards by the Senate Feb. 11 demanding that he send a clear copy of the contract to the Legislature along with a funding source for the agreement. (See "Lieutenant Governor in Hot Seat Over Airline Contract").
Several senators, upon hearing that the V.I. government may have to pick up the tab if American Eagle did not make its minimum revenue requirement, were upset that Richards did not first go to the Legislature for approval of the contract. The senators then voted to subpoena the information from him.
Attorney General Alva Swan said Tuesday the Sunshine Act exempts trade secrets from exposure, and Eagle's pricing formula is considered a trade secret.
"We cannot disclose trade secrets; it's simple as that," Swan said.
Richards said the contract was entered into in "good faith" with the help of the Property and Procurement Department, and the Attorney General's Office.
"We've met all the legal concerns," Richards said. "This agreement was not entered into blindly."
Richards said the contract did not happen overnight, but took a year of negotiations with Eagle.
"When will we understand that we must change the way we do business in the territory?" Richards asked. "The conventional manner in which we've operated has yielded nothing.
"If we are going to do the same thing that we've done for the last 20 years, how are we going to grow and move on," he added.
Richards said he is certain that American Eagle has similar contracts with other Caribbean countries.
"We're in competition with our neighboring islands," Richards said. "They are doing creative things. If we fiddle, our Virgin Islands burn. We cannot afford that any longer."
According to the contract, American Eagle has to make a minimum revenue requirement for each round trip. If Eagle does not meet this minimum, the government has to pay the shortfall.
The American Eagle contract took effect Jan. 1 and will remain in effect until May 1. American Eagle has not yet notified the government whether it has incurred a cost due to Eagle's inability to reach it's minimum required revenue. Richards said Eagle representatives would meet with him in early March to assess if the V.I. government has to pick up any shortfall. Tickets cost $60 one-way and $120 round trip. The government receives a discounted rate of $54 one-way.
In the event of a shortfall, Richards said the funds would come from the St. Croix Economic Development Fund.
The flights Eagle provides have been beneficial to the territory, Richards said, adding he entered into the contract to "rejuvenate the St. Croix economy," and because his constituents have made numerous complaints about the limited flights between the islands.
The lieutenant governor said Eagle provided much-needed airlift during the Agricultural Fair this past weekend.
"It facilitated that process, and it made a difference," Richards said. "We are benefiting from the experience."
The American Eagle contract is not the first airline contract Richards worked on. He said he also played an integral role in acquiring the Danish charter flights contract.
"What we're doing with American Eagle is no different from what we've done with the Danes," Richards said.
Richards said as part of the Danish charter flight contract, the V.I. government paid $450,000 for the first season, which began in April of 2004. (See "First Danish Charter Gets a Warm Reception" on St. Croix Source).
The Danish flights were beneficial to the St. Croix economy, resulting in many hotel stays, Richards said, unlike several contracts entered into by the V.I. government in past years where millions of dollars were spent without results.
Richards urged the Legislature to focus on improving the territory's fiscal condition, instead of making things worse by driving companies away.
"We ought to be ever sensitive to how we treat the private sector," Richards said, adding that many companies are looking at how the Virgin Islands treat the private sector. "It is critical that we send the message that we're business friendly."
Richards said American Eagle has not yet indicated whether they would renew the contract after its May expiration date, but said the company expressed interest in a continued relationship with the territory.
Sen. Roosevelt David was in attendance at the conference along with representatives of Sens. Lorraine Berry and Louis Hill.
"The lieutenant governor is focusing on trade secrets and confidentiality," Berry said, adding he is avoiding the "main issues" of the total cost to the government, the funding source and where he got the authority to enter into the contract.
"We're going to request a legal opinion on the trade secrets matter," Berry said. The Senate President said she would also call Property and Procurement Commissioner Marc Biggs to verify whether the contract was within the bounds of the procurement code.
"If we subsidize American Eagle with public money, all other carriers will wonder why they didn't have that option," Berry said.

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