(Continued from this weekend’s Sunday edition, #2287 of Nov. 23, 2008)
Further testimony from Mr. Troy Gabb, the CEO of the DFC, in response to a question from Senator Rev. Chan, was along the same line what was the basis for the belief that the projects were completed: (5th public hearing pages 5 and 6).
Mr. Gabb: It was general and based on the information that we had received and is in the file which you all have a copy, everything appeared authentic.
Senator Rev. Chan: In terms of what Mr. Glenn Godfrey said that “the project had changed” did you know anything about that? That the purpose of which the initial loan was loaned out and there was a change afterwards according to his testimony? Did you know anything about that at all?
Mr. Gabb: At the point of closure of the transaction we weren’t aware of any change of the project.
Mr. Alvaro Bautista, former General Manager and Chief Operations Officer of the DFC and secretary to the board of the BMC, was of a similar belief. (Excerpts from Public Hearing no 5, pages 38-47.)
Senator Hulse: Okay. Were you at the board meetings during the period of the time that the North American Program was being discussed and these new pools of loans that would have been sold on to the North American market were being discussed?
Mr. Bautista: Yes.
Senator Hulse: Do you recall at anytime discussions surrounding two projects, one for Intelco and one for Western Caribbean?
Mr. Bautista: No. Those two projects have never been tabled at any board meeting.
Senator Hulse: The arguments that we have heard both from Mr. Godfrey and to a certain extent from Mr. Gabb, Mr. Godfrey stated categorically that the funds were disbursed so there is no argument about that.
Mr. Bautista: Yeah.
Senator Hulse: He says the rate of interest is correct, the term is correct, payments were made, interest was collected, quarterly payments were made, and insurance was issued. He denies none of these. But he contends that, in fact, that doesn’t in anyway all these statements do not in anyway suggest that this is coming from a project on the site of that nature. Payments could be coming from another source but as far as the DFC was concerned payments were coming. Insurance could have been on a building and properly issued, notwithstanding, that the building was not yet constructed it was an intent to do that. In fact, the appraised value could be done on the basis of future development.
In your experience as a banker and you have been at the DFC since 1976, is it? And in your experience of lending, which I think is by far wider than anybody else at the DFC would you conclude in hindsight that, in fact, there was something wrong with these two projects having being presented the way they were presented? And you are now finding out that that is not the case.
Mr. Bautista: Yes, I would say yes, because as I said that information that you just read is the information that we accepted to complete the files. That was the information that was passed on for review by the investors and it would indicate there, clearly, what was approved. What was disbursed, what was the insurance value, what was everything which we didn’t have originally, because when the information was submitted all we had was the copy of mortgages and so on to show there was a loan, right? But after reviewing the files prior to the visit of these investors and these consultants, we had to make sure that that is complete and that is the reason why this information was requested and based on that then we completed the files and did the recommendation.
Senator Hulse: Was there any requirement on part of the DFC to send anybody out there to physically verify?
Mr. Bautista: No. We didn’t do that as I said, because some of the loans we had dealt with it so many times. So it wasn’t necessary. We went based on information provided and from that information anybody would think that this is a project that is there, it is ongoing. It has flows and everything.
Senator Hulse: Does a development institution of the nature of DFC require that the use of funds be for the projects specified? Is that a requirement of a development institution?
Mr. Bautista: If that is the project, yes. If that is what they are financing it has to be that way.
Mr. McMillan of BIMCO and the project coordinator had the following comment in response to a question from Chairman Hulse on the matter of a change in the projects. (Public Hearing no 6, page 25-27).
Mr. McMillan: Now respectfully, Mr. Godfrey cannot excuse himself of his responsibility as now he is wearing many hats, as the chairman of DFC regardless of the fact that as we progress in this transaction, as frustrating as it was, even though we were able to complete this transaction which was a first transaction of its type in the region half a year prior to another competing one. He cannot excuse himself from the responsibility of knowledge because each time around transactional documents were presented or drafts represented these two particular loans which are over a million dollars in disburse balances to use the term disburse balances had to and were illuminated within the private placement memorandum, right.
Senator Hulse: But he said that he didn’t read that. He doesn’t remember…
Mr. McMillan: Well, that is his responsibility or his irresponsibility.
Senator Hulse: Well, my question to you, Mr. McMillan, is, in any of the discussions around this August, September period, did, when you were talking about not having Social Security charged anything to facilitate and so forth, was it clear in your mind that all parties, including Mr. Godfrey in the various conversations when he was objecting that the money should come without any deductions, that it was still clear to him and all parties that you all were talking about the same thing? There are two issues. One we are talking about disbursements; we have cleared that to a certain extent. But the second one we are talking about the same thing and he was still clear that you are talking about Cahal Pech and you are talking about San Pedro. You are talking about apartment buildings there, and the same projects have been described, or had those terms being specifically discussed? Okay, now you have your buildings up any kind of conversation because he is saying that a year before which should have been from April of 2001 that had changed and you were not talking about those things anymore. You are talking about different projects.
Mr. McMillan: That’s the companies. I had to laugh when I heard that because that is or those are the companies changing what they want to do. That is fine. But there was a responsibility to advise at least your originator, which would have been then St. James, that you have a change of desire to do whatever it is. That is your prerogative. But the originator should have known and the originator being a willing participant, no guns to their heads, to desire to off load their mortgages for the sake of liquidity purposes. All this program was designed to do create liquidity in the market place for further un-lending, should have as a willing participant advise SSB who would have in turn advise the DFC, the issuer, that there has been a change of intent; obviously, that did not occur.
So we have a problem there now, Mr. Godfrey, as chairman of DFC, who knows when these transaction from DFC are going to – when they are going to emanate, what’s the time line? And these mortgages are not buried in the hundreds of mortgages within the tape; they are illuminated by virtue of their principal balance being in excess of a million Belize dollars. So they are there, described the intent of the projects are described, prefab buildings in two. Every month you would get into the same documents; maybe you are tired of getting the documents but getting the documents nonetheless with it being there.
Senator Hulse: Every month?
Mr. McMillan: Every month or every two weeks. They came very rapidly but the fact to the matter is that there was no concealment, right. No rational or reasonable argument that anyone could put forward that you were not given the opportunity to be aware of what mortgages since you have a beneficial interest in St. James and, as we are learning now, beneficial interest in the two mortgages themselves. I am learning that from this hearing, which is another issue which I am very upset over. But going back to it, in terms of dealing with the issuer, should Mr. Godfrey have known it was his responsibility to have known. If he did not know then, you have to ask him why he did not exercise his responsibility in knowing what was there, because he signed off on it.
The SSB, as seller, makes representations and warranties in the Mortgage Purchase Agreement to the DFC, as purchaser, indicating that the mortgage loans originate with SSB and through several of the warranties, indicates that the loans comply with the program. This is accurate in the case of the loans actually originating with the SSB. However, in the case of the two mortgages from St. James, several of the representations and warranties in the Mortgage Purchase Agreement do not apply and raise suspicion of the status, nature and the origin of these loans.
(To be continued in next Sunday’s edition of the Amandala, dated November 30, 2008, issue #2289)