No one from the Government, the DFC board of directors, or top management has yet been called to publicly explain to the Commission why the Government kept pumping money into the institution, but present and past DFC workers at the lower levels continue to be called to give their perspectives on the DFC?s demise.

The Commission began this morning by replaying the testimony of Ann Wiltshire, DFC?s legal counsel, which she gave on August 8, 2006, regarding a promise that Glenn Godfrey, former DFC chairman, had made to Narda Garcia at the time when she served as general manager of the Social Security Board (SSB). In an acknowledgment letter of February 1, 2002, Godfrey promised Garcia that the DFC would release the SSB from its guarantee of loans for St. James, and particularly for his companies, Western Caribbean Properties and International Telecommunications Limited (Intelco).

When Wiltshire was first asked about the letter from Godfrey to Garcia, she said that she had seen a copy of the letter; today, she presented a copy, which the Commission asked her to initial, date and submit for their records.

The letter, according to Wiltshire, accompanied the draft of a deed of discharge and release of June 2002, which would have released the SSB from the risk of carrying the WCP and ITL loans, by transferring the risk to the DFC instead.

Wiltshire reiterated today that when Troy Gabb, DFC?s former GM/CEO, had asked her opinion on the matter, she had advised that, under the DFC Act, the deed would have had to carry DFC?s seal, as well as the signature of one other director and the DFC?s manager for it to be legal. She also said that releasing the SSB from the guarantee would have compromised the securitization deal, because the official documents had indicated SSB as the guarantor. She noted that a board resolution was required for the decision to be legal.

Was the document ever finalized and executed? Wiltshire said that the deed never went back to her and as far as she knows, it was never executed.

So far in the hearings no one has named the person responsible for preparing the deed, which Wiltshire opined is ultra vires the DFC Act.

Commissioner Merlene Bailey-Martinez noted that Godfrey was attempting to indemnify the SSB as the primary obligor for specific loans to his companies. She noted that in the event of a default, the DFC would have had to pick up the tab.

The Commission also recalled Jane Longsworth, who formerly served as DFC?s manager of MIS, securitization officer and acting assistant general manager ? services. Commission chairman, David Price, asked Longsworth to look at independent audits done for the DFC, first for 2003 and then for 2004.

She pointed out that the audits had some commonalities?particularly in their stance that the DFC?s financial position was being presented as better than it actually was.

In particular, the two audits indicated that the value of assets DFC was holding for resale, such as houses, was vastly overstated. The value of such assets was estimated to be $156 million in the first audit?with Mahogany Heights ($91 million), San Pedro ($25 million), and Los Lagos ($10 million) constituting the bulk of this amount. The second audit went on to specify that the assets? value was overstated by roughly $104 million.

Furthermore, Government put tens of millions of dollars into the DFC so that the books did not reflect how much money DFC was losing. For 2003, Government paid $37.3 million into the DFC to cover interest expenses. DFC should have shown a loss of $37.2 million that year, but instead it showed a net profit of $845,000. For 2004, Government paid another $59.4 million into the DFC. This boosted the DFC?s position from a loss of $61 million to a much smaller loss of $413,000. The assumption made was that the Government of Belize would continue to put money into the DFC to keep it going. The auditors warned that certain aspects of DFC?s financials, and especially the overstating of asset value, did not meet international standards.

Longsworth revealed that by the year 2004, DFC?s assets had grown to $626 million, but this included $139 million worth of assets held for resale. Included among those assets were loans Government owed to the DFC, but the DFC also owed Government and so the two values offset each other.

She said that DFC also depleted an $81.3 million sinking fund to pay the Royal Merchant Bank bond under securitization. GOB later settled the securitization debt and paid off the RMB.

Mrs. Bailey-Martinez said that at some point, the extent to which the Government bailed out the DFC would have to be quantified.

It appears that the Government?s bailout of the DFC and the transfer of the risk for the two Godfrey loans to the Social Security Board still did not ease all the tensions at the DFC over these transactions. Longsworth said that the matter had been repeatedly raised to Gabb and Roberto Bautista, formerly DFC?s chief operations officer, and the response from them was that the loans would be swapped out of the pool, or replaced with other loans. The problem was to find $17.5 million worth of loans to replace them. In the end, the loans continued to be serviced with payments of $101,000 per quarter, but when the companies defaulted, the SSB, and later the Government of Belize, ended up meeting payments, Longsworth informed.

Commissioner Bailey-Martinez and Commissioner Price compared the timing of the default with the period during which Godfrey and Garcia were communicating about the discharge of charge. Mrs. Bailey-Martinez said it seemed as if somebody was trying to pre-empt the default.

While the DFC escaped being placed at risk for that $17.5 million for its former chairman, Godfrey, it has, supposedly, not escaped risk for another $17 million that the Belize Bank loaned to the Universal Health Services and a $1 million loan to BELITUR (another Novelo company) from an unidentified lender. The DFC guaranteed both loans, according to Bailey-Martinez.

Again, the one-day disbursement of $30 million to Novelo Ltd. was brought up. Longsworth told the Commissioner that had such a decision for a full disbursement in one day been brought to her attention, she would have definitely challenged it. She said that in other cases, she had refused to book transactions either because they did not have the appropriate documentation or lacked the proper approving authority. She declined to comment on the specifics when asked for further information, explaining that she would have to check to see if the transaction falls within the period for investigation (1999 to 2004) before she could say anything about it. But she took this position only after Commissioner Bailey-Martinez asserted that the only way she would not be allowed to respond is if she would incriminate herself by doing so.

The lunch hour caused a break in Longsworth?s testimony, but she returned at the 1:30 p.m. session to confirm that the transaction she had refused to book did fall within the timeline for the investigation. She revealed that Gabb had asked her to book a $50 million transaction with the Belize Bank as a loan, but she declined because she did not see evidence that the loan even existed. She said that for her to book the transaction, she would have had to see the loan agreement and evidence that the DFC received the money, whether as a loan or term deposit. Lo and behold, the loan was later booked. By whom? It has not yet been revealed.

Longsworth went on to tell the Commission that she only found out that the transaction was placed on the DFC?s books when she was doing a later reconciliation and noticed that DFC had paid interest on the loan.

She said that, to her understanding, no money actually changed hands; it was simply a paper transaction. The loan itself, she added, was also not reflected in the DFC?s financial statement. She was asked to submit more documented information on what transpired in relation to the $50 million Belize Bank transaction on September 1.

After Longsworth, Robert Belisle, DFC?s former internal auditor/manager of internal audit division, took the stand. What was revealed during his testimony was that the DFC?s staff had produced routine internal audit reports and branch reports.

The Commission also unearthed today another case of the DFC lending a borrower money to pay another DFC loan. Such was the case with Novelo Ltd. and its principals David and Antonio Novelo, indicated Commissioner Bailey-Martinez.

Belisle told the Commission that the IDB or some other similar agency was about to visit the DFC and ?they??who Belisle did not name?wanted to show that the loans were performing. The new loan to the principals was used to meet payments on the loans for the companies, said the Commissioner.

Belisle has been asked to return to the stand on Thursday.

He told the Commission that he was terminated from the DFC in 2005. When asked why, he said that ?restructuring? was the reason given.