Less than ten years ago, the Novelo brothers were riding high after they borrowed thirty million dollars from the Development Finance Corporation, bought out the competition and then presided over a virtual monopoly of the country’s bus industry.
But on Friday, both men claimed to be “broke,” lucky to have the very shirts on their backs. Unfortunately for them, the DFC isn’t buying the “riches to rags” story, and as part of ongoing proceedings to recover the monies they loaned Tony, David and their father, Hipolito Novelo, the corporation began the tedious task of examining the financial situation of the businessmen and their respective abilities to pay.
It’s a process called “an examination of means,” and it follows a default judgment in February, which empowered the DFC to review the personal standing of the defaulting borrowers. According to the Corporation’s attorney, Michel Chebat, the companies’ assets have been dealt with through receivership.
Chebat says that the receiver sold what he could (those sales netted approximately eight million dollars), and now the point of these proceedings is to collect the difference by going after the Novelo family on the personal guarantees they gave to the DFC.
We understand that the outstanding balance may be as much as 24 million dollars, but some court papers speak only to 18 million.
But whether it’s 18 or 24 million, the Novelo brothers say the DFC can’t collect a cent because all their money and assets have either been seized, or are on mortgage to other banks and creditors.
Both Tony and David appeared before the Registrar of the Supreme Court, Aldo Salazar, and made those very claims under oath.
Tony declared, “I’ve lost everything, the banks have taken everything…when I was drowning I mortgaged everything I owned to the banks.”
David told a similar story, telling the court his assets are encumbered and that his salary is used to pay off new loans in his name to the Belize Bank and Scotia Bank, respectively.
Despite those claims, Chebat determinedly questioned about both men’s properties, ownership of shares and even the existence of bank accounts outside Belize.
When Tony was on the stand, Chebat asked about a number of specific properties in the Belize and Cayo District, but to every question, Tony’s answer was either, “Everything I have is encumbered… I don’t have anything,” or “I cannot recall.”
The examination grew increasingly testy, and at one point when Chebat was asking about 5.3 acres of land at Mile 12 on the Northern Highway, the exchange was…
Tony: “All my assets have been seized.”
Chebat: “Mr. Novelo, remember you are under oath.”
Tony: “I don’t need to lie.”
Chebat: “I hope so.”
Tony also claimed he could not recall owning any shares. According to him, before the receivership there were over 25 companies, including BeliTour, Novelo’s Limited, Novelo’s Bus Line, Western Transport, Northern Transport and Southern Transport, and he doesn’t know if he still has shares in any of them.
Tony also couldn’t remember if he is a director of any of those companies. In an attempt to explain his bad memory, Tony told the court, “This is a blow for any human being. I don’t know how I’m standing here.”
Tony would also go on to testify that he is a single man making three thousand dollars a month. He says he then pays rent of fifteen hundred dollars to live at his home on St. Luke’s Street, and spends the balance on food, clothing and utilities. Tony insisted that he is in no position to repay the DFC.
Before leaving the stand, however, he told the court that he honestly believes the monies can be repaid if the receiver jointly appointed by the DFC and the Atlantic Bank were investigated. Novelo boldly proclaimed, “We had 98 million dollars in assets as collateral at the DFC. Now I get an 18-million-dollar judgement against me. The receiver has not provided me with an accounting of my company. I want my change, they robbed me.”
David’s testimony was only slightly less dramatic. He told Chebat that his home on Princess Margaret Drive is owned by his wife, Sarah Lee Hobbs. David did testify that as Chief Executive Officer in National Transport, he makes approximately thirteen hundred dollars a week, receives an additional thousand dollars as stipend and has access to a company vehicle.
But he was quick to say that his salary is directly deposited to the Belize Bank and loan payments are automatically deducted. As for owning any shares, David told Chebat, “I hold no shares in National Transport; never have.”
But when Chebat asked about the transfer of 2,500 shares from David to Eduardito Novelo on the April 30, 2007, David said he could not recollect the transaction. He also told Chebat he would have to “check” about shares in BelCruise because it “might be a possibility” that he holds shares in that company, but he “would have to look at it.”
He gave that same story about BeliTour Limited. An obviously frustrated Chebat then reminded Novelo that the summons to the proceedings had stipulated that he bring all documents related to property and assets.
Novelo’s answer? “I have not been legally advised.”
Despite the trend of both testimonies, outside the courtroom Michel Chebal was confident, telling Amandala that even though the brothers contend that all their assets and properties are encumbered, that will not stop the DFC from collecting.
According to Chebat, the DFC will proceed to get valuations of the properties, obtain a court order to sell them off, pay the creditor what is owed, and then pay the rest into the Corporation. The attorney says Tony owns a “significant” amount of assets and believes both men own shares in the companies that owns buses.
The DFC would also proceed to have the court order that those shares be sold off as well. Chebat told us, “We are not going to leave any stones unturned here. He (Tony) can say as much as he wants that he’s broke, but he needs to show us that indeed he is, and we are going to try to find whatever assets we can find.”
The DFC and the Atlantic Bank took over control of the Novelos’ family bus line in 2003 after they failed to meet their financial requirements to both lending institutions. The DFC and Atlantic Bank then jointly appointed Kevin Castillo as the company’s receiver.
In December of 2005, the DFC posted notice in local papers of its intent to pursue legal recourse against the Novelo family to recover its money. At the time, the Novelos claimed to be confused, contending that they were “surprised” at the DFC’s actions because the Corporation couldn’t expect to be paid even after taking away the bus company from the family.
The resulting court actions have meandered through the judiciary since then, with the latest development prior to today being the default judgment in February.
But outside the courtroom, both Tony and David insist that they only found out about that judgement last week when they received summonses to appear before the Registrar to be examined about their financial circumstances.
Their attorney, Elson Kaseke, informed Registrar Salazar this afternoon that he will seek to have the court set aside that judgement because the family never got an opportunity to present their “valid defense” in the case because the claim form was improperly served on the law firm of Elrington and Waite.
Hubert Elrington tried to convince Registrar Salazar this morning that while his firm did sign to accept the court papers, and while he did appear in court last week on the brothers’ behalf and accept service for them, at the time he did not have instructions to do so, although he had appeared for them “on other matters.”
According to the Novelo men, they could not appear personally at the time because they were in another courtroom dealing with another case involving the same monies.
Despite the mounting legal tangles and their apparent financial status, following their examinations this afternoon, David and Tony told Amandala they are confident that they will be vindicated. The brothers estimate that they owe 9 million dollars to the Atlantic Bank Limited and 25.6 million dollars to the Development Finance Corporation. They insist that they pledged 98 million dollars in personal and company assets.
So, according to their math, they’re owed a credit. And they believe in this so much that in addition to having the default judgement set aside, the brothers also say they are going to sue their company’s receiver, as well as the DFC and the Atlantic Bank to investigate how their company was financially managed.
According to family spokesperson, David Novelo, “Let the receiver have to do their part, in showing the audit. I am sure that when that is complete, we are going to be able to see a gross negligence not only from the receiver, but from the creditors who allowed them to have committed such atrocities in terms of putting this debt into a fragile situation.”
The oral examination proceedings are set to continue on December 5 when the DFC will question Hipolito Novelo about his finances. The Novelos’ attorney, Elson Kaseke, says he intends to file a challenge to the default judgement and therefore the examinations, well before then.
The 30-million-dollar loan to the Novelo family was one of the loans at the centre of the DFC financial fiasco that transpired during the tenure of the Corporation’s People’s United Party Government-appointed board.
As was subsequently revealed during the Commission of Inquiry proceedings into the institution, the entire 30 million dollars were disbursed in one day, with no apparent consideration to proper oversight and prudence.