Lawsuit and request for regulator’s investigation are latest Stake Bank developments. Stake Bank claims Atlantic Bank put “…at risk ABL’s depositors and employee pension funds …”
BELIZE CITY, Mon. Apr. 22, 2024
Things are coming to a head as it relates to the unfinished Port Coral project spearheaded by Stake Bank Enterprise Limited (SBEL) which was placed under receivership by Atlantic Bank Limited (ABL). The move was executed on March 14, 2024. As was previously explained by Stake Bank’s Director and shareholder, Michael Feinstein, ABL is the lead organizer for its loan from a group of creditors. On Friday, Stake Bank issued a “public notice” alleging that SBEL was “improperly placed under an induced receivership.” It closed that statement saying, “… this entire episode that SBEL (a Belizean owned company) is experiencing is driven by related party banking relationships that will be unfolding in upcoming weeks both in public and legal domain.” That same day, Atlantic Bank, through the law firm, Courtenay Coye LLP, filed a lawsuit against Stake Bank for fraud and breach of trust. Today, Monday, April 22, Stake Bank took the stakes even higher when it had its attorney, Senior Counsel Godfrey Smith from Marine Parade Chambers write the Governor of the Central Bank of Belize (CBB), Kareem Michael, requesting that the CBB exercise its responsibility and launch an investigation into certain activities of Atlantic Bank as per the Domestic Banks and Financial Institutions Act of 2020. Stake Bank affirms that ABL acted in clear breach of the law, in detriment to Belize’s national interest because it disbursed $60 million in loan funds using depositors’ and ABL employees’ pension funds without first ensuring that adequate security was in place. SBEL underpins its letter with the strong request that the Central Bank “immediately call on shareholders of ABL to recapitalize the bank to ensure that depositors’ as well as employees’ pension funds are safeguarded.”
We go back to the first public statement by ABL on Friday, April 19, which came over a month after the receiver had moved to take possession of the company’s assets. Expanding on its claim that the receivership was imposed, SBEL affirmed that funds were available to service its ongoing obligations within Atlantic Bank; and still, the bank placed it under receivership, citing an inability of the company to service its debt obligations. Well, SBEL declared that payments were only one week overdue. The release states, “These funds were made available by a syndicate of lenders who agreed to finance the project and are still lodged with ABL and are being wrongfully withheld from SBEL.” Stake Bank then went on to argue that its only debt to ABL is BZ$61.5 million “as per their demand letter of March 13, 2024.”
SBEL was also clear that the company was not the one to purchase or contribute to the purchase of Minister’s Fiat Grant No. 881 of 2021, and, as such, the lending institution has no claim or equitable interest in that property. Well, Atlantic Bank differs in opinion, and the claim it filed on Friday surrounds that title which is for 23.4 acres of the seabed around the original 16.085-acre Stake Bank Island. In the claim form it is noted that Atlantic Bank provided $62 million to Stake Bank to extend Stake Bank Island by dredging to reclaim the 23.4 acres of seabed.
The claim states, “Beginning in 2018, the Claimant provided the funding for the development of a cruise ship docking facility and the dredging and reclamation at Stake Bank Island relying on the agreement that the 2nd Defendant would ensure that title to the Extension would be procured from the Government of Belize in the name of the 2nd Defendant and charged by way of first ranking legal mortgage in favour of the Claimant.” It goes on to state that 1st Defendant, Michael Feinstein applied for, and obtained, title to the extension in his name. As part of the bundle of documents submitted for the lawsuit, there is a lawyer letter from Stake Bank to Atlantic Bank’s Managing Director dated March 22, 2024 which addresses this point. It states, “… the Minister’s Fiat Grant for the additional 23.4 acres was issued to our Client on 8th November 2021. The Bank, after conducting comprehensive due diligence, decided to advance loans to SBEL secured by a Mortgage Debenture dated 18th January 2022, and chose not to include Minister’s Fiat Grant No. 881 of 2021 in the list of charged assets.” Senior Counsel Godfrey Smith states that his client, Michael Feinstein holds absolute and unimpeachable title to those 23.4 acres. SBEL further argues that the receiver has saddled the company with additional unauthorized debt by signing a variation note of an estimated US$151 million. SBEL has publicized that it will sue the receiver and his accomplices for this.
Turning now to the other weighty accusations that SBEL makes in today’s lawyer letter to the Central Bank Governor, the company affirms that, “There has been a significant write down in the value of the security held by ABL, putting at risk ABL’s depositors and employee pension funds given ABL’s failure to ensure that its loans to SBEL were properly collateralized.” SBEL cites section 57 (1) of the Act which “requires that a bank shall not advance unsecured loans to a person amounting to 15% of the fully paid-up capital of the Bank.”
SBEL added that Atlantic Bank failed to ensure there was adequate security to underpin the loan, given Michael Feinstein’s title to the 23-acres extension around Stake Bank Island. Making another significant accusation, Stake Bank declares that Atlantic Bank created subsidiary loan facilities “under the guise of construction credit loans,” totaling about $21 million to continue funding SBEL’s project and to avoid scrutiny from the Central Bank. According to SBEL, those loans were serviced and settled by Bueso-related entities, including one by the name of OPSA. This is a reference to the Honduran principals of Atlantic Bank.
In an even more interesting twist, SBEL is making the accusation that Guillermo and David Bueso, the latter being the chairman of Atlantic Bank, failed to disclose that they were the moving force of OPSA, which became a shareholder in SBEL in April of 2018 via a shareholders’ agreement. SBEL says that by virtue of that agreement, OPSA committed to finance SBEL’s cruise port project. The lawyer letter states that their ownership of ABL, and ABL’s control and influence over SBEL, in effect, made Atlantic Bank a de-facto shadow director of SBEL. The company argues that as per the banking act, the directors and shareholders of the bank were required to disclose their interests. This leads to another curious allegation that ABL advanced loans to SBEL “on concessionary terms which is in breach of section 67 of the Act.”
Senior Counsel Godfrey Smith tells the Governor of the Central Bank that if CBB refuses to exercise its supervisory duties and responsibilities under the act, then SBEL will seek an order of mandamus from the High Court to compel it to comply with its statutory duties. The Central Bank is not commenting at this time as it says its legal department is just beginning to review the matter.