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The Primer on the People called Garifuna

by William Ysaguirre (Freelance Writer) BELIZE CITY, Thurs....

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Narda says, ?Bring St. James!?

GeneralNarda says, ?Bring St. James!?

Under the program, the SSB pooled some of its own mortgages, as well as those from entities such as the Belize National Building Society and the St. James National Building Society, and got up-front money for the mortgages.


Like Garcia, the chairman of the Special Select Committee, Senator Godwin Hulse, lauded the concept, describing it as ?having your cake and eating it too,? since money would be readily available to invest in other projects that could then generate even more money to invest.


On the flip side, though, Senator Hulse lamented that, ?Instead, somewhere along the line, we create this kind of bungle and killed the goose before it dropped the good golden egg. And the reason I am so concerned is because notwithstanding any accommodation of the Government right now to take over these [defaulted] loans, etc, we are in a mess by something that somebody concocted wrongly, mischievously, erroneously?or any other word we could use?because these are not legitimate??


The Senator was speaking specifically of two mortgages totaling $17.5 million that were for Western Caribbean Properties and the defunct Intelco. Neither mortgages had adequate collateral to back them up, but SSB?s directors and CEO have argued that this was no secret, but that it was understood by the parties that the proceeds received under securitization would have been used to develop the properties so that the revenue streams could be generated to pay the debts.


The problem is that the projects were never realized as stated and the loans reportedly have fallen into default, leaving the public sector guarantors (taxpayers) to pay them in some instances.


It was revealed in Wednesday?s Senate hearing that out of the over $200 million in receipts that came to Belize under the securitization program, over $40 million was paid to foreign bank accounts of NH Financial Investment, reportedly a Glenn Godfrey company.


Senator Hulse said, ?It is my understanding that NH Financial is an IBC, I think out of Antigua or one of those countries. But a check of the local registry of companies and an updated filing of directors and shareholders show for both companies [Western Caribbean and Intelco] no such entity as NH Financial or any other entity. It is fully Belizean owned, with Mr. Glenn Godfrey owning the majority shareholding.?


Testifying before the Special Select Committee on Wednesday afternoon, Mark Hulse, CPA, the auditor whom the Senate committee had appointed in December 2004 to do an investigative audit into the SSB, reported that there had been a number of transfers to foreign banks out of the St. James portion of the securitization proceeds and only about $2 million of the St. James proceeds stayed in Belize. The breakdown is as follows:


March 23, 2000: SSB instructed to the Central Bank (CB) that BZ$10.6 million (US Dollars equivalent) should be transferred to NH Financial at Hibernia National Bank in New Orleans.


April 18, 2000: SSB asked CB to transfer BZ$8.7 million (US Dollars equivalent) to the same account at Hibernia.


September 2000: SSB asked CB to transfer BZ$5 million (US Dollars equivalent) to Hibernia.


2002: From the North American deal, SSB asked CB to transfer BZ$17.1 million (US Dollars equivalent) to The International Bank of Miami [TIBOM], to be credited to the account of Provident Bank, for further transfer to the account of NH Financial.


The total proceeds of securitization that went abroad were just over $41 million Belize.


Asked about these transfers, Garcia said, ?We were given instructions to deposit in Hibernia Bank, wherever that is, or Bank of Miami. There is a proposal that the proceeds will be used to do buildings. What do I know if the money is going out, is not to buy materials and to come back and do the buildings? That?s not my purview. I think that?s Central Bank?s purview to say if there is 10 million US dollars being sent to Hibernia Bank on behalf of X company being paid by Social Security or any other entity, what are the proceeds used for and to whom is this being paid? That is the responsibility and purview of Central Bank. When I as a citizen need a permit for a thousand dollars US, I have to tell them where I am sending that to and what I will pay for and when I come back I have to give them receipts unless I have a travel document and I?m going out of the country. So to me, in my mind, I am saying Central Bank needed to ask that question. Who is this for? Why you have hard currency going out when in fact we are securitizing to bring in hard currency??


Glenn Godfrey was the chairman of the Development Finance Corporation at the time of the securitization program, and it was the DFC that was lead facilitator for most of the ?tranches.?


The auditor remarked that he had found numerous discrepancies in some of the transactions that involved the St. James loans.


?What was discovered in our investigative processes in tranches C, D, and the North American and the relationship between companies and people and the same people signing the same documents for all companies and these sort of?in our terms?non-arms length transactions, dictated that we investigate the ownership and the directors of those companies,? said the auditor, adding that the details are contained in his report, which remains confidential until the Senate Committee concludes its work.


Earlier in the day, Senator Godwin Hulse noted, when CEO Garcia had appeared before them, that the two files of Intelco and Western Caribbean Properties in particular had included major misrepresentations, and that 22 of the 43 warranties, on which Garcia signed, were incorrect. The ?mortgages? were also supported by insurance documents from what Senator Rene Gomez described as a ?phantom? company that shares the same address as Godfrey?s Offshore Center on Barrack Road, Belize City, but for which there is no official documentation that the Senate Committee could find.


?The most interesting one was that at Number 43, where it says no mortgagor is an employee, officer, shareholder, director, or is related to an employee, officer, director, or shareholder of the seller in any way,? Senator Hulse pointed out.


He also asked CEO Garcia: ?Is there anybody that you feel or know is responsible for having created these tremendous amounts of documentation with flows, assignment charts, project documents, insurance and everything to the extent that qualified accountants from Deloitte and Touche could have believed that these were genuine documents, who is responsible for having created this so I can go and get that person to answer the question. Do you know??


To this Garcia replied, ?Senator, I told you that the last time, that I believe that securitization is a good program and you have said that also, if done the right way. I can only say again that, to me, where the problem starts and finishes is with St. James. You know who the principals of St. James are and who is involved with all the documentation.?


?So those would be the people?? Senator Hulse pressed.


?Bring St. James and let them answer the questions?? she replied.


Senator Hulse continued, ?You know these systems, you understand them well, and why would you have gone with it and even now, that we do not have the commitment to pay and indeed if you read your guarantee, it gives the DFC no right to give a discharge of charge. No right! And indeed the DFC Act gives Mr. Godfrey no right to issue a letter of discharge of charge. That has to be ratified by his board, which was not done!


?So even that letter?and I am not the attorney here, but I don?t know if it will stand?but the point is, with all of that, even if the Social Security Board is not required to pay because you?re honoring that letter, the people of Belize are still being asked to pay. And really to use a pretty strong word, a non-legal term, one could say that when you look at these files and all the documentation in here it is definitely, totally, completely, misrepresentation of what the true facts were and led to a securitization process which the people who did due diligence, the investors, the cash collateral agent, the trustee, the placement agent all believed to be genuine because they were only looking at documentation.


?Honestly, madam G.M., there must be somebody who understood this process well enough to know that if construed and concocted in this manner it would go through and obviously the board went along, to my mind, on the instructions and directions of somebody. Do you know who that person is??


Garcia responded: ?I don?t know, Senator. I can only say I followed the decision and the directive of the board to go ahead. I gave my recommendations and I think that you will be able to understand in my position and in any CEO?s position, that is the way we are expected to perform. You can give your recommendation, you can voice your concerns, at the end of the day, if they approve it, they are taking responsibility??


Responding to this, Senator Hulse pointed out to Garcia that it is her signature that appears on the warranties.


Auditor Hulse gave a detailed review of the securitization transactions. He said that the first minutes of SSB?s board to mention securitization were those of April 14, 1999. On that same day, the board decided to participate, and the first transaction was a week later, on April 21, 1999, he told the Committee.


He also revealed that in December 1999, the SSB had participated in a smaller domestic securitization with the offshore bank – Provident Bank and Trust of Belize, another Glenn Godfrey entity. He said SSB was used as ?an intermediary? and had securitized $1.7 million worth of mortgages coming from St. James to Provident Bank. SSB got the money on December 31 and transferred it in full to St. James the same day.


He reported that to date, there has been one instance of default on the US$9,000 monthly payments in December 2002, but neither St. James nor the SSB paid. A Government of Belize contingency guarantee in favor of Provident Bank, dated December 31, 1999, backed the transaction.


Asked what was the benefit and cost to Social Security for getting into this transaction, Auditor Hulse told Senator Hulse that he saw no benefit or no reason why SSB would have even been involved with the transaction. SSB did not lose or gain any money because of it, he said.


He agreed with Senator Hulse that the securitization could have been for the convenience of sourcing US dollars. There was no response to Senator Hulse?s question of whether SSB suffered any exchange loss in the transaction?converting St. James? Belize dollar payments to SSB to US dollar payments from SSB to Godfrey?s Provident Bank.


There are 5 other securitizations in which the SSB was involved. There were four with the Royal Merchant Bank of Trinidad and Tobago and one under the North American Securitization Program.


He said that he also includes in his report a timeline that reflects correspondences, dealings, documents, etc., from 18 March 1999 to 26 December 2004, between and among the Social Security Board, St. James Building Society and related companies.


He also reported that while the SSB?s loans to the credit unions and agricultural sector have been performing well, many of those loans to individuals, especially to the Development Finance Corporation, which accounts for 50% of loans to the private sector, are not performing adequately.


Chairman Hulse said that the 140-page report of auditor, Mark Hulse, CPA, would form an annex of the report of the Special Select Committee, after which the entire report, including the auditor?s report would be made public. Until then, the audit is a confidential document, said Senator Hulse.


Senator Rene Gomez said at the hearing that the auditor?s report had been very enlightening and had corroborated some of their own observations and findings. He indicated that they are looking forward to concluding their investigations around month?s end. Gomez pointed out that Garcia was taking all the blame, even though there must be somebody else responsible for the irregularities.

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