Magloire began his testimony last Tuesday, August 15. He was called back on Thursday and yet again today to give sworn testimony before the Commission. But even more noteworthy than the length of time the Commission held Magloire was the content of his testimony ? Magloire?s responses shed significant light on the inner workings of the DFC?s hierarchy, as well as the details of its finances.

He told the Commission that there were 298 cases of loans that had inadequate collateral. (This means that if the debtors stopped paying, the DFC would not be able to recover its money from mere foreclosure.)

A specific, and significant case, was then highlighted?that of Universal Health Services. Information disclosed at the hearing indicates that the DFC risked over $20 million for that institution when it loaned Universal $12 million and guaranteed the hospital?s $17 million loan from the Belize Bank, but took collateral with a market value of $22 million over which the Belize Bank has control.

Returning to the stand with information he had been asked to research on Universal Health Services, Magloire revealed that the total loan value for Universal was $28 million, but $17 million of this amount was allotted to pay for bridge financing from the Belize Bank Limited.

The circumstances surrounding the bridge loan have so far not been clarified, and it appears, from statements at the hearing on Tuesday, that the Belize Bank has not been repaid, since, it has been said, that the DFC still holds a guarantee for that $17 million loan.

The other $12 million was to be used to refinance a loan with the DFC, to pay a year?s interest to the Belize Bank, to pay legal fees for the transaction and to pay the Government of Belize for registering loan securities.

Commissioner Merlene Bailey-Martinez also pointed to a discrepancy in the numbers that indicated that the disbursements to Universal amounted to $13.6 million.

It was also revealed in today?s hearing that there were 12 properties held as collateral, with a reported market value of $22 million.

Mrs. Bailey-Martinez pointed out that DFC?s full exposure for the loan is $29 million, since the DFC loaned Universal $12 million and guaranteed the $17 million bridge loan from the Belize Bank.

Why is the DFC perceived to be at that much risk if there is $22 million worth of collateral for the loan? It was then stressed that the DFC only has a second mortgage on the collateral, while it is the Belize Bank that has the first mortgage and hence a lien on the properties.

?Where does that leave the DFC with respect to these properties?? Commissioner Bailey-Martinez asked Magloire.

?Local parlance, up the creek,? he replied.

So far, there has been no indication why the DFC undertook such a risk to lend Universal money, except an allusion Magloire made on Tuesday to the hospital?s engagement in Government?s National Health Insurance Scheme. The question of ?why? was not raised when the figures were discussed today.

As to who is responsible for making the loan decisions at the DFC, Magloire had previously stated, and reiterated today, that the decisions were made at the board level. He indicated that when he did attend board meetings, there were four government representatives and three private sector members, and the government reps, he said, ?rode with the program.? Whose program? He did not say. But what he did say was that a simple majority was the only requirement for a decision to be passed (meaning that the four private sector reps could have carried a vote), and to his recollection, when he attended board meetings, there was hardly ever dissent among board members, or at least not that he could recall.

Taking the stand after Magloire was Jane Longsworth, who said that she has worked with the DFC since 1995, first as the manager of Management Information Systems (MIS). Longsworth subsequently served as securitization officer and as acting assistant general manager ?services.

Easy access to financial information is undoubtedly essential to an institution such as the DFC. According to Longsworth, management had determined at one point that the ledger system had to be changed from the manual system to a well-tailored computerized system to make information access easier. She and other management staff were working on a broad concept of the model when they were informed that a consultant, Mr. Sanker, had been hired to source the software. A million dollars later, the DFC had to scrap the whole effort, said Longsworth, because they found that the software?SIT Portfolio Plus purchased from Canada?did not meet their needs. She told the Commission that no needs analysis had been done before the DFC attempted the switch. Like previous DFC employees who have taken the stand so far, Longsworth indicated that decisions were made at the board level?but she said she did not know who had made the decision to bring in a consultant to source the software.

Apart from her MIS work, Longsworth also spoke of her experiences at the DFC as a securitization officer. She said that she had done an analysis to determine how much the $104 million securitization transaction with the Royal Merchant Bank was costing the DFC. After analyzing the numbers for the four tranches, she said, she determined that the DFC was paying an interest rate of 13.37%, which, she noted, was more than the 8% to 12% rates at which DFC was lending most of its loans.

Why was the DFC borrowing expensive money to give cheap loans?

?Well, sometimes if you need cash, expensive money is better than no money at all,? Lonsgworth said.

She reported that the net proceeds, after discounts, fees, etc. were taken out, amounted to $72 million. Most of that money, as well as the proceeds from a $50 million loan that was deposited at the Central Bank for the DFC, she said, went to housing projects and schemes such as Los Lagos ($10.6 million) and Cohune Walk ($2.2 million), and loans to Nelson Feinstein ($3.21 million), Paul Jones ($410,000) and others.

She also provided details on an asset purchase program, through which the DFC reportedly raised $81.8 million. The DFC had to find $8 million every quarter to repay the loan within a three-year term. Longsworth noted that this was very stressful for the DFC.

?Is this what broke the DFC?s back?? Commissioner Bailey-Martinez asked her.

?I would almost venture to say yes,? she replied.

With millions of dollars pouring into its till, did the Corporation have a clear plan for the use of incoming funds? Longsworth said that she knew of no set plan for the incoming money; however, for specific cases, she gave a breakdown of how the money was used. For example, when the DFC got $58.9 million through the North American Securitization Program, she said, it paid the Social Security Board (SSB) $24.6 million for its part in the transaction, as well as an additional $1.2 million for a loan. It paid $4.7 million to Provident Bank; used $6.6 million to pay the Royal Merchant Bank debt, and paid $4.2 million for a loan asset purchase agreement. Also, in addition to paying $10.4 million to the International Bank of Miami and $2.35 million to James Jan Mohammed?s Royal Palm Inn, the Corporation made other smaller payments towards the CDB, its current account, and housing projects, such as Los Lagos and those for Luke Espat?s Indeco.

Longsworth noted that even though the Godfrey Group of Companies had put two loans in the pool for $17 million, these loans were disbursed by the SSB from the SSB?s portion of $24.6 million.

She told Commissioners that the DFC had to meet excessive transaction costs, and said that it would have been her CEO, then Troy Gabb, who would have instructed that the calculations include DFC?s assumption of St. James? costs. By her estimate, this meant that the DFC?s expense would have been adjusted from $9.4 million to 11.9 million. DFC, in effect, absorbed the cost that should have been absorbed by St. James, she noted.

It so turned out that some of the loans in the securitization program? including the St. James/Godfrey loans?later went belly-up. The Commission has also revealed, and reiterated today, that in order to keep things afloat, the DFC gave loans to the principals of those companies to pay their companies? loans. The Government?s legal advisor told the DFC, however, that doing so was illegal and violated the respective loan agreement.

What also emerged in Longsworth?s testimony was that, in some cases, the DFC deferred payments on loans for some debtors?effectively giving certain borrowers a moratorium on repaying their loans. This meant that at times, the loan carried an interest rate as low as 0%.