When the Texas-based energy company Enron collapsed, it was because the company's accountants had kept US$40 billion in secret money deals hidden, as the term goes, off the books. That means debts were incurred, deals transacted, monies received, and paid out, but never put on the books. It turned out to be one of the biggest and most far-reaching corporate scandals in U.S. history, and that's why you might be surprised to know, that Social Security was also keeping transactions "off the books." And it's not Channel 7 that's saying that, it's the report of the Senate Special Select Committee which shows that Social Security kept US$12 million in securitization transactions off its books.
It's one of the most scandalous revelations of the report, that fund managers knowingly hid transactions guaranteed with public funds to conceal securitization proceeds that were diverted into the foreign accounts of companies in which Glen Godfrey was a player. Tonight, we'll look at one of those, tranches C and D of the North American Securitization programme, conducted in March and August of 2000. The Social Security portion of those securitizations amounted to BZ$27.2 million. That means Social Security sold mortgages, from the Godfrey affiliated Saint James, for those amounts and then received cash, U.S. dollars from the Royal Merchant Bank in Trinidad.
But instead of staying here to be used for development purposes, that money went straight out of the country, to Hibernia Bank in New Orleans. On page 32, the report notes: "the proceeds of tranche C, totaling US$9.6 million were directed to the Hibernia Bank of New Orleans." 7 pages later on page 39 it goes on to say, "a portion of the proceeds of tranche D totaling US$2.5 million were directed to the St. James account at Hibernia Bank of New Orleans."
The Central Bank facilitated these transfers and the report notes on page 48: "...the proceeds from Royal Merchant Bank were deposited to account at the Central Bank of Belize. SSB then instructed the Central Bank on how to disburse these funds to St. James account at the Hibernia Bank in New Orleans."
Then, in its most telling conclusion, the report states: "SSB did not record these transactions on their books." That's a total of over US$13 million not recorded on the books. But while the SSB did not make those key disclosures, the report goes on to say on page 96: "SSB authorized the Central Bank to make payment to St. James outside of Belize in U.S. dollars upon sale of the mortgages through the securitization programme, which the Central Bank did contrary to its regulatory functions over the control of foreign exchange."
On page 118, the report states, "the general manager authorized the Central Bank to transfer these funds to St. James accounts abroad." On page 101, the report concludes, "the funds were diverted for other uses than those stated in the documents. The SSB board and general manager displayed negligence in their stewardship of the fund."
Again, these are the findings of the Senate Special Select Committee; there are much more telling details of mismanagement of the fund's money, including the 19 loans made to the DFC valued at a total of $41 million, a full 52% of the loan portfolio, which at September of 2004, were all in default.
You can read the full report at FreeBelize.org.
