Last night we showed you excerpts of the 3 hours of Narda Garcia's testimony before the Senate Special Select Committee. It was a marathon, often riveting session full of startling revelations, most important among them, that Social Security, specifically CEO Garcia had signed on to what has every appearance of being a fraudulent securitization complete with phantom insurance companies, and phantom building that they insured.
In the afternoon, the Special Select Committee reviewed the special audit completed by Chartered Accountant Mark Hulse. Hulse was commissioned to review Social Security's investment portfolio and the securitizations it presided over. Here's what some of his findings showed.
Jules Vasquez, 7NEWS Director
He trundled into the National Assembly Chamber hauling a suitcase full of documents making it clear that for the past 11 weeks, this Special Auditor has been hard at work compiling the 140 page report.
Mark Hulse, SSB Special Auditor
"It is the most comprehensive report that the committee would be able to used to further its course."
And in furthering his course, Hulse looked deep into the bowels of Social Security and found an institution managing a massive loan portfolio of $291 million carelessly and primitively.
Mark Hulse,
"We were a little bit surprised at the, shall I say, management of that total portfolio. In other words repayment terms were not kept up, collections of interest--the total follow-up of any loan that is given by any commercial bank is very strict and very aggressive, that did not seem to be the case at the DFC, at the Social Security. What surprised me (was) that in an institution like the Social Security Board, with such a large portfolio, right up to the year of 2003 the general ledger, which is the Bible of any business, was done manually; interests etc. were calculated manually."
Manual record keeping for an investment portfolio that's bigger than many banks, but that would hardly be the end of it. As the compendious trove of records on the desk before him indicated, Hulse went through these manual ledgers and volumes of other records to find out about the 5 securitization programs Social Security participated in combining for a total of more than US$200 million.
The irregularities started to appear in what are known as tranches C and D, the third and fourth securitization programs where St. James, the company so closely associated with Glenn Godfrey first emerged. This is when Social Security started acting strictly as a go between for the movement of millions of dollars in mortgages between St. James and the Godfrey-chaired DFC.
Mark Hulse,
"Social Security's portion of tranche C does not represent any of Social Security's loans. Social Security's portion in tranche C are two loans which were assigned from St. James to Social Security for further assignment to DFC to be incorporated with the DFC loans and then sold. These two loans which it received from St. James are a St. James loan to Data Pro for $17,810,000 and a St. James loan to Aquarius for $1,800,000; a total of $19,610,000. Tranche
D duplicates tranche C in that Social Security, again, securitized loans on behalf of St. James National Building Society. These are loans owned by St. James assigned to Social Security for re-assignment to DFC for securitization."
Senator Godwin Hulse,
"Was there any benefit coming to the Social Security, any benefit at all for engaging in the securitization process? Was there any financial benefit in terms of increase interest, in terms of any benefit coming to Social Security for undertaking this task of processing these documents, of offering them for sale to the DFC, of getting them from St. James and all the rest of them, was there any benefit?"
Mark Hulse,
"We cannot identity any benefit at all."
In both those tranches and the North American securitization that followed, large sums of U.S. dollars were diverted away from projects in Belize to accounts in the Hibernia Bank in New Orleans, all with the approval of Social Security.
Mark Hulse,
"Because of discrepancies we encountered, from tranches C, D, and the North American program, regarding loans assigned from St. James to Social Security, assigned and or but, in reference to the North American, we did detailed investigations. We used detailed investigative processes with regards to those specific loans within those two tranches and the North American bond issue. We found numerous discrepancies of every kind."
Irregularities of every kind so did Social Security say yes? And if she had the chance to do it again, would this embattled CEO sign her name on the line?
Senator Godwin Hulse,
"Do you feel in anyway that you, in hindsight now, that perhaps you failed your Minister, or the PM because I think at the time he appointed you to the position, or the people? And maybe let them down to not inform the PM, or inform your Minister, and stop the process with respect to those two loans we have been talking about you knew, or discovered, that they were errors in these files? And do you in anyway feel that perhaps you feel a little guilty or responsible or liable for failing to be a whistleblower, if you like, and the third part is would you do it the same way again or would you take a different stand now?"
Narda Garcia, Fmr. SSB Gen. Mgr. & Current CEO
"You're asking me if I failed to inform the Prime Minister and the Minister, as far as I know my job is to inform the Board. So I believe I did that. I would
recommend that, yes, maybe we should stand stronger and publicly say what we do not accept or we believe was not done in the best interest of whom we are serving. It's difficult. I would definitely in hindsight, and in having to go through all of this, definitely act in a different manner if given the opportunity."
Of course with hundreds of millions of dollars at stake and with tens of millions presently in default, this CEO hardly qualifies for a do-over.
Senator Rene Gomez, Member, Select Committee
"Some has to be made responsible for these monies that have been given out and we are looking at that they will not be recoverable. And if that be the case then, this Senate Special Select Committee will need to submit our recommendations to the Senate as to measures and procedures involving these persons. And I would like to say here Mrs. Narda Garcia, with all due respect to you, that you are taking upon yourself as the C.E.O., all the blame when we know that someone else is behind all of this, but yet you are taking the blame. And at the end of the day probably your job will be in jeopardy because of this gross negligence. That is my comment, thank you."
Narda Garcia
"Senator Gomez, respectfully I will answer you and tell you that, I will repeat again that I only acted for and on behalf of the Social Security Board. I made my recommendations; they were not taken for whatever reason. I can't blame anybody if I don't have any proof. I will not be taken to court for saying person A and person B. The records are there and I hope that you make an objective decision and objective recommendations. Bring the principals of St. James, they will have or should have the answers that I clearly don't have and I don't think my colleagues at the D.F.C. have."
Hulse's report has not been released by the Special Select Committee and, we gather, is the subject of some secrecy as he was asked not to read the 7 page conclusion. Chairman Godwin Hulse has however given the undertaking that it will be released in entirety along with the commission's report which they have started to compile.
