The third day of hearings into the Development Finance Corporation commission of inquiry rolled on today. Three current employees of the DFC were called: Emerson Burke the chief appraiser, legal supervisory officer Ann Wiltshire, and Orlando Magana. It began with Magana as he told the commission how the DFC's debt was profiled.
Alfonso Noble Reporting,
The morning session saw DFCs debt management clerk Orlando Magana and legal supervisory officer Ann Wiltshire take the oath and testify. Magana's testimony clarified one thing as regards foreign loans.
Orlando Magana, Debt management clerk
"All loans were guaranteed by GOB."
David Price, Chairman - DFC Inquiry
"So if DFC defaulted on those loans, am I to understand that payment would
be made by GOB?"
Orlando Magana,
"Yes the default would be paid by GOB."
David Price
"If and when that happens, that GOB payment would actually come from taxpayers dollars?"
Orlando Magana,
"Well government revenue comes from taxpayer dollars so the payment that they make would indirectly come from us."
David Price,
"Whenever DFC defaulted on its loan, and those had to be paid by GOB, then it would be the taxpayers who would be picking up that tab."
Orlando Magana,
"That's correct. Since I make all the payments on these loans, DFC has never defaulted on those loans, these foreign loans then. Payment has always been made on time and they were current, the foreign ones I am talking about."
While there was no default on foreign loans, the story is different for local loans in particular from the SSB.
Orlando Magana,
"The DFC defaulted in 2003 with the Social Security loans. During that period, up to 2004, payments were being made but not sufficient enough to cover the areas. Staggered payments were being made but for other local loans, payments were being made for the other local loans. All local loans were being serviced with the exception of the Social Security loans. At December 2004, total arrears owing to SSB was a figure of $7+ million."
Magana continued disclosing that on receiving funds from abroad there were foreign exchange gains and losses which if there were losses again GOB would cover.
Merlene Bailey-Martinez, Commissioner
"When you get in Belize currency at the Central Bank, then you have to make payments in U.S. currency. For instance to Provident Bank and Trust you would have to had to make payments in U.S. Currency. What was the effect of that?"
Orlando Magana,
"Any stamp duty, as we call it, or well...any gain or loss should be refundable at the end of the year by the government of Belize. So if you make a gain then we don't get anything, we just take it for ourselves. If we make a loss, which is most times because we get at a lower rate than what we pay out, it should be refunded by the government of Belize. Recently, for the past two years, we have been absorbing losses on the foreign exchange due to the Euro to U.S. dollar. For example the last loan we got from the IAB for the citrus growers, when they were just starting out with the Euro, we got the loan at the time when the rate was 1.7 something and now it has increased all the way to 2.5."
Herbert Lord, Commissioner
"So you have to pay the difference."
Orlando Magana,
"Well we just put the loss which will he payable by the government of Belize."
As Magana disclosed the government's commitment to DFC, Ann Wiltshire disclosed DFC's commitment to borrowers and the legal department's shortcomings in that area as well as the names associated here.
David Price,
"Were the services of Glen D. Godfrey ever utilized by the DFC at the time he served as Chairman of the Board of Directors?"
Ann Wiltshire, Legal Supervisory Officer
"The services of the law firm were retained at that time but it was actually Mr. Christopher Coye who did the work for the law firm."
David Price,
"It was the law firm of Glen D. Godfrey and Company."
Ann Wiltshire,
"Yes sir."
David Price,
"I believe it was that law firm, correct me if I am wrong, that dealt with most of the Novelo's legal documents. Is that correct?"
Ann Wiltshire,
"Yes sir that is correct."
And while Glen Godfrey's name was called so too were those of Arnaldo Pena in which the legal offices of DFC drafted promissory notes and in which loans were made to pay old loans of the very same DFC.
Ann Wiltshire,
"The first one was dated 27th May 2004. This one is 30th March 2004 and this one is to Mr. Arnaldo Pena also for a loan of $10,532.20 to assist with working capital needs of your company, Belize Resorts Development Limited."
David Price,
"Was there anything beyond the promissory note that secured that additional....?"
Ann Wiltshire,
"No sir. They were individually secured by a promissory notes as far as I can recall."
Merlene Bailey-Martinez,
"I have here a loan repayment on the 31st of May 2004 under Belize Resort and Development Limited. She read about five promissory notes in there but we are looking at I think between twelve and fourteen depending on how far back it starts. We are looking more at twelve to fourteen such loans, not five as the promissory notes that were read out there so we need to be very clear that it is not only those five that she read from there."
With that clarification the commission continued chipping at the DFC imbroglio and Wiltshire admitted to irregularities in how the legal business was conducted.
David Price,
"With respect to the Novelo's loan of $30 million, was everything in order,
above board, and transparent?"
Ann Wiltshire,
"The Novelo's loan, the documentation was not prepared us. So I would not be in a position to comment on that. The only thing I know about that aspect of the security itself is that the lands which were to have been held under legal charge were not held from the onset."
David Price,
"With respect to loans to James Jan Mohammed and associated companies, as legal officer, was everything in order, above board, and transparent? I think the associated company was Royal Palm Inc...San Pedro.."
Ann Wiltshire,
[Pauses] "As far as I know, the security which was required was taken. The only thing I know about that is that the units which were taken as security under the strata title, these had already been sold before the whole transaction occurred and at various points, we had to prepare deed of releases to the individual owners."
David Price,
"Would you consider that to be an irregularity?"
Ann Wiltshire,
"I would consider it not the norm."
David Price,
"With respect to loans to Arnaldo Pena and associated companies, in your view as legal officer, was everything in order, above board, and transparent? Tat is the same one I asked you read out just now."
Ann Wiltshire,
[Pauses] "But these are additional loans. These were not the original loans. The original loan, as far as I can recall, whatever was set down as security was taken."
David Price,
"Let me ask you the question with respect to those additional loans. Were those additional loans in order, above board, and transparent?"
Ann Wiltshire,
"I would not know sir."
And that may largely be attributed to the fact that on many occasions the legal department was in the dark. And from not being well informed the commission continued the hearing with testimony by chief appraiser Emerson Burke. After underscoring the protocols put in place by the DFC to ensure that debts would not go bad burke admitted that the astronomical growth that the DFC had caused for protocols to be thrown out the window.
Emerson Burke, Chief Appraiser
"The magnitude of growth was not sustainable. Along with that, we had
a multitude of appraisals to get done, tons of loans to monitor. It means then that just by per capita, in terms of your staffing, you had a tremendous increase in the value of loans and that volume of loans that any particular individual had to deal with. It meant then, along the way when some of our more stringent policies, some of the guidelines we had in place, some of the tools that we use to ensure efficient implementation of our projects went through the window. You are moving an institution that was dealing with these stringent guidelines, follow up implementation of course became very burdensome I believe on all of us. At the end of the day, what we had was magnificent growth but the quality went along with, or I should did not go along with it."
Merlene Bailey-Martinez,
"Was there a directive to relax the requirements to facilitate the processing of these loans? Was that every discussed?"
Emerson Burke,
"I think there was a general feeling that....with fairness to all appraisers, credit officers, we had and we were told we had x amount of million dollars sitting in the Central Bank, it will not create anything there, we needed to implement. So there was a need, there was this drive to facilitate the processing of loans. You would submit a project saying that as per our guideline we don't have this on file or that on file and those loans would be approved by whatever authority which would say a condition for those things to be submitted prior to approval or prior to disbursement or some of the requirements were waived."
Merlene Bailey-Martinez,
"Were waived by whom?"
Emerson Burke,
"By the approving authority, at whatever level."
The inquiry continues on Thursday as Burke's testimony continues.
