This morning the public hearings of the DFC Commission of Inquiry almost didn't start after the commission was hit with a sheaf of paperwork form the law firm of WH Courtenay and Co. Looks like the summonses which were sent to a number of witnesses including David Courtenay, Troy Gabb and Bob Abou-nahra had a critical oversight in their wording. The commissioners had to hold an emergency meeting with their attorney Lois Young-Barrow where it was decided that those summonses would be re-sent. That procedural hiccup caused a 50 minute delay and the hearings started at 10:23. After last week's explosive back and forth between former financial controller Roy Pandy and Commissioner Merlene Bailey-Martinez on Thursday, today started much more slowly with testimony from the independent auditors who did the DFC's books. Here's what was revealed.
Jules Vasquez Reporting,
CPA Giacomo Sanchez was part of the DTT team of independent auditors that did the DFC's books from 1999 to 2004. Everything was fine from 1999 to 2002, but then….
Giacomo Sanchez, CPA,
"In 2003 and 2004, the opinions were adverse."
The auditors found a number of what Sanchez calls significant issues with the DFC's, mainly that government had made promises to a hemorrhaging DFC that the auditors had no proof that government could meet.
Giacomo Sanchez,
"Because of the losses sustained via the various transactions such as the housing programs in DFC, there was tremendous amounts of interest costs absorbed by the corporation and as a way of offsetting, the government has committed to the corporation that it would cover those costs by way of commitment and that commitment was actually made; provisions were made in the financials for those commitments."
Merlene Bailey-Martinez,
"You're not satisfied with the way it was booked in the transactions as a receivable and offsetting expenses. How do you think this should have been booked? Do you think it should have been booked at all?"
Giacomo Sanchez,
"Our disagreement with that treatment amounted to the fact that if there was any transfer of cash commitment that accompanied just the general commitment by government then that would have substantiated the overall form of the transaction. In the absence of that, we weren't sure."
Merlene Bailey-Martinez,
"You're saying it didn't happen so it shouldn't have been booked. In lay terms you were not satisfied that it actually happened so it should not have been…"
Giacomo Sanchez,
"As of this fiscal period, it didn't happen."
Merlene Bailey-Martinez,
"If you had seen evidence of that transaction then you would not have had a bone of contention even in terms of reflecting it in the financial statements. That's what you are saying?"
Giacomo Sanchez,
"Yes."
One of those interests costs arose from the controversial $50 million paper transaction between government, the DFC and the Belize Bank.
Claude Burrell, CPA
"What I am looking at is the recording of the loan from Belize Bank for $50 million and the different transactions relating to that loan."
Merlene Bailey-Martinez,
"What was your, Burrell you have to help me out here, were you at all concerned about this transaction?
Claude Burrell,
"Our main concern, because of the fact of the time gap between the inception of the transaction and the completion of the transaction from GOB's perspective would have been the residual, which is the payment that was made by the corporation on behalf of this facility. The only item on this transaction that we are looking at would have been the residual which is the difference between the cash the corporation received and what it paid out which was approximately $400,000, a bit more."
$23,000 more and the man who booked it as an accounts receivable from the government of Belize came back to explain the transaction or as the case may be, a non-transaction.
Roy Pandy, Former Financial Controller
"What happened is that a CD was established in favor of the government of Belize and a liability was established that DFC owes the Belize Bank $50 million. That is actually what took place."
Merlene Bailey-Martinez,
"Was there ever, any physical movement of funds from the Belize Bank to the DFC? Yes or no."
Roy Pandy,
"What happened is that a liability was established for the DFC and there was a loan to the government of Belize. That doesn't require any movement of funds."
Merlene Bailey-Martinez,
"You're that what happened is that a CD was established."
Roy Pandy,
"Yeah."
Merlene Bailey-Martinez,
"Did you see that CD?"
Roy Pandy,
"I did not see the CD."
Merlene Bailey-Martinez,
"How did you know it was established?"
Roy Pandy,
"The government of Belize confirmed that."
Merlene Bailey-Martinez,
"In what way?"
Roy Pandy,
"Well at the end when it was surrendered, they told me that they would be surrendering…"
Merlene Bailey-Martinez,
"Mr. Psndy I am not even there yet."
Roy Pandy,
"I am running away from the point of view where you are asking me if I saw a CD to the point where it was surrendered."
Merlene Bailey-Martinez,
"I am asking you, did you see a CD?"
Roy Pandy,
"I told you already I did not see a CD."
Merlene Bailey-Martinez,
"No, the last time you said you can't recall."
Roy Pandy,
"I can't recall and I have not seen it."
Merlene Bailey-Martinez,
"You have not seen it. It is really refreshing to get a straightforward answer. Thank you so much."
Roy Pandy,
"Well I am all about straight forward answers."
And the often sparring pair again reached an agreement on another reversal of position.
Merlene Bailey-Martinez,
"What was the purpose of the $50 million when you were hear last, just refresh us because I haven't had the time review the transcript?"
Roy Psndy,
"What I told you the last time is that government has been making advances to the DFC and the $50 million from my perspective, I may be wrong, is that it was in a way to say, to reduce the lull of the advances that were being made to the DFC. That is only my take on it."
Merlene Bailey-Martinez,
"Your testimony is that this $50 million was passed to the government to offset advances that the government had made to DFC? Is that what you are testifying to?"
Roy Pandy,
"Yeah but I'd like to do a change to that slightly in the sense that we didn't apply the $50 million directly to the amounts that were advanced to the DFC. It was treated as a loan to government and as you look at the agreement that your Chairman rightly said…."
Merlene Bailey-Martinez,
"Thank you very much Mr. Pandy because in one breath you are telling me that it was to offset advances and now you're telling me that it wasn't to offset advances, it wasn't applied in that way."
Roy Pandy,
"It wasn't applied that way."
Merlene Bailey-Martinez,
"So why would you get this impression that it is to offset advances? It wasn't applied that way."
Roy Pandy,
"It wasn't applied that way. What we did is we mainly established a receivable from government for $50 million."
Merlene Bailey-Martinez,
"Receivable, meaning that you lent the government of Belize."
Roy Pandy,
"That is right."
Merlene Bailey-Martinez,
"That is entirely different, Mr. Pandy, from saying that you were given money back to the government that it had lent you."
And after all this back and forth about the booking of the $50 million, what was it all for - this round tripping transaction?
Merlene Bailey-Martinez,
"And how was that loan liquidated Mr. Pandy?"
Roy Pandy,
"Government surrendered it in November, I think."
Merlene Bailey-Martinez,
"So what is the real effect of that loan?"
Roy Pandy,
"The real effect of the loan is that for the transaction that we signed, it costs DFC $423,000."
Merlene Bailey-Martinez,
"What was the benefit?"
Roy Pandy,
"If we didn't have the $50 million what was the benefit?"
Merlene Bailey-Martinez,
"I would love to know."
And while that smile means zero gain, the loss, to repeat, was $423,000. One more fun fact about the magic $50 million transaction that wasn't is that DFC borrowed the money at a rate of 10% and loaned it to government at 8.5%, thus lending at 1.5% less that the borrowing rate. The hearing continues on Thursday morning with testimony from a board member.
