Today the public hearings of the Senate Special Committee's probe into Social Security continued in the National Assembly Building in Belmopan. At the last public hearing in January, former board member Martha Williams testified that Social Security was only acting as a conduit to deflect a possible conflict of interest when it securitized $17 million in mostly unsecured mortgages for the St. James Group, a company directly linked to the Glenn Godfrey Group of Companies, at a time when Godfrey was also the Chairman of the DFC.
Today, the main witness was Social Security's General Manager, Narda Garcia, who was recalled to clarify some of the details surrounding that securitization. We'll get to those quite stunning details in a minute, but we start with some of the early questions from committee chair Godwin Hulse who asked Garcia about the DFC, which is accountable for 52% of Social Security's long term investments and none of that 52% is performing. By our account, that's close to $60 million of your Social Security money in serious jeopardy and that's what Hulse asked Garcia how close are we to losing that?
Senator Godwin Hulse,
"In your judgement, based on all we've said over the last hour and 15 minutes already, do you see the Social Security Board incurring substantial losses, if any losses at all, with all of these packages, and if so what percentage would you hazard?"
Narda Garcia, SSB - CEO
"Senator I am of the opinion that if we have any losses, if we manage right and we do what we need to do, the losses, and we have to be realistic - there will be losses, I believe, but I wouldn't want to venture into a percentage but I think that we can minimize the impact on the Social Security Fund, if managed right. The Fund has problems so the ability of DFC to pay back Social Security is utmost important; its imperative."
Senator Godwin Hulse,
"Is the fund in any jeopardy at this point in time? Because at the end of the day that is what people want to know, that the Social Security Fund, which people, everybody contributes to is safe, is secure, and is there to meet the needs of the people."
Narda Garcia,
"Unless we have a big default, for example like a non-payment of the DFC portfolio which is to me the most concerning, I don't see that we are in jeopardy but it is critical that we get the business with the DFC and that we get it over with, that we know where we stand, and we can work out a way that those loans will be paid. The DFC loans continue to be in default, I got a letter late last week from the CEO asking the Board for a meeting with a view to restructuring or refinancing the loans to a point where the DFC will be able to service them. I am taking that letter to the Board tomorrow and they will have to decide. My technical recommendation is yes you need to look at their request."
Senator Godwin Hulse,
"You don't have a choice do you?"
Narda Garcia,
"Exactly."
Senator Godwin Hulse,
"You don't have no security."
Narda Garcia,
"So that is where we are."
From the discussion about Social Security to more pointed conversations about companies associated with its past Chairman Glen Godfrey. As we have reported Social Security facilitated and, arguably, guaranteed $17 million in mortgages for two Godfrey Companies: Western Caribbean Properties and Intelco. Both of those private investments are non-performing and right now government is using your taxpayer dollars to pay the foreign banks.
And the reason they are not performing, is because there are no real Investments, the money that was slated for those real estate development were diverted to other ventures, presumably the defunct Intelco. But why did Social Security use your money to guarantee Godfrey investments that had no security? Well, that's the $17 million question. And today Chairman Hulse posited that Social Security's Board was well aware, in fact members had been forewarned that there was likely inadequate security. Still, they went ahead and approved what was a dubious securitization. Well Chairman Hulse today cited evidence, which shows that it was more than dubious, it was downright false. He referred to two files prepared by St. James which profiled robust, performing projects. The paper cover, bolstered by a Social Security stamp of approval was good enough to convince international auditors but it runs out it was chockful of misrepresentations, not even worth the paper it had been written on. In a pointed, passionate, and extended question and answer session, Hulse asked Garcia why she signed Social Security's approval on to a project outline she knew to be highly suspect.
Senator Godwin Hulse,
"While there was documentation to say that these loans, and I am sticking to the files because the files make it very clear that St. James had made these loans, but there was no evidence in their financials to support that these loans had been made by St. James to these entities, but the files are saying the loans were made. In order words, how were two files of mortgages that should have existed, or for all intents and purposes existed, indeed it gets more interesting because these mortgages then were being securitized on one of almost the most impeccable programs, the North American Program, which to be honest with you in going through all the details over the last six months I fell in love with. I really fell in love with the Northern American Program, it was an impeccable program, a mastermind. And we were selling these mortgages, and there were tight controls to ensure that only proper disbursed, proper functioning mortgages would be sold. How were two files, that first of all had a tremendous amount of inadequacies if one took the time to read them, not coming to you from St. James, but from the DFC - sitting Chairman of DFC at the time Mr. Glen Godfrey, major investor in both companies and St. James Mr. Glen Godfrey. With all these documentation, every piece of documentation the registered address, whatever company it was, was out of 30 something Barrack Road. All the signatures on all the transfers were from people who were involved in every company who were involved in every company, in other words it was a total in?house package. And financials of St. James were showing that they were nowhere near this kind of sums having been disbursed. And not withstanding the collateral, which was kind of the small issue really, we didn't go ahead. Now I want to ask you directly Mrs. Garcia, directly, when you read those files and you saw in them the information, the inconsistencies, and inadequacies in the file, was there no serious concern of yours alone?"
Narda Garcia,
"There was."
Senator Godwin Hulse
"Did you point those out to the board?"
Narda Garcia
"Yes I did."
Senator Godwin Hulse
"And what was their response? "
Narda Garcia [Shrugs her shoulders].
Senator Godwin Hulse,
"Was there a directive to the board to proceed?"
Narda Garcia,
"I don't have any notion of that."
Senator Godwin Hulse,
"But you pointed them out to the board?"
Narda Garcia
"Yes, management, myself, and Mr. Zetina pointed out both to the Investment Committee and to the Board of our concerns with those two."
Senator Godwin Hulse,
"It is clear the monies were disbursed; the files even include insurance policies for buildings, premiums paid, insurance policies and buildings that do not exist. Premiums were paid so the file in itself was a complete thorough document. We could not find, nor could you find, at the Registry this insurance company being registered. The Director of Insurance has no knowledge of this insurance company yet premiums were paid and description of buildings is on them etc. So clearly these were doctored files; there is no doubt in our minds these were doctored files. But in the assignment, in the assignment to the DFC under the 43 clauses, which were intended to make doubly sure-43 times sure that these were impeccable mortgages, every imaginable condition was included, including that these loans had no delinquency, that they were current, that they were being serviced - only from proceeds of the project that the valuation was done by employee of the valuer of the mortgager who had no interest in the project. The most interesting one was that at no. 43 where it says no mortgager is an employee, officer, shareholder, director, or is related to an employee, officer, director, or shareholder of the seller in any way. And all these clauses, I catalogued about 22 of them which were incorrect with respect to the warranties given and the documentation in the file. Why would you have signed it and not said to somebody else, 'look man unu sign that but my signature no gwen.' I can understand, of course, your director before you in the previous hearing said, 'I neva read it and I didn't know and I trust it to the lawyers,' but Madam GM you are at the top of the food chain, you know these systems, you understand it well. Why would you have gone along with this and even now that we do not have the commitment to pay, and indeed if you read your guarantee it gives the DFC no right to give a discharge of charge, none whatsoever, and indeed the DFC Act gives Mr. Godfrey no right to issue a letter of discharge of charge. That has to be ratified by his board, which was not done, and for obvious reasons. His board obviously believed these were legitimate mortgages, so even that letter, and I am not the attorney here and I don't know if it will stand, but the point is with all of that, even if the Social Security Board is not required to pay because you are honoring that letter, the people of Belize are still being asked to pay. And really using a non-legal term, one could say that when you look at these files and all the documentation in here, it is definitely, totally, completely, misrepresentation of what the true facts were. To any foreigner sitting down, seeing an insurance company, seeing all these things-the files says this is good and legitimate; this is gold. But you in Belize, and I in Belize, and other people in Belize, who see for example an insurance company you never heard about, did it not dawn on any Board member when you advised them that this was something Social Security should not have gotten involved in? Did any of them raise any comments at that Board meeting?"
Narda Garcia,
"Yes to be fair with them yes Senator."
Senator Godwin Hulse,
"Honestly Madam GM, there must be somebody who understood this process well enough to know that if construed and concocted in this manner, it would be go through, and obviously the Board went along with it--to my mind on the instruction or the direction of somebody. Do you know who that person is?"
Narda Garcia,
"I don't know Senator. I can only say I followed the decision and the directive of the Board to go ahead."
Senator Godwin Hulse,
"Were you required to affix your signature because the signature of Narda Garcia is on the document certifying these warranties which are not so? If the trustee bank, the Bank of New York, knows that these are 'uncertain files,' and I will not use any stronger language than that at this point, we could be in serious problems. Is there anybody that you feel, or know, is responsible for having created these tremendous amount of documentation with flows, assignment charts, project documents, insurance, and everything to the extent that qualified international accountants from Deloitte and Touché could have believed that these were genuine documents? Who is responsible for having created this so I can go and get that person to answer the question? Do you know?"
Narda Garcia,
"I can only say again that, to me, where the problem starts and finishes is with St. James. You know who the principals of St. James are and who is involved with all the documentation. Bring St. James and let them answer the questions."
And from that withering conclusion on what Hulse delicately and euphemistically referred to as "misrepresentations", Hulse moved onto another Godfrey company called NH Financial. NH Financial's account at the Hibernia Bank in New Orleans was the direct recipient in US currency of a portion of the securitization proceeds. Hulse asked Garcia why Social Security, as guarantor, let the money go away from Belize instead of making sure it came here to be used to develop the real estate projects. Again, according to Chairman Hulse, all roads led to Godfrey's door.
Senator Godwin Hulse,
"It is my understanding that NH Financial is an IBC acting out of Antigua or one of those countries. But a check of the local registry of companies and an updated filing of directors and shareholders show for both companies no such entity as NH Financial or any other entity; it is fully Belizean owned with Mr. Glen Godfrey. So why would the money not have gone to the properties and be sent elsewhere to an account hat has nothing to do whatsoever."
Narda Garcia,
"But Senator I don't know that; I don't know that that account didn't have anything to do. What happened was the proceeds came to us, we were given instructions to deposit in Hibernia Bank, wherever that is, or Bank of Miami. There is a proposal that proceeds will be used to do buildings. What do I know if the money going out there is not to buy material to come back and do the buildings. That's not my purview, I think that's Central Bank's purview. So to me, in my mind, I am saying Central Bank needed to ask that question, who is this for, why you have hard currency going out when in fact we are securitizing to bring in hard currency."
Senator Godwin Hulse,
"Exactly and in those large sums."
And just if you're keeping score on the case of Glenn Godfrey and the Government versus the public purse, Garcia confirmed that Godfrey or government still owes Social Security $1.9 million for covering his debts in December. And, according to Central Bank documents, government has had to come up with another $0.8 million to continue to cover that debt since. And, not to forget, two weeks ago on March 22nd government lost a US$5 million deposit at the Antigua Overseas Bank when Northern Data Pro Limited, another golfrey company defaulted on its debt.
