The DFC hearings continued today at the BIM Office in Belize City. The commission is building its case to show how loans were given recklessly and with disregard for DFC's policy and practice. Adding much to that today was Franklin Magliore, he managed credit and projects and would have to perform project appraisals. He discussed the many times his office was by passed.
Franklin Magloire, who still works at the DFC, served during the period in question on the board's management credit committee. The group comprised of the board and senior managers would make recommendations on loans. But according to Magloire, the healthy debate on the comparative merits of loans ended when the Godfrey board came - and the credit committee was chaired by Godfrey's deputy David Courtenay.
Franklin Magloire, Manager of Credit & Projects
"Effectively, we had no say."
David Price,
"When you say "we" whom do you mean?"
Franklin Magloire,
"Management had no say in terms of what was going to be approved and what was not going to be approved. There was no voting. It was either decided by the deputy chairman and the other board members and if they said that this project was to go through, it was going to go through. Sometimes a project was outside the guidelines. We had come from an era when we were adhering to project guidelines to 'the T' and so if a project did not fall within the guidelines, I would, on more than one occasion, I had said I didn't think the project qualified."
But regardless of what he thought, the loans went through and no dissent was recorded and no vote taken. And, by Magloire's account, that slippage of standards opened up to vast disasters such as the $30 million Novelo's loan, disbursed in two $15 million payments on the same day.
Franklin Magloire,
"If you disburse the entire $30 million in one day, you have lost control.
That would be an example in which you lost control where you did not control the disbursement."
David Price,
"Lost control or gave up control?"
Franklin Magloire,
"Lost control. To my mind we lost control."
Lost control and with that, it was a disaster that Magloire says he could have foretold.
Franklin Magloire,
"In my view I wouldn't have funded the project. The project fell way outside of DFC's concentration guidelines and DFC's guidelines say you could lend up to 5% of your portfolio or 25% of capital, somewhere around, and it exceeded that by far margains."
Those risks were exceeded on many occasions thereafter and Chairman Price went through a laundry list, a virtual graveyard of bad loans, made to friends of the government such as Luke Espat, Papi Pena and Bill Lindo. Members of the board also received loans for their projects, such as when Chairman Godfrey got an investment approved for his own company.
David Price,
"In early 2000, I want you tell me first of all if this is a project. The DFC agreed to purchase 278 lots from Western Caribbean Properties Limited."
Merlene Bailey-Martinez, Commissioner
"Have you ever seen a project proposal on this investment?"
Franklin Magloire,
"No I haven't."
Merlene Bailey-Martinez,
"Do you know if any that you haven't seen, was ever tabled at the board at any point in time?"
Franklin Magloire,
"I don't know of any being tabled at the board."
David Price,
"The then Chairman of the Board of directors of the DFC, was he also a principal of this Western Caribbean Properties Limited?"
Franklin Magloire,
"I have not seen a document that says that but my understanding is that he was a principal."
David Price,
"Is there, was there, at the DFC at the time, any concern over potential conflict of interest that such a situation might pose?
Franklin Magloire,
"I don't want to venture to say that at the board when it was discussed, it was discussed at the board, that there was concerns raised. Somebody who attended those board meetings would be in a better position to answer those questions than myself."
But Magloire did work on a project involving deputy chairman David Courtenay to build 120 homes for $3 million.
David Price,
"There was an application by CAD Construction Company, David Courtenay, for the construction of some houses. Do you recall that?"
Franklin Magloire,
"I recall that project."
David Price,
"Was an appraisal done of this project? What was your recommendation?"
Franklin Magloire,
"That it was viable and it should have been funded."
David Price,
"When you say viable you mean financially and economically?"
Franklin Magloire,
"Financially viable. It had to be viable. The DFC was going to buy back the houses from the applicant. DFC provided the credit, DFC purchased the buildings on completion of the project. Now the market for the project basically was guaranteed, no risk for the client."
Merlene Bailey-Martinez,
'No risk for the client but certainly a risk for DFC."
David Price,
"Are you aware of who the principal of CAD Construction was/is?"
Franklin Magloire,
"I know it is Mr. David Courtenay."
David Price,
"He is also the vice chairman of the then Board of Directors."
Franklin Magloire,
"That is correct."
David Price,
"Did it occur to you or to the DFC that this might constitute a conflict of interest?"
Franklin Magloire,
"It was the board who approved that loan."
David Price,
"But there was no concern expressed as far as you know?"
Franklin Magloire,
"As far as I know, no."
And according to Magloire, that same board had and used the authority to bend policies generally to permit many risky loans.
Franklin Magloire,
"Those loans were being approved by the board. The board reserves the right in its judgment, in whatever consideration, that they have before them to lay aside policies. It should not the norm, but they have that right."
And while he granted the board wide sway, one thing Magloire did question the board on was the idea to avoid a default for big loans such as 'Papi' Pena and Novelo by making them new, personal loans to service failing company loans. It was called working capital, and Magloire says that by his reckoning, it was illegal.
Franklin Magloire,
"The brilliant idea came up and said, 'hey if you offer a loan to the principal, then you are not offering it to the client. There was a section of the servicing agreement which I had gone through and I have my doubts about it. it can be done legally and it can be done illegal and we're not the legal experts so those are the issues. Eventually we, without the authorization of the then Chairman who was there, and the CEO, the legal officer, myself, and I think the advisor of finance sought a audience with Mr. Ghandi and he advised, as I suspected, that under the servicing agreement, that was illegal."
Magliore was asked to review a number of files and he will return with more information at Thursday's hearing which, again, will be aired live on Channel 7.
