Perhaps the most telling thing so far about the DFC Commission of Inquiry hearings is the fact that so many competent professionals just stood by and said nothing as DFC was systematically stripped of its internal controls and best practices. Well today, one senior manager came forward to say that she did say "no" when her CEO tried to run a red with a bogus loan. Finance and Internal Services Manager Jane Longsworth today explained why she had to say no to a shaky $50 million loan.
Jane Longsworth, Finance/Internal Services Manager
"I have been in a position where I've refused to book a transaction I was not satisfied that the transaction was legitimate and there was documentation to support it."
Merlene Bailey-Martinez, Commissioner
"You have been in that position?"
Jane Longsworth,
"Yes."
Merlene Bailey-Martinez,
"Would you like to comment on the specifics of.."
Jane Longsworth,
"No."
Merlene Bailey-Martinez,
"Do you want her to comment on the specifics?"
David Price, Chairman
"Is it within our time frame?"
Jane Longsworth,
"I would really rather not."
Merlene Bailey-Martinez,
"Who are the parties involved?"
Jane Longsworth,
"I would really rather not respond to that right now."
Merlene Bailey-Martinez,
"Miss Longsworth does it incriminate you?"
Jane Longsworth,
"No."
Merlene Bailey-Martinez,
"Because you need to know that that is the only basis on which you can refuse to answer that question."
Jane Longsworth,
"This is tough."
Merlene Bailey-Martinez,
"We need to establish the wrongdoing that occurred and those responsible.
That is a part of the legal requirement of this Commission."
Jane Longsworth,
[Hesitating] "Creole say fish get ketch by their mouth. Can I check this first before I spill it?"
And after a lunch break she checked the dates to make sure it happened between 1999 and 2004 and "spilt it."
Jane Longsworth,
"It pertains to a $50 million loan that DFC was supposed to have secured from the Belize Bank and I was given instructions to book it and given some documentation on which to base the transaction but the documentation was not sufficient and so I refused to book it and I did not authorize that it be booked either. They were entering into an agreement to borrow $50 million from Belize Bank who had agreed that they would lend provided certain conditions were met and that was the nature of that document. It's listing the type of conditions that it was an agreement that we would do this if these conditions are met and that is the document I was given and said to process and I did not."
Merlene Bailey-Martinez,
"And the basis of your objections to that were that..."
Jane Longsworth,
"That if it were a legitimate transaction, I would have an agreement, a loan agreement, that says DFCnow has secured a loan with the bank and I would have some evidence that DFC received a disbursement or has a term deposit in its name and I did not find that so I did not proceed."
Merlene Bailey-Martinez,
"We won't speculate as to why but was that transaction eventually booked or passed through the accounting system of DFC?"
Jane Longsworth,
"Yes it was."
Merlene Bailey-Martinez,
"By who?"
Jane Longsworth,
"I don't know who processed it but maybe later on in 2004, maybe in 2005, I noted that interest had been paid on the facility."
Merlene Bailey-Martinez,
"Interest had been paid to Belize Bank?"
Jane Longsworth,
"Yes."
Merlene Bailey-Martinez,
"But you did not see where the funds had come into the DFC in any form at all."
So what was really behind the $50 million transaction?
Jane Longsworth,
"DFC was borrowing $50 million to pay back government of Belize $50 million it had borrowed and that the nature of the transaction would have been such that the DFC would procure a loan and pay to the government of Belize who would then use the $50 million to have a term deposit in the Belize Bank. So we're not moving money, we're moving just paper and that the DFC would be responsible for the difference between the interest on the loan and the interest earned on the term deposit and I think the difference was 1.5%. So that 1.5% interest was paid for the period of time that this loan supposedly existed."
Merlene Bailey-Martinez,
"But the loan never existed?"
Jane Longsworth,
"Not as far as I know. I never saw evidence of it."
Merlene Bailey-Martinez,
"We're talking about $50 million that was passed through the DFC that did not have a basis for doing so. It was not a legitimate transaction, which means that it passed through DFC's books without an agreement actually going through."
And for a little more on that $50 million loan, 7NEWS first reported on it in July of 2004 when it appeared in the Central Bank aggregates. At the time we noted that it was highly irregular because the Central Bank had recorded on its books $50 million that it had not received. It was later exposed as a less than convincing shell game where government was trying to prop up its accounts for a visiting IMF team. Well, it didn't work, and instead had a contrary effect, when the IMF team saw through the ruse, and encouraged government to reverse the transaction.
