The public sessions of the DFC Commission of Inquiry are winding down and the commissioners are hoping to end with a bang. There are only four hearings left and the commissioners are hoping to bring in a cast of senior DFC personnel who have named as responsible for much of what went wrong at the DFC between 1999 and 2005. And today the commission set the stage with a presentation from forensic auditor Mark c. Hulse. He's compiled a draft forensic audit in a little over a month, and while it's a lot of work for a small span of time, he disclosed the bulk of his findings in the morning session. Here are highlights.
Jules Vasquez Reporting,
What you see here is hard talk between co-chairs of the Commission of Inquiry Herbert Lord and Merlene Bailey-Martinez, they are arguing over the sudden reappearance of former counsel Lois Young.
Merlene Bailey-Martinez,
"We had some issues that we needed to air out just now and just for matter of clarity and matter of record, I have invited Miss Lois Young to be my counsel in this Commission. Because we would have had to have gotten agreement or consensus, we have some degree of disagreement as to an external counsel. Mr. Lord has indicated that he has no objections to Miss Young being here and so Miss Young will be advising me until such time as we can come to some consensus about whether or not she will be advising the Commission."
With that disclosed, forensic auditor Mark Hulse took the stand to outline his 165 page draft audit of the DFC. He said that he had a short time to do a voluminous job but he had one central question.
Mark Hulse,
"Whether there was financial wrongdoing at the DFC and or whether the DFC was used as a vehicle through which to perpetrate financial wrong doing and if so, the perpetrators there of."
And in pursuit of that, he gave a broad and compelling overview of reckless mismanagement and fiduciary irresponsibility.
Mark Hulse,
"My analysis of high value delinquent loans at 31st December 2003 indicates that at least $2.7 million was owed by one Arnaldo Pena and his company. This is just an example. Our further inquiries indicated that Mr. Pena was constantly being granted new loans despite all his existing loans being non-performing. As I said these are examples of what the body of the report carries.
In March 2001, the DFC lent Novelo's Holdings Limited $30 million for the purposes of buying a bus line and other assets. This loan did not perform. It appears that its non-performance was concealed by way of the creation of new loan accounts, all of which became non-performing. Our review of the Novelo loan indicated many breaches of procedure, protocol, and fiduciary duty.
It also indicated conflicts of interest in respect to which Mr. Godfrey, the Chairman of DFC appears to have been a beneficiary through his legal practice and bank under his control. The DFC acquired various housing assets for excessive consideration. Total write down in respect of such assets amounted to $69.2 million. The largest examples were satellite city, Mahogany Heights housing project, and the San Pedro housing project. The Mahogany Heights project gives rise to substantial losses because of apparent mismanagement.
With regards to the San Pedro housing project, the DFC acquired some 728 San Pedro lots for Belize $14.5 million. These were supposed to be filled lots but approximately five hundred were unfilled. The San Pedro assets were acquired from Western Caribbean Properties limited, a company owned by Mr. Glen Godfrey, chairman of the DFC. Mr. Courtenay, DFC Deputy Chairman, was the DFC project manager who approved payments to Western Caribbean Properties Limited."
The list reads like a whose who of PUP insiders but not only was there poor performance in housing, there were also suspect banking transactions.
Mark Hulse,
"The DFC borrowed the sum from Alliance Bank in March 2000, one for five and a half months to seventeenth December 2001. Interest paid on this loan of five million for five and a half months was $805,000 which works out to 17.5% per year. Mr. Glen Godfrey the Chairman is a major shareholder of the Alliance Bank Limited."
Indeed Hulse painted a picture of a complete lack of regard for procedure at the board level.
Mark Hulse,
"In my opinion a number of transactions undertaken by the DFC were not properly approved by the Board and indeed could not reasonably been so approved. I respectably suggest that the commission takes legal advice on the question of initiating proceedings against members of the board in connection with potential breaches of fiduciary duties and consequent recovery of funds expended in transactions that were not in line with the constitution of DFC. I formed this view that the Board gave insufficient priorities to its responsibilities for financial stability and was not sufficiently involved in ensuring that the system of internal controls were properly maintained."
And the blame for many of those mishaps were heaped at the doorstep of the Chairman and the Deputy Chairman at the time.
Mark Hulse,
"The executive managers appeared to have been usurped in their function to a large extent by certain members of the board. May I repeat that please, the executive managers appeared to have been usurped in their functions to a large extent by certain members of the board, particularly Mrs. Godfrey and Courtenay when they were Chairman and Deputy Chairman."
But Hulse said that they were probably acting on behalf of the main shareholder of the DFC, the government of Belize. He quoted a report which the government commissioned in 2001 when a foreign contractor was asked to examine the operations of the DFC.
Mark Hulse,
"In order to stimulate the economy and fulfill campaign promises, the controlling shareholder of DFC, the government, is significantly pressuring for more growth. The board of directors is sympathetic to this objective and has focused on growth to the extent that financial soundness and sustainable operations are now in jeopardy. These two board members are involved personally in real estate development and banking in Belize and appear to dominate decisions of the board. While their leadership and knowledge of the market conditions can be valuable to DFC, their judgment may be bias by government's growth objectives and the faith of their personal investments."
With that clear warning from a foreign contractor in 2001, Hulse says GOB should have known better but it didn't and when problems appeared, GOB let taxpayers pick up the slack.
Mark Hulse,
"All this money was spent on these developments and in 2005 the DFC did a valuation of its own assets, independent valuations, and came up with a figure far less than the book value, the cost of what it spent on these developments to the tune of $69.2 million, I believe it is. Therefore these assets were overvalued in the books of the DFC."
Later on in the news we'll have some clips form the afternoon session of the hearings when the man who succeeded Glenn Godfrey as Chairman, Jorge Omar Espejo took the stand.
