Lord’s report made public; criticises Godfrey and others
The report of Justice Herbert Lord, one of the two co-chairs of the Commission of Inquiry investigating the Development Finance Corporation, has been received by the Prime Minister and released to the public. A quick but full reading indicates that Lord’s report is a not unfamiliar rendition of what transpired over many months of public and private hearings in which forty-four witnesses gave testimony and thousands of documents were reviewed. Lord’s account is detailed but not so burdensome that it can’t be understood by the general public. Its primary conclusions appear on page eighty-eight of the ninety-three page report. I “The Commission was … asked to determine whether any wrongdoing occurred in the operations of the D.F.C. during the said period, and if so to identify the persons responsible, if possible.
It is the opinion of the Commission that wrongdoings did occur in the operation of the D.F.C. Some occurred inadvertently; many occurred otherwise and there are no explanations given for them.
Because of the wrongdoings and the mismanagement of the D.F.C., this once magnificent institution was brought down and is now being dissolved.
The Board of Directors, especially the first board 1999-2003, some members, its chairman and deputy handled this institution as an extension of their own private business. There were fiduciary duties which were breached, the statute under which the institution was governed seemed to be put aside and not used at all. Overall then the board of directors saw the handwriting on the wall and did nothing, not even registering a protest. Silence can be a powerful vote in the wrong direction, at times.
Agreed, many were frustrated, however many seemed to have profited at the expense of the D.F.C., by extension the G.O.B. and the people of Belize.”
Lord goes on to single out those directors and D.F.C. officers who were the prime movers in the corporation’s demise. Lead villain in the drama is businessman Glenn Godfrey, whose private ventures somehow seemed to become inextricably linked to his position as D.F.C. chairman. According to Lord, “His performance of his duties in many instances were in conflict to the duties he was required to perform as Chairman, D.F.C. There were too many companies and entities in which he held prominent (posts) which also did business with the D.F.C. and profited from these business deals. There were conflicts of interest with his fiduciary duty to the D.F.C. and there may have been breaches of the D.F.C. Act on many occasions when dealing with these companies and the D.F.C.”
Lord goes on to state that two directors and the C.E.O. also shared the blame. “The same can be said for Mr. David Courtenay (deceased) in the dealings of his companies with the D.F.C. Mr. Bob Bou-Nahra, he also was prominent and seems to have profited from his involvement with the D.F.C. Mr. Troy Gabb, Chief Executive Officer profited on many occasions from the D.F.C.”
These directors and C.E.O. were not the only ones to benefit from the D.F.C.’s mismanagement. According to the report, at the end of 1999 thirteen percent of all D.F.C. loans by value, were considered non-performing … but five years later that percentage of bad loans had skyrocketed to thirty-three percent. The names are certainly not unfamiliar to viewers who followed the hearings, but the report identifies the borrowers whose multimillion dollar loans were marked by breaches of procedure and fiduciary duty or conflicts of interest in which board members benefited. These are loans to the Novelo family, Arnaldo Pena, Aqua Marine Suites, Royal Palm, and New Millennium Enterprises. Glenn Godfrey’s Western Caribbean Properties appears to have received very special treatment as did his St. James Building Society. Godfrey’s law firm managed to score big with over a million dollars in legal fees on the thirty million dollar Novelo loan … a loan that Chairman Godfrey approved for payment in one day without meeting any of the D.F.C. guidelines. Lord specifically cites the Forensic Auditor’s report with respect to the Novelo’s transaction.
“The file displays a number of serious conflicts of interest, not least in a situation where the law firm advising the borrower was associated with the Chairman of the D.F.C.; the Chairman of the D.F.C. appears to have personally overridden D.F.C.’s internal control system in order to make unauthorized and probably ultra vires payments to the client of his law firm, some of which was actually paid to his law firm in legal fees.
Not only was D.F.C. covering the fact that no payments were being received from Novelos, but now they were being deceitful.”
The report offers details of the offending transactions which make for interesting reading. It is in the area of recommendations, however, where Lord displays some of the timidity and seeming lack of interest that marked his many hours as part of the investigative panel. Not surprisingly, he asks for his report to be sent to the Director of Public Prosecutions to see if any criminal action is warranted. He also suggests civil litigation against those borrowers who have not repaid, as well as those who profited or helped others to profit wrongly at the public’s expense.
As for specific recommendations–in the unlikely event that the D.F.C. is resurrected–he says that the D.F.C. Act should be amended to require board members and officers to publish any potential conflict of interest in a newspaper or government Gazette, under penalty of criminal prosecution. He specifies that the Act should also make clear the permitted areas of investment and criteria for those investments, instead of merely being written as management guidelines.
And finally, Lord recommends that a representative from the Trade Union Congress and N.G.O. community must be included when constituting a quorum of the D.F.C. Board.
