D.F.C. hearings: more hints of scandal

As the Commission of Inquiry into the D.F.C. wound up its second week of public hearings, the questions continued to focus on loose management, non observance of policy guidelines and a pattern of unjustifiable favouritism for the politically connected. News Five’s Janelle Chanona reports.

Natalie Goff, Former Assistant General Manager
?It?s nearly six years since I?ve left the D.F.C. And I?ve had reason to put it behind me.?

Janelle Chanona, Reporting
?Day four of the D.F.C. Commission of Inquiry saw former Assistant General Manager Natalie Goff take the stand. Goff was one of three employees fired in November 2000 for what she says may have been too many questions about the way the corporation was being run.?

Natalie Goff
?For me, the board was too involved in the day to day management of the corporation. The board is there to provide direction and a strategic direction and even a short term direction to the corporation. So you introduce the new activities and the securitization that is the purpose of a board. The Government at the time, I don?t know if it was a promise to build certain houses, but they had a housing scheme and most of the funds were going to be used to fund the programme. D.F.C. was owned by the government of Belize.?

David Price, Chair, D.F.C. Commission of Inquiry
?Was that ever explicitly expressed that the proceeds from securitization were to fund housing??

Natalie Goff
?No, it wasn?t explicitly for that. It was to fund the lending operations of the Development Finance Corporation. I would assume that because the money was free of C.D.B guidelines and any stringent guidelines we could lend the money as we wanted here in Belize. We didn?t have to adhere to any stringent guideline that came with donor funds.?

David Price
?When you say we in a context do you mean the D.F.C. or G.O.B.??

Natalie Goff
?D.F.C. Can you talk about D.F.C. without G.O.B.??

David Price
?I am asking you.?

Natalie Goff
?I don?t think so.?

David Price
?D.F.C. would have lost as a result of securitization??

Natalie Goff
?Well not necessarily because having trying look into securitization is what you do with the money and how soon you roll over in the funds in securitization. If the money?remember we had somebody in from I.D.B. or may have been C.D.B. who was concerned that the money was going back into housing, which was not considered productive activity. It did not generate a lot of income except for the employment that it would create. If it was invested in very productive activity, then it would have been worthwhile. I will say here and then that I?m not an economist and I did not have that sort of expertise, but I think if we did things like that and if the securitization was properly planned, the risk that was taken could have proved beneficial to Belize. Because securitization is a common transaction out there on the external financial market. It was new to us, but in hindsight I think it was rushed. The way we tried to expedite the loans, the funds and giving the loans was rushed, so it was not properly planned. Because if you have an administration coming in 1998, and by April we have the first sale? I think all of that was stated in the strategic review done by the consultants. That was their major concern in the strategic review was that the D.F.C. was not structured physically nor had most adequate human resources to enter into these seasoned activities that the corporation has entered into. Because while we were dealing with securitization that took up a lot a time, granted Mr. McMillian was involved in the process, he took it over and we only provided the mortgage. I think he came with the second tranche. We were also involved in selling these Los Lagos loans and things like that, which were also new to D.F.C. So there was stress and strain on the staff.?

What was a stress and strain to the D.F.C. portfolio were many of its housing projects.

Merlene Bailey Martinez, D.F.C. Commission of Inquiry
?It says the most recurring concern noted by clients and credit officers alike ? this is talking about Hattieville Housing Project was of the quality of workmanship. Reports on these were often followed by a directive to proceed with disbursement to the various contractors without any demand for any remedial works to be carried out. Who issued those directives??

Emerson Burke, Chief Appraiser, D.F.C.
?I would need to refer to the specific files, but I must say what I found in my review is highlighted there. There were directives issued to proceed with disbursement. They may have come from manager of projects or the general manager or whoever at the time, but those directives are on file.?

And while homeowners have complaints about their houses, in the Mahogany Heights Project, buyers are still waiting for their land titles.

Emerson Burke
?To my knowledge we have not transferred titles to any homeowner or any individual at Mahogany Heights.?

David Price
?Why not??

Emerson Burke
?To my knowledge the D.F.C. does not hold a legal title to the lands at Mahogany Heights.?

David Price
?Who does??

Emerson Burke
?To my knowledge, it is a gentleman by the name of Johnny Kuo. When I saw legal, I mean he has a legal mortgage over the property. The original owner of Mahogany Heights, all that property known as Mahogany Heights is one Abdul Hamze. I reported it to my immediate supervisor, who is the manager of projects Mr. Franklin McClure. I reported it to Mr. Espejo at the time and I reported it to Mr. Troy Gabb. And my memory serves me well, the following morning we tackled our approach to solving it. Whether or not a title search was carried out … I don?t know. Whether or not the office of the SolGen conducted a title search ? I don?t know.?

David Price
?So in effect the D.F.C. inherited a problem from G.O.B??

Emerson Burke
?We inherited that problem. We inherited the project, because the Mahogany Heights project as it were did not commence–we basically took over that project.?

During the investigation period, Herman Morris was the D.F.C.?s accountant … a position he describes as simply pushing paper and cutting cheques.

David Price
?Can you look at this ledger card for Novelo?s limited. That loan was for thirty million dollars I believe. How many disbursements or tranches was that disbursed in??

Herman Morris, Former Accountant, D.F.C.
?It appears that it was like one. I see one.?

David Price
?I believe there were two.?

Herman Morris
?They occurred on the same date.?

David Price
?Yes. So if there were two, would that be a highly unusual situation??

Herman Morris
?Yes.?

David Price
?Who would have authorized such a disbursement??

Herman Morris
?The project appraisal unit. I said earlier that I act on the strength of their recommendation, who happens to be the technical staff where projects are concerned. I?m ignorant when it comes to the actual loan application and appraisal. We act on the strength of the signatures affixed on this instrument.?

David Price
?I understand that, but I still want to ask you, if it wasn?t highly unusual to disburse thirty million in two tranches on the same day??

Herman Morris
?It?s not highly unusual, because of the size it may appear to be unusual. I am certain that we may have had a situation where we did cut a cheque for a smaller value. Maybe a ten thousand dollar loan issued in one cheque because of the nature of the transaction.?

Merlene Bailey Martinez
?I want to encourage you to chose this day whom you will serve, whether it is a commitment to members of the Board or a commitment to this process of enquiry in letting us know. Listen this was a weakness in this system. I?m not asking you to incriminate yourself in any way; I?m asking you for some help here. What should have been done differently, before that fifteen million dollars; the second fifteen million disbursed.?

Herman Morris
?I can?t say what.?

Merlene Bailey Martinez
?You don?t know??

Herman Morris
?I don?t know.?

But Morris did know after he left the D.F.C., not everything in the books were above board.

Merlene Bailey Martinez
?The section on loan review speaks about?I will read the little section: ?worthy to note also that was found during review was forgiveness of interest, the amendment of an account by changing the disbursement date, so that all interest arrears are wiped out. Loan repayment then starts at the new date of amendment. Are you familiar with that practice? Have you ever engaged in that practice? What is your opinion on that particular practice??

Herman Morris
?That is incorrect. It is not good accounting.?

Merlene Bailey Martinez
?Would you consider it illegal??

Herman Morris
?Yes.?

Janelle Chanona
?After listening to ten different employees and former employees of the D.F.C., an apparent trend is starting to emerge, in that while most of them had concerns … in some cases some very serious concerns about how millions of taxpayers dollars were being handled, in the end they did what they were told or worse, what they thought was expected of them by the General Manager and Board of Directors. From the Belize Institute of Management, I am Janelle Chanona reporting for News Five.?

On Tuesday, San Pedro branch manager Juvencio Rivero is expected to testify before the Commission.