Senate Committee continues S.S.B. probe
It would normally be the leading news of the day, if not the week, but today?s second session of hearings by the Senate Select Committee investigating Social Security was largely overshadowed by other events. In the long run, however, it may prove more important. First to testify this morning was former financial secretary Joseph Waight, a government representative on the S.S.B.?s board of directors between 1998 and 2003. Rene Gomez focused on ministerial interference on the board?s actions.
Rene Gomez, Senator, Senate Special Select Committee
?I would say we are position of some documentation that the Government or some Minister of Finance at times would request for Social Security to facilitate a process to some entity. Are you aware of this??
Joseph Waight, Former Financial Secretary, S.S.B. Board of Directors 1998-2003
?No ?
Rene Gomez
?Is the Board fully independent when it comes to these decisions??
Joseph Waight
?Well, it?s independent in so far as making the investment decision. It follows the overall macro-economic guidelines of the Government of the day. It is influenced– as I mentioned earlier–when it comes to like a wages policy or that type of thing for the public sectors in general and I remember being involved in the negotiations at the time with the unions and so. But when it comes to targeting specific investments, not really; no. The Government would–maybe deviating a bit–but something called the Social Security development account, which is basically a small amount of money that is used for social assistance and for medical assistance and indeed there is quite a bit of references from people in Government to the Social Security Board; hardship cases and cases that need medical treatment abroad. So there is quite a bit of contact there. But to answer your question as to whether there were instructions to then the A, B or C no.?
The second witness to appear was Ramon Cervantes, who had served as Chairman of the S.S.B. investment committee between 1998 and 2003. It was revealed that despite recommendations by the investment committee not to securitize loans for the Godfrey group of companies, days later, the board approved their inclusion in the securitization bundle.
Dickie Bradley, Senator, Senate Special Select Committee
?So the gist, the core reason for the investment committee to turn down those mortgages was because–in your view, your committee?s view–the collateral of did that add up to the amount of money on the mortgages. The passers of land did not cover the value of the mortgages for each of those transactions. Is that the reason??
Ramon Cervantes, Former Chairman, S.S.B. Investment Committee 1998-2003
?Well at that time, with the information we knew then at that meeting, based on that information, everybody knows you just cant have two properties, just the two pieces of land without knowing what will happen to it valued at seventeen million. It would be imprudent of us to approve that with what we knew at that time.?
Dickie Bradley
?Did you consider the decision of the Board imprudent to subsequently approve those mortgages.?
Ramon Cervantes
?With the explanation I was given I don?t think it was imprudent because the investors themselves knew what the proceeds would have been used for. In normal everyday banking procedures, the banks would lend on a ten thousand dollar property or maybe two hundred thousand dollar to build a home for you to enhance the assets and build. The North American Investors knew it because it was in the bond offering plus we had gotten a commitment from DFC that they would sign off for undertaking to release and discharge the liability from S.S.B..?
Dickie Bradley
?So had the matter come back to the investment committee, you all would have approved it based on the additional information??
Ramon Cervantes
?It?s a hard question. I can?t say what we would have done.?
Dickie Bradley
?Give me a hard answer. Would you all have approved it with the information that the Board claimed they approved it on.?
Ramon Cervantes
?We probably would have in view of the economic situation.?
Next to appear before the senators was Martha Williams who served as a member of the board of directors and of the investment committee.
Moises Chan, Senator, Senate Special Select Committee
?You being a member of both the Investment Committee on the Board and signatory to many of those documents, can you tell us who takes responsibility for the risk that now the Social Security finds itself? From your point of view, you being party to the Board, the Committee and the in house due diligence that have been done, who you can really say should have done this job and to whom we need to now hold and say it has not been done.?
Martha Williams, Member, S.S.B. Board of Directors and Investment Committee
?I?d like to go back to the role of the Investment Committee and the Board, whereby the Investment Committee recommends and the Board approves so I would (say) the Board is the final answer.?
Mayor David Fonseca, who was a member of the Social Security Board and was later appointed by that body to the board of directors of the St. James Building Society testified as to which body is ultimately responsible for the loans securitized.
Godwin Hulse, Senator, Senate Special Select Committee
?So would it be your understanding that all the talk that we are having–this is the second time that I am asking the question and I am sure you?ve heard it while you were waiting–about all this talk about paying off Intelco?s loan and Western Caribbean properties to Social Security is a mute point because it really doesn?t exist??
David Fonseca, Former Member of S.S.B./ Former Member of Board of Directors, St. James Building Society.?
?The things is that Social Security, from my point of view has a social obligation to the country under this whole transaction as a guarantor and that is why our Social Security Board is still involved with this situation.?
Godwin Hulse
?But I thought that the discharge of charge transferred it to the DFC.?
David Fonseca
?Yes it did but I think we all know that DFC is in a position not to take up that responsibility at this time.?
Godwin Hulse
?So Social Security is playing a kind of ‘good guy’ thing??
David Fonseca
?I would think so. Yes.?
Godwin Hulse
?With seventeen million dollars.?
David Fonseca
?Bear in mind that it?s also guaranteed with a sovereign guarantee.?
Yasin Shoman, current chairman of the S.S.B. Board, told the Senate Select Committee that Mrs. Narda Garcia has been reappointed as general manager because of the ?commendable job? she has done over the last five years. This despite the swirl of controversy surrounding her tenure. In Shoman?s opinion, the disputed loans will not come back to haunt the S.S.B. as there is sufficient collateral to back them.
Yasin Shoman, Chairman, S.S.B. Board
?The entire package related to St. James, Western Caribbean, International Telecommunications, Data Pro and other as they are popularly called Godfrey related companies. The entire exposure initially was for little over forty-three million Belize dollars. At the end of December 2004 that figure was down to twenty-seven point eight million dollars, which means that of the initial amount close to fifteen million dollars have been paid. Our total exposure today stands at twenty-seven point eight million dollars.?
Dickie Bradley
?As of today??
Yasin Shoman
?As of December thirty-first 2004. On the other side of the coin, we have seen as recent as yesterday a press release by BTL in which they categorical state that they are prepared to pay twenty million Belize dollars for the Intelco portion of that loan. When that comes about, our total exposure based on December thirty-first figures will be seven point eight million Belize dollars. Against that, one of the properties which covers the Data Pro portion of the entire package is valued in excess of sixteen million dollars. So, even if there is a default in that seven point eight million dollars remaining, there is more than adequate security and I am sure that we will all agree that twice the value of your exposure is more than adequate security.?
She was the one witness for whom the Senators and gallery had been waiting patiently for all day. Narda Garcia, having only been recently reappointed as General Manager of the Social Security Board, has appeared publicly several times to answer questions regarding the S.S.B. management and investment portfolio. Therefore, there were no surprises in her responses to the Senators questions; she answered no to all inquires about Government interference. However Garcia did clarify for the panel just how much of the Board?s finances are at risk.
Dickie Bradley
?I want to be able to explain to everybody in street form language. What is the amount of money that Social Security has exposed; has at risk that there is default and there is not efficient collateral and therefore Social Security will have to dig into the Social Security fund to make up somebody else?s default. What are we talking about??
Narda Garcia, General Manager, S.S.B.
?Senator presently those accounts of those related companies stand to principal of twenty-eight million dollars.?
Dickie Bradley
?Principal being how much??
Narda Garcia
?Twenty-seven point eight million dollars.?
The date fort he next hearing of the Senate Select Committee has yet to be announced.
