Former finance minister testifies at D.F.C. hearings

Like one of those hyped up heavyweight fights on pay-per-view, the long awaited showdown between D.F.C. Commission of Inquiry Co-chair Merlene Bailey Martinez and former Minister of Finance Ralph Fonseca could never have lived up to its advance billing. To the disappointment of many, there was no knockout, knockdown, or even a solidly landed blow to the head. Instead, the two gladiators bobbed and weaved, advanced and retreated, and generally managed to protect their private parts from any low blows, perceived or real. Ralph scored points for aggressiveness, Merlene for tenacity and keeping her cool. For spectators, it is clear that few minds were changed by today’s encounter–you either believe in Ralph Fonseca or you don’t. But for the unbiased and unemotional judges, required to mark their scorecards, it had to be a unanimous decision for the minister. Fonseca may have been typically combative and high handed, but Bailey-Martinez, despite six hours of trying, did not even come close to breaking his story line or tying him in a meaningful way to the cesspool of mismanagement and self-interest at the D.F.C. that previous hearings have established. News Five’s Janelle Chanona has put together some highlights of today’s testimony.

Ralph Fonseca, Former Minister of Finance
“The D.F.C. was one of some sixty responsibilities that were given to me by the Governor General on the advice of the Prime Minister. And like most other portfolio responsibilities, they were general in nature and policymaking in focus. As it relates to the day to day operations of the corporation, the board is for all intents and purposes autonomous.”

“I am also shocked and horrified to hear, Mr. Commissioner, that you are not finding these things after the people of Belize have spent some one million dollars on this commission if not more, because there were many, many approvals. Approvals, written approvals were given in various forms—I can’t recall all of them of course, but I know that all the approvals that came to me were approved. I am not saying they were approved immediately, I may have had to asked questions about it through a representative from the Ministry of Finance, but they were approved; so there were different ways of getting them approved. What was crucial for me, and this is I am a bit shocked that this information was not there after so much of the public money has been spent, is because in each case these approvals had to be approved by the board first, otherwise it could not even come to me. And I was very, very cognizant of that, so there should be a record there, so someone is not doing their work. And apart from that record, once that is then sent over to me, it is sent over in various forms. There may be a letter, I guess it all depends on the timing; if someone is just buying a house—maybe I should back up a little bit so you can understand because we, I think try to jump to conclusions without looking at the whole picture. Many of the housing projects that the D.F.C. was undertaking were under attack by the Opposition and other special interest people and hypocrites in our society. People were not buying those houses, they were some bold members of the staff of the D.F.C. that felt very passionate about the fact that they had done a lot of work to build these houses, to have the funds available, and that because of this attack these houses were falling into a state of bad repair. So, some of the staff actually got together I guess and decided that they would move into these different locations, Los Lagos is a good example.”

Herbert Lord, Co-Chair, D.F.C. Com. of Inquiry
“We have heard—informed in testimony, let me put it that way—by some persons who have given testimony that as far as they are aware, when they had applied for any loans et cetera, that a phone call was made, it was approved, but it was not necessarily in writing. That is why I asked for both sides…”

Ralph Fonseca
“Phone call made to who?”

Herbert Lord
“That is the question.”

Ralph Fonseca
“Certainly not to me. I don’t approve things by phone as it relates to loans from the D.F.C.”

Merlene Bailey Martinez, Co-Chair, D.F.C. Com. of Inquiry
“It was no less than the Deputy Chairman who said that on occasions he would pick up the phone and call you to approve transactions for the chairman and that you would give that approval on the phone and that there was no necessity to tender a written request to you.”

Ralph Fonseca
“The deputy chairman erred. … The mandate given to the government is to build ten thousand houses. How the government builds those ten thousand houses, the people that don’t have a roof, that don’t have food on their table, that don’t have jobs, don’t care. They want a house, they want food on their table, and they want a job. And whether you are using D.F.C. or whether you are using whatever, that is what they want.”

Merlene Bailey Martinez
“Well actually, we are talking about D.F.C.”

Ralph Fonseca
“Those decisions are made in Cabinet and because of the oath of secrecy that I take, I cannot get into the details as to how those policies are refined. All that I can assure you is that all the requisite approvals were given.”

“I have heard people say for instance that D.F.C. could not survive if the Government of Belize was not putting monies into the D.F.C. Of course, the Government of Belize is the only shareholder for the D.F.C. It put assets into D.F.C. that was costing D.F.C. money. It had to provide D.F.C. with the liquidity to service that debt. At the end of the day it’s a set off, so the Government of Belize was not ducking its responsibilities, it was doing everything it could to make sure that it provided D.F.C. with the liquidity, not only to deal with those assets that it passed over, but to make sure that as many Belizeans as possible had a roof over their head, had a job, and had food on their table.”

Herbert Lord
“So with that fifty million, that is why you’re telling us now the government picked up the tab at the end of the when it was cancelled.”

Ralph Fonseca
“Yes, Mr. Commissioner.”

Herbert Lord
“Thanks.”

Merlene Bailey Martinez
“Why did the government pass these things to the D.F.C. Mr. Fonseca and in terms of …”

Ralph Fonseca
“What things?”

Merlene Bailey Martinez
“Those investments I need to ask you within the context of the D.F.C. Act that said any investment that the D.F.C. makes or made since the D.F.C. has been changed—any investment that the D.F.C. made had to be on its economic and financial merits. So taking on those projects for the Government of Belize, which became financially burdensome, and which you are saying that the Government of Belize knew was financially burdensome, was requiring D.F.C. to take on investments in violation of the D.F.C. Act that said that any transactions or any investment should be on its financial and economic merit.”

Ralph Fonseca
“We disagree Madam Commissioner. I stated very clearly that the Government of Belize was not dodging its responsibilities to make up the financial gap; it was passing these assets over in various forms. If you may allow me again because it’s not simple. It’s not just Mahogany Heights, but there are other projects, like for instance Libertad. Libertad was in effect given to the Government of Belize, given to the Government of Belize through a grant from Taiwan. So we picked up Libertad and the Santa Cruz Lodge and we wanted to get Libertad going again, but we knew that it would not be overnight. So we passed it on to the D.F.C. for whatever value that between D.F.C. and the Ministry of Finance agreed to based on market value or revenue streams because of the projects that they had in place or because of that those people that were applying for it at that time. So government never intended to give D.F.C. an asset which would cause it to lose money. Any monies that it lost, the Government of Belize was obligated to make up for because the Government of Belize would have had to pay for it in any case. In some cases we had already paid for it in the budget, like in the case of Mahogany Heights. Like I said, for three years under the different budgets, I think it is from 2000, 2001 and 2002, they were monies allocated, millions of dollars allocated to invest in Mahogany Heights. And the investment took place, the Government of Belize took it on.”

“There was nothing to be alarmed about. As a matter of fact, from where I worked and sweated, the D.F.C. with great challenges and writing the book on eliminating poverty, was doing its best to serve. Then again, even the report that you mentioned Mr. Commissioner, which came in after my leaving the D.F.C., which was signed on July fifth, 2005, covering right up to the end of 2003 showed another reduction in the overall deficit now to one million dollars. But there were qualifications in that particular statement and those qualifications, as you said, made reference to the book value of the asset vis-à-vis the market value and we wanted that corrected and as far as I know, it was corrected in the following year.”

Merlene Bailey Martinez
“Minister Fonseca, you were saying that the D.F.C. was turning a profit, that’s what you were saying.”

Ralph Fonseca
“I said it was turning a profit up to the last report that was given to me.”

Merlene Bailey Martinez
“What I am saying is that the auditor’s reporting is indicating otherwise. That is what I am saying and that’s the passage I just read.”

Ralph Fonseca
“Because Madam Chairperson you are continuing to ignore the fact that I will only be responsible for those—I am saying that I will only be responsible for those audits that were delivered to me during my term of office. I cannot be responsible for audited financial statements that were delivered in a different environment completely were people allowed different assets to be written down in a certain way, where certain interest were taken on and qualified using language that could—not could, has caused someone like yourself to draw the obvious conclusions. I stated before in my statement this morning that this setoff that’s taken place this period of time was intended to be done in any case, in any case. So whatever losses that as you want to call it that the D.F.C. incurred in 2003 because this reconciliation took place, should not be viewed as anything that is out of the ordinary because it was just following government policy. So more and more, D.F.C. was servicing the high risk. Unfortunately, or fortunately, the high risk are the people in Belize that need the help the most and they do run into delinquency problems. So yes, we increase the number of houses, we increase the number or risk, we knew that we were walking a tight rope. So we had several meetings trying to do the best that we could to get people up to speed as much as possible, to have the staff of D.F.C. try to remind these homeowners for instance or other people that these obligations should be paramount as it relates to their priorities for paying bills. There was also another factor, and I cannot recall the timing of this, but I know that at some point the decision was made to change the criteria for putting loans in the caption of delinquency from a hundred and twenty days to ninety days, which also increased the delinquency. But I am not sure as to the timing; it must have been before June of 2004. So there was that factor and then of course there was the factor of these big loans which had to be dealt with based on the specific nuances involved with these big loans. So yes, we were very, very concerned and discussed it and did the best that we could to have the staff get as involved as possible with it and take whatever action was necessary. In some cases as you know, we had to go into receivership.”

Merlene Bailey Martinez
“Why are we at this point where D.F.C., according to the prospectus, was being liquidated and now D.F.C.’s activities are so scaled down that it has been redesigned just to manage the securitisation portfolio, it’s no longer the institution that it was. Why are we at this point, you’re your understanding?”

Ralph Fonseca
“The short answer, in my understanding is that D.F.C. fell victim to a well orchestrated political agenda that was owned by a determined, determined ideology of the international financial institutions.”

Merlene Bailey Martinez
“Did the D.F.C. err in not implementing its own policies and did the D.F.C. err in just approving payments that should not have been approved because we’re looking at this payment made on behalf of St. James for instance, which was contrary to the agreement that the D.F.C. had with the Social Security Board in terms of sharing of the expenses and the deposits. So we cannot just put it squarely in the lap of the government, we have to look at the D.F.C. in terms of what they could have done to prevent a absolute disaster that the D.F.C. found itself in where it was facing that liquidation. It was not only that a propaganda tool by the International Monetary Fund.”

The next Commission of Inquiry public hearing will take place on Tuesday with former D.F.C. Chairman Glenn Godfrey expected to testify.