Gabb defends accomplishments at D.F.C.

Throughout much of his more than five hours of testimony yesterday, Troy Gabb, former Chief Executive Officer of the Development Finance Corporation, failed to recollect the information asked of him by the Commission of Inquiry investigating the corporation. According to Gabb, when he left the institution in June 2004, it was “financially viable” and boasting a profit. And as for all those bad loans that have now forced D.F.C. into liquidation, Gabb says “all efforts” were made to collect.

Troy Gabb
“All efforts, the record will reflect that major efforts were made to try to correct particularly many of the large loans to be able to have them become performing.”

Merlene Bailey Martinez
“What were these efforts sir?”

Troy Gabb
“All kind of efforts that we could—as a board, as management, we have met with the large loans in reference for argument’s sake the Novelos—and let the record reflect that I was not there for the approval of the Novelo loan—however, we ended up putting that particular loan into receivership, which is following what the debenture sets out legally what the institution should do”

“It’s not that anybody sat back and didn’t do nothing. It is working very hard day and night in some cases to try to have these particular loans perform, find some way to make them loan perform seeing that for whatever reason they had gone into non-performance.”

And one way the D.F.C. ensured certain accounts were performing was to issue “working capital loans” to the borrowers, money that was in fact lent only so the client could pay the interest and keep the original loan out of default. Gabb says the board approved all those “working capital loans” based on the advice of the D.F.C.’s technical team. But when confronted by documentary evidence to the contrary, the former C.E.O. took another tack.

Troy Gabb
“That is not a remedy, the D.F.C. refinanced thousands of loans on a continuous basis. To my knowledge, there would be not only the Novelos, it is thousands of other loans, the student loans, the people with housing loans. It is a matter to bring the loan into a manageable state. If a client is not able to meet its obligation, if the loan rides that client and it becomes too large an interest component for them to overcome and they believe if it is rescheduled they can then be able to catch up and pay; this is what the D.F.C. does. The D.F.C. is a development bank, it’s not a draconian institution; it is here to foster development.”

Merlene Bailey Martinez
“Who wrote that letter Mr. Gabb?”

Troy Gabb
“The letter is stating that it is written to C.E.O., copied to D.F.C. chairman from Securitisation Committee in reference loan to Novelo’s Limited.”

Merlene Bailey Martinez
“And initialled by whom?”

Troy Gabb
“There’s a signature here, looks like Franklin Magloire.”

Merlene Bailey Martinez
“Could you read for me what that is saying?”

Troy Gabb
“I didn’t write it.”

Merlene Bailey Martinez
“Could you give me to the date too please?”

Troy Gabb
“Fifth of April 2004. It says on March thirty-first the board approved a loan of one point three-four-three million to Novelo’s Limited currently under receivership. The proceeds of this loan were intended for debt servicing which forms a part of the B.M.C. portfolio. Further to this approval, the Securitisation Committee held discussions with Mr. Ghandi, legal counsel of the Ministry of Finance regarding the legality of this transaction under the deal parameters. It was concluded that section four point zero-two, article fourteen and thirty-six prohibits the advancing of loans to the mortgager or any parties on behalf of the mortgager for debt servicing under the deal. The committee is unaware of Atlantic Bank’s approval for the receiver to accept this loan on Novelo’s behalf. This could have negative implications for the collection of the loan from the liquidation proceed resulting from the sale of the company’s assets. In this regard, the securitization committee recommends the cancellation of the un-drawn balance of this loan and that the necessary arrangement be made to meet the cash shortfall resulting from non-payment of the loan. The same is being recommended for loans similarly affected, Royal Palm and Belize Resorts Development. Submitted for decision and further directive.”

Merlene Bailey Martinez
“Okay. What was your response to that letter Mr. Gabb?”

Troy Gabb
“I don’t recall ever seeing this letter.”

Merlene Bailey Martinez
“I am looking at the propriety of so doing. I’m looking at the propriety of so doing and in Mr. Ghandi’s letter he’s indicating that any payments should not come from the D.F.C. to cure the non-performance of that loan.”

Troy Gabb
“He is saying it should come from the mortgager. And that is why from my understanding and advice given by the technical people of the Securitisation Committee. The Securitisation Committee advised the board that they can make the facility on a temporary basis loan available to the mortgager who will then make the payment to the securitisation pool.”

“I think the point still stands and I think you’re trying not to deal with that portion, is that the mortgager was the one who made the payment. D.F.C. is a lending institution. The principal has all right to borrow from the D.F.C. and do whatever it wants with the money. So the principal of Novelo’s borrows from the D.F.C. and pays down the obligation that it has. That is the…”

Merlene Bailey Martinez
“Are you saying that was a proper procedure to do Mr. Gabb? To lend the mortgager money to pay a defaulting loan within the D.F.C.?”

Troy Gabb
“The board as far as they were concerned, under the circumstances, they approved it as was presented to them. I cannot speak for the board, I didn’t make that decision. … The board is responsible for their own decisions.”

Herbert Lord, Co-Chair, D.F.C. Commission of Inquiry
“We accept the comment you made that the board is responsible but as the C.E.O. at the time looking at those particular transactions; did it ever cross your mind or having discussed with the other persons who worked with you that possibly, although the board made the decisions, you could have given them some advice as to whether, having read all the papers concerned, as to whether what they were doing—I know you can’t change it, but your advice may have been listened to—what they were doing was proper or improper at that time?”

Troy Gabb
“Well as far as the board is concerned, they acted on the legal advice. There’s nothing else that is there for me to follow. … From my recollection, this was a temporary matter, the board was seeking to find a solution to be able to swap out that huge thirty million dollar loan, because you needed to have loans of that particular size to be able to swap out. So the board knew whatever it was undertaking would not go on infinitely and I think from my recollection, eventually that did occur, the opportunity did present itself where these loans could have been removed from the pool and replaced by other performing loans.”

Herbert Lord
“Yes, we are aware they were removed. Shortly after Mr. Ghandi wrote that letter saying that it was illegal, they were removed.”

The next Commission of Inquiry hearing will be held on Friday when former Minister of Finance Ralph Fonseca is expected to testify.