Commission: auditor has no conflict of interest

Since the Commission of Inquiry investigating the Development Finance Corporation began last August, the thirty million dollar loan to the Novelo family has featured prominently in the line of questioning to former employees, managers, and board members. But tonight the Novelo family is eager to share their side of that story.

David Novelo, Novelo Group of Companies
“We are saying to the Commission, this is one of the biggest loans that the D.F.C. ever booked, we have monies that are still owed to the corporation, and the family wants upon its deliberation that we want to ensure that there is objectivity.”

Janelle Chanona, Reporting
This week, the Novelo family launched a campaign against Mark Hulse, the forensic auditor appointed to review the operations of the Development Finance Corporation. In a letter dated February eighth, David Novelo informs the Commission of Inquiry that Hulse is compromised as the auditor because he participated as a consultant in receivership of the Novelo Group of Companies. This morning Novelo went as far as to present press kits containing what he claims is evidence of Hulse’s conflict of interest.

The first document is the Receiver’s Interim Report, which lists Hulse as a consultant. The second is the copy of a letter from the Atlantic Corporation Ltd. appointing Hulse as the receiver of a property owned by Hipolito Novelo Sr., which was used as a surety to Novelo’s Bus Line Ltd. And thirdly, Novelo to suggest that under the Banks and Financial Institutions Act, Hulse as auditor of the Atlantic Group of Companies should not have been appointed to that receivership position in the first place.

Mark Hulse, Forensic Auditor (February 1st)
“Prior to accepting instructions, I made inquires to identify any actual or potential conflict of interest in connection with the parties, witnesses, and advisors concerned. I identified no conflict of interest, albeit some of the individuals are known to me personally.”

As he did on February first, this afternoon Hulse maintained that no conflict of interest exists. He clarified that during the receivership of Novelo’s, his client, the Atlantic Bank, hired his firm for thirty days to establish a cash management system for the Novelo Group of Companies. Later, The Atlantic Corporation appointed Hulse receiver for a lot owned by a member of the Novelo family. But Hulse maintains he did not breach the Banks and Financial Institutions Act because Atlantic Corporation is a leasing company.

David Novelo
“It is important for the Commission to recognise that under oath he committed perjury because he was asked by the Commission of Integrity whether he had any conflict of interest and he denied that he had any conflict of interest. And we are saying that in the objectivity side, we want the country to know the truth, we have to be objective, the Novelo family is ready to give full disclosure, but we want to make sure that we are treated fairly.”

This afternoon Co-Chair Merlene Bailey Martinez told us that the Novelo family’s objection was discussed yesterday but the commission feels that nothing that has been presented to them represent any conflict of interest.

Hulse’s final report is not expected until February twentieth. But in presenting his draft report to the commission last Thursday, this was what he shared about the Novelo loan.

Mark Hulse
“In 2001, the D.F.C. lent Novelo’s Holdings Limited thirty million dollars for the purposes of buying a bus line and other assets. This loan did not perform. It appears that its non-performance was concealed by way of the creation of new loan accounts, all of which became non-performing … new loan accounts to members of the Novelo family. Subsequent to 2004, by way of a sale of assets held as security, the D.F.C. managed to recover some monies, leaving a balance of twenty-seven and a half million dollars. Our review of the Novelo loan indicated many breaches of procedure, protocol, and fiduciary duty.”

David Novelo
“We want clarity and we are saying that the family requires the time that is necessary and that audience has to be given to the family by the Commission to ensure that we can basically express and share to the country the truth of what folded with this loan, what went wrong, and basically for the Commission to have a comprehensive knowledge of it.”

“The core of it was the runs. You could have all the buses, all the terminals, but if you don’t have the runs that allow you to run and generate revenue, it’s not worth nothing. This has not come to the commission.”

Tonight it is uncertain whether Novelo will ever appear before the commission, but he is asking that both he and his brother Tony get their chance to speak publicly about their loan.

Janelle Chanona
“Didn’t you as the borrower think that it was strange that your one loan that you have highlighted as the largest D.F.C. loan was disbursed in one day?”

David Novelo
“Janelle this is one thing that in the letter I have stated that whereas in the summons, I, David Novelo, has been summoned to last Friday to come to the commission, I have to remind that I was the C.E.O. between 2003 and 2004. That’s why in trying to have clarity in this whole loan, I have requested in writing to the commission that Mr. Antonio Novelo, who was actually the one in charge of the loan at that time and was the CEO, to come about and give his deliberation. And I’m sure, I would like to say that if the Novelo family is given the opportunity—and we hope so—we will be able to clarify these matters as regarding why it was disbursed in one day.”

Janelle Chanona
“But you all are a close family, you were integral in the company…you can’t say when you found out from your brother Tony that you got this money in one day that you said, “Hey! What’s happening?”

David Novelo
“Well I think what is only proper, yes, I have been briefed, but I would not like to second guess. I think it’s only proper for Mr. Antonio to answer that. We are willing and he has offered to give his first hand account of it.”

The next D.F.C. public hearing is scheduled for Wednesday, February fourteenth. Reporting for News Five, I am Janelle Chanona.