DFC HEARINGS CONTINUE

August 24, 2006

The Commission of Inquiry investigating the Development Finance Corporation continued today. Richard Merrill reports that Anne Wiltshire testified this morning. 

Richard Merrill:

“She was questioned again about the Belize Social Security Board regarding a deal of release; this is something that came up in the Senate Select Committee investigating Social Security. The Social Security Board had asked for DFC to release Social Security from being responsible from any of the loans that have been past from the Social Security Board to the DFC defaulted. Chairman of the DFC Glen Godfrey wrote a letter back to Narda Garcia the General Manager of Social Security Board and that would be granted that Social Security Board would in fact be released of any obligation. However that letter apparently no legal did not have any legal affect because the DFC Act does not provide for such a thing, such a letter according to the Act would need to be approved by the Board of Directors, would have to be countersigned by a member of the board and the letter was specifically regarding loans that came through Social Security Board form St. James Building Society that is for Western Caribbean Development and INTELCO, International Telecommunications. Wiltshire said that to her knowledge the exemption was not executed that it could not be legal she does not know if the board ever discussed the document and had the Social Security Board guarantee be with drawn or relieved then the DFC would have been fully responsible if those loans defaulted. The second witness during the morning session was Jane Longsworth who was recall, Longsworth had testified at length on Tuesday. This morning she was questioned about a 2003 Auditor’s report which in its case questions the valuation of asset, she pointed out that the Auditors said that the asset valuations did not include  a level of deterioration she said quote “The DFC did not do the necessary revaluation” unquote. She said that the valuation was based on total cost of projects and not actual sales value of projects that infrastructure cost had been figured into the assets, she said that there was serious cost over runs and poor planning particularly in the delivery of materials, that materials were sometimes bought and delivered well ahead of when it was being used. She said that there was a need to separate the houses from the cost of the project; she said that no private developer could have done all the infrastructure work and then had low income housing on the project. That you had to look at it from the stand point of that if Government was going to spend the money for the infrastructure that had to be an investment in long term good for the community. She talked considerably about Mahogany Heights that the Mahogany Heights houses were expected to sell quickly but they were apparently over priced for the market at the beginning. The development of the infrastructure was well along when the project was taken over by the Development Finance Cooperation she said that the interest cost at the DFC exceeded income and that the Government of Belize had to subsidize as DFC and continues to. She said that the DFC could not afford the debt service the loans and that the lending part of DFC was making a profit. This is a point that has been made a couple of times by a couple of different witnesses, that as long as DFC stayed with its original purpose on lending money for specific purposes for housing, for start up of a business, for student loans that par of DFC made money made a profit, bur when DFC got into actual construction and handling housing projects and such DFC began losing money. Toward the end this morning’s testimony she talked about when she realized that DFC was in trouble that in 2002 when she looked at the books, she saw two problems that there were large loans that were not performing and that the assets were not what they should have been. She said she wrote notes to the General Manager and that letters were sent to the Minister responsible saying that DFC would need subsidy, she was then directed to talk about whether a loan of thirty million dollars could be disbursed in one day would that have been normal and she said no that would not have been normal and she said that development banking is normally managed lending in other wards the structure that you are going to put on a piece of property that you are borrowing money to build that structure itself becomes a part of the collateral. For this reason for example a housing loan would normally be in three phases the first phase would take care of the foundation work, the second phase much of the basic structure of the above the foundation, the third phase all of the finished work on the house and beyond the first phase the subsequent part of the money would not be disburse until all of the work was done prior to that. At the very end of Miss Longsworth testimony this morning she was asked if she had ever been in a position to refuse to sign off on a loan when documents were not in order, yes she said, she was asked to explained, she said she would rather not answer. She was asked if answering that question would incriminate her and she said no it would not. She said that she still would prefer not to answer that question at a public hearing, it was pointed out to her that legally the only reason she can refuse to answer such a question, she would get her material she will be back at one thirty apparently to pick with her testimony at that time.”  

Richard Merrill reporting on the ongoing public hearings of the Commission of Inquiry investigating the Development Finance Corporation.

|

|