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Aug 24, 2006

D.F.C. employee describes unorthodox transactions

Story PictureWhere the Commission of Inquiry into the D.F.C. is headed is, by now, no mystery. But as the Commissioners build a prima facia case of corporate malfeasance based on the testimony of middle managers, the evidence is growing more specific that the institution’s top officials will have some tough questions to answer. News Five’s Janelle Chanona has the highlights of day eight.

Janelle Chanona, Reporting
?For weeks the Commission of Inquiry has listened to one D.F.C. employee after another say they did what they were told to do. But today the Manager of Finance testified that she said no to a transaction that involved some fifty million dollars.”

Jane Longsworth, Finance Manager, D.F.C.
?I have been in a position where I have refused to book a transaction if I was not satisfied that the transaction was legitimate and there was transaction to support it.?

Merlene Bailey Martinez, Member, Commission of Inquiry
?You have been in that position??

Jane Longsworth
?Yes.?

Merlene Bailey Martinez
?Would you like to comment on the specifics??

Jane Longsworth
?No.?

Merlene Bailey Martinez
?Ms. Longsworth does it incriminate you??

Jane Longsworth
?No.?

Merlene Bailey Martinez
?Because you need to know that that is the only basis on which you can refuse to answer that question.?

Jane Longsworth
?This is tough.?

David Price, Commission Chair
?We would prefer you to answer that question in public. Except of course if it does incriminate you.?

Merlene Bailey Martinez
?She had already stated that it does not incriminate her.?

Jane Longsworth
?It does not incriminate me at all. Now you have me trying to make sure it falls within your date range. Can I check this first, before I spill it? I?d rather check.?

Merlene Bailey Martinez
?we need to establish the wrongdoing that occurred and those responsible that is a part of legal requirements of this commission.?

Jane Longsworth
?Creole seh fish get ketch by deh mouth tru??

When she returned to the microphone, Longsworth cut to the chase.

Jane Longsworth
?It does fall within the dates. In 2004, I can?t say date exactly. It pertains to a fifty million dollar loan that D.F.C. was supposed to have secured from the Belize Bank. And I was given instructions to book it and given some documentation on which to base the transaction. But the documentation was not sufficient, and so I refused to book it. And I did not authorize that it be booked either.?

David Price
?Who gave you the instructions in the first place??

Jane Longsworth
?Who gave me the instructions was Mr. Gabb. Mr. Troy Gabb. The document that I was given was about they were entering into an agreement to borrow fifty million dollars.?

Merlene Bailey Martinez
?From??

Jane Longsworth
?The Belize Bank who had agreed that they would lend the money provided that certain conditions were met. That was the nature of that document. It was an agreement that we would do this if these conditions are met. That was the document I was gives and said to process and I did not.?

Merlene Bailey Martinez
?The basis of your objection to that were that??

Jane Longsworth
?That if it was a legitimate transaction, I would have a loan agreement that says D.F.C. now has secured a loan with the bank. I would have some evidence that D.F.C. received a disbursement or has a term deposit in its name. I found out that it was booked eventually, because when I was doing reconciliation of some sort in 2004 or 2005 I noted that interest had been paid on facility.?

Merlene Bailey Martinez
?Interest had been paid to Belize Bank??
Jane Longsworth
?Yes.?

Merlene Bailey Martinez
?But you did not see where the funds had come into D.F.C. in any form at all??

Jane Longsworth
?No.?

Merlene Bailey Martinez
?And interest had been paid??

Jane Longsworth
?This transaction, now I?m going to start speculate on the reason for this transaction because I don?t have anything to support what I?m going to say. But my understanding of the transaction was that the D.F.C. was borrowing fifty million dollars to pay back the Government of Belize the fifty million dollars it had borrowed. The nature of the transaction would be have been such that the D.F.C. would procure a loan and the pay to the Government of Belize, who would then use the fifty million to have a term deposit in the Belize Bank. So we are not moving money we are moving just paper. The D.F.C. would be responsible for the difference on the loan and the interest earned on the term deposit. I think the difference was one and a half percent. So that one and a half percent was paid for the period of time that this loan supposedly existed.?

Merlene Bailey Martinez
?But the loan never existed??

Jane Longsworth
?Not as far as I know. I never saw evidence of it.?

Another document whose existence has been called into question is a deed of discharge from the D.F.C. to the Social Security Board. During the Senate Select Committee hearings, Narda Garcia testified that then D.F.C. chairman had written her a letter releasing the S.S.B. as guarantor to certain loans in the securitization pool. Godfrey denied the claim but today D.F.C.?s legal officer Ann Wiltshire read what she says is a copy of the original document.

Ann Wiltshire, Legal Officer, D.F.C.
?Dear Mrs. Garcia,

Re: Undertaking to release and discharge.

The Development Finance Corporation of Belize hereby undertakes to fully release and discharge Social Security Board from all the liabilities arising directly or indirectly. And including, but not limited payment obligation arising from the purchase of loans by the Social Security Board from St James National Building Society. And in particular, the loans related to Western Caribbean Properties and International Telecommunications Limited.

Yours truly,
Development Finance Corporation,

Glenn Godfrey
Chairman Development Finance Corporation.?

Merlene Bailey Martinez
?These are companies that are part of the group owned by Mr. Glenn Godfrey??

Ann Wiltshire
?Yes they are.?

Merlene Bailey Martinez
?So in effect he was giving a D.F.C. or attempting to give a D.F.C. indemnification to Belize Social Security Board to cover loans in his company??

Ann Wiltshire
?Yes, that is exactly what was purported to be done.?

Merlene Bailey Martinez
?But it did not go through??

Ann Wiltshire
?As far as I know, the deed was never executed. At least, it didn?t come back to me. Since to my knowledge it was not executed then the D.F.C. did not release the S.S.B. from its obligation.?

Herbert Lord, Member, Commission of Inquiry
?Had it been executed the S.S.B. would have been out??

Ann Wiltshire
?Yes.?

Herbert Lord
?D.F.C. would have picked up the tab for that??

Ann Wiltshire
?We would have, we would be fully responsible without the guarantee and indemnity.?

Jane Longsworth
?We were always told that we would eventually swap these loans out of the pool. That we would take them out.?

Herbert Lord
?Was this ever done??

Jane Longsworth
?No, we were not in a position to do that.?

Merlene Bailey Martinez
?You are saying we would swap with what??

Jane Longsworth
?Well that what?s we would say. We would say we don?t have anything to swap it with.?

Merlene Bailey Martinez
?And the response??

Jane Longsworth
?We?ll work it out.?

Merlene Bailey Martinez
?We?ll work it out that?s what Mr. Gabb said??

Jane Longsworth
?Yes.?

David Price
?And the total quantum was in the vicinity of seventeen million??

Jane Longsworth
?I think one of them is nine point eight million and the other was seven point seven. We knew that that the security was not consistent with what we said it was, and according to the document these loans could now be considered defective.?

Merlene Bailey Martinez
?Could you detail what were the securities were supposed to be, what they were and what the deficiency was??

Jane Longsworth
?I don?t know exactly what it was supposed to be. It was so supposed to be pre-fab buildings directed on each of these locations for different purposes.?

And the impact of such decisions by the management of the D.F.C. showed up in the corporation?s audited financial statements.

Jane Longsworth
?Without the assistance from the Government, the corporation would continue to operate with a significant loss, and would be considered insolvent. Our lending operation, despite the non-performing loans, was generating a profit. The housing development component was operating at a deficit because the assets were non-performing.?

Merlene Bailey Martinez
?Then who are beneficiaries of these costs that we are incurring??

Jane Longsworth
?Homeowners at Mahogany Heights, I suppose San Pablo.?

Merlene Bailey Martinez
?And who were the beneficiaries of the homes that have not been sold? Who benefited from construction of those loans that we are now carrying on the books of the D.F.C. and ultimately the Government of Belize? Who benefited from the construction of those houses??

Jane Longsworth
?Well I mean–a lot of people were involved in construction of these houses and in the development of these projects.?

Merlene Bailey Martinez
?And then of course, we have to look at the list in Los Lagos and see who some of those homeowners are. And I have looked at the list of Los Lagos, and you see multiple owners. Like one person would own several units in Los Lagos. So it is good that you mention the homeowners because we would need to look at who those homeowners are in some of these projects. I believe one name that comes to my mind is Mr. Troy Gabb in Los Lagos. So you are right in saying some homeowners benefited.?

Janelle Chanona
?While today?s testimony was captivating it does call into to question whether anyone possibly incriminated, like management or the board of directors, will have any incentive now to appear before the Commission of Inquiry. Reporting for News Five, I am Janelle Chanona.?

The third witness to appear today was Robert Belisle, who served as the D.F.C.’s Internal Auditor. Belisle supported previous testimony that key conditions were waived for certain loans like those to Novelo’s, and for projects like Mahogany Heights.


Viewers please note: This Internet newscast is a verbatim transcript of our evening television newscast. Where speakers use Kriol, we attempt to faithfully reproduce the quotes using a standard spelling system.

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