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Aug 17, 2006

Charges of D.F.C. mismanagement continue at hearings

Story PictureIt started late and ended early but day six of the Commission of Inquiry into the Development Finance Corporation made for just under two hours of gripping testimony. The continued questioning of Credit and Projects Manager Franklin Magloire delved deeper in the corporation’s long list of bad loans with little or no collateral. According to Magloire, one such loan was for four million dollars to Western Development, a company controlled by P.U.P. official, Bill Lindo. In Magloire’s opinion, the institution fell woefully short in protecting the public’s funds.

Franklin Magloire, Credit/Projects Manager, D.F.C.
?The collateral was?well number one there was supposed to be some real estate collateral. As far as I know, the understanding that I got from the file, was that the loan was disbursed without that land document submitted. I also know that the document was never submitted to the D.F.C. My ?understanding?, I don?t know if I can get a document that validates that. The principal of the company, rather than getting the land document in Western Development?s name, got it in his own name and that document was handed directly from Natural Resources Department to him.?

Herbert Lord, Commissioner
?It would in my opinion be risky to approve loans based on the fact that the Lands Department or the Lands Registry section was saying that they would send documents later on. It now turns out from your testimony, that perhaps my intuition was correct, in that some documents were never received although an arrangement, a letter of comfort would given that it would be done. So there was a big risk element there.?

Franklin Magloire
?I would concur, and that?s why you need to have the collateral perfected before you disburse the loans.?

Merlene Bailey Martinez
?Is there any assessment by the D.F.C. on those files as to why these are non-performing, any information as to why they are non-performing??

Franklin Magloire
?Ideally, when a project is implemented and it goes into the administration fees, the D.F.C. is supposed to do supervisions on those projects annually. The reason for that you want to, very early in the game if a project is going wrong for whatever reason, you want to be able to identify why, so that corrective measures can be taken. I can tell you that we?ve not been up to date with our supervisions, and primarily it was because of the volume of loans. Concentration was more on the delivery than credit administration to that extent.?

Herbert Lord
?I note that the audit report committee in 2001 had recommended that a strict monitoring of all projects be done. That persons be trained to continue this because this was what was reflecting huge losses to the D.F.C. Was this ever followed up, and persons trained to continue monitoring these projects and reports sent monthly as recommended by the audit committee??

Franklin Magloire
?Okay, the audit committee is practically defunct. The only committee is made up of a couple members of senior management and of the board. I recall, if my memory serves me correct, the last Audit Committee meeting that we had probably was in time of Mr. Carballo, when he was a board member. After that, and that was probably about 2001-2002.?

Herbert Lord
?December twenty-first, 2000.?

Franklin Magloire
?2000? I don?t think we?ve had meetings at all.?

A large part of the D.F.C’s loan portfolio consists of home mortgages. Once again, Magloire explained how the abandonment of proper procedures with respect to housing loans had costly consequences for the corporation.

Franklin Magloire
?It?s not to say, look projects won?t go bad. Projects can and do go bad but if you in the preparation stage, take in all angles, then you will lessen the impact. I was concerned that our established policies/guidelines were being waived too frequently. I was concerned and there were reasons for it you know. In regards to housing, you had a whole inventory of housing that we were trying to move. You can?t wah sell something and ask for equity. So you found that people start saying well let?s finance the thing a hundred percent. When you do that you also lose some control. The person moving into the building really has no equity at stake, and we experienced persons moving into buildings, staying in there for a few months, not paying anything. And when you pressured them too much, they simply walked off the building. So you had properties coming out the inventory, going back on the inventory. Every time you did that you had go and repair the building to make it look like brand new again to sell. That resulted in tremendous cost for the organization. To my mind the organization was headed, and had already been involved too much into areas that we were not cut out for. We were cut out for providing developmental credit, we were cut out for providing student loan and for residential mortgages. We had that kind of expertise. We did not have the expertise in construction projects. That should have been left to the private sector entirely. So those were some of the concerns I had at the time.?

David Price, Chairman, Commission of Inquiry
?Didn?t you bring these concerns to the attention of management or board.?

Franklin Magloire
?I did not. Primarily because I knew that it would not have been heeded. As I mentioned earlier in previous testimony, management had no discretionary powers whatsoever. And I think if I had brought up this thing, it would have just been ignored.?

Magloire will resume his testimony on Tuesday morning. Also expected to appear next week is the D.F.C.’s securitization officer, Jane Longsworth. Today’s session ended early to allow members of the Commission to attend the funeral of veteran educator Charles Longsworth in Independence Village.


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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