Businessman says $15 million FINSAC Bad debt does not exist

KINGSTON — Kingston businessman, Aubrey Smith, told the FINSAC Enquiry Wednesday April 27 that he had no outstanding debt with Century National Bank (CNB) when it was taken over in 1996, although he has ended up owing over $15 million in bad debts dating back to his relationship with CNB.

Mr. Smith has taken the matter to court, seeking a judgment preventing the Jamaican Redevelopment Foundation Inc. (JRF), which bought the bad debts from the Financial Sector Adjustment Company (FINSAC), from selling his property at 114 King Street in Kingston. However, he admitted that he has already lost an attempt to get an interlocutory injunction to stop the sale of the property pending a court hearing.

Mr. Smith’s companies – Beautifit Limited, Beautifit Career Fashions Limited and Caribbean Chalks Limited – were all victims of the 1990s financial meltdown, which led to the establishment of FINSAC, by the then Government, to restore stability to the financial sector.

“I am contending before this commission, that Beautifit Limited, Beautifit Career Fashions Limited and myself are not indebted to FINSAC, and were not indebted to CNB at the time of its takeover by FINSAC,” he told the Commission appointed by the Government to look into the 1990s financial meltdown and the involvement of FINSAC in the recovery period.

“In fact, all liabilities incurred have been fully satisfied ‘and more, in that there were overpayment in respect of the demand loan, and there was a credit balance in excess of $400,000 in the current account at the time of the takeover,” he claimed.

He told the press after the sitting that he believes he is owed some $3.7 million, including $722,000 overpaid on a demand loan from CNB and $407,000 in credit balance with CNB up to May, 1995 when his companies ceased banking relations with that bank, as well as some $2.5 million which, he claims, was “overpaid to Eagle Merchant Bank after the sale of properties at 110-112 King Street and 211/2 Love Lane in Kingston. He said he had documentary proof.

Mr. Smith said that he formed Caribbean Chalks Instruments and Arts Products Limited (CCIAP) in 1987, in response to the Government’s “export or die” slogan.

“As a member of the business community, I joined the drive of the Jamaican business community to get into the export market and earn and save foreign exchange,” he said.

He explained that the company developed relationships with international agencies and consultancies, as its objectives were to expand productive capacity and production methods to attain quality standards to enter the export market.

He received funding through the Eagle Merchant Bank (EMB) under an International Financing Corporation Export Support (EMB/IFC) programme and an United States Agency for International Development (USAID) programme, adding up to just over $2 million in 1989.

He says delays in granting him a letter of credit and creeping interest rates throttled his company’s efforts but, by May, 1994, the company gave Eagle Merchant Bank the go ahead to sell 110-112 King Street for $2 million. EMB executed a Memorandum of Complete Satisfaction, which was subsequently filed with the former Registrar of Companies, along with mortgage discharge documents, showing that the debt for which the mortgage stood as security was “fully satisfied”.  However, it was later stated that while the funds were received by EMB, it was only applied to interest on the debt.

Commission attorney, Judith Clarke, said JRF ignored his pleas that he owed nothing, on the basis that documents they received from FINSAC, after purchasing the debts, showed otherwise.

FINSAC has a lawsuit against Mr. Smith and his companies as the guarantors of the Eagle Merchant Bank loan in the Supreme Court, while Mr. Smith has a case seeking to prove that he is not indebted, and therefore his properties should be returned to him. The witness claims there is “overwhelming evidence” that EMB issued a Memorandum of Complete Satisfaction, mortgage discharge documents and statements showing that his debt was settled.

The Commissioners are Worrick Bogle, chairman, and Charles Ross. Legal adviser is retired judge, Justice Henderson Downer. The enquiry resumes next week at the Jamaica Pegasus Hotel, New Kingston.

By BALFORD HENRY, JIS Reporter & Editor