Dear Editor,
We refer to the letter signed by the Director/ Secretary of the New Build-ing Society (NBS) published in yesterday’s edition of your newspapers. While welcome, the letter confirms our concerns about the developments in the Society and most especially the quality of governance and expertise at the Board level. In this response we address the principal issues the directors have raised.
Pension Scheme losses: The directors are now confirming that the pension scheme of the Society stands to lose $111M in a Flexible Annuity Policy with Clico. If anyone should have known Clico was going under it was the directors of the Society, yet they failed to protect the Society and the members who may now have to make up the loss. Nor it seems did they read the contract document for these deposits contained many standard terms and conditions applicable to life insurance when the deposits had no connection contingent on human life. In other words the Directors may have led the Society to participate in an instrument posing as a life insurance product.
Bank of Guyana (BOG) oversight: The Society is playing with facts and danger when it refers to three inspections done by the BOG, two of which were done in the last three years. The issue is not whether any was done but the continuing flouting by the NBS of section 3 of the Financial Institutions Act 1995 which provides that “No financial business shall be transacted in Guyana except by a company which is in possession of a valid licence granted to it by the Bank authorising it to conduct a financial business in Guyana”.
In our view, it is grossly irresponsible and a dereliction of duty by the Bank of Guyana to allow the Society to operate in this unlawful manner.
Investment in the Berbice River Bridge Bonds: While admitting that they did not bargain sensibly for the best price for the Bonds, the directors have avoided our concerns that they failed to seek a professional valuation of the price to be paid and most importantly that their decision was made not at a properly convened meeting but by round-robin. These are serious matters which the directors should not ignore. The directors of the NBS seem unable to distinguish between the insurance of the Bridge and the insurance of their investment in the Bridge Company, of which there is none. Nor we add is the investment guaranteed by the Government. The directors tell us that the investment in the Bridge is “sound, justified and is the most lucrative investment opportunity currently available to NBS.” Those words are eerily similar to those used by Chairman Gopaul’s Office of the President colleague Dr. Roger Luncheon in relation to the NIS’s investment in Clico. And if the investment is so sound the directors should tell us how much interest the Society actually received in 2008 on its investment in the Bridge Company Bonds.
The directors tell us that their Bridge investment is merely 5% of total assets. Like the Hand-in-Hand Trust, they seem unaware that an investment for purposes of risk assessment – and indeed under the FIA – is measured not in relation to assets but capital base. By the correct measure the investment is in excess of 30% of its capital base. Section 14 of the FIA allows a maximum 25% in respect of any single facility that is secured and 10% if unsecured. For all practical purposes the Berbice River Bridge Bonds are unsecured. Can you imagine the bondholders calling in their security and selling the Bridge to realize their security?
Profits: In seeking to explain a loss on exchange of $200 M the Society asks that this be measured against those massive gains made in earlier years when according to the Society one of our members was once a director. We are not aware of any responsible Board which would shrug off a major loss by reference to previous profits.
Governance: The Board’s boast of good governance cannot be taken seriously. A minimum requirement of good governance is compliance with the law which it openly flouts. Another is the quality of the directors. Over the past three years by various means, independent and professional voices on the Board have been displaced or replaced by political appointees and supporters of the ruling party or Government.
The directors treat the members no differently. To avoid criticism the Board is again taking the AGM to Berbice which accounts for 15% of the loans granted by the Society at December 31, 2008 while Demerara including Linden accounting for 80% is ignored.
The letter claims that we “predicted the downfall of the Society”. We did no such thing but now warn the directors and members that no company can survive indefinitely the quality of governance being practised at the New Building Society. How responsible is it for directors to accuse others of statements that are “slanderous/ Libellous, misleading and mischievous” and at the same time accuse them of engaging in “sinister plots designed to undermine the Society”. If that is not libel, please tell us what is?
Finally Sir, while we are fully aware of the stage-managed, proxied nature of the Annual General Meetings, we will be attending the meeting today at the Cotton Tree Primary School, West Coast Berbice and encourage members to do so. Our group is arranging transportation to and from the meeting for persons interested in attending. We ask that they assemble at the office of the Guyana Consumers Association in Lamaha Street (just west of Camp Street) at 11.45 AM.
Yours faithfully,
Cyril Walker
Chairman
concerned members
