Finsac short $1.2-billion
Finsac liabilities outweigh assets
FIFTEEN years after it was created to clean up the country's financial meltdown, Financial Sector Adjustment Company (Finsac) has no winding-up timetable and needs government help to complete its mission.
The company is pursuing initiatives to "accelerate the winding up, but we are not in a position to give a definite timetable", Finsac General Manager Errol Campbell said last week.
In the company's 2010-11 Independent Auditor's Report and Financial Statements, chartered accountants Deloitte noted that the company's liabilities exceeded its assets by $1.2 billion.
As a result, the auditor questioned whether the company could continue as a going concern.
"Support of the company's shareholder, the Government of Jamaica, its creditors and future profitable operations are necessary to ensure the company's continued operations," Deloitte said.
The Accountant General has already indicated continued government support, it said.
Finsac has failed to reach three of four primary targets it set itself for 2011-12: divestment of its remaining assets; continued litigation; compensation for a property seized by the government of St Lucia; and providing documents to the Commission of Enquiry.
"Despite our best efforts, we have not progressed very far in these areas, other than the Commission of Enquiry, for which all required documents were provided," Campbell said.
The two-man Commission of Enquiry into the 1990s financial sector crash has not met since late 2011, and its office has been closed since the start of the year.
Finsac's annual report for 2011-12 has not been presented to Parliament, but the independent auditors' report and financial statements for 2010-11 was tabled recently.
It disclosed that the company made a profit of $1.05 billion that year, but its liabilities, $3.2 billion at the end of March last year, dwarfed its $1.9 billion in assets.
Most of the liabilities - $2.3 billion -- are to cover the possible costs of various legal claims against companies in which Finsac intervened.
Of the rest, $825 million is for bad debts that are unlikely to be collected. If any of that cash does come in, it will be treated as income for the current year.
Following a court decision in November 2010, Finsac has paid $43 million to Dr Paul Chen-Young for living expenses and legal fees.
"It should be noted that this amount is derived from proceeds of sale and rental of certain properties owned by Dr Chen-Young or his companies, as identified by previous Court Orders of July 2006," Campbell said.
Chen-Young's financial network, which included Eagle Merchant Bank and Crown Eagle Life Insurance, crumbled during the 1990s and was acquired by Finsac.
The company faces six other outstanding legal cases, Campbell said: YP Seaton v RBTT Bank Jamaica Limited; Thermoplastics/Plas-Pak v Downer, PWC & Recon Trust Company; Prospective Motors v Workers Savings & Loan Bank and Finsac; Mirage Entertainment Limited v Finsac; Rudolph Daley v RBTT et al; and Bentley Rose/Benros Co v Workers Savings and Loan Bank.
On the receivables side, Finsac has two outstanding loans: One to the Jamaica Urban Transit Company (JUTC) for $14 million since 2007, which should have been repaid in quarterly instalments between October 2007 and July 2008. However, the agreement was varied in 2010 and is now repayable by January 2013, at interest of six per cent a year.
The other is to the Jamaica Racing Commission (JRC), which received $50 million in February 2011 over 10 years. After a one-year moratorium on principal and interest it is to earn five per cent per annum.
A third loan of $120 million at 10 per cent to the National Irrigation Commission (NIC) disbursed in July 2010 and due in June 2012 has been repaid.
Finsac continues to get a share of the money recovered on bad debts sold to the late Texan millionaire Dennis Joslin's Jamaican Redevelop-ment Foundation (JRF), receiving US$6.7 million last year and US$3.9 million in the first half of 2012.
That brought to US$74.3 million the total amount collected by Finsac from JRF since the loans were sold to it, including an initial deposit of US$23 million.
The Government has spent $60 million on hearings by the Commission of Enquiry, but suspended funding early this year and demanded a report from commissioners Worrick Bogle (chairman) and Charles Ross.
The Association of Finsac'd Entrepreneurs (AFE), which represents investors who were victims of the meltdown, appealed to Governor General Sir Patrick Allen to intervene in the issue in late August, but despite a confirmation that their letter had been received and an assurance that the governor general was seeking advice on the matter, nothing has been heard from King's House.