$600-m fraud probe

National Insurance Fund board calls in FID, police

BY KIMONE FRANCIS
Observer staff reporter
francisk@jamaicaobserver.com

Friday, March 02, 2018

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The National Insurance Fund (NIF) board has called in the Financial Investigations Division (FID) and the police after uncovering what is believed to be a multimillion-dollar fraud involving the purchase and sale of stocks by some managers at the State agency.

According to a law enforcement source, the money amounts to at least $600 million. But a source with knowledge of the development yesterday told the Jamaica Observer that what has so far been discovered “is the tip of the iceberg”.

“It is unbelievable what is happening. We've never seen anything like this before,” said the source who requested anonymity and who confirmed that the matter has been turned over to the FID and the police.

According to the source, the board was livid when it became aware that the managers, using NIF money, bought $500 million worth of shares in a prominent local company without first taking the matter to the investment committee, the board, and the Ministry of Finance for approval.

“Anything over .5 of one per cent of the fund value must go to Ministry of Finance for approval,” the source explained, adding that when the individuals involved were questioned by the board, they said they were allowed to buy and sell shares.

It was at that point that the board called in the police and the FID, a division within the finance ministry with the remit to probe money laundering and other financial crimes.

The source also said that one of the managers involved bought $12 million worth of shares that belonged to his wife, then sold them to the NIF at a dollar more per share than their value.

According to the source, the board also found that after it approved the purchase of $63 million worth of shares in another company, at $1.45 per share, the managers used $600 million to buy the stocks at $2.45 per share.

“None of them said anything; not one of them mentioned it to the board,” the source said, and accused the persons involved of engaging in a conspiracy of silence.

The NIF is funded by national insurance contributions and is the source from which pensions and other benefits under the National Insurance Scheme are paid. The fund has a portfolio mix of money market instruments, equity, and real estate.

“Things have been brewing for a while and the board has other investigations going on,” the source said, adding that a forensic probe has been ordered into the operations at the 232-room Melia Braco resort on which $2.5 billion was spent two years ago for upgrading, but which is reported to be bleeding heavily.

“The problem with the public sector is that you can't fire them, and everybody files clean. It's like a system protecting itself... closing ranks,” said the source. “You have an entrenched corruption in management... There's a conspiracy of silence... It's very hard to find a whistle-blower.”

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