Measures in place to prevent another PC Bank scandal

BY ALPHEA SAUNDERS Senior staff reporter saundersa@jamaicaobserver.com

Tuesday, February 21, 2017

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The Agricultural Credit Board (ACB) says the financial mess uncovered at the National People’s Cooperative Bank (NPCB) by the Auditor General’s Department two years ago is being mopped up, and some amount of restitution is being made on loans that were found to be inappropriately granted.


According to ACB Chairman Hugh Graham, the measures now in place will ensure that the situation uncovered by Auditor General Pamela Monroe Ellis could never recur.


"Progress has been made. Some loans have been recovered, some you know will never be recovered, some you will only recover a part of it. All of those collections are proceeding," Graham told the Jamaica Observer yesterday.


A special audit of the premier agricultural development bank for farmers carried out by the Auditor General’s Department between May and June 2015 had uncovered the alarming misuse of members’ funds and rampant abuse of position by those in charge at the NPCB, which resulted in over $665 million, or 21 per cent of members’ deposits, unaccounted for.


Permanent secretary in the agriculture ministry Donovan Stanberry told a parliamentary committee that the audit had found that managers had been approving loans for themselves and members of the NPCB board.


"A lot of people have parted company with the bank," Graham told the Observer yesterday. "The ACB made a lot of strides in terms of revamping the loan administration, putting systems in place including the IT infrastructure, and other improvements in terms of the human resources. The most important thing that we did was separate ourselves from it, not being part of the day to day management, and that was accomplished by putting in a board at the PC Bank."


Renowned banker Rex James has been appointed to head the newly constituted board of the NPCB.


On Monday Opposition spokesman on agriculture Dayton Campbell questioned the "motive and rationale" for what he said was the sudden firing of the entire board of the ACB, which has oversight for the NPCB, earlier this month.


"It is strange that the minister has claimed that the board was dismissed immediately because it is to be merged with the DCFS (Department of Cooperatives and Friendly Societies), when the ACB has not been repealed and no formal proposal for the merger has been presented," Campbell said.


Attempts to reach Agriculture Minister Karl Samuda for comment were unsuccessful.


The Government is proposing to merge the ACB with the DCFS, which would call for a repeal of the ACB Act to allow for any transfer of its functions to the DCFS.


TheObserver has learnt that some members on the ACB, who have served across administrations, including the chairman, were reappointed.


In May 2015, then Opposition spokesman on finance Audley Shaw first raised alarm that the NPCB was in trouble and called for an immediate investigation into the management of the bank. Shaw said the deposits of over 200,000 members of the bank were at risk, as the NPCB was in fact insolvent, and that up to $1 billion in loans had been written off.


Among the activities noted in the probe was the decline of a loan application from a director at the bank for $50 million in 2011 by the Development Bank of Jamaica, and the approval of that loan by the NPCB. Monroe Ellis’s investigation revealed that while the application was being processed, a bridge financing loan of $10 million was granted to the director from members’ savings.


The audit also highlighted other examples of weak internal control, such as the non-collection of commitment and processing fees on a $30-million loan for as long as six months; as well as other facilities amounting to $180 million which the bank granted to an applicant to build 24 townhouses.

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