Many reputable persons and institutions “who propagate the highest form of ethics and moral values” are among those on the run from Jamaicans who are demanding repayment for money lost in the Ponzi schemes they operated.

Former junior minister of state for foreign affairs, Delano Franklyn said the Ponzi schemes, widely known as unregistered financial organisations, mushroomed in Jamaica because of the reputation of many of the people involved in collecting money.

Franklyn was speaking recently at a public seminar on corporate governance hosted by the Financial Services Commission (FSC), the state agency tasked with pursuing the Ponzi schemes, the biggest being David Smith’s Olint which operated out of the Turks and Caicos Islands. Smith is now in prison in the United States.

To a large extent, the former senator suggested, it was the FSC which saved Jamaica from being “completely overrun by the myriad of Ponzi schemes which recently engulfed the country” and he gave three primary reasons for the fact that the schemes were able to mushroom.

“First, known and reputable persons and institutions were involved. A list of the names of the institutions and persons published by the FSC indicates that even persons who propagate the highest form of ethics and moral values in the society were involved in the collection of funds, some of whom are now on the run from people who are demanding repayment.

“Second, the high level of informality which exists in the Jamaica economy. Studies have shown that the size of the informal economy in Jamaica is almost 50 per cent. This informal economy is characterised by a ‘hussle’ mentality. It operates above, around and under the regulated economy. Its culture is one of anti-regulation. It settles its own scores where there are differences. It is not class or social specific. All types are involved, the rich, the poor, the social, the anti-social and big and small businesses.

“Third, the existence of selective morality and ethical values in the country. The owner of a business in Jamaica has no difficulty conspiring with another to extract electricity from the Jamaica Public Service, but rightly, calls in the police if an employee is caught stealing; a provider of professional services has no difficulty operating two books in order to avoid the payment of taxes, but complains bitterly about the irregularity with which his garbage is being collected; and there are persons among us who have no respect for planning or building laws. They build anything, anywhere.”

Franklyn said those three features which allowed for the flourish of the Ponzi schemes, “are regrettable features of the Jamaican society which impact very negatively on corporate and public governance in Jamaica”.

He prescribed two ways of combating those features: Implementation of a strong regulatory framework and provisions related to standards of conduct, which allows for strict and rigid penalties when breaches occur and the perpetuators are caught; and a consistent, persistent, and relentless national assault against the erosion of social and ethical values in the society.

Doomed to failure unless…

While there was room for improvement, Jamaica already had a raft of regulations to ensure public sector oversight. What was needed was to ensure that “we become far more proactive in the application of these laws and regulations”.

He pointed to one such regulation — the Financial Administration and Audit Act — which provides that the auditor general is under a duty to report to the financial secretary any deficiency, loss or destruction of government property and the occurrence of an unauthorised expenditure, and he suggested amending the Act “to allow the auditor general to report his or her findings to the director of public prosecutions who will then determine if criminal charges must be brought against a person who has destroyed government property or was involved in any improper, extravagant, or wasted expenditure of government funds”.

Franklyn insisted that more important than the establishment of a strong regulatory framework to strengthen corporate and public governance was operating in a society underpinned by good values and attitude.

“Members of the society must recognise the necessity of having a moral feeling towards each other. A strong regulatory framework is important, but critical as this is, I believe that our efforts are doomed to failure unless, we restore, as a country, a sense of decency and national purpose in everything that we do.

“What kind of economic development are we going to have, how sound will our financial institutions be; how effective will our national boards be, if what we are creating is a society that is rapidly in danger of dehumanising itself?

“As an example, we have a bad attitude to public funds. Some of us believe that we are not required to account for public funds. Some persons are given contracts not because they have the requisite skills but because of how much money can be made; public property is constantly vandalised, including schools and community centres. We cannot go on like this. We need to bring back a sense of value, honesty, and decency in what we do… and an obligation to do what is right,” said Franklyn.

Addressing the issue of taxes, Franklyn noted that 80 per cent of company taxes and 50 per cent of property taxes were not being collected and, therefore, not being paid.

“Apart from PAYE (Pay As You Earn) taxpayers, only 4,000 individuals are paying income tax. It is estimated that 250,000 persons who should be paying taxes are paying nothing.

“Of course, there is the obvious need for serious tax reform, but there are those among us who feel that they have no social or moral responsibility to pay taxes,” Franklyn complained.

“…It is important that we arrest the general deterioration in our ethical values and societal norms. This is in order to become known to others as a country with a reputation for honesty, integrity, and trust.”