The Cash Plus verdict — its origins & underpinningsTuesday, May 30, 2017
The culmination of the Carlos Hill matter, no doubt, has left a very bitter taste in the mouths of many — over 40,000 according to reports — and a yawning chasm in the pockets of perhaps many more. As the news filtered out last week I could well imagine the shock that reverberated throughout the island and here in the Diaspora as the reality of the situation of the billions of dollars in losses to the Cash Plus misadventure sunk in.Cash Plus began its run in Jamaica in 2002 as an investment club promising lenders up to 120 per cent in annual returns for funds invested in the scheme, payable in monthly disbursements at a proposed rate of 10 per cent. The fact that such a scheme was unsustainable may well have crossed the minds of some contributors but, given the potential windfalls, most simply ignored the pleadings of advisers and ploughed their monies in.
The time-honoured adage “caveat emptor” (let the buyer beware) never phased these contributors as the opportunity to make some “free money” was on the table, and in an economy such as Jamaica's it was every man and woman for him or herself.
Cash Plus, like its foreign exchange-demarcated investment club counterpart Olint, was born out of a combination of human greed on the part of the promoters and subscribers and an economic environment created by the political misadventures of those in government, especially in the post 1980-1990 periods. The use of short-term monetary policies to mop up what was termed “excess liquidity” on the island became a preferred course for government policymakers, a programme that was founded in the Edward Seaga years and which legitimised the flow of ill-gotten foreign currency into the system to satisfy the island's punishing need for foreign exchange.
As the river of funds swelled, it may have dawned on the so-called financial wizards that there was no corresponding production to match these funds, and the Bank of Jamaica's use of treasury bills to mop up the excess funds only created more excess funds, as at some point the interest on these instruments had to be paid. What this generated was an appetite for higher interest on the part of depositors, as Government encouraged owners of funds to park their monies in treasury bills and certificates of deposits instead of engaging in productive investment endeavours.
The 1990s were the years of speculation-led expansionism, where wealth was created on paper, aided and abetted by Government's monetary policies. New policy directives saw the creation of a plethora of merchant banks, most of whom made money trading paper. The stock market ballooned and made multimillionaires overnight, with no corresponding increase in economic or development activities tied to the expansion of cash in the economy.
The financial sector meltdown and the consequent establishment of the Financial Sector Adjustment Compnay in the late 1990s only exacerbated the situation, as people with cash were taught by those experiences that running a business was an anathema. Let's face it, government policy in Jamaica was anti-growth, and everything pointed to earning money with the least amount of headache. Why bother with the stress of building a business when there was free money to be made?
Carlos Hill's Cash Plus and David Smith's Olint were the mother of all easy-money schemes, and it was only when the legitimate banks began to feel the effects of the movement of monies from their coffers to Cash Plus's and Olint's coffers that the Government moved in. Granted, some banks adapted to the state of affairs, as they created “work-arounds”, lending clients monies against their own deposits for on-lending/investments to these schemes. The net effect was the continued ballooning of loan portfolios at commercial banks, which maintained the flood of cash to these schemes.
It would not have helped, either, that when the then minister of finance announced intention to pull the plugs on these schemes that his Opposition counterpart may well have lent legitimacy to them when he accused the minister of trying to prevent Jamaicans from taking advantage of moneymaking opportunities.
It may be argued that Hill really had not committed a crime — a position that we may never know the answer to as the case is now over and no evidence was ever presented to substantiate the government's fraud charges. What is clear, though, is that this counts as another nail in the coffin of Jamaica's justice system and its ability to provide any kind of recourse to aggrieved individuals in criminal matters.
It took just over eight years for this case to be taken to court, albeit with multiple delays, and in the course of that time the complainants 'vanished', lost interest, or simply became too scared or too embarrassed to pursue their claims.
We should be aware that, looking at this decision from the outside, Jamaica has succeeded in painting itself into a corner of lawlessness with an ineffectual justice system that only provides fuel for antisocial behaviour and corresponding breakdown of law and order. Which serious outside investor will be encouraged by such a system to the extent that they will be beating down our doors to invest their hard-earned monies with us? Further, Jamaica with its punishingly high murder rate and its associated penchant for reprisals buffeted with its anti-informer culture, all combine to deliver the judicial result presented last week.
We have seen it before, and we will continue to see it as long as the problem of a lack of confidence in how the country's justice system works remains untreated.
David Smith of Olint, who now languishes in an American prison, must now be ruing his decision to flee to the Turks and Caicos. All things considered, perhaps if he had stuck it out in Jamaica, maybe he, too, would be walking free.
Richard Hugh Blackford is a self-taught artist, writer and social commentator. He shares his time between Coral Springs, Florida, and Kingston, Jamaica. www.yardabraawd.com. Send comments to the Observer or firstname.lastname@example.org.
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