SSL’s monthly burden on taxpayers $15 million and counting

It will cost taxpayers at least $15 million monthly to pay the salaries of workers and some operational expenses at Stocks and Securities Limited (SSL), the private investment firm rocked by an alleged $4 billion fraud.

At the same time, Finance Minister Dr Nigel Clarke, who disclosed the preliminary figures today, said the situation is not similar to the government's bailout of failed financial institutions during the 1990s crisis.

Clarke was speaking in an interview with Emily Shields on the talk show programme Hotline on Radio Jamaica.

Yesterday, he told The Gleaner that the government will have to intervene to ensure ongoing investigations are not hindered after workers stayed off the job to protest the non-payment of August wages.

Some 22 persons are employed at SSL and their total monthly wage bill is $9.5 million, Clarke said.

There are also other operating expenses of $5 million monthly, in addition to one-off fees for legal services, among other things.

The Opposition People's National Party has demanded full disclosure of the government costs associated with the SSL probe.

"We would like to know the total cost to taxpayers for this SSL investigation. In addition to the staff salaries cost, what is the cost of retaining the receiver/manager and his team? What is the cost of the international forensic firm, Kroll Associates, and whether all these costs are being covered by the Government," said spokesman on finance, Julian Robinson.

In the radio interview, Clarke said the $15 million is not the final figure and that he will update the public on the costs later on.

He also said he was not in a position to say for how long the government will cover SSL's costs, but he insisted that it is "clearly not an indefinite situation."

"If we don't pay the salaries, the investigation will be compromised," he said, reiterating the government's policy position to "spare no resources" in supporting the investigation being led by the local authorities.

"There's a lot of work to be done to compile the evidence and to put it together and to answer queries. When the investigators come they ask questions. Who answers the questions?"

On Thursday, the Financial Investigations Division (FID) announced that its probe of the fraud reported in January has widened with 70 victims now identified and monies allegedly fleeced increased by 1.5 billion (US$10 million) to over $4 billion.

Not a bailout 

Clarke rejected a suggestion that the government's support of SSL was similar to the bailout of financial entities that were affected by the financial crisis of the 1990s.

The state created an entity called the Financial Sector Adjustment Company (FINSAC) that it used to address the issues.

"In the case of FINSAC, certainly with some of the financial institutions, shareholders kept ownership of institutions, at least for some time, at least with some entities. In this case, the shareholders, the persons who own SSL, the persons who benefited from the profits of SSL to the extent there were any, they have lost their investments in SSL. The government, similarly, is not putting in any resources to support depositors and investors, I mean clients of SSL. ...The clients of SSL, whatever the balance is there in their account is the balance that they will get, the government is not subsidising any client of SSL," Clarke explained.

Clarke argued that the beneficiaries of a "complete and thorough investigation are the people of Jamaica" and that the country's reputation is at stake.

"The reason why this fraud is so problematic is that it has a spill-over effect on the financial system. We've had cases of fraud in the financial sector and there has been no accountability at the level of the courts and that leads to feelings of impunity, which are injurious to the health of the Jamaican financial system, and by extension, the Jamaican economy. To the extent that there's a successful investigation and perpetrators and conspirators and co-conspirators are brought to justice, the beneficiaries of that are the Jamaican people and the Jamaican economy. That is the only reason why we are supporting the payment of salaries," he said.

The Financial Services Commission (FSC), which regulates investment houses, took temporary management of SSL on January 17 and two months later declared the company "insolvent".

Clarke said the Government's policy is not to cover the operational costs of private entities taken over by the FSC.

In SSL's case, he said the company's money was used to cover the workers' wages for the period January to July.

Those funds have now run out.

One person has been charged in the SSL fraud case so far.

The FSC has faced scrutiny after Gleaner revelations that for more than a decade, it flagged SSL as a “problem institution” with a “culture of non-compliance and mismanagement of client funds”.

However, despite the findings from its own investigators, the FSC never revoked SSL's licence, and the public was never told of the concerns.

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