Davies knocked over 'fatally flawed' protections for JRF
Published:Friday | February 25, 2011 | 12:00 AM
Dionne Rose, Business Reporter
Gayle Nelson, attorney-at-law representing businessman Bentley Rose, one of the aggrieved witnesses appearing before the FINSAC enquiry, has criticised the former finance minister for exempting foreign-owned company Jamaica Redevelopment Foundation Inc (JRF) from the Money Lending Act.
The law limits interest charges by moneylenders, but allows for exemptions by ministerial order.
Nelson's described former minister Dr Omar Davies' actions in 2002 as "fatally flawed".
He said the purpose of the Money Lending Act is to protect borrowers from unscrupulous moneylenders; relieve the borrowers from any sums in excess of the sum adjudged by the court to be fairly chargeable under the loan contract; and to set aside any agreement made in respect of money lent where there is evidence which satisfy the courts that the interest charge in respect of sum actually lent is excessive, or the transaction is otherwise deemed as harsh.
Nelson pointed to the high interests being examined by the FINSAC enquiry as a typical situation that the Money Lending Act was supposed to guard against.
He said Section 3 of the law speaks specifically to interests charge exceeding 40 per cent per annum of the principal, which he said the act deemed as excessive and "unconscionable", and that Section 5 provides that any borrower who has interest in excess of the principal sum originally borrowed would soon be relieved of the transaction.
"The protection passes with the ball - so whoever has it is protected," he said. "We are saying that is not in the case here."
"[It] means that the ball must be passed to an entity such as the one listed in Section 13 of the act. It can't go willy-nilly to some moonlighting entity coming from America, for example, to make a lot of money very fast and then leave Jamaica."
JRF is owned by Beal Bank, a Texan firm.
Nelson said such entities should operate under the Banking Act, where they would be properly supervised by the Bank of Jamaica.
He charged that Davies decision to invoke the Money Lending Act instead was questionable.
"That's all I'm saying, that what the minister did in the very beginning was fatally flawed," he said at Wednesday's sitting of the enquiry. "There is nothing which allows him to go and make an order to protect such an entity at the beginning of 2002."
Earlier in the cross examination, Bentley Rose said that his loan of J$8 million - of which he paid off $6-million - ended up as a J$23-million liability after interest and charges.
Rose also claimed that his property was put on the market by JRF for sale despite getting the assurance of former FINSAC head Patrick Hylton, now the group managing director of National Commercial Bank, that the assets would not be sold until a lawsuit that he had filed against one of the rescued banks, Workers Bank, was settled.
NCB was also bailed out by Government during the financial meltdown, whose causes the FINSAC enquiry is exploring, and sold to billionaire investor Michael Lee Chin.
Dave Garcia, NCB's in-house counsel and the lawyer represen-ting Hylton at the enquiry, said that no such assurance was given to Rose. But the businessman insisted that Hylton intervened twice to stop the properties from being auctioned off.
Rose, under cross-examination, retracted statements made earlier in the enquiry that he was never notified by JRF of the sale of two of his properties that were put up for sale.
He said he was notified late in the process, about one month before the properties were put on the market.