Accounting lecturer blames Hylton for loan problems
Published:Sunday | April 3, 2011 | 12:00 AM
McPherse Thompson, Assistant Editor - Business
An accounting lecturer has blamed Patrick Hylton, the former managing director of FINSAC Limited, for his failure to pay off a J$5-million loan before it was sold to collection agent Jamaican Redevelopment Foundation Inc (JRF), a debt which later escalated to J$17 million because of the high interest rates attached to it.
"The refusal of Patrick Hylton to facilitate what was clearly a reasonable approach to negotiate a government-to-government (FINSAC to Ministry of Finance) agreement was pivotal in my failure to arrive at a successful conclusion at the level of FINSAC," said Anthony Hutchinson, lecturer at Northern Caribbean University, Mandeville, Manchester.
Hutchinson was testifying before the commission of enquiry into the cause of the financial sector meltdown of the 1990s on Thursday at The Jamaica Pegasus hotel, New Kingston.
The commission is also examining whether debtors, whose assets were seized by FINSAC and sold to the JRF, were fairly treated.
Hutchinson had borrowed J$1.6 million from National Commercial Bank (NCB) in 1995 under a special agricultural facility to refinance an existing overdraft at the bank.
The loan attracted an interest rate of 53 per cent per annum, plus 15 per cent if he defaulted, and an additional two to three per cent for other fees.
However, the loan was later transferred to Recon Trust, a subsidiary of FINSAC, and in or around 2002 sold to the JRF, which charged the educator between 25 and 30 per cent interest per annum. By 2008, having paid $5.5 million on the loan, the JRF advised him that that the total obligation stood at more than $12 million.
Hutchinson, under examination by Judith Clarke, who is marshalling the evidence, asked the commissioners, comprising chairman Worrick Bogle and investment manager Charles Ross, to help him address a number of concerns, including a determination of how the JRF's interest rate of 30 per cent, the compounded daily, was set.
He also wanted to know if the JRF "was entitled to charge me this interest, or any interest whatsoever" after it acquired the debt from FINSAC.
The accounting lecturer, who lives and farms on a 17-acre property in May Day, Manchester, asked what the bases or criteria were upon which generous write-offs were extended to some FINSAC debtors, having regard to the company's "refusal to accommodate in such a way as to allow me to liquidate my debt from the sale of a portion of my land to the Government, and the subdivision and sale of a part of the land".
Although a number of potential buyers have made down payments on the subdivision, the JRF has blocked Hutchinson from selling by refusing to hand over the main title for the land, he said.
He also invited the commissioners to consider why Patrick Hylton, as chief executive of FINSAC, "and an essential stakeholder in facilitating a memorandum of understanding such as would permit a non-cash settlement on a large portion of the debt by direct exchange with the Ministry of Finance consistently refused to accommodate me".
Hutchinson said that in 2002, then Minister of Education and Culture, Burchell Whiteman, wrote to Dr Omar Davies, then minister of finance and planning, expressing an interest in acquiring two acres of his land for use as a playing area at the May Day All-Age School.
Payment was to be made by land bonds, which bore no interest. However, the JRF was only willing to accept the bonds provided there was an interest factor.
Having learnt that land bonds are usually non-interest bearing, "I realised that had FINSAC given me the opportunity to negotiate on the basis of the purchase of the land by the Government with bonds, my debt may have been liquidated and not sold to JRF," Hutchinson said.
"I say this because I think FINSAC, being itself a government institution, may not have been in a position to insist on the payment of interest on the bonds as a condition of it accepting the proceeds of the sale in the form of bonds."
On that basis, he asked the commissioners to address the following: "If it is a fact that land bonds are usually non-interest bearing, why would JRF insist on the payment by the Government of interest on the bonds which it offered to issue as payment for the two acres of land, thus seriously undermining and delaying my efforts to settle my indebtedness?"
He also asked that the commissioners make a determination about the extent of the principal debt when it was sold to the JRF, what proportion represented interest, and how it was calculated.
Under cross-examination by attorney-at-law Gavin Goffe, representing the JRF, Hutchinson said that although he agreed to settle his debt by the end of September 2001, he did not because he had a cash-flow problem.
He agreed with Goffe that in 2008, his debt escalated to J$17 million because despite an agreement to make monthly payments of J$30,000, he did not service the loan for three years.
However, he said there were other factors, including a long delay on the part of the Government to complete the sale agreement for the land to be used by the May Day All-Age School.
In 2008, the loan decreased to just over J$12 million when the Government applied the J$5.5 million proceeds of the sale of the land to the debt. But Hutchinson said the debt continued to rise thereafter.
The enquiry continues on April 12 after a one-week break.