Beginning with this issue, Amandala will be publishing, in serial form, the 124-page REPORT OF THE SENATE SELECT COMMITTEE INVESTIGATING THE SOCIAL SECURITY BOARD. The Report was first published in July of 2006.
This is a very important document, and especially so in light of what has happened on Wall Street, and indeed globally, because of abuses in the mortgage market. The scandal in the Belize Social Security Board which first came to light in July of 2004, involved a so-called “securitization” scheme. The perpetrators, and remember this was a conspiracy at the highest levels of the Government of Belize, used home and real estate mortgages to create domestic and foreign currency liquidity for themselves. Because of their political power and connections, they organized the scheme in such a way that the Social Security Board and the Development Finance Corporation, which is to say the taxpayers of Belize, paid their bills. It was a scam, and the evidence is in the Report.
If chairman Godwin Hulse and his Senate Committee could do all this work to prepare the evidence of the scam, then you, Belizean taxpayer, have to take the time to examine this document. The proof is in the pudding.
REPORT OF THE SENATE SELECT COMMITTEE INVESTIGATING THE SOCIAL SECURITY BOARD
Parts 1 to 12
The Senate Select Committee (herein after referred to as “Committee”) hereby submits its findings, analysis, and recommendations of the investigation of the Social Security Board’ investment portfolio and its securitization program
Part One - - Overview
Part Two — Investments
Part Three — Guarantees
Part Four — Securitization Transactions
Part Five — A further requirement of the mandate of the Senate Select Committee is to identify, if possible, any person or persons that are responsible for any breaches of law and or procedures.
Furthermore the committee is required to recommend any action that may be brought against any person or persons for any alleged misconduct or violation of the law.
Part Six — The Senate Select Committee as a further part of its mandate is required to recommend any corrective actions necessary to the laws or procedures to prevent recurrence of such incidents.
Part Seven — As part of its mandate to deal with any other matter relating to the above the Senate Select Committee makes additional recommendations.
Part Eight — Conclusion of the Report of the Senate Select Committee
Part One: Overview
The Social Security Board, the “SSB” or the Board was established in 1981 by the Social Security Act (hereinafter referred to as “the Act”). The SSB’s functions are regulated by the Act and by several Statutory Instruments. Of primary importance for the purposes of this report are Sections 28, 46 and 49 of the Act. Section 28 establishes the Social Security Fund (the Fund), the primary purpose of which is the payment of benefits to contributors. These Sections vest the Fund and the general “control and overall management” of the Fund in the SSB.
Section 49 of the Act, however, creates a specific exception to the SSB’s general “control and overall management” of the Fund; it establishes a Social Security Investment Committee (Investment Committee) and endows that Committee with the power to give general or specific directions from time to time on the investment of moneys in the Fund which are surplus to current needs of SSB. Section 49, significantly, also enjoins the chief executive officer of SSB (the manager), to give the investment committee any information necessary for the proper discharge of its functions.
In or about July 2004, the Fund and its investments became the subject of adverse public speculation and comment. There were charges of wrongdoing, mismanagement and even misappropriation of the Fund’s assets. These reports came to the attention of the Senate and in response, the Senate appointed a Special Select Committee to review the operations and investments of the Board and the Fund for the period of 1999-2004 and to report back to the Senate with its findings.
The Senate Special Select Committee was duly constituted on 16th day of September in the year 2004 by a resolution passed by the Senate. This resolution detailed the terms of reference of the Senate Committee thereby giving it its mandate. These terms specify that the committee should:
· Conduct an independent and impartial investigation into the investment and loan portfolios of the Belize Social Security Board with particular reference to the Board’s Securitization and Guarantee programs;
· Interview any persons connected with the said Belize Social Security Board’s program and any other persons whose information may be material to the above including engaging expertise to facilitate that process;
· Examine all documentation pertaining to the above matters;
· Determine whether proper procedures and/or regulations were followed or whether any process were circumvented;
· Identify if possible person or persons responsible for any breaches of the law and or procedures;
· Recommend any corrective actions necessary to the laws or procedures to prevent non-recurrence of such incidents;
· Recommend any action that may be brought against any person or persons for any alleged misconduct or violation of the law; and
· Deal with any other matter relating to the above.
· The Committee was comprised of the following Senators:
• Senator Godwin Hulse: Chairman.
• Senator Dickie Bradley : Member,
• Senator Rev. Moises Chan: Member,
• Senator Rene Gomez: Member
• Senator Arthur Roaches: Member.
Subsequent to his appointment, Senator Roaches, a member of the Opposition party in the Senate, informed the Senate that based on instructions from his party he would not be participating in the meetings of the committee. Senator Roaches therefore did not participate in the investigations or deliberations of the Committee.
The committee held 67 committee meetings over the period up to its conclusion. These meetings met the requirements of the quorum which had to consist of two social partners represented in the Senate. The Chair presided at all the meetings.
In furtherance of its work the Senate Committee requested and received from the SSB and other entities documents containing information pertinent to its investigations. Where information was required and documents did not exist, the requested body offered explanation to the Committee. The reason given to the committee was that the information sought was not documented since that particular information was only discussed verbally. There were only two occasions when there was a delay in receiving information from the SSB and the Senate must be advised that it was necessary to request those documents multiple times in order to obtain the information. With respect to information from the Development Finance Corporation (DFC), the Committee had some difficulty initially in receiving the information requested due to what the DFC perceived as client/ banker relationship privilege. However, after making known the powers of the Committee to subpoena documents and summon witnesses, the documents requested were handed over.
As a further part of its mandate the Senate Select Committee was required to examine all documents pertaining to the investment and loan portfolios and the securitization and guarantee programs of the SSB and to determine whether proper procedures and /or regulations were followed or whether any processes were circumvented.
The Committee received and perused the following documents from the SSB:
• Copies of minutes of the Board of Directors’ meetings for the years
• 1999 to 2003;
• Copies of the minutes of the Investment Committee meetings for the years 1999 to 2003;
• Copies of loan documentation covering all the outstanding loans and loans granted within the period
• Copies of investment documentation covering all investments for the period under review;
• Copies of the documentation covering the investments under Securitization Program (Tranches A, B ,C, D and the North American Securitization Program);
• Copies of inter- office correspondence, letters, memos and many other documents considered pertinent and relevant.
The Committee requested and received the following documents from the DFC for its perusal and comparison with the copies received from the SSB:
1. Project documents relating to:
• Western Caribbean Properties Ltd.
• International Telecommunications Ltd.
Miscellaneous correspondence relating to securitization process.
The Committee examined and reviewed the documents, verifying their authenticity where possible, by cross-checking the sources. The examination of those documents formed the basis for the invitation of witnesses and their subsequent questioning at the hearings.
III. Special Audit
The Committee, after wide advertisement locally, interviewed prospective auditing firms and individuals with a view to engage an Auditor to conduct a detailed Special Investigative Audit of the SSB’s loan and investment portfolios. Three candidates applied, and after interviews, the three firms submitted bids together with pertinent requested details of their firm’s experience, affiliation and capacity to carry out the assignment. The Senate Committee, after reviewing the responses and factoring in the criteria including cost, selected Mark C. Hulse, Chartered Accountant, a member firm of Baker Tilly International (hereinafter called “the Special Auditor”) to conduct the audit. The Special Auditor commenced work on the 3rd day of January of the year 2005 and concluded on the 22nd day of March in the year of 2005. The cost of the Special Investigative Audit was funded through special warrant of the Ministry of Finance. However, the Ministry was not consulted on the Terms of Reference (otherwise known as TOR) of the audit nor has the Ministry been given a copy of the report. A full report was submitted to the Senate Committee, and hence by reference forms part of this report.
IV. Public Testimony
Part of the mandate of the Senate Committee was to interview persons connected with the said Belize Social Security Board’s program. The following is a summary of hearings held and documents collected by the Committee.
The Committee met with witnesses twelve (12) times. Six (6) of these sessions were public hearings in the National Assembly chamber and the other sessions were held in private settings (otherwise known as in-camera hearings). During the public sessions the Committee examined witnesses under oath; their testimony was recorded and transcribed. Relevant parts of the testimony are included in this report.
The Committee interviewed, in-camera, persons it considered could provide advice on certain technical issues. It also re-examined, in-camera, some witnesses who had previously been examined in public. The testimonies given in-camera from those who had already testified in public were taken under oath and recorded. The testimonies of expert witnesses were not taken under oath and in cases where the Committee did not deem it necessary, the interviews were not recorded.
From the evidence received by the Committee it was possible to construct a clear, comprehensive and consistent narrative of the events that are the subject of this investigation. The Committee received support from the Clerk, acting as secretary to the Committee, and the staff of the National Assembly who did the administrative/secretarial work. To the date of this report the operating costs, transportation, lunch and other incidentals have been covered from the budget of the National Assembly.
The following persons were interviewed in public and under oath and the transcripts of the interviews form part of the permanent records of the Senate.
A. Hearing No. 1 conducted on December 15, 2004
Mrs. Maria Elena Contreras: Secretary Social Security Board
• Mr. Rolando Zetina: Secretary of the Investment Committee ( SSB)
• Mr. Elson Kaseke: Solicitor General of Belize
• Mr. Sydney Campbell: Governor of The Central Bank of Belize
• Mr. Antonio Cawich: Lands Officer, Ministry of Natural Resources, Environment and Industry
• Mr. Troy Gabb: Chief Executive Officer of D.F.C.
• Mr. Eberto May: Executive Chairman Social Security Board
B. Hearing No. 2 on January 19, 2005
Mr. Joseph Waight: Board Member (SSB) 1998 to April 1, 2003
• Mr. Ramon Cervantes: Chairman (SSB) Investment Committee 1998 to 2003
• Mrs. Martha Williams: Board Member (SSB) 1999 to 2003
• Mayor David Fonseca: Board Member (SSB) 1999 to 2003
• Mr. Yasin Shoman: Vice Chairman Board, Investment Committee Member (SSB) 1999 to 2003; Current Chairman of SSB
• Mrs. Narda Garcia: Manager Social Security Board, Member of the Board of Directors, and Investment Committee Member (SSB)
C. Hearing No. 3 on April 6, 2005
1. Mrs. Narda Garcia: Chief Executive Officer, Board Member, and Investment Committee Member (SSB) 1999 to 2003
• Mr. Mark C Hulse: Auditor, Member Firm of (Baker Tilly) International.
D. Hearing No. 4 on June 9, 2005
1. Mr. Glenn Godfrey: Chairman, DFC, 1998 to 2003
• Mr. Selwyn Hernandez: Valuator, International Telecommunications Limited (ITL) and Western Caribbean Properties Ltd. (WCPL).
• Mr. Roy Cadle: Board member, WCPL and St. James Building Society (St. James)
E. Hearing No. 5 on June 29, 2005
Mr. Troy Gabb: Chief Executive Officer, D.F.C., 2001 to 2003
• Dr. Carla Barnett: Financial Secretary, Government of Belize
• Mr. Alvaro Bautista: General Manager, D.F.C., 2000 to 2003
• Mr. Sydney Campbell: Governor of The Central Bank of Belize (Central Bank)
• Mr. Ian McMillan: Managing Director, (BIMCO)
• Mrs. Narda Garcia: C.E.O. and Board Member and Investment Committee member (SSB)
F. Hearing No. 6 July 21, 2005
Mr. Ian McMillan: Managing Director, (BIMCO)
• Ms. Leonora Flowers: Legal Officer, (SSB)
• Mr. Franklin Magloire: Project Officer, D.F.C.
• Mr. Rolando Zetina: Financial Comptroller, (SSB), 1999 to Present
The following persons were recalled to give testimony in-camera by virtue of the need to clarify certain issues and expand on their previous testimony given:
Mr. Eberto May: Chairman, (SSB) 1999 to 2003
• Mr. Antonio Cawich: Lands Officer, Ministry Natural Resources
The following persons were invited to give expert evidence in chambers:
Mr. Gian Gandhi: Legal Counsel in Ministry of Budget Management/former Solicitor General of Belize
• Mr. Luis Zabaneh: Consultant, Ministry of Budget Management 1999
• Ms. Alma Gomez: Supervisor of Insurance , Ministry of Finance
The following persons assisted the Committee with legal advice from time to time:
1. Mr. Elson Kaseke: Parliamentary Counsel
Part Two: Investments
The following are the findings based on the documentary evidence and testimony.
After approximately twenty one (21) months of in depth investigation undertaken by the Senate Committee, it makes the following findings, which incorporate information from documentary evidence, oral testimony and information from the Special Auditor’s report.
The task to investigate and review the investment and loan portfolios with particular reference to the securitization programs actually covers the amount of $249,350,989.00 as of September 30, 2004.
Investments consist of the following types. (Page 3 of the Special audit report):
1. Short term investments: -
2. Investments in associates:
3. Long-term investments:
(I). Short term investments consist of the following:
• Certificate of deposits with local institutions for $65,684,096.46 and
A short term loan to the Citrus Growers Association for $3,901,848.26
A. Certificate of deposits
At September 30, 2004, thirty-eight point nine percent (38.9%) or $25,555,997.17 of the deposits is held by the Alliance Bank. This represents twenty-five point forty-seven percent (25.47%) of the total time deposits held by this bank as at the quarter ending September 30, 2004 as per the Central Bank of Belize report.
Eleven point three percent (11.3%) or $7,418,510.25 of time deposits is held by Scotia Bank (Belize) Ltd. This represents six point thirty eight percent (6.38%) of the total time deposits held by this bank as at the quarter ending September 30, 2004 as per Central Bank of Belize report.
Fifteen point two percent (15.2%) or $10,000,000.00 of time deposits is held by Atlantic Bank Ltd. This represents ten point forty seven percent (10.47%) of the time deposits held by this bank as at 30th September 2004 as per the Central Bank report.
Twenty-two point four percent (22.4%) or $14,709,589.04 of time deposits is held by The Belize Bank Ltd. This represents five point twenty six percent (5.26%) of the time deposits held by the bank as of September 30, 2004 as per the Central Bank of Belize report.
Seven point six percent (7.6%) or $5,000,000.00 was held by the First Caribbean Bank Ltd. This represents eleven point seventy three percent (11.73%) of the time deposits held by this bank as of September 30, 2004 per the Central Bank of Belize report.
The Belize National Building Society (BNBS) held more than four percent (4.6%) or $3,000,000.00
B. Short term loan
The only short-term loan was to the Citrus Growers Association (Special Audit report, page 9). The loan was for one (1) year at interest rate of nine percent (9%).
Comments on short term Investments
The Belize National Building Society (page 8 of Special Audit report) held $3,000,000.00 or 4.6% of the deposits for the SSB. The committee understands that these deposits were opened with the BNBS as part of an out of court settlement in 1999. These deposits were made during the period September of 1999 to March of 2000. BNBS paid interest on these deposits only once. Although interest is payable semi-annually, there has been no additional payments of interest. SSB demanded payment of the first deposit when it matured in September 2004, but BNBS has still not paid the deposit. The parties are now in litigation, and the Senate Committee notes that dependent on the judgment of the court, SSB could sustain losses.
(II). Investment in associates
The only investment in associates held by the SSB as of September 30, 2004, consisted of shares in Belize Electricity Ltd. (Special Audit report, page 10). Investments in associates are investments in which the SSB holds twenty-five percent (25%) or more of the shares in the entity and holds a seat on the board of directors.
Cash inflow from dividends over the years 2000 to 2003 amounted to $4,380,791.14. In 2003, Social Security entered into a dividend re-investment plan offered by Belize Electricity Limited (BEL), and through this plan, either a portion or possibly all of the cash dividends are reinvested in additional shares at $2.75 per share. SSB acquired an additional 400,952 shares through the plan at a value of $ 1,102,618.00. Equity interest in the company has grown to $10,766,207.06, and SSB holds over twenty-six (26.5%) of the total shares of BEL. Dividends earned over the period from 2000 to 2003 equal twenty-five percent (25%) of the cost of the investment in the shares, and the equity interest equals more than sixty-two percent (62.12%) of the investment.
Up to March 2004, when the entire shareholding was sold, SSB held 9,459,518 ordinary “C” shares in BTL. Dividends received over the years from 2000 to 2002 totaled $8,155,842.89 and the equity value had grown to $30,183,714.28. Proceeds from the sale were listed at $51,866,566.23; this was invested in various Time Deposits at the commercial banks and in a loan to the Citrus Growers Association. (Page 12 of the Special Audit report)
Dividends earned over the years of 2000 to 2002 inclusive, before a dividend reinvestment program of 2003, represented $8,155,842.89 or a percentage of 44.14% of cost of shares at 2002. The equity interest in the company of $30,183,714.28 represented 143.96% of the cost of investment in shares at the time of sale. The returns from this investment were adequate. The Senate Committee finds it unfortunate that the SSB divested its interest in BTL; this however was a decision of the board.
Investments that mature after twelve months or that will be held for more than twelve months are recorded as long term investments. At September 30, 2004 SSB’s long-term investments included equity investments, real estate investments and loans to the private sector and the DFC. The loans constituted over fifty percent (52.2%) of the total portfolio.
As at September 30, 2004, SSB recorded the value of the following long term investments as follows:
Equity investments of $6,152,490.00 or 4.06% of the total long-term investments;
• Real Estate investments of $13,206,300.91 or 8.70% of the total long term investments;
• Private Sector loans of $79,194,968.68 or 52.22% of the total long term investments and Mortgage Portfolio of $53,112,802.78 or 35.02% for a total long term investment of $151,666,562.37. (Special Audit report page 14)
Equity investments are shares held in entities that SSB has less than 20% of voting rights. (Special Audit report page 15).
(B) Real Estate investments at September 30, 2004 consisted of properties located in Vista Del Mar, San Pedro, St. George’s Caye and Mile 8 on the Western Highway. Details of these are covered in the special audit report on pages 17 through 20.
It is important for the Senate to note, that at the date of the audit, no title for the plot in San Pedro procured from Government of Belize (GOB) had been obtained even though land title documentation should have been finalized by the first week of September of 2004, as per a letter from the Financial Secretary dated August 13, 2004 (Special Audit Report page 19). SSB is also paying for the survey of the property. The total value of this investment in SSB’s account is $6,607,848.00.
In a subsequent development, the SSB presented to the Senate Committee a copy of the Minister’s Fiat Grant no 12 of 2006 covering 2,487.443 acres of land at San Pedro. This document settles the matter as the SSB is now the legal owner of the land in San Pedro.
Another property of 1000 acres was purchased from Belize Hotels Ltd. as part of redemption of shares agreement. The value of the shares, $2,775,686.68 plus an additional $1 million dollars, was paid for the property which is located seven (7) miles north of San Pedro Town on the west side of the island. SSB has title to this land and the value of this investment in the SSB’s accounts is $4,000,000.00.
(C) Private Sector Loans totaled $79,194,968.68 as of the balance sheet date of September 30, 2004. This includes nineteen (19) loans to the DFC at an outstanding value of $41,912,442.98 or 52.92% of the total loans. SSB holds promissory notes as security for the DFC loans. As of September 30, 2004, SSB had not received any repayments from the DFC for 15 months. (Special Audit report pages 22 through 35)
(a) DFC loans
The loans to DFC are categorized as follows:
Large Private Sector Special Loans transferred to DFC: $20,760,138.59
I. Housing and Student Loans
The Housing & Student loans were made to DFC on a promissory note only. There is no appraisal or monitoring reports on the files presented to the committee in respect of these loans. There is no guarantee of payments on file from the DFC or GOB on behalf of DFC. As can be seen from the Special Audit Report, up to the date of the conclusion of the audit all the loans are in arrears for both Principal and Interest.
II. Large Private Sector Special Loans transferred to DFC
The following are loans made by the SSB to the DFC for on-lending to entities in the private sector and in some cases loans which the SSB had made directly to entities and subsequently transferred to the DFC.
Loan number seven (7) was made to DFC specifically for the Northern Fishermen Cooperative Society. (Special Audit report page 26) This loan was for $6,000,000, and was to enable the DFC to assist the cooperative with debt restructuring. Loan repayments from DFC have been very irregular and at September 30, 2004, the outstanding principal balance was $4,644,860.12. The outstanding interest was $519,969.82. Only one interest payment has been made (October of 2004) toward this balance, and as of December 31st, 2004 the outstanding interest was $380,787.16. The DFC sold this mortgage on the North American Securitization Program. Thus loan repayments to DFC made by Northern Fishermen cooperative are to be utilized to facilitate the mortgage (bond) payments which are a priority. Because of the lengthy delinquency period of this loan, it appears that the DFC does not have the additional income to honor this outstanding commitment to the SSB. It is unclear why at the time of securitization the loan was not settled with the SSB, and perhaps even more puzzling is why the SSB did not follow up with a request for repayment.
Loan number ten (10) is the aggregate of loans to three separate medical institutions which was originally made directly to them by the SSB and subsequently transferred to the DFC from SSB. (Special Audit report page 28 through 29). The loans are as follows:
Universal Health Services:
Belize Medical Associates:
3. Physical Therapy Center:
As stated above these loans were originally made by the SSB to these entities; however they were later transferred to the DFC and became a receivable for the SSB.
These loans were all securitized by the DFC in the North American Securitization program, but at that time the proceeds of the securitization were not paid to the SSB. Payments made by these institutions to the DFC are to be utilized to repay the secured bonds which are a priority. Because this loan has been delinquent for some time, it is not clear whether the DFC has any additional income to repay the SSB. Once again, it is unclear why the SSB did not follow up with the DFC when these were securitized and recovered its money at that time.
Loan number eleven (11) is a loan to the DFC in respect of Agriculture & Industrial Credit. (Special Audit report page 29 thru 30) The outstanding loan balance is $900,158.26. According to the special auditor’s report the SSB has no details as to the use of this loan. Although the first disbursement was September 13, 2000 and final disbursements were October 5, 2000, the Investment Committee makes no reference to this loan in any of its minutes for the year 2000.
Loan number fifteen (15) is a loan made originally to Maya Land by the SSB and subsequently transferred to the DFC from SSB. (Special Audit Report, page 32) The outstanding principal balance of this loan was $1,997,608.72 at September 30, 2004. The outstanding interest was $221,199.23. As mentioned above, this loan was originally a direct loan to the borrower; however, after several difficulties with collections, SSB decided to exercise its power of sale. The Board advertised its intent to sell in May of 2002, and the DFC made an offer to purchase on or about November or December of 2002. The receivable was transferred to the DFC in January 2003.
As at the date of the special audit, SSB had not received payment from the DFC in regards to loan 15.
Loan number eighteen (18) is a Special Assignment loan. (Special Audit report, page 34) According to the auditors, details of this loan were not made available from SSB. The outstanding Principal and Interest balances as at September 30, 2004 were $2,500,000.00 and $310,428.10 respectively.
The investment register gives the purpose of the loan as the “Sale and Assignment of Mortgages from DFC to GOB to SSB.” There is no reference to this loan in Investments Committee minutes of 2003, even though the loan was disbursed on September 25, 2003. The original amount approved was $2,500,000 at an interest rate of over eleven percent (11.17%) for 15 years with 4 years grace period on principal repayments. Repayment is scheduled monthly. However, only two (2) payments of interest were received in 2004, one in September and the other in December.
Loan number nineteen (19) this loan was made to the DFC in respect of Bellevue/Arnaldo Peña. (Special Audit report page 34) The outstanding balance as of September 30, 2004, was $2,800,000.00, and the outstanding interest was at $86,137.81. This loan to the DFC transferred the balance of Arnaldo Peña’s Loan from SSB to DFC. Once again, there are no references to this transaction in the Investment Committee minutes. The Bellevue property was originally held as part of Security for a loan to Dinger Enterprise Ltd., and SSB took possession of the property in 2001 when the loan to Dinger Enterprise became past due. In February of 2002, SSB negotiated with Arnaldo Peña for rental and eventual purchase of the Property. However, there were repayment problems and SSB “divested” the loan to DFC by transferring the receivable to DFC in April 2004. The loan to DFC is for $2.8 million with an interest rate of over eight point five percent (8.5%) for fifteen (15) years with a four (4)-year grace period on the principal balance. Repayments on this loan are due monthly but only two (2) payments against the interest were received in 2004, and the outstanding interest balance as at December 31, 2004, was $85,359.85.
Loan numbers eighteen (18) and nineteen (19) were both extended to the DFC with grace period of four 4 years on principal repayment. It is unclear why loan nineteen (19), a commercial loan, would be transferred to the DFC with such a grace period. Such concessionary terms are normally reserved for Student loans and not even development projects attract this type of moratorium. The Senate committee has not established what moratorium if any was offered to Peña on this loan.
Comment on private sector loans made to the DFC
The Special Auditor reports on page 22 that overall the performance of the DFC’s portfolio is very poor. Loans to DFC are not performing adequately and are unsecured, except for a verbal commitment by GOB to ensure that the SSB sustains no losses to the Fund. This prompted the General Manager, in her testimony during the second public hearing, to express concerns about the security of the Fund in light of the potential default of the DFC.
The Senate Committee recommends that the SSB obtains from the DFC a workable loan repayment program and the SSB institute a monitoring mechanism to ensure adherence to the rescheduled program to cover these liabilities. With respect to the non-performing commercial loans, the SSB must formally demand settlement from the DFC in order to pressure the DFC to take necessary action against delinquents to settle their debts. It is important that the SSB fund remain intact, because it represents the collective savings of the people of Belize who are by law required to contribute and so it must be available to meet the demands of the people, as beneficiaries, when required.
(b) Other Private Sector loans
Other Private Sector Loans on SSB’s books do not include the loans made to the DFC directly or transferred to DFC as discussed above. The total value of these loans is $37,349,742.14. This is made up of thirty-five (35) loans among twenty-one (21) borrowers. Of this, twenty-five (25) loans are performing satisfactorily, which is 75% of this portion of the portfolio by value. Three loans totaling $118,002.28 are recommended for write off and seven (7) loans totaling $9,418,046.54 are in difficulty. (Special Audit report pages 36 thru 58).
Part Three: Guarantees
On May 5, 2003, the Board gave a guarantee to First Caribbean Bank International Ltd on borrowings by the Citrus Products of Belize Limited (CPBL) amounting to US currency of $4,500,000.00 with a further consideration that CPBL may at any time request that the Board provide a similar guarantee not exceeding BZ$6,000,000.00.
In the event the Board is called upon to make good on any default of payment by CPBL, the CPBL shall issue debentures to the SSB, those debentures to carry the option for the Board to convert them to ordinary shares. A one and one-half percentage (1.5%) fee is payable to the SSB on an annual basis on the guaranteed amount.
Other guarantees that the SSB has entered into include the guarantees on behalf of the mortgage loans and receivables sold as part of the mortgage securitization program. Most of these mortgage loans originated with the SSB and appear to be backed with adequate collateral. However, some of those emanating from St. James Building Society are extremely problematic as they lack adequate collateral to support the guarantee.
Furthermore, in the case of the mortgage loans sold on the North American Program, the SSB retained no collateral since the mortgages were transferred to the DFC for further transfer to the BMC. In this case the SSB was not holding any collateral which it could foreclose on to cover payments which it would be required to make under the guarantees.
Summary of Investments and Guarantees
Statutory instrument No. 86 of 1980 makes Financial and Accounting Regulations for the management of the Social Security Fund. Section 14, subsection 1 explains how the collected contributions shall be distributed among the Benefit Branches in the following proportions: (1) Short Term Benefit Branch 21.4%; (2) Long Term Benefit Branch 50.0%; (3) Employment Injury Benefit Branch 28.6%. Section 17, subsection 1 and 2 explains the minimum level of Short Term Benefits, Contribution Reserves and the minimum level of the Employment Injury Benefits (Short-Term) reserves that should be available at any one time.
The reserves, as specified in paragraphs (1) and (2) of section 17, shall be used to meet unforeseen or abnormal expenditure, which the current income of any Branch may not be sufficient to cover. There is a provision for appropriate action to be taken should the reserves fall below the prescribed levels.
As at the December 31, 2002, as per the audited Balance Sheet of the SSB, the totals of the reserves allocated to the various Branches were as follows:
• Short-Term Benefit Branch:
• Long –Term Benefit Branch: $164,835,184.00
• Employment Injury Benefit Branch:
This sum was tied up in investments as follows (1) $13,298,402.00 were in term deposits with maturity dates ranging from January 2004 to March 2005. Of this, $2,000,000.00 was restricted; (2) $3,000,000.00 was on deposit with Belize National Building Society and virtually unredeemable, therefore the only amount that would be readily available to the board in case of an emergency was $8,298,402.00.
The balance of the investments was as follows:
• Investment in Associates: $70,526,601.00
• Shares: $10,832,490.00
• Private Sector Loans (10-20 years) $62,588,249.00
• Mortgages and Housing (10-20 years) $66,686,943.00
The Senate Committee notes that the entire sum which was allocated to reserves was tied up in long term commitments with a large proportion of these in non-performing loans. This does not, however, include any indirect or contingent liability resulting from the guarantees extended to the DFC and the RMB under the securitization programs.
Section 18 of the Statutory Instrument No. 86 of 1980 states that each of the reserves constituted under Regulation 16 shall be invested only in accordance with general or specific directions given by the Social Security Investment Committee or as may be prescribed. Provided that due regard shall be had to the nature and purpose of each reserve and to the probable period at which it may be necessary to realize the investment. It appears that this has not been followed, and the Fund as at that date could be considered over-exposed.
Part Four: Securitization Transactions
Overview of the Local and Eastern Caribbean Securitization Programs
The evidence is that, upon being returned to office in 1998, the new government began implementing a policy of “growth economics”. In summary this policy sought to grow the domestic economy by securing through various mechanisms increased financial capital inflows from abroad. One of the mechanisms used was “Securitization”.
Securitization, despite its seeming exoticism, is not a complex concept. Fundamentally, it involves nothing more sophisticated than the selling by a lender, the receivables or future flows of mortgage loans or the Mortgage Loans themselves, which that lender has made to a borrower, and the transferring of the Mortgages, as collateral, to secure the debt to institutional investors directly or through agents to individuals as bondholders.
The idea was to be able to bring fresh capital into the country by selling on the international market genuine collateral backed mortgage loans to investors in this type of business.
This would be achieved by using various mechanisms to ensure that the institutions selling the loans received new funds to enable them to continue their lending program, new foreign currency came into the system to help with the expansion of investments and the investors were repaid in a timely manner.
One of the fundamentals of the program would be that, with time, confidence in the international market would be built up around commercial paper coming out of the country which would eventually reduce the cost of doing this type of business, remove the need for government intervention, and ensure a continuous source of hard currency for further investment as development continued.
It follows, then, that in order for there to be a securitization transaction, there must be an original debt owing to the lending institution wishing to sell that debt, and there must be a mortgage over valuable assets in favor of the institution to secure the debt. When the debt is sold and the mortgage transferred to the new party, then the transaction is complete.
Mr. Ian Macmillan, the General Manager of the Belize Investment Management Company (BIMCO), was assigned overall management responsibility for the securitization program.
He confirmed that the impetus behind the securitization effort was government’s effort to grow the economy. Mr. Macmillan described the purpose of the program, as “the utilization of the securitization methodology was to be part of that stated agenda, which is to bring capital into the country and provide for development.” (Excerpts from transcripts of Public Hearing # 5, page72)
Mrs. Narda Garcia, the General Manager of the SSB, also confirmed that the Securitization Program was a part of the general policy of the new Government to attract capital from abroad for development. “It was a decision made by government,” she said, “to bring in fresh money.” (Excerpts from transcripts of Pubic Hearing # 3, page 58). The securitization program was therefore, from the start, a program fully supported by the Government of Belize as part of its overall growth economics agenda.
Consistent with this agenda, BIMCO was restructured and assigned to lead the securitization campaign. BIMCO was initially a subsidiary of the SSB, involved primarily in generating and managing residential mortgages at the consumer level.
Shortly after the change of Government in 1998, BIMCO was brought under the control of the Ministry of Finance and given the responsibilities of developing and implementing the securitization program. These responsibilities, Mr. Macmillan said, were equivalent to those of “a domestic investment banker.” BIMCO was initially quite successful in its efforts to get the program off the ground. To this end it sought the participation of local lending institutions, since getting a large enough pool of mortgages was crucial to the success of the effort.
Mrs. Garcia, Manager of the SSB, remembered that “there were heavy discussions with the credit unions, for example, to participate because they had, collectively, a large mortgage portfolio and some of the credit unions had initially been positive to the discussions.” She remembers also that, “some of the commercial banks were very much interested.” (Excerpts from transcripts of Pubic Hearing # 3, page 58).
BIMCO also sought mortgages from the building societies, including the Belize National Building Society and the Saint James National Building Society, and quasi government institutions such as the Development Finance Corporation, the Reconstruction and Development Corporation and the Social Security Board.
Once a critical mass of mortgages was gathered, Mr. Macmillan then set out to find buyers for the collected mortgages. Mr. Macmillan described their first venture into the international markets as follows: “Initially we dealt with the Eastern Caribbean Financial Market, with our primary agent there being the Royal Merchant Bank of Trinidad and Tobago. I believe late 99 and up to early 2001, or barely 2001, if my brain serves me correctly, we entered into transaction with RMB, four transactions in all on the face value of probably 102, 103 million U.S. dollars.” (Excerpts from transcripts of Public Hearing # 5, page 72)
The local counterpart institutions handling these mortgages were the DFC as the lead institution and the SSB through which mortgages from Government and other institutions were channeled.
SSB participated in the Securitization Program by selling flows from loan receivables to the RMB in the Eastern Caribbean Program and mortgage loan receivables to the DFC for sale in the North American Program. These sales were backed by an assignment of the relevant Mortgages to the institutions as collateral to secure the indebtedness.
In the Eastern Caribbean Program the SSB sold these flows from mortgage loan receivables to the RMB in four Tranches as detailed below. These sales included six (6) commercial loans which SSB claimed to have purchased from St. James National Building Society, (St. James).
In the North American Program the SSB sold Mortgage Loans to the DFC which in turn sold them on the North American Market. In this program the SSB sold loans totaling $33,957,467.38.
This included Mortgage loans for housing purchased from Belize National Building Society, a commercial mortgage loan made to the Belize Boarder Management Agency by the SSB and two (2) mortgage Loans which the SSB claimed to have purchased from St. James Building Society.
In November of 2003 there was the first default on the entire commercial mortgage Loans purportedly purchased by SSB from St. James. As mentioned above, these loans were sold by the SSB to other institutions, namely the RMB and the DFC.
Because of guarantees given by SSB to these institutions to make payments in respect of these Loans irrespective of any default of payment by the borrowers, SSB was required to make these payments to RMB and the DFC respectively when St. James defaulted.
These payments by the SSB on behalf of St. James’ Loans came to public attention in August of 2004, resulting in great controversy and in the appointment of this Senate Committee to investigate the matter.
Throughout the entire securitization program there was one transaction undertaken with a local bank, four transactions with the Royal Merchant Bank of Trinidad and Tobago, referred to as the Eastern Caribbean Program, and one transaction through the Bank of New York as trustee bank, referred to as the North American Program. Details of these transactions are given below.
(I) Transaction No 1
On December 31, 1999, SSB became a go-between for St. James Building Society and Provident Bank and Trust of Belize Limited in a securitization agreement. In essence, mortgages held by St. James were secured with Provident Bank for $1,774,547.94 via SSB. (Special Audit report page 73) This transaction is supported by a transfer of charge from St. James National Building Society to SSB dated December 30, 1999. There is a further transfer of charge from SSB to Provident Bank and Trust also dated December 30, 1999. The agreement is also supported by a Put and Call Option Agreement dated December 31, 1999, between the Government of Belize and the SSB and Provident Bank and Trust of Belize Limited, and a Government Contingency Guarantee in favor of Provident Bank and Trust dated December 31, 1999.
Comment on transaction No 1.
Social Security entered into this arrangement as a facilitator for payments between the two companies. However, no fee was charged by SSB for facilitating this transaction.
While St. James pays the SSB in Belize Dollars; the SSB forwards these payments to Provident Bank and Trust Limited in US dollars. However in the event of a default by St. James, Social Security is not liable for payment. Social Security could offer the Senate Committee no logical explanation for their involvement in this transaction and why the Government would guarantee this transaction. Furthermore, the Senate Committee notes that the Special Auditor did not get a response from Provident Bank on this transaction.
Eastern Caribbean Programme
(I) Tranche- A
On April 21, 1999, the Board entered into an agreement for the assignment of mortgages (Tranche-A). (Special Audit report pages 75-78) The SSB, the DFC, and the Government of Belize signed an agreement with the Royal Merchant Bank and Finance Company of Trinidad and Tobago. Under the agreement, the Board assigned a total of BZ $18,940,271.83 worth of mortgages. Tranche A was the first issue in which the SSB participated in the sale of mortgage receivables to the RMB. Signing on behalf of the SSB were the Chairman; Mr. Eberto May, the Manager; Mrs. Narda Garcia; and Board member Ms. Martha Williams.
A “Put and Call Option Agreement” was executed between the Government of Belize, the DFC and RMB as well as a Government Guarantee in favor of the RMB to support this agreement. The agreed purchase price for the entire group of mortgages was US$31.0 million. The fixed return to RMB is 168 monthly payments of US$315.000.00 (BZ$630,000.00) per month, and the SSB’s portion of this is BZ$293,643.00. The expiration date of this agreement is April 30, 2013.
The sale was a combination of mortgages issued by the DFC and the SSB, an approximate value of US currency totaling $23,600,000.00 or BZ currency totaling $47,200,000.00. (Special Audit Report, page 75).
As stated above, the agreed sale price to RMB was US currency of $31,000,000.00. The total money received from RMB after deduction of costs was US currency $30,685,000.00 or BZ currency of $61,370,000.00, which included a sum of US currency of $8,000,000.00 that was placed in a sinking fund and deposited with The Royal Bank of Trinidad and Tobago. The fund belongs to the DFC, but was assigned by the DFC to the RMB under a deed of assignment. The beginning date of the transaction was April 21, 1999 and the termination date is April 30, 2013. Under the administration agreement, the monthly commitment is paid to DFC, for further payment to RMB, and was scheduled to remain in force until April 30, 2013.
Comments on Tranche A.
The committee notes that under this agreement the proceeds of the transaction before pro-rated costs should have been as follows:
Proceeds to SSB:
• Proceeds to the GOB:
• Proceeds to DFC:
However, the breakdown of the proceeds received were distributed as follows:
• Proceeds to the SSB: $18,080,131.96 (-$860,140.00)
• Proceeds to the GOB: $19,127,519.98 (+$15,890,034)
• Proceeds to the DFC: $24,162,348.02 (-$ 1,106,081.)
It would appear that the GOB received the portion of the sinking fund that should have been deposited with the Royal Bank of Trinidad and Tobago. However, there is no record that the government was repaying this sum. This situation is not significant now because GOB has taken over the liabilities from RMB and therefore the sinking fund is now to the benefit of the Government. This sum should not have gone to GOB since the government was not a party to the benefit of the mortgages before they assumed the liability from the RMB in 2005. The Special Auditor could not determine whether the mortgages pledged by GOB were generating enough income to pay their portion of the monthly payments, since the collections are reported combining SSB’s and GOB’s portfolio. (Special Audit report, page 78).
In a subsequent development since the date of the audit report, the GOB has paid off the debt with the RMB, and so now the liability of both the SSB and the DFC is with the GOB. According to the Manager of the SSB, the arrangements remain the same as previous, except that the payments now go to the GOB and are made in Belize dollars instead of in U.S. dollars.
(II) Tranche B.
On December 23, 1999, a second agreement for the assignment of mortgages (Tranche B) agreement was signed between the SSB, DFC, and RMB. (Special Audit report pages 79 through 84) The total value of mortgages assigned by the SSB in this transaction is $15,473,754.00, and the servicing agreement is for $175,200.00 monthly payable to DFC, for further payment to the RMB, and shall remain in force until December 30, 2013.
The overall sale was a combination of mortgage receivables due to the DFC and the SSB totaling a value of BZ currency of $25,753,004.26. The agreed sale price to the RMB was BZ currency $28,800,000.00 or U.S. currency of $14,400.000.00. The total money received from the RMB after deductions was BZ currency of $ 21,564,000.00. A sinking fund was established and retained by the bank in this Tranche. The sinking fund of BZ currency of $6,600,000.00 was assigned to the Royal Merchant Bank by an assignment of deposit agreement, and through an investment management agreement the bank may invest the sinking fund as it sees fit and retain the returns therefrom. This gives the bank an additional income over the fixed return arrangement.
Comment on Tranche B.
Similar to the arrangement under Tranche A, the GOB has also taken over this arrangement and so now payments are from SSB and the DFC to the government instead of the RMB, and payments are made in Belize dollars instead of in US dollars
(III) Tranches C and D.
On March 21st and again on August 30th of the year 2000 a third (Tranche-C) and a fourth (Tranche D) agreement were signed between the SSB, DFC and the RMB. (Special Audit report, pages 84 through 100) Under these two agreements, the mortgages assigned to RMB by the SSB came from St. James and totaled $27,731,240.00.
Tranche C included the following Mortgages:
1. Data pro International Limited for Bze $ 17,810,000.00
2. Aquarius Limited for Bze$1,800,000.00
Tranche D included the following Mortgages:
• Aquarius Limited for Bze$ 5,000,000.00
• A Mortgage for Bze$1,463,140.58
• A Mortgage for Bze$ 1,658,099.32
Under the Assignment of Mortgage agreements between SSB and St. James, St. James agreed to pay the SSB a total of $1,221,720.00 on a quarterly basis. The SSB then pays that amount to the DFC for further payment to the RMB. Under a guarantee agreement, the SSB is responsible to collect from St. James and pay the DFC for further transmittal to the RMB. This responsibility remains in force until March 21, 2009 for Tranche-C and August 30, 2010 for Tranche-D. Under the Agreement if there is a default in payments by St. James, the SSB is still required to make the payments to the DFC for further payment to the RMB. (Section 3.1 of Assignment of Mortgage document)
The Senate Committee points out to the Senate that at the date of this report, this arrangement is no longer in force since the GOB in May 2005 assumed the liability of SSB under these agreements. This is discussed in detail in a subsequent part of this report.
The Tranches C and D documentation is as follows: (1) Guaranty Agreement, (2) Administration Agreement, and (3) Purchase Sale Agreement.
Tranche C Loans.
As mentioned above, the mortgages which the SSB securitized in these two Tranches came from St. James. The SSB did not include any of the mortgages from its own loans portfolio in any of these Tranches.
There was no financial benefit to the SSB fund for engaging in these transactions and furthermore, because SSB undertook to unconditionally guarantee payments to the RMB in the event of a default by St. James, and in fact St. James defaulted on payments to the SSB, SSB was therefore required under the Guarantee to make payments to the RMB on behalf of these loans.
Because of the foregoing circumstances, the Committee examined the nature and origins of the loans from St. James securitized by the SSB in Tranches C and D.
Two loans listed above and securitized in Tranche-C by SSB came from St. James. One of these loans was made by St. James to a company named Data Pro International Limited for the sum of US$8,905,000.00. The other loan was made to a company named Aquarius Limited for the sum of US$ 900,000.00.
Because the loan to Data Pro is one of the loans which defaulted and for which the SSB was forced to make payments to RMB, the Senate Committee examined this loan to Data Pro in depth and the details are given below.
(a) Mortgage from Data Pro to St. James for 17.81M Tranche C.
St. James and Data Pro entered into a loan agreement covered by a mortgage which was signed and registered on March 1, 2000. According to St. James, disbursement of this loan was made to Data Pro on March 1, 2000.
Through an Assignment of Mortgage dated March 16/2000 and registered on the 24th of March 2000 St. James transferred this mortgage and the benefits thereunder to the SSB subject to conditions precedent and on the condition that the benefits would be transferred on the payment date.
The Senate Committee notes from documentation that St. James was negotiating to securitize this loan with SSB since February 2000, even before the mortgage between Data Pro and St. James was signed.
The legal document assigning this mortgage from St. James to the SSB states the following:
1. Of principal sum secured by the said mortgage the sum Eight million nine hundred five thousand Dollars (US $ 8,905,000.00) United States Currency remains owing by the mortgagors under the said mortgage.
2. The mortgagee, The St. James National Building Society Limited, has agreed to transfer the benefit of the said mortgage to the assignee, The Social Security Board upon payment by the assignee to the mortgagee as hereinafter mentioned.
The Committee notes that in part B of the Recital section of the assignment of Mortgage document between St. James and the SSB it states:
“The Seller (St. James) by way of investments has advanced sums amounting in aggregate to $19,610,000.00 secured by mortgages or charges , particulars of which are set out in Schedule A hereto ( the mortgages)”
The Senate Committee further notes that in part C of the Recital section of the assignment of Mortgage document, it further states:
“In order to finance its investment program the Seller has offered to sell to the Buyer its rights, titles and interests in the receivables due to it under and the benefit of the Mortgages upon the terms and conditions of this Agreement” .
However, the Senate committee notes that the audited financial statements of St. James for the year ended Dec 31 2002 and seven months ending December 1999 show that only 3.7 million dollars were disbursed at the time of the sale. And there is also no reflection of any additional disbursements of funds in respect of this loan in the in-house financial records of St. James for that period. Furthermore, in correspondence received from the former General Manager, Mrs. Corrine Robinson Fuller, she states, “One mortgage that I have knowledge of, a loan of $17.81M to Data Pro International, was facilitated through the Society, but not booked in the Society’s portfolio.” She further stated: “The sale of this loan to SSB was facilitated through the Society, so that it (Data Pro International) could have participated in the securitization Programme. I do not recall that the mortgage originated at the Society. It may have been prepared elsewhere, and then sent to SSB through the Society. No monies were disbursed by the Society to Data Pro International in respect of this mortgage, and I was not aware that the mortgage was being transferred from another financial institution. The proceeds of the sale were not disbursed to the society. This mortgage between St. James and Data Pro to secure $17.81M, together with another for $1.8M between St. James and Aquarius( to be analyzed later in this document), were included in the assignment of mortgages dated March 21/2000 among DFC and SSB as Sellers and RMB as Buyer. In this Assignment, the sellers, namely the DFC and the SSB, agreed to sell, and the buyer, the RMB, agreed to buy the Purchased Debts, defined therein to include “all principal interest commissions penalties debts and claims both present and future.” Recital B of this document states: “DFC and the Board [SSB] in accordance with its mandate have lent sums the aggregate principal of which amounts to approximately US$28,135.000.00, secured on the several Mortgages, particulars of which are set out in schedule 1 (the mortgages).” Recital C states, “in order to finance their new mortgage lending Programme, each of the Sellers has offered to sell to the Buyer its respective rights titles and interest in the receivables due to them under and the benefit of the transferred assets upon the terms and conditions of this agreement.” Section 4.3.1 of the same document states: “immediately prior to the sale, assignment and transfer hereby effected, each Seller was the legal and beneficial owner of all the Purchased Debts generated under the terms of the Mortgages.”
In summing up the Data Pro transaction, the committee finds that: 1. It appears that at the time of the assignment of the mortgage by St. James to SSB only 3.76M Belize dollars had been disbursed to Data Pro. It appears that the balance may not have been disbursed until after the mortgage was securitized. However, the Senate committee notes the contradiction between St. James independent auditor’s report for the period ended Dec 2000, its in house financials and the letter from St. James’ former General Manager (Mrs. Corrine Fuller) to the Special Auditors. 2. St. James offered to sell to the SSB the full value of the “Purchased Debts” (receivables) which would be due from Data Pro if the full amount of the loan been disbursed at the time of the assignment to SSB. However, as noted above only 3.76 M had been disbursed and recorded on its books at the time it made the offer of sale. 3. These “Purchased Debts” (receivables) from St. James were assigned to the SSB on March 16/2000 and the SSB sold them to RMB under the Eastern Caribbean Program. At the time of the sale of the receivables by the SSB to the RMB, the SSB had not paid St. James for the mortgage loan receivables assigned to it. Note the following statement in the assignment of Mortgage Document between the SSB and St. James: The mortgagee, The St. James National Building Society Limited, has agreed to transfer the benefit of the said mortgage to the assignee, The Social Security Board, upon payment by the assignee to the mortgagee as hereinafter mentioned. Furthermore, the SSB did not record this transaction in its books. 4. SSB together with the DFC signed a Sellers Guarantee in favor of the RMB dated March 21, 2002, guaranteeing payments to the RMB irrespective of non- payment by the individual mortgagors 5. It appears that SSB did not do any due-diligence investigation in respect of this mortgage loan prior to signing documents with St. James. 6. SSB signed and accepted the Assignment of the “Purchased Debts” without verifying that these receivables were reflected in St. James’ in-house financial statements. 7. The Senate Committee was not shown any valuation or inspection report of the assigned mortgaged property. It appears that SSB did not do a report.
In respect to point 5 above, the Senate committee notes that in a letter dated January 12/2006 addressed to the Clerk to the National Assembly, as secretary to the Senate committee, the Manager of the SSB, Mrs. Garcia, writes: “It is important to note that the SSB would not have copies of the project documents for mortgages bought and securitized in the secondary market. As the primary originator, the St. James National Building Society (SJNBS) is the institution that should have these.”
In respect to point 7 above, the committee did not see any valuation of the collateral offered and it is not known whether the SSB requested a valuation. However the Senate Committee requested and obtained a valuation on the Data Pro property mortgaged for $17.8M.This valuation was done by the valuation section of the Ministry of Natural Resources on January 18th. 2005 and showed a value as at that date of approximately $16.3M to $16.7M. The proceeds of Tranche C totaling US$ 9,661,859.41were directed to the Hibernia Bank of New Orleans.
Conclusions of the Committee 1. It appears that the statement in the mortgage document made by St. James National Building Society representing that it had “advanced sums amounting in aggregate to $19,610,000.00” to Data Pro is incorrect, since the records show that at the time the statement was made only $3.76M had been advanced to Data Pro. 2. The statement in recital B of the assignment of mortgage document from DFC and SSB to RMB (that portion of the sum as it applies to the SSB) stating that they have loaned $28,135,000.00 which is secured on the several mortgages listed in the schedule, was false at the time it was made, because the SSB had no