Saturday 26th July, 2008

 

Inspection team:

HCU violated loans policy

 
 
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A June 2007 report by an inspection team probing the Hindu Credit Union found evidence that the credit union violated most of its written policies, failed to adhere to the legislation which governed it and replaced its core business—the granting of loans—with the acquisition of properties.

The inspection team, from the office of the Commissioner of Cooperatives, found that acquisition of properties placed the HCU in an adverse cash flow position.

The inspection team found that the HCU had a “written, detailed and comprehensive loans manual” but that there were “violations of the loans policy.”

The team found:

• “People became members by purchasing $25 in shares and received huge loans in excess of $100,000 on the same day. There were little or no securities found for these loans.”

• The fact finding sheets in members’ files revealed that although members did not qualify for loans, the loans officer was instructed to grant these loans through telephone conversations from officers of the credit union.

The team even found that the HCU had granted a loan to a non-member who was described as a “Costa Rican employed at the Costa Rican Embassy” who received two loans totalling $269,000 on March 12, 2002, and June 5, 2003.

It was discovered that no repayment was made on either loan and that the interest outstanding on the loan was $234,556.10 as at September 15, 2006.

The report found that “this non-member was given an account after the first loan was disbursed.

Under the rubric officers’ loans, the inspection team observed the following:

• Officers with delinquent loans continue to serve on the board of directors of the HCU in contravention of the by-laws

• Loans were not granted in accordance with Section 43 (3) of the Co-operative Societies Act and By-Law 40 (f)

• There were cases where officers had more than one mortgage loan, which violated Bye Law 40 (f)

• Huge loans were granted (over $500,000) in excess of their shareholding (some officers holding shares of only $30);

• Delinquent loans were refinanced which contravened the loans policy;

• There were incomplete loan application forms but funds were disbursed

The inspection team found that an HCU director had $19,380.29 in shares with a total loan balance of $1.6 million to purchase property. The loan was classified as an ordinary loan and the interest rate charged was 0.5 per cent.

The inspection report gave another example of a member, employed with an HCU subsidiary, who had $25.33 in shares with a delinquent loan of $150,651 on which the outstanding interest was $58,754.

On February 6, 2005, the member sold a 1.5 tonne Isuzu truck to the credit union for $152,242.73. “This sum was used to clear off the loan principal. On August 18, 2005, interest in the sum of $58,754 was waived. No valuation for this vehicle was carried out. Member is a relative of (an official of HCU), as such a proper valuation of the vehicle should have been done in order to ensure transparency and accountability with respect to this transaction.”

On the issue of the land and buildings owned by the HCU, the inspection team found in some cases:

n There were no valuation reports for some properties;

n Proper and thorough searches were not conducted thus resulting in the loss of investment;

n Valuation and searches were completed in some cases after the transaction;

n Deeds of conveyance were not seen for some properties purchased;

n Deeds were not registered;

Properties were sometimes purchased for amounts in excess of that stated in the valuation report.

The team found that the HCU Convention Centre was valued at $1 million in November 2001. The property was purchased by an HCU member in March 2002 for $710,000 and sold seven months later to HCU for $2.5 million.

Another example was the so-called twin towers property located at Mulchan Seuchan Road in Chaguanas which HCU purchased for $16.9 million in June 2003.

“By January 2005, HCU still owed $7 million by way of mortgage on the property,” according to the report. An HCU director and the businessman from whom the property was purchased signed a Memorandum of Understanding dated January 22, 2005, in which they agreed to the formation of a limited liability company (World Select Gem Ltd) with a share capital of $16.9 million. The two signatories to the MOU therefore owned the property 50/50.

The report noted that the HCU toward the end of 2006 had a huge fixed deposit portfolio of $621.9 million, however, “members were unable to cash in their fixed deposits upon maturity.”

Harnarine: I’m no pauper

BY ADRIAN BOODAN

 

Harry Harnarine at HCU’s administration building in Edinburgh, Chaguanas, yesterday. PHOTO: ADRIAN BOODAN

When Harry Harnarine joined the Hindu Credit Union ten years ago he was no pauper.

He says before that he was earning between $50,000 and $60,000 a month from his previous job at Clico.

Harnarine, 46, revealed this yesterday in an interview at the HCU’s administration building in Edinburgh, Chaguanas.

He sought to clear the air on his personal assets that, he said, had been cropping up in the media.

He said he would like the assets of other public figures to be raised in the media.

Harnarine admitted to owning Miami property, which, he said, he purchased in 1998 and was still paying a monthly mortgage of US$1,262.

He said he was also joint owner of a tyre shop with his siblings in Florida.

He said he also owned a furniture store in Rio Claro and ran a consultancy service.

Harnarine said he did not own property or business interests in Costa Rica.

He said his Mercedes Benz and Lexus were brought long before his entry into the HCU and noted that both vehicles bear PBK and PBM registration plates, respectively.

Harnarine said his sprawling mansion at Alligator Trace, Munroe Road, Cunupia, was built over time and not erected overnight, having started the project since his involvement in Clico.

He said he was the largest single depositor at the HCU.

©2005-2006 Trinidad Publishing Company Limited

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