The Commission of Inquiry into DFC continued today with two former employees and a current one taking the stand. We begin with the testimony of chief appraising officer Emerson Burke. His testimony brought up very familiar names but gave clarity to what was happening at the DFC when Print Belize was sold and the La Democracia housing community was hatched up.

Alfonso Noble Reporting,
Emerson Burke's testimony continued this morning with him stating that while he was the chief appraiser there were doings inside the DFC that had no knowledge of.

David Price,
"Can you tell us why you were not invited to participate in obviously, such an important valuation?"

Emerson Burke,
"I have no idea sir."

David Price,
"This is the first time you are hearing about a Print Belize transaction?"

Emerson Burke,
"Not at all. I think that was general knowledghe, it was public knowledge."

David Price,
"Did you query why your unit was not involved in the process of valuation?"

Emerson Burke,
"No."

David Price,
"Why not?"

Emerson Burke,
"As far as I know, I wasn't privy to any loan document, any application, any knowledge if a Print Belize application being processed by the DFC. I learnt of a Print Belize transaction through the media."

David Price,
"This isn't a Print Belize transaction, this is a valuation of Government Printery which was eventually to become Print Belize. But at the time, it was not Print Belize."

Emerson Burke,
"Generally, what this...I am looking here at the valuation done, this two page valuation. The valuation I would do would reflect the ownership of such a property, who requested such a valuation etc. I don't know who requested this, whether it was government of Belize, whether it was DFC, I don't know and I can't speak to the valuation itself."

David Price,
"So as far as you are concerned, you and your unit were totally ignorant of that transaction?"

Emerson Burke,
"I can speak to my desk in the sense that I was not privy to any information of the sort."

Merlene Bailey-Martinez,
"Mr. Burke, were you curious at all about the Print Belize transaction? Did it ever occur to you to take a look at the valuation, seeing that you said in the media? In the media the main point of contention was that of the valuation. Did you ever think about pulling that file and looking at it? Have you ever done that?'

Emerson Burke,
"I've never. This is the first time I am seeing this valuation and I am saying who requested it, how it was derived, I don't know. Whether or not whoever provided it, I don't know. It never crossed my desk and whether or not I was curious, certainly to what this curiosity extends, if it extends to my going into a file and searching for this sort of information, I did not."

Merlene Bailey-Martinez,
"Would you say it is unusual or irregular for this not to have crossed your desk?"

Emerson Burke,
"Well I would like to think that the chief appraiser, and given my own job description, certainly something of this sort, like the Voice of America, would have been brought to my desk."

Merlene Bailey-Martinez,
"Should have been brought or would have been brought?"

Emerson Burke,
"I would like to think that it ought to have been brought to my desk and my opinion would have been sought."

Merlene Bailey-Martinez,
"You use these strange phrases Mr. Burke, 'you would like think.' Do you think that it is unusual or irregular that it did not cross your desk, yes or no?"

Emerson Burke,
"Let me go to...."

David Price,
"Can we get a straight yes or no? it is either unusual or not unusual?"

Merlene Bailey-Martinez,
"Do you think that was unusual?"

Emerson Burke,
"I would think it was irregular. I found some of these valuations done by individuals within my own department that never passed my desk."

Herbert Lord,
"How can you explain that one? How they got it and you're the head of the department?"

Emerson Burke,
"I don't know. I am saying categorically that individuals within my own department conducted valuations on proprieties without my knowledge and without my having an input in the final valuation that was derived."

Merlene Bailey-Martinez,
"Is that a violation of the reporting procedure? Is that a violation of the normal way of doing business in that appraisal unit?"

Emerson Burke,
"The valuations could be looked at and signed off by any superior, be it the branch manager, be it may he manager of projects, be it may the general manager as long as a valuation is reviewed."

And while he may not have had an idea on the printery issue he was intimate with Mahogany Heights that famously saw government buy the land where it now sits without knowing that it had encumbrance on it.

Emerson Burke,
"The DFC does not hold a legal title to the lands at Mahogany Heights."

David Price,
"Who does?"

Emerson Burke,
"To my knowledge it is a gentleman by the name of Johnny Ko. When I say legal, he has a legal mortgage over the property and the original owner of Mahogany Heights is one Abdul Hamze."

David Price,
"Has that issue been resolved?"

Emerson Burke,
"To my knowledge, I don't know."

Herbert Lord,
"When was this discovered? Was it discovered prior to the Mahogany Heights project which the DFC put money into or subsequent to the project being commenced?

Emerson Burke,
"If my memory serves me well, I came upon the issue of an encumbrance in 2002, early 2003."

Herbert Lord,
"The project had already commenced then?"

Emerson Burke,
"Yes."

Herbert Lord,
"What phase was it in?"

Emerson Burke,
"I have no idea. The first time I visited that property, that site known as Mahogany Heights, was about a week before it being opened, being launched."

Herbert Lord,
"Your department, yourself or whoever else in the appraising department who deal with these matters, would have checked to ensure that the property was free of encumbrance etc. S in this one which is something so huge, what was the slipup, what may have occurred?"

Emerson Burke,
"To my knowledge, the government of Belize transferred the project known as Mahogany Heights to the DFC. Along with the project itself was the relevant title to the property. I was given an assignment to get out into the field and to do whatever work to decipher what the total acreage was."

Herbert Lord,
"How was he able to give a clear title to government of Belize when it was mortgaged to someone else? The mortgage would have stopped that from way on."

Emerson Burke,
"I think that is a question for my ultimate superiors and perhaps Mr. Gian Ghandi could give some insight."

Herbert Lord,
"How is it a conveyance would come from Hamze to the government of Belize when purportedly, supposedly, maybe, somebody else had a mortgage on it which means Hamze could not sell or should not have sold at that point in time? If a proper inquiry was carried out at the Lands Registry, then that would have come up right away. There is a lien on this property so now could it not be sold clear encumbrances?"

Emerson Burke,
"I agree with you 100%. I have no idea."

Merlene Bailey-Martinez,
"The matter of this encumbrance that you were the one who, as you say, discovered or came across this encumbrance. Was it ever declared at all prior to your coming across this encumbrance?"

Emerson Burke,
"Not to my knowledge."

Merlene Bailey-Martinez,
"When you encountered the encumbrance, what was the response? You reported it to whom?"

Emerson Burke,
"I reported it to my immediate supervisor who is the manager of projects. I reported it to Mr. Espejo at the time. I reported it to Mr. Gabb, Troy Gabb and if my memory serves me well, the following morning we tackled our approach to solving it. There was un impromptu meeting called."

Merlene Bailey-Martinez,
"With who?"

Emerson Burke,
"It was myself, I think it was the manager of projects, certainly Mr. Espejo and Mr. Gabb. I think Mr. Bautista was party to that and the full disclosure of what was basically on the table being a registered mortgage and the power of attorney and we sought the opinion of our legal officer at the time and we proceeded from there to see...and of course we engaged Mr. Ghandi on the matter. I think if we are getting a piece of document from the Government of Belize, I think it is taken for granted that that document is in order. And I say so because the government of Belize has at its disposal, all the records and whether or not it acquires a property from John Doe or Jane Doe, and then passes it on any other individual or company, from the time of acquisition, it has at its disposal, the information to determine whether or not that document itself, the original document, is in order."

Next to be sworn in was Natalie Goff former financial controller of the DFC. In her testimony she gave insight as to what mortgage securitization was and how it was supposed to work.

Natalie Goff, Former Financial Controller
"What we did was to take the mortgages that were contained in our loan receivable portfolio."

David Price,
"And these were mortgages of any kind?"

Natalie Goff,
"The first tranche were housing mortgages because they were deemed as the best performing with regards to portfolio performance."

David Price,
"And these were only DFC mortgages?"

Natalie Goff,
"No. The first pool, I think, included SSB and may have included some GOB mortgages. These were sold to whatever entity. The main purpose of the transaction was to get cash for operations, for the organization. It was something new for us. It was not something unusual in the financial market outside of Belize, but it was something new for Belize and I remember having difficulty in how to book the transactions because it wasn't an outright sale where we sold the mortgages and got a discount. We sold the mortgages but yet we were responsible for the mortgages if they went bad. In other words we sold the mortgages and we didn't have to pay RBTT whatever was collected on those mortgages. We had to pay RBTT a set amount that was determined in an agreement. So we had to ensure that we had good mortgages in order to make those payments."

And the new areas of business for the DFC, according to Goff, was never straight forward because of the unfamiliarity that the employees had with it.

Natalie Goff,
"The DFC was not structured physically nor had the most adequate human resources to enter into these activities that the cooperation had entered into because while we were dealing with securitization, which took up a lot of time, granted Mr. McMillan was involved in the process, he took it over and we only provided the mortgages. I think he came on board in the second tranche. We were also involved in selling these Los Lagos loans and things like that which were also moved to DFC. So there was stress and strain on the staff."

Goff went on stating that she did an analysis of the viability of the mortgage securitization scheme and she says it was unsustainable.

Natalie Goff,
"The first tranche, I think, cost us about 13% to 14% yet we were lending money at 12% and 13% and even lower in some cases. So right away that sent a red flag and I went on to do the analysis. What I wanted was some attention, somebody to do something and look at this transaction."

David Price,
"Your analysis suggested that you would have experienced a deficit. Can you tell me what your analysis showed for tranche b?"

Natalie Goff,
"The balances sold were $10,675,000. the cash received from the sale was $8,589,141 resulting in a discount of $1,435,798. That had transaction cost. Now as I said I can't remember there was not a transaction cost on the first one. But the transaction cost on tranche b was $253,828 which included legal fees. The payments due to RBTT on that tranche were $18,043,872 based on the payments within the agreement and the remaining connection from July 2000 up to the end of the agreement would have been $15,743,732 resulting in another deficit."

David Price,
"For tranche c, what did your analysis show?"

Natalie Goff,
"Tranche C, the balances sold were $36,800,000 to round it off. The cash received from the sale was $34,799,000 resulting in a discount of $1,363,000. The payments to RBTT for the life were $56,338,170 and the remaining connections due to the end of the agreement was $50,198,523 and I am thinking that there was a deficit because we have included the arrears, some sort of protection on the portfolio."

David Price,
"On the face of it your analysis is suggesting that DFC would have lost as a result of securitization."

Natalie Goff,
"Well not necessarily because trying to look into securitization is what you do with the money and how soon you roll over the funds in securitization. We had someone in from, it may be IDB or CDB, who was concerned that the money was going back into housing which is not considered productive activity, it didn't generate a lot of income except for the employment it was going to create. If it was invested in very productive activity then it probably would have worked well. I will say honestly that I did, I am not an economist, I didn't have that sort of expertise, but I think if we did things like that, and if the securitization was properly planned, the risk that was taken could have proved beneficial to Belize."

Because of Goff's ability to see into unsound business practices she believes she was terminated.

Natalie Goff,
"There was no prior official notice of my termination. I heard rumors about my termination and I remember approaching the general manager at time who was Mr. Bautista and telling him that I was willing to resign because I just didn't like the atmosphere under which we were working at that time."

David Price,
"Can you elaborate on that atmosphere."

Natalie Goff,
"For me the board was too involved in the day to day management of the corporation. But to get involved in the day to day operations...we were experienced managers at DFC."

Merlene Bailey-Martinez,
"In what ways specifically?"

Natalie Goff,
"Well I can remember for instance, and I don't know if this is in the records and I could be wrong, where management's authority to approve loans, I think the general manager had authority up to $75,000 at one time and it was reduced to $10,000. Now I don't know if that was reinstated afterwards, I cannot recall, but things like that. And so when the board management credit committee met we had a lot of small loans that became an administrative burden to the management of the corporation. Things like and just the general atmosphere for me, I am not saying about anybody else. I didn't appreciate it.

It is hard for you to just get up and leave an organization after twelve years of service. After having gone through what we went through. We went through salary freeze and things like that during the time we were bringing back the DFC. It is hard to pick up and go. You feel that you can make a difference, you can make a change but after a while you realize nothing will happen. And so I decided it was time to leave. Regrettably I did not submit my resignation so I was given one day. For me that was very humiliating, that is not the way you treat a member of staff after twelve years of service. If we can't agree on how we are doing things, there is a way to do it and that is the reason I had to put DFC behind me, to move on.

I think in hindsight, I didn't need to be at DFC. When you have somebody working for you, you have to have people who are in line with the things you are doing. They obviously felt that I wasn't."

Merlene Bailey-Martinez,
"In line with what things?"

Natalie Goff,
"Well not the transactions but the way loans were being approved, like for instance when the loans were being circulated would have put a note as to why; 'this loan was approved but look at this and things like that.' The way the things were being done, the haste. You would hear like for instance the thorough inspection of the legal documents and things liken that, the amount of monies that were being approved in haste. I guess I came from the old corporation. I am not saying that we didn't need to come up to date with the things we did because some of the recommendations that were done were excellent. I think the way we looked at things more creatively, those were good. But I still think that we had a duty to ensure due prudence when loans were approved and in my heart I was comfortable that was being done. But I wasn't approving loans. It was just a general feeling. And so I was at ease. When I had to leave the corporation I had no regrets."

And from Goff who was fired presumably for asking too many questions the inquiry moved on to former accountant at the DFC Herman Morris. Unlike Goff, his role at the corporation was robotical.

David Price,
"Can you look at this ledger card for me for Novelo's Limited. That loan was for $30 million I believe. How many disbursements or tranches was that disbursed in?"

Herman Morris, Former Accountant
"It appears that it was like one. I see one."

David Price,
"I believe there was two."

Herman Morris,
"They occurred on the same day."

David Price,
"That $30 million was $15 million to pay for the Z-Line Bus. The other $15 million to purchase buses to improve terminals and things of that sort. So if there were two, wouldn't that be a highly unusual situation?"

Herman Morris,
"Yes."

David Price,
"Who would have authorized such a disbursement?"

Herman Morris,
"The purchase appraisal unit. I said earlier I act on the strength of their recommendation, who happens to be the technical staff where projects are concerned."

David Price,
"So long as you have that signature on a piece of paper?"

Herman Morris,
"Right."

David Price,
"Regardless of whether pre-existing, pre-disbursement conditions, were met or not would be immaterial to you."

Herman Morris,
"Because I would not know, that is correct. I would not know."

David Price,
"But wouldn't it be higbly unusual for you to...."

Herman Morris,
"In my view it depends on the nature of the project. There are certain projects where you can disburse 100%. It depends on the nature. If you are doing an outright purchase, normally you the disbursement in one."

David Price,
"How many $30 million loan in your career have you disbursed?"

Herman Morris,
"One, to my recollection one."

David Price,
"So I imagine that that would stand out in one's mind, wouldn't it?"

Herman Morris,
"Yes and I am also convinced that the credit staff would have done their due diligence to ensure that a loan of that magnitude had gone through the entire loan application and appraisal process."

David Price,
"On what basis would you make that assumption?"

Herman Morris,
"Because of the dollar value."

David Price,
"I still want to ask you if it wasn't highly unusual to disburse $30 million in two tranches on the same day."

Herman Morris,
"It is not highly unusual. Because of the size it may appear to be unusual. I am certain we have had situations where we did cut a check, perhaps for a smaller value, maybe $10,000, but we issue one check because of the nature of the transaction."

The Commission of Inquiry continues next week Tuesday. There is a list of over 60 persons to be called at the inquiry.