NICA 10

NICA 10.

In October 1998, Kennedy Hodge was the duly appointed Manager of the National Investment Company of Anguilla Ltd. He made a recommendation to the Board to invest in the shares of a subsidiary of Motorola. It was a company known as Iridium World Communications Ltd. The Board agreed. The investment was made.

As a result of a lawsuit brought against NICA in the year 2006 by two of its shareholders, Avondale Thomas, a chartered accountant of Antigua, was appointed to carry out an investigation into the way the Board of Directors was managing NICA. We take up the story of the Iridium investment from pages 48-50 of the Thomas Report filed in the High Court in August 2006 as a result of the litigation.

It was a bold investment. Iridium was highly visible on the international stock markets, the telecommunications industry, and investors worldwide. It was well known because it was venturing into parts unknown. Its ideas were pioneering in nature. It was a high-risk stock. The technology required to do what Iridium wanted was unproven. The cost involved and the ability of the company to raise the funds required was uncertain. Investing in this stock was an obvious risk. Established investors were extremely nervous about buying these shares.

NICA was not without professional advice in this matter. Its brokers, Salomon Smith Barney, warned the company not to invest beyond a certain level in such shares. Salomon Smith Barney sent at least two letters to the Board warning them of the risk and expressing concern about NICA’s intention to invest in high risk companies.

Mr Hodge was a trained electronics engineer. He recommended otherwise. The Board was willing to take the risk. They authorized Mr Hodge to invest US$110,775.00, or some EC$300,000.00, in Iridium. The share price began to fall. NICA did not sell, but held on to the investment until it was entirely lost.

In an interview with Mr Thomas, Mr Hodge told him that he had also purchased Iridium shares for himself. He had sold his shares when the price began to fall, and had been able to save part of his investment. He had not sold the NICA shares. George Kentish, NICA’s Chairman, told Mr Thomas that he had also invested in Iridium and lost his investment.

Mr Thomas describes this as the biggest loss in the history of NICA so far as investments are concerned. The company could have avoided the loss. In its prospectus offer, the company had promised that it would employ competent and experienced persons. In this case, NICA did employ competent brokers in the form of Salomon Smith Barney, but they ignored their advice. Mr Thomas concludes that the Directors must take responsibility for the loss of EC$300,000.00 which resulted from the Iridium share purchase.