NICA 8

NICA 8.

As a result of a law suit brought against the National Investment Company of Anguilla Ltd in the year 2003 by Bob Rogers and Carlyle Rogers, the High Court appointed a chartered accountant, Avondale Thomas, to carry out an investigation into the company’s affairs and to report to the Court. The Thomas Report was filed in the High Court and copies made available in August 2003. We are looking at pages 31-38 of the Report where Mr Thomas deals with an investment in Jem Homes Inc.

Kennedy Hodge was a member of the Board of Directors of NICA. The Board appointed him additionally to be the manager of NICA. With the approval of the Board, Mr Hodge proceeded to make investments of the company’s funds. Some of those investments were profitable. One of the worst of them was in Jem Homes. Jem Homes was supposed to design and build homes for NICA to develop a housing project on the Gibbons Estate lands.

Jem Homes was a foreign company. At a minimum, Mr Thomas points out, some due diligence should have been done on it. Instead, the Board relied on what the representatives of Jem Homes told them. The documentation in NICA’s files do not make it clear if NICA was investing in shares in Jem Homes or in the work product of Jem Homes. The Board should have had a legal opinion on the investment. There was none. The lawyer should have vetted the investment contract before it was signed, and advised the Board. Nothing of the sort was done.

Mr Thomas reports that no trace of the cheques drawn to pay for this investment could be found in NICA’s records. He managed to obtain a copy from the company’s bank. No documentation could be found concerning the investment. It is erroneously shown in the 1998 financial statements as a Salomon Smith Barney investment. It was only the fact that the debit appeared in the company’s bank statements that brought the transaction to light. Some of the Directors were unaware of the investment. They were not aware of the loss. Mr Hodge told Mr Thomas the money was paid to invest in shares in Gem Homes. The share certificate relating to this investment was not available. There were no receipts or documentation to allow an audit of the transaction. The only documentation relating to it was brought to Mr Thomas when he asked for it.

When asked by Mr Thomas if he had informed the Directors of the loss of the company’s investment, Mr Hodge replied that they were aware but things were left to him generally to manage. When asked if he did not think that such a serious loss should have been brought to the Board and a formal report of the circumstances surrounding the loss placed in the records, he replied that he had been burdened with the affairs of the company, and that even his family was upset with him because he was the only Director of NICA giving full attention to NICA.

Mr Thomas reports that the documentation given to him by Mr Hodge revealed that the investment in Jem Homes had been blindly and recklessly made. The company bought a pig in a poke. The preliminary work which should have preceded the investment was not carried out. He comes to this conclusion because the sum of $50,000.00 was paid before any design details of the proposed houses were received. When the design details of the proposed houses were delivered, Mr Hodge discovered that they were entirely unsuitable for the proposed development. Not that he consulted any other director or any engineer, architect, or contractor.

Additionally, Mr Hodge had a conflict of interest. He had also invested his personal funds in Jem Homes. It was disturbing to Mr Thomas that he was never able to find any evidence of NICA’s investment in Jem Homes. The only evidence of any investment is the bank instruction to pay Jem Homes. There is no document showing if NICA was investing in shares or in the product supplied by Jem Homes. There is no document to show any relationship whatsoever between NICA and Jem Homes.

Jem Homes went bankrupt within a few months after NICA’s investment was made. The loss was US$50,000.00. Mr Hodge had sought the Board’s approval to put another $50,000.00 into the investment, but the Board put its foot down and refused. Otherwise, the loss would have been US$100,000.00. Mr Thomas concludes that it is alarming that public funds could have been administered in such a nonchalant way. That is saying the least!