NICA 9

NICA 9.

Kennedy Hodge was a member of the Board of Directors of the National Investment Company of Anguilla Ltd. The company was without a manager in the year 1996. Mr Hodge wrote a letter dated January 1996 to the Board offering to manage NICA himself. He submitted his offer again by letter dated 22 October 1997. There is nothing intrinsically wrong in a member of a Board of Directors being also a Manager. However, care must be taken to avoid any conflict of interest and to properly document transactions to permit an audit of them.

As a result of a lawsuit brought in the High Court of Anguilla, Avondale Thomas was appointed to carry out an investigation into the way in which the Board of Directors was managing the affairs of NICA. Mr Thomas filed his Report in August 2003. Mr Thomas considers the circumstances of Mr Hodge’s employment at pages 38-47 of his Report.

The Board permitted Mr Hodge to function as NICA’s Manager at least from the time of his first letter in 1996. He may have been in the position as early as the year 1993 as he claims. Neither NICA nor Mr Hodge prepared any documentation to formalize the relationship. There was initially no agreement for payment to Mr Hodge for his services. He was working on NICA business on a voluntary basis. In 1998, the Board appointed one of its members, Marcel Fahie, to look at Mr Hodge’s proposal and to make recommendations to the Board. Mr Fahie prepared a report dated 8 March 1998. He recommended that Mr Hodge be officially taken on as manager at a salary of EC$36,000.00 per year with 25% in profit-related bonuses, and an inducement compensation of up to 30,000 shares in each year at a discounted price of EC$.20 cents, provided agreed profit targets were achieved. The Board accepted the recommendation to employ Mr Hodge, but rejected the idea of the inducement compensation of discounted shares.

The problem is that Mr Thomas found that, long before his remuneration was agreed by a recorded Board decision, Mr Hodge was making payments to himself. He prepared the vouchers and the cheques for his own payment. He signed some of these cheques along with another Board member. Others were signed by two Board members. Mr Thomas points out that as a beneficiary of the payments, it was inappropriate for Mr Hodge to have signed any cheques for payment to himself. There is no indication in the company records how it was agreed what payments should be made to Mr Hodge. Nor was there any record produced to Mr Thomas of who on the Board agreed to the payments. Mr Hodge told Mr Thomas that at one point he had to stop paying himself because of rumours circulating in Anguilla about him. However, he then decided that he needed to start paying himself again, because his family felt that he was being taken advantage of. Again, there is no documentation showing the company authorizing a resumption of payment.

Mr Thomas does not doubt that Mr Hodge genuinely thought that the payments to himself were properly authorized by the Board. The problem is that Mr Hodge did not take sufficient care to ensure that he was relieved of accusations of conflict of interest. He did not ensure that the Board’s decisions, if any, were properly documented and the minutes placed in a proper file. The result is that there is no record of Board approval of what now appears to be questionable decisions that he took on behalf of the company.