06 October, 2010

Due diligence

The Social Security Board is responsible for the safe-keeping of the Social Security Fund.  That is one of the reasons why the recent story about the Government of Anguilla consenting to the Social Security Board taking a particular loan is so disturbing.
Below is a letter from the Government of Anguilla to the Social Security Board.  It is in the public domain.  I found it posted on the website axareality.com.  It cries out for comment and for explanation.  It is dated 9 July 2010.  It was signed by the Hon Hubert Hughes, Chief Minister and Minister of Finance.  The Minister of Finance of Anguilla is the Minister for the Social Security Board.  The Board and its Investment Committee make their own investments, but the Minister has statutory power to oversee the Board’s activities.

The letter authorises Social Security to borrow up to US$200 million from United Investment Limited of Austin, Texas.  The letter authorises the use of the Social Security Fund to be the security for the loan.  I need not remind you that that Fund is the contributors’ money.  It is not the money of the government of Anguilla or of the members of the Social Security Board.  The Board has strictly limited powers to invest the Fund.  They are charged with what I consider a sacred duty to invest the monies in the Fund for the advantage of the owners, the contributors to the Fund.  Before they begin negotiating with a supposed lender about putting the Fund up as security, we would expect that they would do their due diligence to ensure they are dealing with a reputable institution.
For such a supposedly major financier, United Investment Limited's website is remarkable for the many grammatical and punctuation errors on its various pages.  Whoever the owners are, and despite the numbers they quote, they seem not to be big enough to employ someone to proof-read their website content.  You might almost think that their promotional materials on the website were written by a semi-literate schoolchild, rather than by the marketing department of a major financier.  It is also remarkably lacking in any solid information about the company or its work.
If you do a little detective work and investigate United Investment Limited further, this is what you find:
> domain:                          ui-ltd.com
> created:                         06-Apr-2006
> last-changed:                    07-Apr-2010
> registration-expiration:         06-Apr-2011
> nserver:                         ns47.1and1.com
> nserver:                         ns48.1and1.com
> status:                          CLIENT-TRANSFER-PROHIBITED
> registrant-firstname:            Kirby
> registrant-lastname:             Gonzales
> registrant-street1:              660 Preston Forest center
> registrant-pcode:                75002
> registrant-state:                TX
> registrant-city:                 Dallas
> registrant-ccode:                US
> registrant-phone:                +214.6329531
> registrant-email:                info@dallasfestival.com
This tells us that the United Investment Limited website was created by one Kirby Gonzales in 2006.  In 2006, Kirby advertised the company as "an OEM manufacturer and Distributor of building electrical supplies and tools for constuction of housing, commercial, medical and educational institutes. We also sell Petroleum and Gas profucts." Yet, in the space of four short years, the company now claims the ability to lend or to arrange a loan of upwards of US$200 million.  That is quite an extraordinary accomplishment.
If you go to the corporationwiki.com website, you will find a list of other companies formed by Kirby and Stacy Gonzales.  From the addresses of their various companies, it seems that they operate out of Trinidad and Tobago.  It would appear to me that Kirby and Stacy are in the business, among others, of creating shell companies in Texas.  A shell company is one that is barely worth the paper its certificate is printed on.
Of course, the matter may just have been an advance-fee fraud.  This is a lucrative but dishonest business.  It involves a person calling himself an investment adviser pretending to desperate borrowers that he can find easy, cheap money for them to borrow.  All the borrower has to do is to pay in advance a fee of a few thousand dollars to be introduced to the lender.  It is usually demanded towards the end of the transaction when the desperate borrower feels the deal is about to close.  Once the fee is paid you never hear from the investment adviser again, and the lender mysteriously disappears.  In which case, we may have risked losing only a few thousand US dollars.  I am not suggesting that is what happened here.  Indeed, there is no evidence that any advance fee was asked for or paid. 
For the loan to have been authorised by government it would need to have been approved by the Executive Council.  Heaven alone knows how ExCo could have authorised the Chief Minister to sign such a thing as that letter.  The whole transaction should have been suspicious from the start.  It appears to have been a proposition that almost suckered in our Chief Minister.  Fortunately, the transaction seems to have been stopped by someone who did his due diligence.  In my opinion, the due diligence should have been done before the Chief Minister was asked to sign the letter. 
This is all very disturbing.  If you were unkind and wanted to be sarcastic you might say that this incident clearly indicates that Anguilla needs to declare immediate independence so that our leaders can work for the people without the interference of the “meddling British”.
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  1. Have you realized that yesterday during the course of the day, Radio Anguilla announcers read
    an apology by the CM, regarding the Financial Services role in this mess and that story never made the local news at 7:05pm? So, it was probably done not for too many people to hear it but just to say it was done publicly. This needs more investigation.

  2. Don, on Anguilla Transparency on facebook, hayden Hughes writes this :

    "The Governor has also refused to cooperate with the Chief Minister’s request to shuffle his government’s portfolios and left the island last week to make his case to the FCO on Anguilla.

    It is now coming to a head and the FCO is sending a joint delegation of FCO and DFID technocrats to deal with the budgets for 2011 and increase and broaden the tax base of Anguilla. A source in the FCO has said that they intend to suspend the constitution by order in council and put Anguilla under higher supervision. While there will be no elected government, reports claim that elections in Anguilla can be held as soon as 2012 and as far away as 2014. Director of the Overseas Territories in the FCO, Mr. Colin Roberts refused comment and the Minister for the Overseas Territories Mr. Henry Bellingham could not be reached for comment. Questions still remain as to whether or not either the ruling Anguilla United Movement candidates or the candidates for the former Anguilla United Front administration will be allowed to contest these elections if and when they are held.

    The Turks & Caicos islands was the first island to receive this dubious distinction of higher supervision and it was the second time they have gone through this. This is the first time Anguilla’s constitution is being suspended."

    Have you heard anything to that effect???

  3. I doubt that Hayden could have written that.

    As we all know, the British FCO went back into the direct administration of TCI because the vast majority of the Islanders wanted nothing to do with the ruling party or the opposition. The Islanders want checks and balances and watchdog institutions placed in their Constitution so that the rip off that past administrations have committed will be easier to spot and to stop. When that new Constitution is in place, and the presently discredited political leaders in prison, there will be new elections.

    There is no such demand from Anguillians. There is no responsible Anguillian calling for the British to intervene in Anguilla and take over the administration. There is no reason at all why the British FCO should want to directly administer Anguilla.

    Their only concern is, from what I have read, that Anguilla should downsize a terribly top-heavy inefficient administration and do something to collect in the taxes which are due to us. They are concerned about their contingent liability to bail us out if they do not persuade us to clean up our own act.

    Just my opinion. I have no inside information.


  4. I read the signed letter. No one who had searched 2 minutes on the internet (and few Americans) would have signed this letter because the address of the loaning company is so suspect at first glance.

    Four digit zip codes do not exist in the U.S. Zip codes must be a minimum of 5 digits. This could have been a typographical error because the zip code of Preston Forest Road is not 5230 but 75230.

    The U.S. postal service website page at http://zip4.usps.com/zip4/zcl_0_results.jsp shows that the range of suites at Preston Forest Road may be for example (600-612) or (703-714). The address in the letter appears to cover 3 floors of suite numbers, from the 6th to the 3rd floors (660-388). The U.S. postal service has no record for mail delivery to suite 660-388 or to suite 388 and but does recognize suite 660.

    All this from a 2 minute internet search. It took me longer to write this comment. It is just so shocking that anyone would have signed that letter, a point you made in the blog. It is just so shocking!

  5. A check of the address at 11700 Preston Road, suite 660 shows it to be a UPS store.

    I called the UPS store and they said they have post office box numbers and 338 is one of their post office box numbers. They couldn't tell me who had rented the post office box.

    So, a company willing to lend 200 million dollars works out of a post office box, not a "suite."

  6. Financial Adviser
    Oct 5, 2010 - 11:47AM QuoteReply Re: Authorisation Letter

    It goes without saying that the Chief Minister knew that due diligence was necessary.

    So what is all the Hullabaloo about?

    I see nothing wrong with the letter or anything which has been done to date.

    As financial adviser I would have added for the sake of clarity " The necessary due diligence must be conducted by the Anguilla Financial Service Commission." (Or whoever else is responsible for conducting due diligence).

    I agree that the Chief Minister should have someone with a keen legal eye approving letters or instructions of this nature.Usually it would be the Attorney General, but we all know the story with the lame Attorneys General who the British appoints.

    The British have borrowed up to their wartoosie and owes trillions of dollars to the European Union.

    America has borrowed up to its wartoosie and owes trillions of dollars to China.

    If due diligence shows an institution to not be legitimate and not of good standing, then that is the end of the process- it stops there. No permission to borrow is needed from anyone.

    If due diligence shows an institution to be legitimate and of good standing, why can't a local institution borrow from it?

    I am trying to understand.

    N.B – This came from another web site.

    I too am trying to understand

  7. Please excuse my typo in my last comment - the post office box I checked by calling UPS was box 388 as it appears in the letter and blog, not 338 as it appears in my last comment. UPS confirmed that they have a post office box 388.

  8. This is a joke, right? Right?

  9. We appear to be in agreement with Don, then, that the Chief Minister's signature is a respected one, as it must be, so documents need to be diligently reviewed before they are presented to him for his signature.

    Any head of government deserves as much.

  10. What makes the people of Anguilla feel they have a right to an honest government? Democracy breeds corruption! Politicians need corruption to be elected.

  11. The facts of the matter are, that there are elements in Anguilla including the Governor General who wants to remove the current administration and are using lies and misinformation on a quite legitimate and solid company and person to further their political goals.......We all know that this rubbish being published about the company is just that rubbish, because of the calls for the Governor to resign by the Present CM. Victor Banks and Val Banks are the ones who are behind these lies and accusations. The lending institution was not UIL but a group of Top Banks...UIL are the Brokers for the transaction and are above reproach having been subjected to an entire year of investigations prior to the program being done....in fact it was under the previous administration that the loan was applied for from UIL and on realizing that they were losing power became upset that the present administration would benefit from it. The fact is, the Chief Minister's concern is for his people and UIL is a very solid company and has proven it over and over again but the Governor and Banks Brothers who act as if they own Anguilla are hell bent to lie and now use the internet to attack legitimate companies and people....no wonder the eastern Caribbean is in the shape it is in....No wonder we will always look for "Massa's Approval before we do anything......No wonder good people will not help us because we are always quick to judge......let those who are accusing state what they have done for their "Anguilla" including this idiot of a moderator who actually posted a letter which is not even addressed to a company and using bogus information to falsely state inexactitudes as he thinks because it is in writing on the net that it makes it true....shame on you apparently we now know where your bread is buttered

  12. This whole UIL thing is an obvious scam. I challenge the above poster to name these "top banks" who lend money at 1.5% annual interest.





  14. Anonymous above, I could use a few extra million right now for my business. I have done due diligence in trying to find an ultra-low interest rate, to no avail. The current Federal Funds Rate is only for overnight loans to large banks to keep cash flowing and stands at .25%. The prime rate stands at 3.25% If you wouldn't mind helping me out, could you please forward any info on these legitimate 1.5% loans?

    Thank you, Scotty


    “ Britain is a debtor nation, who while lecturing other failed economies of Iceland and Greece is itself running a 12.6% deficit, as opposed to the equally unsupportable one of Greece, at 12.7%. Worse, England is running a 0% interest rate, ruining the retirement of millions of its pensioners, even as its medical system goes about the task of dispatching them off in drove, to the other world, in a "dignified" manner, of course. That will not be a problem for much longer of course as the retirement age is raised first to 70 and later to 75, at that point we will all be dying in harness with about as much love and care as the pit pony.”

    To Mr. Mitchell-
    You did mention SOCIAL SECURITY?!!!

  16. A keyboard and a brain can be enlightening; a keyboard and half a brain is only entertaining. Is macroeconomics no longer part of any curriculum?

  17. Don’t decry the rate or imagine that it reflects something dubious. WHAT IF, super wealthy Americans could get very little for their USD in the bank, and WHAT IF they wanted to invest it and make an impact in smaller country’s with meaningful loans which helped ease suffering of those peoples, and WHAT IF they deemed loaning to governments and not A-typical borrowers was a more secure risk.

    Or WHAT IF it was an elaborate scheme by the lender to move hundreds of millions of dollars off-shore from USA, because the insane governmental decisions of the US government? There can be many reason how the loan came to be, the only question for AXA is are terms favorable and can it be repaid. They thought yes, time will tell.

  18. According to a report in this week's "Anguillian" about Hubert's press converence
    he thinks the lender is a bank in Texas.

    "...he instructed the Chairman of the Social Security Board to borrow US$200 million from a bank in Texas."

    What happened to the "group of Top Banks"? Why does the story keep changing?


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