NINE MONTHS after news surfaced that Bank of Jamaica (BOJ) Governor Derrick Latibeaudiere had borrowed $51 million from the central bank to construct a house and furnish and landscape the grounds, without providing evidence that the loans had been properly collaterised, the Auditor General's Department has indicated it is still awaiting proof of security.

Last Tuesday, Parliament's Public Accounts Committee (PAC) attempted to bring closure to the controversial issue.

The committee was told that as at Tuesday, May 26, no document had been presented to the Auditor General's Department to indicate that a formal loan agreement between the bank and the governor had been settled.

No documentary evidence

Committee chairman, Dr Omar Davies, instructed both the Auditor General's Department and the central bank to iron out their differences "expeditiously" and to report back to the committee.

In January, the Auditor General's Department confirmed in its annual report an earlier Gleaner story outlining concerns at the central bank. Auditor General Pamela Monroe Ellis told the PAC on Tuesday that she had not yet been furnished with documentary evidence from Latibeaudiere that two loans he received from the bank had been collaterised.

Rudolph Muir, general counsel and corporate secretary of the bank, who appeared before the PAC, sought to set the record straight.

He said $30 million of the loan was fully secured against a four-bedroom house in Belvedere, upper St Andrew, owned by the BOJ governor and his wife. He said this property, with a market value of $32 million, as at 2008, was the former official residence of the governor.

Committee member, Dr Morais Guy, argued that when a property was secured against a loan, the institution would take into consideration the forced-sale value of the property as opposed to the market value. The forced-sale value, according to Muir, was $24 million, an $8 million difference when compared with the market price.

Perfected mortgage

Not satisfied with the explanation of the bank's legal counsel, Monroe Ellis insisted that she had no evidence to satisfy her that a $25 million loan to construct a residence for the governor had been secured.

Quoting from a memorandum from the bank dated March 24, 2006, she said: "Bridging loans totalling $25 million have been advanced to the governor to facilitate the construction of his new residence. This amount is recoverable from the proceeds of the sale of his Belvedere home, which is already mortgaged to the bank."

However, Monroe Ellis said the sale had not occured and her department, therefore, had requested "a perfected mortgage against the property", which, she said, had not been provided by the bank.

Not registered

On November 13, 2008, another memorandum from the BOJ stated: "The mortgage was not registered, as the legal department was advised in writing that the proprietors were contemplating the imminent sale of the premises and the liquidation of the amount outstanding on the bridging facility."

"That portion of $25 million was still unsecured," Monroe Ellis informed PAC members.

Giving further detail, Muir explained that at the time that the human resource committee of the bank approved the loans to the governor, the central bank held eight legal mortgages registered on the title of the governor's Belvedere home.

"The bank obtained the mortgage authorisation which will allow it to complete and perfect that security. As we speak, that matter is being dealt with and the documents are with the commissioner of stamp duty for assessment."

Muir said it was not done before because the bank was in the position of "equitable mortgagee".

Turning to the balance of $26 million, Monroe Ellis said the bank had advised that the governor's pension benefits would be used to secure it. "I have concerns with that," she said.

The auditor general said she sought advice from the solicitor general who advised that it would be illegal to perfect a mortgage against the governor's pension.

While agreeing with the solicitor general's advice, Muir denied that Latibeaudiere had attempted to collaterise the loan by pension.

"It was by choice that the governor gave up the contractual rights to have the thing provided, and borrowed himself, why a series of undertakings were given. Those undertakings were not secured by specific securities," Muir added.

The "thing" spoken of by Muir was in reference to a point he made during his presentation when he asserted that the governor's contract of employment had set out that he be provided with a fully furnished and maintained official residence.

The second loan to the governor, according to Muir, represented advances, which the bank made to the governor for covering the cost of landscaping and furnishing the property where he now resided.

Wanted to borrow instead

"The governor took the decision that rather than having the bank provide contractually, as it could have done, for meeting the landscape and furnishing costs, he said he wanted to borrow." Muir added that the net effect of that decision would mean a savings to the bank over time.

A meticulous Dr Guy questioned how this would result in a savings to the bank. He contended that the loan to deal with landscaping and furnishing would result in an improvement to the residence of the governor. "To my mind, it's not a savings to the bank at all because at the end of the day, the value would accrue to that particular property, which is not under the ownership of the Bank of Jamaica," he insisted.