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Chris Ram, directors blocked payout to small depositors – OP

Apr 09, 2009 News

… Globe Trust liquidation

 

The Office of the President yesterday said that had Christopher Ram and other Directors of Globe Trust and Investment Company Ltd not move to challenge the liquidation in 1991 a total of 5,404 depositors would have each received up to $100,000.

Yesterday, the Office of the President produced critique to show that had the company been fully liquidated, it was certain that up to $235 M would have been recovered from the realizable assets of Globe Trust.

At the time $743M was the total outstanding deposits of the company.

On February 6, 2002 when the hearing begun before the then Chief Justice Carl Singh to decide the fate of Globe Trust, it was stated that the only way to save the institution would be for the reject of the Ram and McRae restructuring plan.

Justice Singh is now Chancellor of the Judiciary.

Following the petition filed in the court by the Bank of Guyana for compulsory liquidation, Ram and McRae, among others, petitioned the court that there was hope for saving the institution.

The Bank of Guyana case for compulsory liquidation of Globe Trust was based on violation of the Financial Institution Act and its accompanying regulations, and the insolvent state of institution.

An article published in the Stabroek News in February 2002 stated that at the time of the liquidation hearing, a consultant to the institution, William Hinds, had said that Globe Trust was on the verge of collapse.

He testified in court that the company needed $2B capital injection for its operation to be rescued.

At the time the Bank of Guyana had refused to loan Globe Trust money at four percent interest because of the lack of collateral.

However, during the hearing, Ram had said that the estimated total recoveries from liquidation would be between $70M and $100M, whereas the restructuring plan could realise $600M more for Globe Trust.

Lawyer for the Bank of Guyana at the time, Senior Counsel Rex McKay had argued in his submission that the objection to liquidate the company was without merit and that there is nothing in the objection filed by McRae to show that there was hope for saving the institution.

The BoG had showed the court that after it had reviewed the inspector’s report of the company it concluded that Globe Trust’s capital was substantially exhausted with no reasonable prospects of its timely restoration.

The court was also told that a substantial dissipation of Globe Trust assets and earning had taken place as a result of the violation; that its assets were not sufficient to satisfy its depositors; and that the institution had engaged in a course of conduct, which has caused its insolvency.

To support its case for the compulsory liquidation order, the bank alluded to the difficulties Globe Trust had since 1997 in creditable equity financing.

On Tuesday, chartered accountant Christopher Ram said that President Bharrat Jagdeo had indeed guaranteed policyholders of Globe Trust that they will receive their invested monies.

Ram produced newspaper clippings from both the Guyana Chronicle and Stabroek News that showed that on August 3, 2001 at a press briefing at Office of the President, Jagdeo offered “solace to the some 2,000 small depositors at the institution whose savings are in the vicinity of about $100,000 each.”

The President promised that they would get their money.

Ram said that nearly eight years later, President Jagdeo failed to honour his promise to the Globe Trust depositors.

However, yesterday, the Office of the President contended that had the liquidation been allowed in 2001, these people would have been paid since then.

The Chief Justice has since issued an order for the compulsory liquidation of Globe Trust following a High Court application by the BoG.

The company came crashing down after issuing many unsecured loans and conducting other dubious practices.

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