Dr Karl Blythe is contending that the government had agreed to repay a multimillion-dollar loan granted to the Central Westmoreland Trust (CWT), of which he was a director, but FINSAC Limited has questioned the legitimacy of the agreement signed by a state official.
To give it legitimacy, the letter of undertaking should have been signed by the Minister of Environment and Housing and not the permanent secretary, FINSAC said.
It is unclear when the Central Westmoreland Trust acquired the J$36.1 million commercial paper facility from National Commercial Bank (NCB), but it was transferred to FINSAC when the agency intervened in a number of financial institutions in the late 1990s.
By 2001, with the accumulation of interest, the balance rose to J$73.6 million because the debt was not being serviced.
Errol Campbell, FINSAC general manager, said CWT has been described as a non-profit organisation established to provide for the general welfare of persons residing and or working in Central Westmoreland.
The commercial paper was granted to assist the Trust with the infrastructure development of the Walter Cheddesingh sub-division in Westmoreland - a residential real estate development.
"Cost escalations and sluggish sales of the units were cited as the company's failure to realise the projected income, which resulted in poor debt servicing," he added.
Testifying before the FINSAC enquiry last Friday, Campbell said the directors of the Trust were Dr Blythe and Trevor Blythe.
But Karl Blythe, testifying a day earlier, said although he was a director of Central Westmoreland Trust, "that was many years ago. I am no longer a director."
Under cross-examination by Brian Moodie, attorney for FINSAC, Blythe said he did enter into negotiations with loan recovery officer Veronica Bailey to settle the Trust's debt.
However, he decided to cease discussions with FINSAC because the government gave an undertaking, through the permanent secretary in the Ministry of Environment and Housing, as well as the financial secretary, to repay the debt.
But Campbell told commission chairman Worrick Bogle and commissioner Charles Ross that "there is some contention that the letter of undertaking is not legitimate as the permanent secretary acted ultra vires."
Consequently, the FINSAC general manager said, "the Ministry is not obligated to honour the letter of undertaking," dated July 1996 for J$20 million. Moreover, several demands for payment issued on the Ministry have been ignored, he said.
Even though Blythe argued that the debt belonged to the government through the Ministry of Environment and Housing, based on documents read into the commission's records, FINSAC held him ultimately responsible.
Campbell said that in April 2001 when guidance was sought from the FINSAC board on how to proceed in the liquidation of Blythe's liabilities, including the debt by CWT, his combined personal debt from NCB, Workers Bank and Century National Bank (CNB) stood at just over J$26.2 million.
Acknowledging the liability
However, Campbell said, and as Blythe himself testified, the former minister refused to acknowledge the CNB liability of J$50,850.63 on the basis that it was incurred by the then manager of his hotel, Jamaica Tamboo, "and he, Dr Blythe, has already paid approximately J$2 million towards settlement of same."
Campbell said that as regards Blythe's personal liabilities, the then Minister of Water and Housing had borrowed J$6 million, the remainder being as a result of the consolidation of debts owed by his father and sister.
The debts should have been serviced from revenue from his limestone quarry and the sale of Jamaica Tamboo hotel. However, income from the quarry was deemed inadequate and sale of the hotel did not materialise.
Insofar as repaying the debt, Campbell, reading from a FNSAC document, said Blythe initially appeared willing to resolve the debt, and had proposed a payment of J$10 million in final settlement when it was first transferred to the intervention agency.
However, "subsequent and frequent attempts to communicate with Dr Blythe revealed a near nonchalance in respect of repayment of the debt," he said. "No attempt has been made to make good on the proposed J$10 million which was under consideration."
Campbell said no payment was being received from the debtor and no financials were available on either the debtor or guarantors.
Blythe is to appear before the commission again on August 4. The enquiry continues today, Wednesday, with another appearance via videconference by Don Crawford.