Editorial | SSL clarity, please

The reported break-in and theft of laptops at the collapsed, fraud-riddled investment house, Stocks and Securities Limited (SSL), clearly demands robust investigation.

The reflex assumption will be that this was no random act of thievery, but an orchestrated effort by someone who either wishes to contaminate evidence, or to know what information investigators may have unearthed about the real state of the finances of the company. Either way, it is important to get to the truth.

But the latest developments at SSL – and not only the theft of the computers – demand that the fraud investigators, in particular the Financial Investigations Division (FID), the agency of the finance ministry that probes certain financial crimes, communicate with greater clarity to the public. So far, FID’s public statements have been largely confusing and obfuscatory. Which, we are sure, is not its intention. The agency must therefore provide background and context in its declarations.

It is now widely known that SSL was an undercapitalised, badly managed business which regulators appear to have, over several years, afforded special privilege and forbearance as its owners breached numerous undertakings to right their company. SSL also benefited from apparently inattentive finance ministers, who, at least in one case, were unaware of documents intended for their perusal, highlighting the company’s insolvency and other failings.

Things finally fell apart in January when Jean-Ann Panton, a senior account manager at the company, admitted to stealing around J$250 million in US and Jamaican dollars from clients’ accounts. Ms Panton is so far the only person to have been arrested and charged for fraud. But she has, in response to a civil suit by one client, claimed she was induced by her bosses to admit to the theft.

ADDITIONAL ARRESTS

In August when FID offered an update on the case, it promised that additional arrests would soon be made. At the time, the agency reported that it had thus far accounted for fraud “amounting to over US$10 million”, affecting 70 client accounts, against the approximately 40 from whom Ms Panton said she stole. The US$10 million, in Jamaican currency, would be more than six times what Ms Panton admitted to stealing.

Last week, FID tripled the value of the fraud. The agency said in a statement, “Evidence now shows that there are over 200 affected accounts and a staggering amount exceeding US$30 million attributed to fraud and other irregularities related to clients’ funds. Despite numerous appeals and direct means of communication, the Financial Investigations Division has only received 23 official statements from affected individuals and entities.”

It is not particularly surprising that numbers change during the course of investigations, especially one where the probe goes back, as FID said of this case, 17 years.

“The meticulous inquiry requires a thorough analysis of the entire time period, scrutinising the flow of investor funds,” the agency said.

However, this situation requires additional particulars, especially with respect to the amount of money SSL’s clients can expect to get back from their investments, in the face of earlier signals from the authorities, and the recent indication by the finance minister, Nigel Clarke, that people would soon have access to their accounts.

IMPORTANT

FID did not say how it accounted for the US$30 million (approximately J$4.68 billion) and if this represented solely off-balance sheet funds held for clients. That is important.

In court documents in March seeking to wind up SSL, the regulator, the Financial Services Commission (FSC), reported that the company had off-balance sheet liabilities of J$29.4 billion, of which its temporary manager, Ken Tomlinson, could account for J$29.2 billion. That represents 99 per cent of the amount.

At the time, it was clearly suggested that Mr Tomlinson had “verified” 98 per cent of the assets.

This reporting was contradicted neither by the FSC nor Mr Tomlinson. Further, more recently, Dr Clarke, the finance minister, has alluded to a J$30-billion portfolio being managed by the SSL temporary manager.

In other words, except that there was a recent deterioration of the portfolio or any management fees to be covered by clients, SSL clients with off-balance sheet portfolios could reasonably expect to get back up to the 98 per cent of their portfolio. The shortfall, based on the March accounting, was J$200 million.

That, however, may not have been the whole story. More information might have emerged about the off-balance sheet transactions since Mr Tomlinson produced that report and the subsequent statements by Minister Clarke. Which is why FID should better explain the basis of its US$30-million calculation, including whether far more off-balance funds than previously thought fell into the cirques and crevasses at SSL.

Clarity, please!