Directors of embattled investment firm Stocks and Securities Limited (SSL) said that the company was in a position to pay “in full” its debts when it applied for a voluntary wind-up last month, documents obtained by The Gleaner have revealed.
On January 16, three of the four directors wrote to the Companies Office of Jamaica (COJ) noting that they had formed the opinion that its debt could be paid “within a period of 12 months from the commencement of the winding-up”.
A statement of the company’s assets and liabilities, signed by SSL founder Hugh Croskery, Laurence Adamson, and Peter Knibb, showed net assets of $1.3 billion and total liabilities at $1.1 billion as at June 30, 2022.
The estimated net distribution to members stood at $98 million.
But in an about-turn on Wednesday, lawyers representing the fraud-hit entity denied that it sought to dissolve its operations, arguing instead that it was the intention of the directors to have their powers and authority vested in a trustee and that the affairs of SSL would be under that person’s control.
The company said the trustee, Caydion Campbell, of Phoenix Restructuring Advisory, Advisory and Insolvency Services Enterprise, and his team, intended to conduct an independent business review and other investigations to determine its financial state as at January 16.
Minister of Finance Dr Nigel Clarke disclosed last Wednesday that state regulator, the Financial Services Commission (FSC), had obtained court orders to block SSL, its trustee, and directors from applying for voluntary liquidation.
But in its first statement on the unfolding scandal, SSL insisted that the move aimed to ensure that “necessary conservatory measures were in place over the assets of SSL as well as to ensure compliance with the enhanced governance protocols as directed by the FSC”.
Still, the finance minister told The Gleaner on Wednesday that he had been advised that documents filed with the COJ show that the members of SSL passed a resolution effective January 16, 2023, to put the company in a members’ voluntary winding up.
“I have been further advised that in doing so, they signed a declaration that the company was solvent and had the ability to liquidate all their liabilities within a 12-month period,” said Clarke.
On Friday, the COJ confirmed in an email to The Gleaner that a declaration of solvency was filed by SSL.
“The documents filed were rejected as they did not accord to the provisions of the Companies Act,” it said.
The COJ said in relation to the reason for placing the company into voluntary liquidation, the provisions of Section 277(1) of the act state that the directors have made a full inquiry into the affairs of the company, and that having so done, they have formed the opinion that SSL will be able to pay its debts in full within 12 months from the commencement of the wind-up.
Meanwhile, Clarke questioned the findings of a special audit on the off-balance sheet portfolio of SSL conducted in January 2020, after external auditors gave the investment firm’s book a clean bill of health.
The accounts of more than 40 people, including retired track legend Usain Bolt, were allegedly defrauded of approximately $3 billion.
Bolt’s account is believed to have been fleeced between 2012 and 2017.
“There are questions to be answered as to why this wasn’t detected by external auditors, by special auditors, by internal auditors, over a long period of time. And the reason is not to cast blame on anybody, but to understand the weaknesses in the private sector that exist that we have got to take action on as far as regulation or other means at our disposal,” said Clarke during the Financial Investigations Division’s Biennial Conference at The Jamaica Pegasus hotel in New Kingston on Wednesday.
The Gleaner reported on Tuesday that the audit report indicated that SSL’s assets and client liabilities within the off-balance sheet portfolio reflected $34.8 billion.
The equity-adjusted portfolio balances reflected $31 billion in assets.
Auditors in the five-page standalone report said they obtained all information and explanations deemed necessary for the audit.
“In our opinion, proper accounting records have been maintained so far as appears from our examination of those records, and the statements on and off-balance sheet assets and client liabilities, which are in agreement therewith, give the information required by the Jamaica Companies Act in the manner required,” the report dated January 27, 2020, said.
However, Clarke said that the external auditing firm, which he did not identify, will not escape questions on the massive fraud.
“The auditors will not escape scrutiny in this matter and the procedures used to provide audits will not escape scrutiny. The regulators depend on third parties to provide external audits. If there is a direction to get an audit and the audit comes back satisfactory, the FSC cannot act on that point,” he added.
The FSC is the Financial Services Commission, which regulates non-deposit-taking financial institutions.
The commission, in an October 2019 letter to SSL, requested evidence of the value of client assets and liabilities within the off-balance sheet portfolio as at September 30, 2019; the value of on-balance sheet client liabilities; and the value of assets (including liquid assets effectively segregated) that is assigned to on-balance sheet client liabilities.
In that letter, it directed the SSL to commission and execute an independent audit.