Raphael John-Lall

Hin­du Cred­it Union (HCU) pres­i­dent Har­ry Harnar­ine spent $7.6 mil­lion on ex­pens­es, in­clud­ing for­eign trav­els, with­out any ac­count­abil­i­ty. Ernst and Young part­ner Maria Daniel gave this in­for­ma­tion yes­ter­day while tes­ti­fy­ing at the Com­mis­sion of En­quiry in­to the fail­ure of HCU at Win­sure Build­ing, Rich­mond Street, Port-of-Spain. She did not spec­i­fy the years that this spend­ing took place.

"The pres­i­dent's to­tal ex­pens­es, over a pe­ri­od of six years-and there was an ac­count for the gen­er­al ex­pens­es-was over $7.6 mil­lion," she said. "It is the pres­i­dent's ex­pens­es, stipend and for­eign trav­els we are speak­ing abut here. "In most in­stances we were not pre­sent­ed with the sup­port­ing doc­u­men­ta­tion, like bills and in­voic­es. For ex­am­ple, the for­eign trav­el­ling ex­pens­es ac­count­ed for $5 mil­lion.

"In the ma­jor­i­ty of cas­es, di­rect trans­fers were made to his Visa ac­count. In Feb­ru­ary 2008 when HCU was hav­ing its dif­fi­cul­ties, he took a loan of $900,000," She gave a list of the HCU's main sub­sidiaries that suf­fered from the group's fi­nan­cial mis­man­age­ment.

She said the amount of mon­ey that was pumped in­to HCU Com­mu­ni­ca­tion was $86.1 mil­lion since it was formed. "De­spite the sig­nif­i­cant out­lay, HCU nev­er man­aged to ob­tain cer­tain li­cences to op­er­ate," Daniel said. "Fur­ther­more, HCU pro­ceed­ed to bor­row the funds from a third-par­ty fi­nan­cial in­sti­tu­tion and pur­chased ana­log tele­vi­sion equip­ment in 2004 for $36.6 mil­lion, on the premise that the nec­es­sary trans­fer of li­cences of $17.8 mil­lion would take place.

"The end re­sult was a li­cence that they did not own, equip­ment they could not use or sell." HCU Food Cor­po­ra­tion was an­oth­er sub­sidiary that ran in­to prob­lems. "There was the ac­qui­si­tion of a third par­ty in 2002, and in 2004 a trans­ac­tion was en­tered in­to with an­oth­er third par­ty," Daniel said.

"What we could not tell, with the high-lev­el due-dili­gence re­port done by the for­mer di­rec­tor, was how much of the sales in­volved sug­ar and the im­pact that had on the ac­qui­si­tion. The equip­ment in­volved in the pur­chase did not work. On­ly one of six pieces of equip­ment was work­ing." HCU Print­ing suf­fered the same prob­lems as the oth­er sub­sidiaries.

"For their pur­chas­es in­clude equip­ment that was not op­er­at­ing and need­ing to be re­placed," she said. "In­stead of spend­ing cap­i­tal on up­dates, mon­ey was spent on build­ings at a cost of $5.8 mil­lion. "Again, this is an ex­am­ple where you have a busi­ness ven­ture, you have an idea, and in­stead of in­vest­ing in ma­chin­ery to gain rev­enues, it was be­ing spent on build­ings."

She said the rea­son why HCU land­ed in all these prob­lems was be­cause it stepped out of the role of a nor­mal cred­it union. "We must go back to the fun­da­men­tal struc­ture of a cred­it union which is, I take mem­bers' shares and de­posits and I have a pool of funds avail­able to my mem­bers to bor­row," she said.

"What took place in the HCU is a de­ci­sion to ex­pand that, and what hap­pened is more than half of the as­sets be­ing end­ed up in re­al es­tate, in­vest­ments in sub­sidiaries and prop­er­ties-mov­ing away from the core rea­son of a cred­it union, which is loan to mem­bers."

Char­tered ac­coun­tant Madan Ram­nar­ine, tes­ti­fy­ing for a sec­ond day, said large amounts of mon­ey were used by HCU to keep the sub­sidiaries afloat. When asked by HCU's lawyer Farid Scoon if any of HCU's sub­sidiaries were prof­itable, he said the suc­cess­es were mixed.

Ram­nar­ine said $250 mil­lion was spent in loans to HCU sub­sidiaries, which Scoon de­scribed as a "sub­stan­tial amount of mon­ey." "I be­lieved bank­ing and in­sur­ance made a prof­it and I be­lieved HCU Food Cor­po­ra­tion made a prof­it and it was like $30,000 to $40,000 for one month. "Most of them were mak­ing loss­es of $700,000-$800,000 a month," Ram­nar­ine said.

Scoon asked Ram­nar­ine how quick­ly a busi­ness should start mak­ing prof­it and if prof­its should be made from the first day. "That ques­tion, chair­man, is not rel­e­vant to the HCU, as they took de­pos­i­tors' mon­ey which came out of re­serves and is ex­pect­ed to make a prof­it. "The ques­tion he is ask­ing is, if I in­vest in a busi­ness with my mon­ey and my bank loan, I can do what­ev­er I want.

"When you take mon­ey from in­vestors to in­vest in­to a busi­ness in or­der to get re­turns, I have to en­sure that I make a prof­it from day one," Ram­nar­ine said. Scoon said sub­sidiaries of the HCU were busi­ness­es in­volved in in­sur­ance, food, dis­tri­b­u­tion, com­mu­ni­ca­tion and se­cu­ri­ty pro­vi­sion, among oth­er things and asked Ram­nar­ine if each of these abid­ed by in­dus­try stan­dards.

Ram­nar­ine said these sub­sidiaries should have been prof­itable by 2004. "That was one of the prob­lems we iden­ti­fied: monies go­ing in the sub­sidiary com­pa­nies and keep fund­ing them while they made loss­es, hope­ful­ly to make a prof­it in the fu­ture. "The busi­ness de­ci­sions that were go­ing in­to these in­dus­tries were wrong be­cause of the long pe­ri­od of loss­es with de­pos­i­tors' short-term de­posits.

"How can you, as a fi­nan­cial in­sti­tu­tion, give de­posits for one to two years, go­ing in­to a busi­ness and make a prof­it in six years' time? How long can you go on? And this was one of the crit­i­cal prob­lems of the HCU," Ram­nar­ine said.