Opposition leader Grant Gibbons questioned yesterday whether political pressure was behind the authorities' lack of action with regard an illegal loan of nearly $3 million.

The latest audited financial statements of the Bermuda Industrial Union's (BIU) Credit Union show the it lent a total of $2,829,166 to Union Assets Holdings (UAH), the BIU-owned subsidiary which provided the completion bond for the contract to build the new senior secondary school.

However, the loan contravenes several provisions of the Credit Unions Act, and could have resulted in the suspension or cancellation of the Credit Union's registration. The move could also be deemed punishable by summary conviction under the law. The Credit Unions Act stipulates that “the amount leant to any person shall not exceed two percent of the share capital of the credit union at the time the loan is made”.

The audit shows on December 31, 2003, the Credit Union's assets came to a total of $9,170,600. Two percent of that, Dr. Gibbons said, comes out to “less than $200,000” - or $183,412. “So, $2.8 million is over 15 times the amount they are normally allowed to loan,” Dr. Gibbons said. “This clearly put the solvency and the financial integrity of the Credit Union at risk. They were possibly committing offences under their legislation.”

The rules of a registered credit union may only be altered at a general meeting of members, according to the law. Any changes made at a general meeting must first be approved by the Finance Minister and registered under the Act before they can take effect. However, according to auditors, the Finance Minister never granted permission for a loan 15 times the allowable amount.

If a credit union contravenes any sections of the Act, the legislation states the Minister may suspend or cancel registration of that union. The Act also shows that failure to comply with the legislation could be punishable, on a summary conviction, by a fine of $500.

It adds: “Every offence by a credit union under this Act shall be deemed to have been committed by every executive officer of the credit union who is bound by its rules to fulfil the duty whereof such offence is a breach, unless the officer is found to have no knowledge of or have attempted to prevent the commission of the offence.”

The Bermuda Monetary Authority (BMA) monitors the Credit Union, and it is understood that officers there did take corrective action. Regarding the suspension or cancellation of the Credit Union's registration, however, auditors noted that to date “no action has been taken”.

Dr. Gibbons questioned why not and asked if politics had played a part. “Once they learned of it (the loan), was there any political pressure on BMA technical officers interfering with their ability to deal with the embarrassing political and financial issue in a timely way?” he asked. “There are so many conflicts of interest and other agendas here.”

Dr. Gibbons cited links between Union Assets Holding, the Bermuda Industrial Union, Government and the Berkeley project. “No one is looking out for the interests of ordinary Credit Union members.”

He questioned when the loan was actually made, when it was discovered by the BMA, and whether or not the Finance Minister was ever asked for permission for the move as required under the Act. BMA General Manager Monroe Sutherland said it would not be inappropriate for the BMA to discuss individual cases. He said any comment must be left to the Finance Minister. The Royal Gazette has been unable to contact Finance Minister Paula Cox on the matter.

The amount of the loan went “well beyond any sort of safety margin”, Dr. Gibbons said. “People need to understand there are certain requirements under the legislation. Who's minding the shop over there?”