Controversy over NBS $69.9M fraud case… Labour Minister to move to High Court next week
Labour Minister Dr. Nanda Gopaul.
Labour Minister Dr. Nanda Gopaul.

LABOUR Minister Dr. Nanda Gopaul is expected to move to the High Court next week to contest the grounds on which the Ombudsman, Justice Winston Moore, compiled and allegedly released a 25-page report on the case of a $69M fraud case at the New Building Society (NBS).

The report addressed what has been termed by the Ombudsman as “wrongful” fraud charges against NBS’ former Chief Executive Officer, Maurice Arjoon and two former senior managers, Kent Vincent and Kissoon Baldeo.
The fraud was said to have been committed in late 2006. The three men were fired in 2007 after an investigation, which concluded that the there was a dereliction of duty, negligence and/or serious misconduct. Following that charges were laid against them.
The managers have since challenged the Society’s decision to terminate their employment, among other things, and the matter is currently before the courts.
The subsequent Ombudsman’s report on the matter was released about a week ago.
Regarding the Labour Minister’s move to the High Court, after the Ombudsman’s report was made public, the Guyana Chronicle was reliably informed by a source close to the matter that the relevant court documents have already been prepared by the lawyers.
The source added that the grounds on which the matter is being contested include the fact that: the NBS is a private entity; the Directors of NBS are elected from its membership; the Ombudsman cannot investigate the actions of the Office of the Director of Public Prosecutions (DPP), since that office is insulated by the Constitution; and that the Ombudsman failed to observe the sub-judice rule.

SUB-JUDICE PRINCIPLE IGNORED
Additionally, Head of the Presidential Secretariat (HPS), Dr. Roger Luncheon, on Wednesday responded to queries about the issue.
His main point of concern was the fact that the principle of sub-judice was ignored, which is even more worrying considering the fact that the Ombudsman was a former judge.
Dr. Luncheon said: “I believe that the principle, this sub-judice principle has been ignored….this is a matter that is being heard before the High Court and I cannot understand how could another judge, the Ombudsman is a former judge, could have ignored the sub-judice principle.”
The HPS also raised concerns about how the contents of the report were made public, given that it was not officially released by the Ombudsman.
“It seems to be that the report may not have been officially released by the Ombudsman and somehow it has been leaked…it (the leak) has distressed them (the Board and membership of the NBS),” he said.
Dr. Luncheon added that he has not paid much attention to the findings of the report, since the more important question is how the report was made public.
“I haven’t paid any mind to the findings, I am more concerned with the reaction of the NBS board and if the Ombudsman asserts that this report is not official then the question is who leaked the report,” he said.

CHAIRMAN’S REPORT
Meanwhile, NBS has since slammed the contents of the report.
Below is an excerpt of a statement made by the then Chairman of the Board of the New Building Society, Mr. Moen Mc Doom, at a Special General Meeting of the Members held on September 8, 2007, at which the issue in relation to the three (3) managers was addressed:
“During this period, the Board was legally constrained from engaging its members and presenting the public with the facts. Those persons intent on misleading our members and hurting the society were able to take full advantage of this until now.”
“The matter of the fraud was first brought to my attention as Chairman of the Board, not, as you might expect by the then Director/Secretary, Mr. Maurice Arjoon, but instead from information I received privately on January 22, 2007.”
“I had been informed that the sum of $69.9M had been withdrawn from the Savings Account of Ms. Bibi Shamila Khan by means of a Power of Attorney over the period November 1, 2006 to December 8, 2006 when the Account was closed by the person presenting the Power of Attorney to the Society.”
“On learning of this allegation, I immediately brought the matter to the attention of the Director/Secretary, Mr. Maurice Arjoon, requiring that he urgently investigate the matter. Mr. Arjoon then informed me that he had earlier chaired a meeting of senior management at which it was decided by the management, that the monies withdrawn from the Savings Account in question were properly withdrawn.
In his report on the matter, which was later submitted to me on February 6, 2007, Mr. Arjoon revealed that, in fact, it had been brought to his attention on January 22 that Mr. Zainool Khan Safi, husband of the Account Holder, had questioned the withdrawals from his wife’s Savings Account.”
“We were later to discover that, on January 3, 2007, Mr. Safi had brought the Passbook for the Savings Account into the Society for updating.” “The same Passbook which the person presenting the Power of Attorney had claimed since October 31, 2006 to have been lost.”
“The Passbook was collected by Customer Service Clerk, Mr. Imran Bacchus, and filed. In fact, Bacchus was involved in all of the withdrawal transactions, but there is no record or report of his having brought this to anyone’s attention.”
Mr. Safi returned to the Society on January 19 to uplift the Passbook when he discovered that his wife’s Account had been closed. Not surprisingly, Mr. Safi demanded to speak with a senior manager and was referred to former Savings/Accounts Supervisor, Mr. Kumar Ragobar who referred it to Mr. Vincent, the then Operations Manager. As you know, Mr Ragobar was later dismissed for reasons unconnected with this fraud.”
On January 29, Ms.. Bibi Shamila Khan, accompanied by her Attorney-at-Law, met with Mr. Maurice Arjoon, Mr. Kent Vincent, the Asst. Secretary, Mr. Nizam Mohamed and the Internal Audit Manager, Mr. Atma Rajaram and indicated that she had not authorised any withdrawals from her Savings Account. Ms. Khan and her Attorney were told by management that the Society would be treating the withdrawals as legitimate.”
“In the meantime, I had instructed Mr. Arjoon to have all of the managers and officers who were involved in processing and authorising the payments of the withdrawals from the Savings Account in question, submit written reports detailing the role they played and the reasons for their actions. I expressed my concern about the matter to the Board on January 25”.
“After discussing the matter further with Mr. Arjoon, I directed him to immediately check with Guyana’s Honorary Consul General in Toronto, Canada, whether the Power of Attorney which had been presented to the Society by the person who had withdrawn the funds from Ms. Khan’s Account, had been executed by the Consulate.”
Mr. Arjoon carried out my instructions on January 30 and reported that the Consulate had affirmed that the Power of Attorney was a forgery.”
“I then immediately directed Mr. Arjoon to hand over this matter to the Police for a full investigation. The board clearly had nothing to hide, as our critics have suggested.”
“You are aware that subsequent investigations by the Police have led to charges of conspiracy to defraud funds from the Society being brought against Mr. Arjoon, Operations Manager at the time, Mr. Kent N.Vincent, and Asst. Mortgage Manager at the time, Mr. Kissoon Baldeo, on June 7, 2007.
I would like to emphasise that it was not until this stage of the matter that the Board was persuaded that a fraud may well have been committed.”
“The Board was left with no alternative, in these circumstances, but to send these Managers on administrative leave while continuing our own internal investigations.”
“During the course of those investigations, the Board invited our Auditors, Jack A Alli Sons & Co. to examine the transactions and to make their recommendations.”
“Our investigations have established that over a period of some five weeks, a person by the name of Compton Chase who was completely unknown to the Bank, and whose identity was never properly verified, was successfully able to present a Power of Attorney, which has subsequently, as I have stated, proven to be forged.”
“This person, without presenting a Passbook required by the rules of the Society, on four separate occasions, commencing on November 1 and concluding on December 8, transacted the withdrawals, a re-deposit and further withdrawals of sums totalLing $69.9M, with full oversight and approval of the three senior managers whose services have since been terminated.
On the first occasion the withdrawal was authorised by Mr. Arjoon and Mr. Vincent. On the second occasion the withdrawals were authorised by Mr. Vincent and Mr. Baldeo and on the third and final occasion the withdrawals were authorised by Mr. Arjoon, Mr. Vincent and Mr. Baldeo.
The Society’s Rules require that an Account Holder must be in possession of a Passbook to make a withdrawal and that, if a Passbook has been lost, prior notice must be given in writing and an Indemnity form completed and submitted for a replacement.”
On the first occasion on 31st October, the person purporting to be Mr. Chase presented himself with the Power of Attorney, claiming that the Account Holder, Ms. Bibi Shamila Khan, was in Canada and volunteered a phone number at which she could be contacted. There was no phone number contact recorded for the Account Holder on the Society’s Index Card. No attempt was, however, made by the management to contact the Account Holder at her Guyana address recorded on the Card for the Account Holder, which was at Better Hope.
No attempt was made by any of the senior managers to check the authenticity of the Power of Attorney as to whether it was registered at the Deeds Registry or, much more importantly, whether it had, in fact, been issued from the Guyana Consulate in Canada where it indicated it had been prepared.
It would not be unreasonable to expect Mr. Arjoon to check with the Guyana Consulate in Toronto, as previously he had verified a Power of Attorney executed by the Guyana Consulate in Suriname tendered for another large withdrawal.
Mr. Vincent did call the number given by the person claiming to be Mr. Chase and spoke to a person alleging to be Ms. Khan. Mr. Vincent did not know Ms. Khan and relied on identifying the person on the phone from the information on the Account Holder’s Index Card. This information is not confidential and is readily accessible to a number of the Society’s employees.
Though the person on the phone was asked to confirm authorisation of the transaction in writing and to request a replacement Passbook, no explanation was sought for the loss of the Passbook and why a replacement had not been requested. Chase was told to return the next day.
Mr. Vincent made no other attempt to profile the person on the phone or to establish the whereabouts of the person. A phone number can be used from almost anywhere in the world. A prudent and careful manager, in the circumstances, should have requested a faxed notarized copy of the person’s ID, or Driving Licence or Passport to be sent before being satisfied of her identity.
The faxed confirmation authorising the transaction from the person alleging to be the Account Holder, had no address or means of tracing its origin and was not notarized, yet it was accepted by the managers.
Prior to the occasion of the second withdrawal on 17th November, the person alleging to be the Account Holder spoke with Mr. Vincent and the day before the withdrawal faxed confirmation authorising the withdrawal. Again, the fax was accepted without a traceable address and was not notarised.”
“When Chase signed the fax acknowledging its receipt by him, he listed a different address to the address on the Power of Attorney and different from the Guyana address of the Account Holder listed on the Index Card. This also escaped the attention of the management.”
“When Chase made the first withdrawal he was given an Indemnity Form for the Account Holder to complete for the purpose of issuing a replacement Passbook, but claimed that it had not yet been completed by the Account Holder.”
“Nevertheless, in complete violation of the Society’s Rules and established practice, the second withdrawal was, once more, authorised.”
“Again, on this second occasion, no attempt was made to establish the authenticity of the Power of Attorney, either at the Deeds Registry or from its identified source of origin at the Guyana Consulate in Canada.”
On November 20, Chase returned for the third time. On this occasion, he re-deposited the sum of $20,500,000 from previous withdrawals, seeking two separate withdrawals of $10,200,000 and $10,300,000.”
“Once more, these withdrawals were authorized by the Managers, despite the considerable sums being consistently withdrawn, without any further attempts to check the authenticity of the documents being presented and without receipt of the Indemnity Form from the Account Holder and without the presentation of a Passbook or request for a new Passbook.”
“Chase returned on December 8, the final occasion, this time to close the Account. On this occasion Mr. Vincent reported receiving a call, prior to Chase’s return, from the alleged Account Holder authorising the closure of the Account and a fax was received on December 7 to this effect, but, again, without a traceable address and, on this occasion, not signed and, as on all other previous occasions not notarised.”
“On this occasion, Mr. Arjoon thought it fit, for the first time, to direct Mr. Vincent to call the person alleging to be the Account Holder and request the Indemnity Form, which had been provided to Chase since November 1 be completed before closure of the Account. “
“According to Mr. Vincent’s report, the person he spoke with returned the call on several occasions to claim she was unable to fax the Form. The Form eventually was sent by email, though not properly completed and was not notarised. Yet, none of this gave rise to suspicion nor concern on the part of the managers and on receipt of the email, the transaction closing the Account was authorised by Mr. Arjoon.”
“You should know that in order to meet the final payment, it became necessary to redeem Treasury Bills held by the Society, prior to their maturity, which resulted in a loss of interest to the Society of $1.3M”
“I wish to emphasise that during this entire transaction, including even the necessity to redeem the Treasury Bills at a cost to the Society, the matter was not brought to my attention as Chairman, nor was any member of the Board consulted. “
Third party withdrawals from members’ accounts, and most certainly of this magnitude, demand of management, extremely careful scrutiny and strict observance of the rules and well established practices of the Society. Such scrutiny and strict observance were significantly absent on the part of the Managers.”
“The three senior managers who have been dismissed and were directly involved in processing and authorising the fraudulent withdrawals from the Savings Account in the name of Bibi Shamila Khan, did not observe the rules of the Society and were in grievous breach of established practices.”
“An Account Holder is required to be in possession of a Passbook to make a withdrawal. A member losing his or her Passbook is required to immediately give notice in writing to the Secretary. Any person other than the Account Holder seeking to make withdrawals on behalf
of the Account Holder, must be subject to due diligence in the identification of that person. As I have described for you, these rules were grossly violated throughout the processing of the withdrawals and the standard of diligence expected of the managers was simply not evident.”
The three senior managers were seemingly content to sanction these withdrawals without ever having properly examined the authenticity of the Power of Attorney which was submitted and without ever having properly established the identity of the person claiming to be the Account Holder on the telephone. It is clear that the senior managers involved in the approval of the transactions of such large sums of cash exercised extremely poor judgment.”
On June 12, the Board, having conducted its investigations, was satisfied that there was sufficient reason to interdict Mr. Arjoon, Mr. Vincent and Mr. Baldeo from duty without pay and benefits with immediate effect. They were invited to meet with the Board on 15th June in order to be given an opportunity to explain why serious disciplinary action, including dismissal, should not be taken against them.”
As you must know, on June 13 & 14, the managers resorted to Court action preventing the Board from taking any further action against them. The Court, however, ruled in favour of the Society. “
“On August 3, the Board, once more, invited each of these managers to meet and be heard separately by the Board on August 8 and 9.. The managers chose not to attend these meetings. “
“On August 14, the Board informed the three managers of its decision to summarily dismiss them with immediate effect for serious misconduct.”
As I made mention earlier, it is entirely regrettable that highly irresponsible and misleading statements, devoid of the truth, have been made by persons claiming to represent the interest of members of the Society. These statements were clearly calculated to cause alarm and could have had no other effect but to hurt the Society. You have now been apprised of the facts.
As I earlier stated, the Society was served with a writ of summons by the Account Holder claiming the restoration of the funds withdrawn from her account.
It is sad, indeed, that this fraud against the Society took place and that we have had to make provision for a loss of just over $70M. Nevertheless, as our published accounts have shown, the Society remains financially sound and stable and in good hands.”
“We have appointed a team of managers with an accumulated experience of some 50 years led by Asst. Secretary Mr. Nizam Mohamed who is acting as Director/Secretary. Mr. Anil Kishun, the former manager of our Rosignol branch, is now in charge of Operations and Mr. Noel Fernandes, who has been with our Society for some 12 years and in a management position for over 10 years, is acting as Asst. Mortgage Manager. We have begun the process of appointing a Chief Executive Officer.”
“In the meantime, our external auditors, Jack A. Alli Sons & Company, have made a number of recommendations which will further improve our systems and make them less vulnerable to both internal and external crime against the Society.”
“Finally, I ask you to recognise that white collar crime and, in particular, fraud against financial institutions, has affected every financial institution in this country. It is a new experience for NBS. Usually, it is given little or no publicity and is dealt with internally. In our case, as soon as the matter came to the attention of the Board, we unhesitatingly brought it to the attention of the police authorities who have initiated their own action in the matter.”
“The Society must now put this matter behind it and move on with the business of serving its members.”
Additionally, the report was endorsed by the Society’s members at the Special Meeting.

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