PRIVY COUNCIL RULES AGAINST PROMINENT FORMER

UNCLAS SECTION 01 OF 02 KINGSTON 002450

SIPDIS

STATE FOR WHA/CAR (WBENT),WHA/EPSC (JSLATTERY)

SANTO DOMINGO FOR FCS AND FAS

TREASURY FOR L LAMONICA

E.O. 12958: NA
TAGS: ECON EFIN JM
SUBJECT: PRIVY COUNCIL RULES AGAINST PROMINENT FORMER
JAMAICAN BANKER


1. Summary: Don Crawford, former head of the failed
Century National Bank, has lost his appeal to the Privy
Council following a 1999 conviction in civil court for
financial fraud and has been instructed to repay about USD
45 million to the GOJ. Although the Director of Public
Prosecutions has made a ruling on whether criminal charges
will be filed, that ruling has not yet been made public.
Crawford, who resides in the U.S., was once the darling of
the Jamaican banking sector. He was often lauded by GOJ
officials for his foray into non-banking areas at a time
when investors were shunning the productive sector to
benefit from the high interest rate regime. However,
Crawford's bank, which made a number of loans to connected
parties, was soon to face a liquidity and solvency crisis
and had to seek assistance from the state. Recognizing
the extent of the deficit, the authorities took control of
the bank and eventually charged Crawford for financial
fraud. It is widely believed that his close affiliation
with the opposition Jamaica Labor Party did not help his
cause, as no other banker has been charged. Crawford's
lawyers are in the process of discussing payment, which if
made would provide a much-needed windfall to the cash-
strapped GOJ. End summary.


2. The UK-based Privy Council, on October 10, ruled that
Don Crawford and former top executives of the failed
Century National Bank (CNB) must pay the GOJ an estimated
USD 45 million in principal and interest for unsecured
loans made ahead of the bank's collapse in 1996. The
Privy Council is expected to announce the final amount
payable to the state when it hands down its written
judgment later this month. The Privy Council's ruling
arose from the appeal of a March 1999 decision by
Jamaica's Chief Justice Lensley Wolfe, in which he berated
the actions of Crawford and another top executive Caple
Williams, whom he described as rogue bankers. "They were
busy helping themselves to the bank's funds," Wolfe said
in his judgment at the time. "These payments constitute a
misapplication of the bank's funds." However, Crawford,
who reportedly resides in Atlanta, was once regarded as a
model banker and GOJ functionaries viewed his bank as a
blueprint. Crawford was often lauded by GOJ officials for
venturing into non-banking areas such as real estate at a
time when investors were shunning productive investment to
benefit from the GOJ'S high interest rate policy.


3. (SBU) Ironically, it was Crawford's foray into non-
core activities, which was partly responsible for the
bank's demise, as a number of unsecured loans were made to
connected parties to finance these investments. In
particular, the bank made loans to companies owned by
Crawford, his mother and former Opposition Leader and
Prime Minister Edward Seaga. One such loan was made to an
affiliated company to construct the over 700-room
Renaissance Hotel. The unsecured loans to connected
parties took a toll on the liquidity and solvency of the
bank when they could not be financed. This prompted the
institution to approach the GOJ for assistance in 1996
when funds were not available to pay depositors. However,
recognizing the magnitude of the deficit the GOJ was
forced to take control of the bank.


4. The Director of Public Prosecutions (DPP),who was
called in to probe the activities of the bank, ruled that
Crawford, his mother and top executives were to be charged
for financial fraud. It is widely held that his close
affiliation with the Jamaica Labor Party did not help his
cause as to date no other banker has been charged despite
the failure of other institutions. However, the Privy
Council ruling could well provide a precedent for other
financial sector players to be charged. Head of the
Financial Fraud Unit in the Office of the Director of
Public Prosecution (DPP) Caroline Haye was hesitant to
comment on whether there were other cases pending against
other former bankers. She suggested that emboff write to
DPP Kent Pantry for a response.


5. (SBU) Lawyers representing Crawford do not expect any
criminal charges to be brought against their client,
although he was investigated by the Fraud Squad following
the collapse of the bank. The lawyers said the next step
is for both sides to meet and discuss the final figures to
be paid by Crawford. If the debt is repaid it would
provide a welcome windfall for the coffers of the GOJ,
particularly given the continued underperformance in
revenues, a point captured by a cartoonist at the Gleaner
newspaper. The cartoon showed an expectant Finance
Minister Omar Davies inquiring of a distraught Crawford
when he would be sending the money, while at the same time
informing him that he could send it through a leading
remittance company. Chief Fiscal Economist at the
Ministry of Finance Courtney Williams told emboff that if
the money is repaid then it would be more than welcome,
but he is of the opinion that the GOJ might only receive a
portion of the judgment amount. Williams told emboff that
he was aware of a case against Paul Chen Young of the
former Eagle Financial Group, who also resides in the U.S.
and has written a book about the crisis. When asked if
there were any political underpinnings in the cases,
Williams said, "not that I am aware of, but nothing can be
ruled out."

ROBINSON