GLENN GODFREY MADE ME DO IT!

UNCLAS BELIZE 000973

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CEN (MACK),CA/VO/L/A (SETTJE),
DEPT FOR INL/C/CP (BECKER, BRANDOLINO, KOHN)

TREASURY FOR IA/WHA (LEVINE)

E.O. 12958: N/A
TAGS: ECON EFIN PGOV PREL BH
SUBJECT: GLENN GODFREY MADE ME DO IT!

Ref: A. Belize 708


B. Belize 678

This cable is sensitive but unclassified. Please protect
accordingly.


1. (U) Summary. On the first day of testimony at the resumed
Development Finance Corporation (DFC) investigative hearings, former
general manager Roberto Bautista said that changes in policy left
the Corporation vulnerable to significant losses. Lending policies
were "relaxed," and the DFC Board instructed staff to process all
government housing projects. Bautista's testimony also implicated
former DFC Chairman Glenn Godfrey, who is rumored to have reaped
extensive benefits from this and other government entities but has,
thus far, remained untouchable. End summary.


2. (U) On October 24, the investigative hearing into the financial
dealings of the Development Finance Corporation (DFC) resumed after
a two-month hiatus. (As reported in reftels, the DFC is the
Belizean equivalent of an agricultural bank, development bank,
Freddy Mac, Sallie Mae, and Fannie Mae all rolled into one. For
years, the DFC granted loans for small- and large-scale
agricultural, educational, and housing development projects). For
the first time, a member of the DFC's top management testified
before the investigative committee and implicated Glenn Godfrey -
former DFC chairman, attorney, local businessman, and ruling
People's United Party (PUP) crony.


3. (U) Roberto Bautista, previous DFC general manager and current
manger of credit administration for the Corporation, testified that
in 1999 the DFC received BZ$86 million and, while a portion of those
funds were to be delivered to the Social Security Board, the
remainder was deposited into the Belize Central Bank, where it would
earn 8.5 percent interest. (Note: US$1 equals BZ$2. End note).
The funds were to be used for housing development so that the
governing PUP could fulfill its campaign promise to construct 10,000
new homes in Belize.


4. (U) At the same time, Bautista said, some of the DFC's strict
lending guidelines - such as the one requiring borrowers to provide
down payments for mortgage loans - were relaxed. The DFC Board also
instructed staff to implement any government housing projects.


5. (U) Despite the policy changes, the DFC continued to disburse
funds to borrowers in a series of payments rather than in one lump
sum. Bautista testified that DFC Chairman Glenn Godfrey made an
exception to this rule and instructed him - by telephone and in
writing - to disburse the BZ$30 million loan to Novelo's Bus Line in
one lump sum. Bautista said that Godfrey called him and suggested
that, rather than letting the money "idle" at the Central Bank for
8.5 percent interest, the DFC should disburse the funds - borrowed
at 13 percent - to Novelo's. Because Godfrey followed up this
conversation with a signed authorization letter, Bautista disbursed
the funds. Full disbursement was premature because all the
collateral had not been secured. Also, Godfrey's law firm - which
represented Novelo's - benefited to the tune of some BZ$2 million
for legal work in connection with the loan. The bus line is now in
receivership and behind in its loan payments. According to
Bautista, the current outstanding balance on the loan is BZ$32
million.


6. (SBU) Comment. So far as Post knows, Bautista's testimony
represents the first time a high-ranking official or political crony
has been directly linked - with tangible documentation - to the DFC
scandal. Poloff did not attend the hearings on October 24, and so
is unable to confirm if Godfrey's signed authorization letter was
produced as evidence. If it was, then it may be helpful in building
a 212(f) case against Godfrey. End comment.

DIETER