The Tribune

• Legal chief blasts suspension; demands apology

• Probe aims at decade-old ‘serious irregularities’

• Ex-Cabinet minister among bungling title lawyers

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Mortgage Corporation’s legal chief yesterday asserted that she and three other suspended executives are being made “scapegoats” over a probe into “serious irregularities” on home loans.

Shirl Deveaux, an attorney of 20 years standing, demanded a public apology from the state-owned lender for damaging her reputation as it investigates multiple transactions - many of which occurred more than a decade ago - which “at worst may have elements of fraud” involved.

Documents seen by Tribune Business detail bungled title searches and opinions provided by multiple Bahamian attorneys, which have potentially exposed the Mortgage Corporation and its borrower clients to multi-million dollar losses because ownership of the homes subject to these loans has been called into question.

Among those blamed for providing “defective title opinions” is a former PLP Cabinet minister, along with a law firm that is no longer in existence. Neither can be identified for legal reasons, but another attorney named is Troy Kellman, an attorney with Hanna, Kellman & Company, who was recently slammed by a Supreme Court judge in a ruling that also involved the Mortgage Corporation.

Justice Keith Thompson, in a February 23, 2021, ruling, urged the director of public prosecutions to investigate Mr Kellman for “possible fraud” over a series of six-figure transactions involving the same real estate parcel. He also called on the Bahamas Bar Association to take “disciplinary action” over what he branded as the attorney’s “seriously unethical behaviour”.

Ms Deveaux, meanwhile, argued that both the suspension and allegations against her were “baseless and unjust” - not least because she only took up her post as legal affairs director in May 2012, which was two years after many of the mortgage transactions in question originated.

Asked why these dealings were only being investigated now, given that many occurred more than a decade ago, while the present board is already four years into its tenure, she retorted: “That is the $1m question.”

Ms Deveaux said BDO Bahamas, the Mortgage Corporation’s external auditors, were presently clearing an audit backlog that has seen no financial statements made public since 2013. She argued that these were likely to reveal the losses resulting from the botched title searches, which the lender was forced to spend hundreds of thousands of dollars remedying to ensure it had security for its loans.

In particular, documents seen by Tribune Business disclose that the Mortgage Corporation “has incurred a loss in excess of $3.5m, outside of the inherent opportunity cost” on the Snow View subdivision in the Bacardi Road area.

Ms Deveaux, though, argued that the Mortgage Corporation had little choice but to acquire that subdivision after it discovered - having already extended mortgage financing to residential lot buyers - that the developer did not own Snow View because it had failed to pay the full purchase price for the property.

With buyers lacking good title to their property, and the Mortgage Corporation having questionable security for its loans, the previous Board and its chairman, Alex Storr, moved to resolve these issues by acquiring Snow View and the remaining unsold lots with a viewing to developing a 50-lot subdivision on the site.

However, Ms Deveaux argued that the present Board, chaired by Patrick Ward, had failed to follow through on these plans and, as a result, Snow View had been “gathering dust” instead of being developed and generating a return on the Mortgage Corporation’s investment. Thus she argued that responsibility for any losses lay with the Board, rather than the suspended executives.

Mr Ward did not return Tribune Business calls seeking comment before press time last night, but Ms Deveaux said: “The subdivision is sitting there, catching dust. When this Board took over, it had a viable subdivision that it could have done things with. It could have built homes, sold lots, but it didn’t do that. It did nothing.

“Now they’re saying the Bahamas Mortgage Corporation spent $3.5m on Snow View and Abraham Estates, and will declare it a loss. They’re saying there was a loss that we were responsible for. The auditors will find monies were paid out, and there was nothing in return.

“The Board needs to have some scapegoats to blame these losses on. The Board was appointed in 2017. Everything they’re discovering now they could have discovered in 2017. They didn’t ask any questions about the subdivision and losses. I don’t think it’s fair.”

Ms Deveaux said she had been left with no choice but to go public, and attempt to clear her name, after her identity as one of the four suspended Mortgage Corporation executives was posted on social media. She added that her name had been incorrectly linked to a separate investigation into fraudulent cheques bearing the Mortgage Corporation’s name.

“People seem to think I’m involved with the fraudulent cheques, which is not true,” she said. “I have had all these people asking me: ‘What’s happening? What’s going on? It’s horrible.

“I had a performance review that was deemed ‘outstanding’ as recently as October 2020. How, all of a sudden, am I negligent and responsible for losses when I was not even engaged by the Mortgage Corporation at that particular time? I just want them to make a public apology. I think they should, and state categorically that the suspension was wrong. They should make it right.”

Philip Haven, the Bahamas Mortgage Corporation’s managing director, in a May 7, 2021, letter to Ms Deveaux confirming her suspension, said: “We refer to our meeting dated April 22, 2021, based upon which you are aware that the Corporation is currently actively investigating matters related to apparent serious irregularities in relation to the issuance and management of several mortgages issued during the period 2010-2013.

“During the course of the meeting, we provided you with details of the serious concerns which we had in relation to the role which you played in the issuance of these mortgages which, at this current time, appear to be at best irregular and, at worst, may have elements of fraud.”

Mr Haven told Ms Deveaux the Mortgage Corporation’s concerns related to her assessment that no loss was suffered on the Snow View deal; alleged failures “to identify the defects in title” at both Abraham Estates and a development on Bernard Road; and failure to take action against the attorneys responsible for the bungled title opinions that had “resulted in loss and/or exposure to loss”.

He added: “The Corporation has incurred a loss in excess of $3.5mm, outside of the inherent opportunity cost, in the Snow View subdivision to remediate title defects, procurement of subdivision approval and refunds to customers.”

However, Ms Deveaux described these allegations as “foolishness”. She said she had been responsible for filing a complaint with the Bahamas Bar Association’s disciplinary tribunal against Mr Kellman for his purported failings, and a hearing for directions in that matter was held two weeks ago.

Mr Haven, though, also detailed concerns over three properties acquired in the Tusculum Subdivision in western New Providence by a developer called Pacific Investment Group. These were all subsequently sold on to Mortgage Corporation borrowers, but all three mortgages were written by the same loan officer, and also shared the same attorney and real estate appraiser.

The land parcels in the sales agreements did not match those on the conveyances, Mr Haven wrote, adding: “To-date, the stamped and recorded conveyance remains outstanding; there is effectively no security on the property.

“While there is evidence that some payments were made to these mortgages, none of the clients made more than nine payments to the account. Collection activity progressed, and new appraisals were conducted that confirmed inflated market values used to qualify the client.

“In all cases, the new appraisal returned market values well below the amount financed to the client. In one instance, the value was $63,000 less than the initial appraisal completed three years earlier.” Mr Haven warned Ms Deveaux that the allegations, if confirmed, “would invariably be indicative of gross incompetence and gross negligence on your part” even if there was no fraudulent activity.

But Ms Deveaux, in her written response to the claims, blasted back: “Please be advised that I deny each and every claim and allegation made against me as contained in your above referenced letter. I have always acted bona fide and in good faith in the discharge of my fiduciary duties to Bahamas Mortgage Corporation.

“Each and every one of your claims is baseless and unfair with the intent to malign my character and cause me loss and damage.” Arguing that she was not being given access to documents with which to defend herself, she added: “Due to the fact that I joined the Corporation in May 2012, any references to responsibilities for mortgages granted prior to the time of my on-boarding between 2010 to April 2012....is baseless and unjust.”

On Snow View, she said the former Board agreed to purchase the subdivision after its seller, Universal Travel Agency and Tour Company, revealed that the original purchaser/developer, Seven Stars Investment, had failed to pay the full purchase price.

She referenced minutes from a November 19, 2013, Board meeting where it was forecast that the Mortgage Corporation could generate “20 percent profit per property” from sales, she said of Snow View’s acquisition: “The Board made a decision to purchase Snow View from Universal Tour so as to guard against a legal claim by Universal Tour to ownership of Snow View and dispossessing the Mortgage Corporation’s borrowers and the Mortgage Corporation of the properties...

“If Universal insisted on its rights as the true owners of Snow View, and took possession of the entirety of its property, the Mortgage Corporation would suffer a loss because it would not be able to hold those properties as security.

“The fact that Universal Tour granted confirmatory conveyances to all affected borrowers of the Mortgage Corporation meant that the Mortgage Corporation would not suffer a loss as it will be able to retain title through its mortgages and exercise its power of sale if deemed necessary.”

The same developer, Seven Stars Investment, created a further headache for the Mortgage Corporation over loans it had issued to lot buyers in Abraham Estates after it encountered challenges in obtaining financing to put in the necessary infrastructure and associated utilities.

Sandra Storr, the Mortgage Corporation’s then-managing director, on July 26, 2013, described borrower clients as “irate” after purchasing lots with appraised values of $70,000, which she said was below the $100,000-plus typically charged for the area.

“Some of the customers are obviously unhappy about their purchase and appear to be having buyers’ remorse. Any implication of collusion on the part of the Corporation in this matter is unjust. They approached the Mortgage Corporation for financing of these properties at pre-developed prices. However, they obviously hoped to see completion of the infrastructure by now,” she said.

“We understand their frustration and, as indicated, the Corporation has also taken steps to encourage the developer to follow through on any agreement he may have made with these individuals. By way of information, the Mortgage Corporation no longer provides financing for properties without subdivision approval.”