The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An accountant has warned that “numerous suspicious transactions” appear to have occurred involving the City Markets pension plan, which required further detailed examination and scrutiny.

The disclosure was contained in a January 7, 2016, letter sent to the pension plan’s current trustees by L. Sidney Saunders, who they had hired to conduct an accounting and reconciliation of the sums due to beneficiaries.

Mr Saunders’ letter, which was among a batch of documents filed with the Supreme Court, did not identify the specific transactions he was referring to, or the individuals or corporate entities involved.

However, his findings - based on an admittedly “cursory review”- have been seized on by representatives for the hundreds of former City Markets employees who have been waiting for more than four years to gain access to their retirement funds and entitlements.

Whanslaw Turnquest, the defunct supermarket chain’s former chief inventory control officer, alleged that the pension plan’s newly-obtained financial records showed evidence of “exorbitant, questionable and unauthorised” payments to various professionals and others.

His April 28, 2016, affidavit alleges that the City Markets pension fund was being “depleted” while its beneficiaries waited for payment.

Numerous cheques, drawn on the pension fund’s account with CIBC FirstCaribbean International Bank (Bahamas), were attached as exhibits to Mr Turnquest’s affidavit.

They reveal that thousands of dollars were being paid by the City Markets pension fund to consultants, legal advisors, other professionals and vendors during 2012-2013 - a period during which the supermarket chain had largely ceased operating and stopped contributing income to the fund.

City Markets shut down in early 2012, with the cheques also showing that thousands of dollars were paid in trustee and director fees to Mark Finlayson and Philip Kemp. The duo were both then-serving as trustees for the pension fund, and as City Markets directors and executives.

There is nothing to suggest there was anything wrong with these payments, yet several other transactions are likely to raise eyebrows.

For instance, a $20,000 cheque drawn on the City Markets pension plan on February 22, 2013, was used to pay Bahamas Automotive Services for the purchase of a 2009 Hyundai van. The licensing and insurance costs for the van were also paid by the pension fund.

And a $176,000 cheque was drawn on March 19, 2013, to pay Trans-Island Traders, the last 78 per cent majority owner of City Markets, “closing fees for the sale of vacant land”. The land in question is not identified.

Trans-Island Traders was the Finlayson family-owned vehicle that purchased majority ownership of City Markets from the BSL Holdings private equity group, whose disastrous years in charge set the stage for the supermarket chain’s failure.

It is unclear what Mr Saunders was referring to, but he told the current City Market pension fund trustees: “Having had an opportunity to cursorily review the bank statements, it is apparent that numerous transactions recorded by the bank appear suspicious in nature and require further audit scrutiny.

“Therefore, we would be hesitant to release these bank statements until we have had an opportunity to subject these documents to further examination, and to ascertain whether those suspicious transactions were made contrary to the objectives and intent of the Bahamas Supermarkets Ltd Profit Sharing Retirement Plan.”

Mr Saunders was engaged by the current City Markets pension fund trustees, Dennis Williams and Rosalie McKenzie, to determine the extent of its beneficiary liabilities, and how much each person was entitled to.

He was to work with fellow accountant Louis Butler, who had been hired by the pension beneficiaries represented by Mr Turnquest, as part of an arrangement where both sides sought to agree the financial numbers for the years 2006-2015.

Mr Saunders, though, warned Mr Williams in his January 7 letter that turning over the pension fund’s bank statements at that point in time, could expose the current trustee to “dereliction of his fiduciary responsibilities”.

He explained: “Divulging confidential operational banking records before they have been subjected to financial scrutiny and verification is not a prudent business decision, bearing in mind there appears to be numerous significant withdrawals that need to be further investigated and explained.

“Until this investigation has been successfully conducted and concluded, it would be imprudent to release these bank statements.”

Mr Saunders said the accountants were in “a tenuous position” due to numerous discrepancies in the City Markets pension fund’s financial affairs.

He noted, for example, that Scotiabank (Bahamas) denied having any banking relationship with the pension fund, which directly contradicted the findings of a previous forensic accounting by John Bain.

As a result, Mr Saunders said the reconciliation was likely to take four to six months, rather than the four to six weeks initially estimated. Tribune Business understands that accounting exercise has just been completed (see other article on Page 1B).

Mr Saunders letter was filed as part of a February 8, 2016, action initiated by the current pension fund trustees, Mr Williams and Ms McKenzie, over real estate deals involving City Markets’ former East-West Highway headquarters.

That property once represented the pension fund’s most valuable asset, but years of being unoccupied mean that it has deteriorated massively, with much of its infrastructure either damaged of looted.

The trustees had been seeking a Supreme Court Order that the East-West Highway building was still owned by the pension plan or, in the alternative, that other parties be blocked from selling it and/or remit the proceeds to themselves.

Tribune Business, though, understands that this particular action has been discontinued, something that was confirmed to it yesterday.

A September 18, 2015, exchange of e-mails between Mr Finlayson and Mr Williams exposed a sharp division of opinion between the two over who owned the East-West Highway property.

Mr Finlayson stuck to the position that as part of a January 16, 2015, settlement agreement, the pension plan’s interest in the former company head office was exchanged for preference shares in Associated Bahamian Distillers and Brewers (ABDAB).

The deal effectively switched the security for the former supermarket chain’s pension beneficiaries from illiquid real estate assets that have proven “impossible” to sell to a more liquid investment in the Finlayson family-controlled company.

With no buyer found for the former City Markets head office on East-West Highway, the pension beneficiaries - via the trade union that represented the majority of the former workers - were in theory given the opportunity to receive dividend payments on those $2.6 million worth preference shares and, potentially, a cash payout of everything owed to them.

But Mr Finlayson, on September 18, 2015, offered to “reverse” the transactions in the January 2015 agreement provided all other parties agreed.

Mr Williams, though, argued in an e-mail the same day that the conveyances for the East-West Highway property’s division, and sale, to two ABDAB companies were “invalid” and that the pension fund remained the true owner.

He was especially concerned over the separate sale of the back parking lot and delivery area, which the new trustees were “only made aware of... in the last few weeks” - some seven to eight months after the deal took place.

Mr Williams also alleged that ABDAB had defaulted on its agreement to redeem the preference shares issued to union-represented pension beneficiaries, and pay out what was owed to them.

Mr Finlayson yesterday referred Tribune Business to his and the former trustees’ latest attorney, ex-FNM Senator Desmond Edwards, when contacted for comment.

Mr Edwards confirmed to this newspaper that the February 8 action initiated against his clients by the current trustees had been “withdrawn”, but declined to speak further.

He asked Tribune Business to submit questions in writing, which it has done, but no replies were received prior to press deadline.

However, Mr Edwards responded to further correspondence on the East-West Highway property on February 4, 2016, warning it could not have been vested in Mr Williams and Ms McKenzie as trustees.

Mr Williams, though, told Tribune Business yesterday that he and Ms McKenzie were standing by their original position that the City Markets pension fund still owns the building and associated land.

“The trustees are advised by [attorneys] that the property is absolutely owned by the City Markets pension plan,” he said via e-mail.

“There are no concerns related to the transaction purportedly transferring the East-West Highway property, as the trustees were duly advised by two counsels that the transaction is null, void illegal and of no effect.

“The properties will be placed in the market in very short order and sold for the benefit of the beneficiaries.”