GERS responds to IG critical report
Steven van Beverhoudt, VI Inspector General, reports for the second time that the Virgin Islands government employee pension system has mismanaged a loan to VI Finest Foods. The principal of the loan has been recovered and bears no relation to the much larger financial crisis facing the pension system. In a letter to GERS board chairman Nellon Bowry at the end of September, Beverhoudt wrote: “GERS did not adequately review the services rendered and did not review the expenses incurred for a loan from $ 2.7 million ”. This was the second loan granted to Finest Food. Beverhoudt also wrote a report in 2016 criticizing the initial loan to Finest Food of $ 8.2 million.
Senator Kurt Vialet told The Source on Wednesday that the report’s findings came as no surprise.
He said senators had heard before that there were problems with the Finest Food loan. He said the problems started early in the process.
Beverhoudt wrote “GERS did not ensure that inspectors monitor all phases of the project while continuing to release funds for the project”
Vialet says that GERS needs to put more guarantees in place in its investment programs.
The report recommends that GERS, if a similar program is restarted, to create a unit to supervise and monitor the costs of the project. In the official GERS response to the report, it agreed to create such a unit if the alternative investment program is relaunched. The program has been suspended.
Austin Nibbs, administrator of GERS, responded in an email to The Source to specific criticisms of the report.
As to the criticism that GERS did not manage the loan effectively, Nibbs wrote: “GERS hired a reputable engineering and architecture firm to be its owner’s representative to review and approve all payment requests received from VI Finest Foods. He added that GERS also hired an outside accountant to review the books and records of VI Finest Foods, but the records were not available.
As to the criticism that GERS advanced the loan without adequate review, Nibbs responded that the GERS board approved the request based on the presentations of the consultant and the engineer / architect of VI Finest Food which were confirmed. by the examination of the engineering and architecture firm of GERS.
The report states that $ 480,850 of the loan proceeds were misappropriated for unrelated purposes. Nibbs writes that he rejected this request as inappropriate for Finest Foods because no inventory had been purchased for the West Bay supermarket. However, Nibbs said GERS was unable to confirm where this money went because, again, GERS was unable to obtain the relevant books and records.
The report also indicates that GERS is negotiating a new loan agreement for the original principal outstanding of $ 3.3 million. And “The collectability of this balance remains uncertain.”
Nibbs wrote: “GERS is not negotiating a new loan agreement. This case is in progress to recover the balance of interest owed to GERS. Nibbs added that it should be noted that “GERS has recovered all of the $ 11 million that has been paid”.
The original loan in 2014 was $ 8.2 million to VI Finest Foods for a new grocery store in St. Thomas. Finest Food then asked for an additional $ 2.7 million, and it was granted.
In 2016, an Inspector General’s report addressed the 2014 portion of the loan and said: “The application and qualification process took almost two years as the applicants struggled to deliver documentation to prove the character. , capacity, guarantee, capital and favorable conditions. In fact,… the external financial consultant drafted an investment memorandum recommending that GERS “not invest” due to competition, repayment capacity and the proposers’ limited experience in operating retail grocery store ‘,
Vialet told The Source that he does not think the loan program problem will distract from the larger GERS problem – impending insolvency.