Thursday, July 31, 2008

HCU gave Maha Sabha $800,000 as charity: Harinarine

Harry Harinarine says two loans that the Hindu Credit Union gave to the Costa Rican ambassador amounting to $269,000 between march 2002 and June 2003 were approved after a top PNM official made a recommendation on behalf of the diplomat.

That loan was one cited in a report prepared for the Commissioner of Cooperatives in documenting activities of the HCU.

The report noted that the ambassador did not make any repayment on the loan and that the outstanding interest was $234,556.10 as at September 15, 2006.

In an interview with the Guardian the HCU chief agreed that the organization approved loans too easily and that contributed to the problems that eventually led to the closure of the HCU. He also said HCU interest rates were also lower than other credit union.

Harinarine said while people have been quick to knock him and the HCU few of them understand what was really going on, including those who have benefited from the credit union.

He told the paper his organization approved a loan of $800,000 to the Sanatan Dharma Maha Sabha (SDMS) in 2000 to build two secondary schools. He said he was trying to help the Hindu organization and approved the loan without any security based on a letter from Sat Maharaj, Secretary General of the SDMS.

Harinarine said one year after approving the loan the HCU cancelled the SDMS' liability and wrote off the full $800,000 as "charity".

Maharaj has not spoken about that issue in his attacks on Harinarine and the HCU.

The SDMS boss has been one of the most vocal critics of the HCU and has used the SDMS's Radio Jaagriti to launch a series of attacks on Harinarine, which might have contributed to the fall.

Maharaj even urged authorities to seize Harinarine's assets and probe him and every member of the HCU board.

Allegations of misuse of company funds for personal gain, mismanagement of the organisation’s funds, violation of loans policy and the relentless media attention into his personal affairs led the current state of affairs, Harinarine noted.

And he said there was another element: race and religion.

The HCU was formed in 1985 primarily as a Hindu organization to serve that community. But when Harinarine took over the credit union in 1997 he decided to expand it while maintaining its basic principles.

He opened up membership to non-Hindus. By 2001 the HCU had grown from 14,000 shareholders to more than 50,000 and it continued to make quantum leaps as it diversified into real estate, communications and other business ventures.

Harinarine also claims that his coziness with the People's National Movement (PNM) led to his organization's downfall.

He said on the one hand it caused his base - which was mainly rural Indian - to become angry for supporting the PNM while on the other the PNM didn't respond when he appealed for help to rescue the organization.

Harnarine said the HCU’s cash-in-hand was always one-tenth of its deposits, which is standard with most credit unions.

But he said demand for repayment exceeded the supply of cash after bad publicity caused depositors to begin losing confidence in the organization.

"This run was not caused by mismanagement, it was an institutional run. In our case, our run can be described as a public relations damaging run. There were statements that were made that was (sic) very damaging," he told the Guardian.

"I should have liquidated and closed the company in 2004 when the run began. But I tried to hold on and turn it around and look at it today," he said.

Harnarine said the HCU—which at its peak boasted of 190,000-plus members and an asset base of $1.1 billion—has reached the end.

About 900 employees are out of work, the HCU has $776 million in liabilities and a liquidator has been appointed by the High Court.

A glance at where the HCU today show that the organization is $153 million in the red. That's based on the following breakdown quoted by the Guardian:

Liabilities Total: $776 million including:

  • Members’ deposits/shares: $700 million
  • Loan from Exim Bank, USA: $24 million
  • Borrowing from Intercommercial Bank: $12 million
  • Mortgage from Clico: $35 million.

Assets Total assets: $623 million comprising:

  • Fixed Assets: 181 million
  • Investment properties: $185 million
  • Loans to members: $164 million
  • Available for investment: $33 million
  • Investment in subsidiaries (litigation): $60 million

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