HCU bosses broke rules, should be made to pay out of their own pockets: Commissioner for Cooperative Development

Karyl Adams

Commissioner for Cooperative Development Karyl Adams said on Thursday persons like former Hindu Credit Union (HCU) president Harry Harnarine should be fined and made to pay out of their own pockets when presiding over illegal credit union transactions.

Adams was giving testimony at the Colman Inquiry into the failed credit union.

He said Harnarine used “other people’s money” to fund millions in risky investments and unauthorised payments.

“If Mr Harnarine wants to form private companies let him do so with his own funds,” Adams said. “Do not use other people’s money. Put your own funds at risk.”

Adams also called for tougher laws to punish delinquent credit union directors.
“We should penalise directors themselves and have them pay out of their own pockets for any failure to adhere to prudential financial standards,” he said.

Adams told the commission the HCU broke the credit union rules and outlined some of the breaches:

• An estimated $225 million paid to so-called HCU subsidiaries
• Issuing of what were purported to be unsecured loans to members and others
• The failure of directors to pay back loans to the HCU
• The HCU’s holding of millions in deposits in unapproved institutions 

He said the HCU broke both the laws of the land and its own by-laws through  “gross mismanagement” by directors, who he said were responsible for the collapse of the credit union.

Adams said many loans were granted at zero per cent and the HCU did not take action on delinquent loans.

“The policies and procedures which we found were very clear,” Adams said. “They unfortunately flouted all of them.” He noted this was widespread in relation to the granting of loans. He said subsidiaries should not have received loans from the HCU. 

“It is not legal to grant a loan to a non-member of a credit union. A subsidiary of the HCU is not construed as a member.” Many of the subsidiaries did not repay the loans and most were never viable.

Adams also gave examples of how the officers of the credit union abused their privileges while breaking the rules. He said secretary Gayndlal Ramnath, chief executive officer Rabindra Bachan and consultant Jameel Ali all benefitted from loans which far exceeded the amount of money they had invested in the HCU.

• Harnarine was granted a loan of over $1.6 million although his investments in the HCU totalled less than $40,000. The loan was delinquent
• Ramnath had a total of $7,019 invested in the credit union but was granted a loan for $175,000 to build a house on land owned by the HCU. After construction was completed Ramnath was granted a mortgage of $225,000 although his loan was delinquent. The mortgage was also delinquent
• Bachan had a total of $2,110 invested in the HCU and was granted an interest-free loan of $300,000 to purchase a vehicle. Although the loan was delinquent, Bachan was granted a second loan for $329,000 to purchase another vehicle. That second loan was also delinquent. Bachan then sold the vehicle to the HCU. He was granted a third loan for $150,000
• Ali had an investment of $100. He was granted a loan of $17,000 which became delinquent. He had an overdrawn savings account of $187,000. A $200,000 deposit without any documentation was made to the savings account