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Debt trap
2008-05-24 Written by: No Author
Jamaica Sunday Herald
The second interim report of receiver manager, Kevin Bandoian and his team indicate that the Cash Plus Group and its creditors were caught in a debt trap. Professor Paul Samuelson of the famous Massachusetts Institute of Technology (MIT) notes that a debt trap results when a country, entity or individual has to borrow from Peter to pay Paul.
Bandoian said that only three of the over 200 companies in the Cash Plus group were viable. He also said that these three companies were not generating enough revenue to the group’s operating expenses, while paying the 35,000 to 45,000 investors and its employees.
The receiver managers also pointed out that the funds borrowed from creditors by Cash Plus Limited were used to repay investors, as well as to invest in tangible assets such as real estate, which were purchased by Cash Plus Developments Limited and the Cash Plus Group.
Bandoian also posited that between 2004 and 2007 investors pumped J$22 billion into Cash Plus Limited, one of the members of the group, which was incorporated on May 5, 2003.
Meanwhile, the receiver managers noted that Cash Plus entered into a number of these real estate transactions real estate transactions without doing the appropriate due diligence. He also said many of these transactions were above market value, were never completed after the initial down payment was made.
No independent valuations were also done on the properties which the group was trying acquire and which contributed to the significant mismatching of assets and liabilities discovered by the receiver manager.
Bandoinan also pointed out the group was characterized by poor internal controls; poorly maintained accounting records; inadequate financial planning; severe mismatching of assets and liabilities; a third party payment system and an overall unsustainable business model. The receiver managers were unable to find any documentation to support the group’s philosophy, methodology or financial plans.
The report of the receiver manager conforms with the analyses of the Financial Services Commission (FSC) during the last 10 months and contradicts that of Hill and his public relations consultants, who sought to give the impression that the banking system, the FSC and the media were against his company because they did not want to see “poor” people make money.
2008-05-24 Written by: No Author
Jamaica Sunday Herald
The second interim report of receiver manager, Kevin Bandoian and his team indicate that the Cash Plus Group and its creditors were caught in a debt trap. Professor Paul Samuelson of the famous Massachusetts Institute of Technology (MIT) notes that a debt trap results when a country, entity or individual has to borrow from Peter to pay Paul.
Bandoian said that only three of the over 200 companies in the Cash Plus group were viable. He also said that these three companies were not generating enough revenue to the group’s operating expenses, while paying the 35,000 to 45,000 investors and its employees.
The receiver managers also pointed out that the funds borrowed from creditors by Cash Plus Limited were used to repay investors, as well as to invest in tangible assets such as real estate, which were purchased by Cash Plus Developments Limited and the Cash Plus Group.
Bandoian also posited that between 2004 and 2007 investors pumped J$22 billion into Cash Plus Limited, one of the members of the group, which was incorporated on May 5, 2003.
Meanwhile, the receiver managers noted that Cash Plus entered into a number of these real estate transactions real estate transactions without doing the appropriate due diligence. He also said many of these transactions were above market value, were never completed after the initial down payment was made.
No independent valuations were also done on the properties which the group was trying acquire and which contributed to the significant mismatching of assets and liabilities discovered by the receiver manager.
Bandoinan also pointed out the group was characterized by poor internal controls; poorly maintained accounting records; inadequate financial planning; severe mismatching of assets and liabilities; a third party payment system and an overall unsustainable business model. The receiver managers were unable to find any documentation to support the group’s philosophy, methodology or financial plans.
The report of the receiver manager conforms with the analyses of the Financial Services Commission (FSC) during the last 10 months and contradicts that of Hill and his public relations consultants, who sought to give the impression that the banking system, the FSC and the media were against his company because they did not want to see “poor” people make money.
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