The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of the Bahamas shareholders yesterday reacted with outrage over the decision to nominate the existing Board of Directors for re-election, one demanding: “Where does the buck stop?”

Materials released for the BISX-listed institution’s upcoming December 18 annual general meeting (AGM), which were received by investors late last week, disclose that little has seemingly changed despite its recent $100 million government ‘bailout’.

The documents, seen by Tribune Business, reveal that seven of the eight directors up for election to the Bank of the Bahamas Board had served on its immediate predecessor, including chairman Richard Demeritte.

He is standing for the same post again, with the only new addition being Renae McKay, a likely replacement for Father James Moultrie as the National Insurance Board’s (NIB) representative.

Excluding managing director Paul McWeeney, the number of directors standing for election at the December 18 AGM has dropped to eight from the previous 11, following the Board departures of attorneys Rawson McDonald, Roger Minnis and John Wilson.

The impression given by the documents, that of little change despite record losses and a taxpayer-financed rescue, is already not sitting well with some investors.

Dionisio D’Aguilar, the outspoken businessman and Superwash president, told Tribune Business he was amazed to see the same Board standing for re-election after a year in which ordinary shareholders (himself included) suffered an almost-$69 million net loss.

“I cannot believe the same Board is there,” he told Tribune Business. “You lost $100 million [really $69 million], and are appointing the same Board? Somebody has to be held accountable for that.

“You just can’t say that we made a mistake. Where’s the buck stop? I’m confused as to where the buck is stopping.”

Mr D’Aguilar is not alone in such sentiments, the FNM’s newly-elected deputy leader K Peter Turnquest last week also calling for accountability and ‘heads to roll’, and urging change at both the management and Board levels.

The AGM materials, coupled with Bank of the Bahamas’ massive losses and related government bailout, set the scene for what may be a stormy December 18 meeting.

This will be the first chance that the 35 per cent minority investors, both institutional and retail shareholders, have to ‘grill’ Bank of the Bahamas’ management and Board about what has led to the institution’s current position.

But, in reality, there is no chance that they will be able to block the nominated directors’ election. This is because the Government, via the Treasury and National Insurance Board, holds a majority 65 per cent of the shares.

It still holds a 51 per cent majority even if NIB’s non-voting ordinary shares are stripped away, meaning that while the AGM may provide a platform for the minority to vent, it will likely be to no effect.

How much new information they will uncover on their company’s financial condition is also unclear, although its 2015 first quarter unaudited statement should be available by AGM time. Tribune Business previously revealed that the bank incurred a further $6.5 million net loss.

Apart from Mr Demeritte and Ms McKay, the other directors standing for election - and who sat on the previous Bank of the Bahamas Board - are Donna Harding-Lee; Don Davis; Errol McKinney; Eric Gibson Jr; Bishop Roston Davis; and Alexander Reckley.

If anything, the AGM documents highlight the need for further corporate governance reforms at the Bank of the Bahamas, and the need to give the minority a Board voice rather than have all directors nominated by the Government - the current practice.

The materials also confirm Mr McWeeney’s previous disclosure that Bank of the Bahamas is rolling two AGMs into one, as the December 18 meeting will deal with both its 2013 and 2014 financial years.

Shareholders are being asked to retroactively ratify the appointments of two previous Boards - those for the years ended June 30, 2013, and June 30, 2014 - despite their respective terms in office having long ended.

Financial statements and meeting minutes from two prior years and AGMs are also up for approval, as are dividend payments, director/management actions and director remuneration.

The December 18 AGM will also seek shareholder approval to appoint Ernst & Young as Bank of the Bahamas’ external auditor, a move that may surprise some in the capital markets.

Several observers suggested that the auditor would likely change, and Ernst & Young step down, following its failure to spot that Bank of the Bahamas had ‘understated’ non-performing loans by $38.4 million in its 2013 financial year.

That error was picked up in the 2014 financial year, the bank’s statements confirming: “During the year, the bank discovered an error in the ageing and classification of certain commercial and mortgage loans, where these certain loans should have been classified as past due.

“As a result of the loans past due 90 days or more, the bank’s non-accrual mortgage and commercial loans were understated in 2013 by $23.7 million and $14.7 million, respectively, and the provisions and equity reserves as a percentage of these non-accrual loans was overstated by 6.62 per cent.”