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'Toxic' Bob Borrower Loses $2.1m Appeal

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A seafood supplier's bid to obtain $2.1m in damages from Scotiabank (Bahamas) for lost profits was this week rejected as "unmeritorious" by the Court of Appeal.

Jerome Forbes and North Andros Food Services, who were among the first 13 "toxic" borrowers transferred from Bank of the Bahamas (BOB) to the Resolve bail-out vehicle, suffered a comprehensive legal defeat in efforts to obtain damages more than 20 times higher than those initially awarded against the rival commercial bank.

Appeal Justice Roy Jones, in a unanimous verdict backed by his two fellow judges, dismissed all arguments for increasing an $89,072 damages award for lost profits after Scotiabank (Bahamas) froze all North Andros Food Services' bank accounts "without warning" on August 12, 2008.

The freeze, which suspended North Andros Food Services' overdraft facilities as well as accounts at Scotiabank's Nicholls Town branch, stemmed from a fraud probe that ultimately resulted in the convictions of three former bank employees.

Mr Forbes, though, was "neither charged nor convicted" of anything related to the fraud probe, and he and his businesses - also including R&R Holding Investment Company - sought damages for the loss of revenue and profits stemming from a five-and-a-half year account freeze.

Appeal Justice Jones ' judgment described North Andros Food Services' business as the purchase, processing, wholesale and retail provision of seafood to both Bahamian and international retailers and restaurants.

Noting that the Scotiabank relationship was established in 2006, he wrote: "In periods when there were huge sales, the appellants wrote large cash cheques on their account with the respondent without objection.

"On August 12, 2008, without warning, notice or any reason whatsoever, the respondent (Scotiabank) froze the appellants' personal and business accounts. The appellants say that they were only made aware that their accounts were frozen after they made attempts to transact banking business. The accounts remained frozen up to the date the matter was settled on 29 January, 2014."

Mr Forbes was also prevented from accessing the $256,805 balance on a Scotiabank mortgage loan, which he was using to build a house in New Providence's Westridge community.

He began a Supreme Court action claiming loss and damage from the account freeze, with Scotiabank (Bahamas) counter suing to recover "the outstanding balances on his outstanding mortgage and personal credit cards, and on all the appellants' facilities with" it.

The two sides ultimately settled all issues between them bar the amount of damages due for North Andros Food Services' loss of revenue and profits, resulting in a legal battle whose outcome depended upon which 'expert witness' the Supreme Court preferred.

Mr Forbes and his companies, and Scotiabank (Bahamas), both hired accountants as 'expert witnesses' to calculate the level of profit/revenue loss incurred. Supreme Court senior justice, Stephen Isaacs sided with the calculation by Ed Rahming, the Intelisys (Bahamas) accountant and partner, who was acting for Scotiabank.

This resulted in the $89,072 award, with Senior Justice Isaacs finding that the calculation by Mr Forbes' 'expert', accountant Kevin McDonald, was based on hypothetical assumptions and documents that "lacked independence".

The Supreme Court found that Mr McDonald had relied largely on North Andros Food Services' bank statements in forming his conclusions, whereas Mr Rahming had performed a deeper analysis of the companies' profitability for the four years "immediately preceding the freeze" of the bank accounts.

Senior Justice Isaacs said the companies' profits "showed a steady decline between 2006 and 2010", and he branded the sum calculated by Mr McDonald on Mr Forbes' behalf as "manifestly excessive".

North Andros Food Services and its principal urged the Court of Appeal to set aside the $89,072 award, and called on it to undertake its own assessment of business lost from Paradise Fisheries, J&J Seafood and Phil's Food Services (the latter who, ironically, was also among the first 13 'bad' Bank of the Bahamas borrowers).

Appeal Justice Jones and his colleagues, though, could find no reason to overturn the Supreme Court's findings. The Court of Appeal reproduced a section of Mr Rahming's testimony in the lower court, where he argued that North Andros Food Services' calculations were based on "highly speculative, unproven non-factual data".

The accountant branded the calculations by Mr McDonald as "far from" the companies' actual financial performance history, and said: "The hypothetical, when you look at it, at the end of the day it is saying that he could have made 50 something million dollars if it was not an act of God, and within four years he could have made $15 million......, with a fishing GDP in the Bahamas only $71 million.

"How could this company that was making $2.5 million at its peak in four years, based on this hypothetical analysis, go all the way up to 50 something million dollars? And with an act of God he's saying it could have been $20 million. These assumptions, which are basically with an act of God I will knock 50 percent here, with an act of God I will knock off another 50 percent here, that is not necessary; we have financial statements."

The Court of Appeal then rejected the argument that the Supreme Court had failed to separate the loss of business from Paradise Fisheries with that from J&J Seafood, as North Andros Food Services used separate bank accounts for them.

It said such evidence was not placed before Senior Justice Isaacs, while Mr McDonald's calculations were for the entire 'Forbes Group of Companies' - not separate entities.

And, while Mr Forbes' 'expert witness' placed the group's total profit loss at $2.102 million, the bank account statements he relied upon showed a $4.432 million credit being offset by a $4.412 million debt.

As for North Andros Food Services itself, Mr McDonald placed its loss at $1.37 million. Again, though, Senior Justice Isaacs found that the account statements showed a positive balance of just $90,056 - a $1.936 million debit offsetting a $2.025 million credit.

Mr Rahming's analysis, though, showed that the net profits for 2005, 2006 and 2007 were $52,699; $84,791; and $36,153, respectively. The Court of Appeal ruled: "The evidence given by McDonald also points to a decline in profits in the years 2006 to 2010.... This appeal is unmeritorious and is therefore dismissed."

Comments

sealice 3 years, 2 months ago

Par for the course - when Scotia gets it hooks into you they rob you blind - this ain't the first 10th or 50th time either - I wonder how they still exist down here ..... musse one dem cronies that get special pertection...

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bogart 3 years, 2 months ago

Incredible the case got this far dats because they have money to find lawyers and sue......whereas the small man ...who gets ripped off....finds no lawyers wants to take on the case for so small punishments imposed against banks....thrn gets removed from the Banks approved lawyers list....then comes tp find out that the banks has the mostest money to appeal all the way to Provy council..then looking at this starting at August 12, 2008.....dats lke 10 years now...!!!!...the small just has to walk away..

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TheMadHatter 3 years, 2 months ago

So you can see how these WTO promises ga work fah Bahamians selling lobster to Europe and ting.

The banks just close ya accounts "by mistake" - kill ya business, then hire big time accountants to tell judge "Well dey wasnt makin' no money no-how, so to Hell with them broke-a$$ Bahamians. They ain't in our leagues. Throw out dey case and rule in favour of the foreign banks dem."

With all the stories people hear all the time, what fool would borrow a nickle from these people? Better, MUCH BETTER, to pay rent and drive kapunkle-up car. Don't let them balloons on the antenna fool ya.

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bogart 3 years, 2 months ago

...Bank...... "without warning".....10 years ago.......freezes your business bank accounts......like closung up yinna life blood to operate your business........stemming from a .........."fraud probe that ultimately resulted in the convictions of three former bank employees."..................and after investigations ... convictions.. three of its former bank employees...to compensate.??? Looks....into your.... past ....11.?12....13.?years ....even further back....business records...pays you just a settlement.?just based on dat...? ..some ten years ago...??....and dats it....?????.....someting aint right wid dis....!!!!!....

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