Cash Plus real estate arm in liquidation

Cash Plus real estate arm in liquidation
by jamaicaobserver.com
Paul Henry
Monday, September 22, 2008

Cash Plus Development, a subsidiary of Carlos Hill’s failed Cash Plus group, was Friday placed into liquidation by the Supreme Court.

The liquidation order was made by Justice Marva McDonald following an application by the court-approved trustee in bankruptcy, Monty Kandekore.

It is believed that the real estate company has assets of some $2 billion.

However, Kandekore, who is also the liquidator of the Cash Plus Group and Cash Plus Limited said that only part payment was made on some of the properties purported to be that of Cash Plus Development. Kandekore said he would only be able to recoup the part payment made on properties that exceed 10 per cent of the purchase price.

As Liquidator, Kandekore is responsible for disposing of the assets of the companies in order to secure funding to pay relevant claims that may be made against the entities by investors.

Cash Plus has approximately 40,000 clients to whom it owes billions of dollars. Several multimillion lawsuits have been filed to recoup monies invested in the failed alternative investment scheme.

Kandekore was appointed liquidator in June by the court, following an application by the Premier League Clubs Association to wind up Cash Plus Group Limited, because of its failure to honour sponsorship commitments regarding the National Premier League Football competition.

Psychologist urges investors to seek help

Psychologist urges investors to seek help
Jamaica Gleaner – Kingston,Jamaica
published: Thursday | July 17, 2008

Following this week’s reports of yet another informal investment club’s apparent collapse, psychologist Dr Leahcim Semaj is advising people who have lost their money to not only seek financial counselling, but to make a special effort to get professional psychological help.

Several more people are likely to lose hundreds of millions of dollars if Olint Corporation Ltd’s operations are brought under by the authorities.

Many losers

Many have already lost funds in other troubled informal investment clubs since the start of the year.

The reports have left many investors worried to the point of illness, with some informal reports of suicide and at least two persons suffering strokes after learning they might not be able to get back their savings.

Yesterday, Semaj told The Gleaner that the knowledge of losing such a large sum of money would trigger stress and the power of stress should not be underestimated.

Stress related

“Up to 90 per cent of visits to doctors are all stress related,” he said. “Up to 80 per cent of all diseases have a stress component. So, we often underestimate the power of stress.”

The two main sources of stress often have to do with money/work or intimacy.

According to Semaj, people should invest no more than 30 per cent of their assets in high-risk funds, and when people violate this rule, there is stress.

“When it looks like they will be losing those monies, the stress is now seen because the chance of them being able to make back that money is between slim and none. So, the real issue is just accepting any kind of loss,” he advised.

Semaj said that while accepting the loss might not be easy, it was ultimately what investors would have to do.

“What they will have to do is seek professional help. Physical illness can occur, but more so things like depression, because the more you start worrying about what happened, the more depressed you become.”

The danger of paper profits

The danger of paper profits
Jamaica Observer – Kingston,Jamaica
Contributed by Dennis Chung
Friday, August 01, 2008

The unregulated financial organisations (UFOs) have one after the other stopped paying out monthly amounts to participants, start-ing with Cash Plus last year. What is even more evident is that many of the over 20 UFOs, identified by the FSC, seem to be “genetically” linked, leading to the collapse of many at one time. This no doubt has led to significant fall-off in the income levels of many Jamaicans, and will no doubt affect industries such as the motor vehicle and real estate sectors.

I have been speaking with some people who have been severely affected by the fallout, as many have not only placed the great majority of their savings in these schemes, but also bor-rowed money to secure assets based on the income flow they expected to continue in per-petuity. The decision to rely on ‘risky’ investments to main-tain a lifestyle of course is one groun-ded in stupidity, as even if a risky investment is legitimate, the fact that it carries such a high risk means that one cannot prudently expect it to continue forever.

Foreign currency trading

I have always indicated that foreign currency trading is a well-established trading activity, and people do make significant returns from trading cur- rency. Within the global context, foreign exchange trading accounts for over US$2 trillion traded daily, and is much larger than any single tra-ditional investment type. On the other hand, I have always been at pains to point out that there is a high degree of risk associated with this type of activity – and just as one wins big, one can lose big also. So even if high-risk investments are regulated, in many instances they will make huge losses and go out of business, causing much pain to those who have invested. In fact, one legitimate hedge fund in the US last week reported that it was going out of business as it had lost some US$3.2 billion on oil longs when the price of oil futures significantly fell off.

There are, of course, methods that can be used to minimise losses, but on average a hedge fund may last for around five years and then usually suffers significant losses because of its risky nature. The lesson, though, is that anyone who significantly upped their lifestyle based on risky returns should not only see a psy-chiatrist, but also a neuro-surgeon to determine what part of their brain was not functioning when they made that decision.

The bigger picture for Jamaica, however, is that these returns were nothing more than paper profits. And the problem with paper profits is that there is no productive asset to back it up, so what it creates is a false sense of wealth for the country, with no productive base. As a country, this is not a strange phenomenon for us. In the 1990s – because of a high interest rate policy – we did create a “paper profit” economy which effectively killed the productive sector, and on its way helped to create that monstrosity we call FINSAC.

Paper profits create a notional return that cannot be backed by the creation of any goods for consumption. So wealth is created by means of money on paper, and is unsupported by an increase in assets, which eventually leads to inflationary pressures. The effect of these inflationary pressures is to push up prices or interest rates in order to keep prices stable, or to borrow money in order to buy more goods for consumption – or a combination of both.

So, when paper profits were being created by high rates of interest on government paper in the 1990s, in order to prevent the inflationary pressures from pushing prices up, we borrowed money to create an illusion that there was real stability when all the time we were only setting up ourselves for the pain that comes with debt repayment. This was not the result of any unregulated scheme, but was the design of legitimate government policy – which had the same effect as the collapse of the UFOs. The only difference was that in the 1990s, taxpayers bailed out those that would have lost their investments, whereas today those that invested directly will lose out.

Parties should repay Cash Plus, Olint

Parties should repay Cash Plus, Olint
published: jamaica-gleaner.com Thursday | September 11, 2008

It is the first anniversary of the 2007 general elections and the nation is in the dark about the source of funds and the sums used to finance the campaigns. In this age, in a civilised country with the threat of money laundering, civil society sees no evil in the present secrecy arrangements.

I read in a Sunday Herald publication that the Jamaica Labour Party (JLP) and the People’s National Party (PNP) admitted that they accepted money from Cash Plus and Olint to finance their election campaign. The respective spokesmen declined to disclose the sums.

It is strange that the then governing party, PNP, would accept money from Cash Plus and Olint when its own minister of finance was so strident against these two companies and there was a cease and desist order against one company. The PNP was saying one thing and doing another. The JLP would have information about these companies that ordinary Jamaicans would not have. I was made aware from September/October last year of some of the things that have since proven true. To accept donations from Cash Plus and Olint was worse than accepting money from Trafigura.

Government regulatory agency

It is amazing that the Financial Services Commission (FSC), a Government regulatory agency, was warning Jamaicans about doing business with these and other entities that do not disclose their financial records and are not registered with the FSC, yet our two main political parties were reaping benefits from them. If it were in the United Kingdom or the United States of America, the leaders who received the money and had knowledge of it would have resigned. In addition, the present minister of finance, when he was Opposition spokesman for finance, gave an endorsement of such enterprises in his budget speech. Some church leaders were principals and participants in foreign exchange trading clubs. A football entity headed by a former prime minister negotiated a sponsorship deal with Cash Plus and it was expected that ordinary Jamaicans should know that Cash Plus was little more than a pyramid scheme?

Investors have been called foolish. However, a Gleaner editorial (August 13) stated that one foreign currency trader said that only 20 per cent of the funds would be traded and the other 80 per cent would be placed in safer investments.

Financial statements

It is sad that investors are being chided for not looking at or seeking financial statements. However, persons can look at the same financial statements and come up with different conclusions. For example, some people believe that, based on the balance sheet, the Brazilian company Infiniti, that will be taking over the sugar industry and part of Petroleum Corporation of Jamaica, cannot deliver, while others examining the same balance sheet believe they can. Did not Michael Lee Chin examine the balance sheet before he lost hundreds of millions in Trinidad? Didn’t Joe Lewis examine the Bear Stearns balance sheet before he lost billions in that company? The truth is every investment carries risk, some more than others.

Investors were gullible

It is fashionable not only to claim that investors were gullible, but also greedy. There were certain elements of both. However, there are persons who tried those things because of hardships and the Government should be sensitive to those who might lose their homes. In addition, foreign-currency trading has two systemic problems. One is rogue traders and two is that the trading platform allows persons to trade up to five times the money he or she has. Both need to stop and make foreign currency a less-risky business.

In the meantime, the JLP and the PNP should return the monies they received from Cash Plus and Olint for the elections. This could be used to help repay the ‘foolish’ investors.

Devon Dick is pastor of the Boulevard Baptist Church and author of Rebellion to Riot, the church in nation building. Feedback may be sent to columns@gleanerjm.com