In early January 2023, news broke that several depositors at the investment firm Stocks and Securities Ltd., (SSL) had been fleeced of billions of dollars.
On Wednesday January 18, a document purportedly signed by an investment advisor who had recently resigned from the company after 25 years of service, was in circulation. The document, a sworn statement witnessed by a Justice of the Peace, listed the names of tens of depositors from whose accounts the investment advisor had stolen funds. The investment advisor, a woman, euphemistically described her actions as removal without account holder’s permission.
The alleged perpetrator also stated, quite instructively, that she took about twenty percent of the sums from the accounts she listed. With her confessed actions amounting to tens of millions, and the scope of the alleged fraud being in the billions, the question which arises is: where has the rest of the money gone and who is responsible?
Oversight Failure?
The government agency responsible for overseeing the operations of non-bank, deposit-taking institutions such as SSL, is the Financial Services Commission (FSC). According to confirmed reports, in 2017, the FSC identified major operational breaches at SSL dating back several years and had been engaging SSL in dealing with said breaches, having described SSL as a “problem institution”. Early in the week of January 16, 2023, the FSC held a press conference to presumably address the issues and to assure the public that it has the matter under control. But apart from the revelation that the FSC was advised of the massive fraud on January 10, and responded on January 12, ostensibly to impose its regulatory authority through, among other things seeking further details, the FSC shed very little light on the situation.
What stood out from the facts revealed or uncovered, was that the FSC despite knowing of the problems at SSL for years, and despite having labeled the entity a “problem institution” could show no evidence of anything it had done to correct, or cause correction of, the problems at SSL.
In response to the developments, the Minister of Finance, Dr. Nigel Clarke, apparently sought and obtained the resignation of the head of FSC, Everton McFarlane. But the resignation of McFarlane is the lowest level at which accountability in this matter can occur. A deep and broad intervention is necessary and must involve ALL members of the management and boards of both the SSL and FSC and a massive criminal and fiduciary responsibility probe, including up to the country’s political directorate.
What’s at Stake
What is at stake in this crisis is not just the losses incurred by the depositors whose funds have gone missing, and the probability that they may not be able to recover all, if any; nor is it just the jolting of confidence in non-bank, deposit-taking institutions (although fraud has occurred at others including banks). What is at stake is Jamaica’s global reputation and whether local or overseas investors can trust Jamaica’s financial system. When one considers that the sums involved amount to billions, it must cause great fright that that volume of money could be moved around in the financial system, fraudulently and remain undetected or detected but unaddressed for years!
It would therefore not be an act of paranoia for Jamaican citizens and foreigners who do or plan to do business with Jamaica to wonder if, and fear that, their funds could be similarly treated. The gravity of this situation requires urgent, focused, transparent leadership and intervention, not just by the security forces, and investigative bodies such as the Office of the Auditor General, but above all by the country’s executive, chiefly the Minister of Finance and the Prime Minister.
The Urgent Need for Moral Leadership
If it is accepted that what is at stake (in this reported massive fraud and apparent failure of oversight by the agency charged with protecting the public) is Jamaica’s global image and reputation, then what is needed in dealing with the problem, above all else is moral leadership. As I pointed out in “Moral Leadership: A Global Crisis?”, published on January 13, 2023 (http://leadershipreimagination.com/), moral leadership, according to Cheng et al (2004), involves the demonstration of superior personal virtues.
For a leader to claim to possess superior personal virtues, and thus to be a moral leader, he or she cannot expect to gain recognition of being a moral leader by suddenly attempting to portray those qualities in the face of a crisis. Those qualities must precede and predate a leader’s crisis management activities as it is the known existence of those qualities which will give him or her the right and power to provide leadership in a time of crisis. Thus, the degree to which a leader is seen as credible, will determine his or her effectiveness to lead during a crisis.
But it is never too late to do the right thing, therefore a leader who when faced with a crisis is handicapped by insufficient pre-crisis moral authority, must, during the crisis do what needs to be done to acquire for that time of crisis, and hopefully build for the future, the level of moral authority needed to lead.
The Moral Handicaps facing Jamaica’s Leaders
In 2016, in explaining how he was able to build a multi-million-dollar mansion, given his small Member of Parliament’s salary, then Opposition Leader (now Prime Minister) Andrew Holness, disclosed that he used funds from accounts at SSL. Information has also emerged showing or suggesting close political ties between some members of the management and board of SSL and the FSC and members of the governing Jamaica Labour Party (JLP).
Against the background of the foregoing, cynicism or mistrust on the part of many members of the public (including supporters of the JLP) on the probable transparency and independence of investigations into the operations of SSL and FSC, would be quite understandable, and perhaps inevitable. Thus, the fact of dealings (business and otherwise) between members of the political directorate, on the one hand, and SSL and FSC, on the other, poses a real handicap for the moral leadership of the government and in particular the Prime Minister.
Added to the fact that the Prime Minister is a customer or investor at SSL, is the daunting fact that, as at date, his 2021 integrity declarations, have remained uncertified by the Integrity Commission (IC), since October 2022. Uncertified integrity declarations mean that the IC has raised questions or asked the Prime Minister to clarify issues in his filing, which to date he has not clarified to the satisfaction of the IC.
While the two things, above, may be materially and legally unrelated, they are morally connected. In the case of SSL there is the potential for conflict of interest, if it is indeed the case that principals of SSL are closely allied politically to the Prime Minister. So, the Prime Minister faces, in this regard, unanswered questions about the nature of his financial dealings with a financial entity. In the case of the Prime Minister’s uncertified integrity declarations, he faces unanswered questions as to why his declarations are not certified. The existence of these questions impairs the capacity of the Prime Minister to offer moral leadership.
Some suggested solutions to the Prime Minister’s inability to provide moral leadership.
In view of the real compromise of his ability to provide moral leadership, I propose five things the Prime Minister should do, in order to retain public (local and international) faith in Jamaica’s financial system and protect the integrity of the investigations into the operations of SSL and the FSC. These are that the Prime Minister:
- Makes public the nature of his business relationship with SSL, including when he had lodged funds there, the amounts involved, the source of the funds, the amounts removed in 2016, the balance that remained, and whether his accounts there were affected by the alleged fraud, and if so, how much.
- Lends his voice of support to the Auditor General to immediately conduct an audit of the operations of the FSC.
- Invites international help to conduct a forensic audit of the operations of the SSL.
- Releases the names of all persons at the SSL and FSC who are card-carrying members / donors of the JLP.
- Explains to the public the reasons for the delay in the certification of his integrity declarations by the IC.
Unless all five actions are taken by the PM, and urgently, then increasing harm will be done to Jamaica.
Professor Canute Thompson is Professor of Educational Policy, Planning, and Leadership at the School of Education, The University of the West Indies, Mona Campus, and Head of the Caribbean Centre for Educational Planning. He is author of two award-winning books and articles, among his collection of eight books and over a dozen journal articles, and the operator of leadershipreimagination.com website. Professor Thompson is an outspoken critic of the Jamaica Labour Party (JLP) and an avid supporter of the opposition People's National Party (PNP).