A total of 17 agencies that represented 45 percent of the sales for Guyana Stores Limited (GSL) were closed or ceased to exist at the time of privatization; when the company was sold to Royal Investments Inc.
This came out came out during the testimony of GSL’s Chief Executive, Tony Yassin when he continued his evidence before Justice Roxanne George-Wiltshire at the High Court yesterday. Yassin explained that after he had taken control of GSL he later found out that the agencies which made up some 45 percent of GSL’s sales were not in existence, although they were supposed to be part of the privatization deal.
The company’s CEO said that he was able to ascertain his losses by the financial information from 1991 to 1997 which was provided in the information memorandum of March 1999. The memorandum showed the actual sales and profit contribution for agencies in each of the division’s that were closed.
Yassin had identified, during his evidence-in-chief, the 17 agencies that did not exist when he took over the company.
He said that after assuming control of GSL he came across correspondences relating to the said agencies. He told the court that he came across a correspondence from one Mr. Fries who was at the time the CEO for GSL, to Mr. Winston Brassington, Head of the Privatization Unit of National Industrial and Commercial Investment Limited (NICIL).
The correspondence, he said, spoke about the change of leadership at GSL and the continued service of the franchises. Fries was at the time seeking a reaction from Brassington to give to the franchises who were inquiring about the new shareholders seeking to acquire GSL. The content of this letter was never made available to him, Yassin said.
Another correspondence that Yassin spoke about dealt specifically about attached documents, but those attachments were not made available with the correspondence.
At this point, lawyer for Yassin, Senior Counsel Edward Luckhoo, sought to tender a document claiming to be the attachments that the correspondence spoke of. Attorney for NICIL, RafiqTurhan Khan however objected saying that it cannot be ascertained that the documents were the actual attachments, but claimed that if the defense was seeking to tender the documents as those which were discovered, he had no difficulty with that. The documents were later tendered.
Another correspondence dated November 9, 1999, came from one Mr. Valdez to Mr. Fries. Valdez was of Perkins Latin America; one of the closed agencies. Fries had later written Mr. Brassington about Mr. Valdez’s inquires regarding service to the new investors, but none of this was related to Mr. Yassin until he discovered them in the company records after he had already purchased GSL.
Yassin reiterated, when asked, that before the agreement of sale for GSL, neither Brassington nor his agents made available correspondence or provided any information of the agencies that were closed or ceased to exist. When asked by Mr. Luckhoo, Mr. Yassin said he attempted to resuscitate the Perkins agency, but was unsuccessful.
Mr. Yassin later explained that he used figures from the information memorandum that was provided on GSL to calculate his losses as a result of the non-existent agencies. Luckhoo then tendered that document with the sales, profit and projected loss for the agencies, which included an individual summary for each of the divisions, with their respective agencies.
Mr. Yassin then said that an excess of one billion dollars was lost in profits after explaining the contributions the agencies that were closed or ceased to exist would have made. He also singled out various agencies which would have contributed major sales and profits for GSL. As a result, the company incurred those losses from the time GSL was purchased to date.
Mr. Luckhoo, then asked Yassin if he gave in writing or otherwise any permission for the encumbrance of GSL and he replied in the negative. This encumbrance was in the form of dividends incurred before the purchase of GSL. The lawyer then asked Yassin if he knew where the money to pay the dividend was coming from before reference was made to the 1999 Annual Report which showed on page 15 a $300 M liability/loan.
Further questions to Mr. Yassin by his attorney proved that he (Yassin) was aware of the source of the loan; Republic Bank. When asked, Mr. Yassin said he had discussions with Mr. Brassington concerning the encumbrance of the loan and the assets of GSL. The loan, Mr. Yassin said, was subsequently removed by himself, GSL controller Mr. Sharma and Mr. Brassington.
Mr. Yassin was also asked by Mr. Luckhoo if he would have signed the purchase and share sale agreement if the loan was included, Mr. Yassin replied in the negative. This was the reason for the cancellation of the loan, he added.
Mr. Luckhoo then asked Mr. Yassin whether he authorized that the loan be replaced by anything else and he replied in the negative, before adding that he expected it to be over.
However, Mr. Luckhoo stated, “By the time of the closing of the share sale and purchase agreement, there was a promissory note signed by Mr. Fries on October 4, 2000;” the day of GSL’s hand over.
Mr. Yassin was then asked by his lawyer whether the promissory note was among the closing documents which he reviewed a week earlier, and he replied in the negative. Mr. Luckhoo also asked Mr. Yassin if at the time of the closing if he realized that he had initialed the promissory note signed by Mr. Fries and he again replied in the negative.
Mr. Yassin later testified that on the day of the signing there were at least 16 people present in GSL’s board room, where the transaction had taken place. He said there was a group of persons from his team, a group from Brassington’s team and that of Mr. Khan.
Mr. Yassin said there was a bit of confusion during the signing over because Mr. Khan had not brought all his people who were necessary to sign off on documents. He said one Mr. Worrell, Secretary for NICIL was given documents of about 150 pages by Mr, Brassington for his initials. Mr. Yassin said he subsequently placed his initials on the said pages without reading it over because it was suppose to be the same documents he reviewed prior to the closing for the sale of GSL.
The matter will return on February 24.
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