By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A $6m default judgment obtained by a former Cabinet minister’s companies has plunged Bank of The Bahamas back into multi-million dollar losses and halted its financial recovery efforts.

The BISX-listed bank, which has been inching towards consistent profitability following five successive years of heavy losses prior to 2018, on Monday unveiled a $4.039m net loss for the three months to end-March 2019.

The “red ink”, which wiped out first-half profits worth more than $3.5m, drove Bank of The Bahamas into a $209,604 loss for the first nine months of a financial year that ends on June 30 - resulting in what management described as a 119.52 percent “decrease” in net income compared to the $1.074m earnings for the same period in 2018.

The 2019 third quarter losses stemmed from a 108.85 percent year-over-year rise in operating expenses, which more than doubled from $7.379m in the prior year period to $15.411m this time around. This, in turn, produced a $6.7m or 30.29 percent increase in operating expenses for the first nine months at $28.948m.

Kenrick Braithwaite, Bank of The Bahamas’ managing director, blamed the hike in operating expenses - and the institution’s return to making heavy losses - on provisions taken after the third quarter’s end for potential losses relating to a $6m default judgment against it.

“Subsequent to March 31, 2019, the bank was made aware of a judgment in default against the bank for approximately $6m plus interest and cost,” Mr Braithwaite wrote. “The bank has filed the applications to set aside the default judgment and the said damages, and also to stay or, in certain circumstances, strike out enforcement proceedings. Adequate provision has been made in the financial statements for any loss that might ultimately be determined.”

Research by Tribune Business established that the default judgment referenced by Bank of The Bahamas’ statement was obtained by companies 50 percent owned by the family trust of Damian Gomez, former minister of state for legal affairs under the former Christie government.

Mr Gomez, who resigned from the then-Cabinet to deal with the dispute with Bank of The Bahamas, yesterday confirmed to Tribune Business that the statement referred to the ruling obtained by his family’s trust.

He argued that Mr Braithwaite’s comments showed the BISX-listed institution was being “disingenuous” in its dealings with him, as he had been waiting for its attorneys to respond to him - after asking for an opportunity to study all the legal filings related to the case - prior to the former Cabinet minister beginning enforcement proceedings.

With Bank of The Bahamas now revealing it had moved to set aside the default judgment, Mr Gomez said the dispute related to mortgage loans extended by the bank that were secured on real estate assets owned 50/50 by his family trust and that of David Jenrette.

Despite promising orally, and three times in writing, to extend further loans, he added that Bank of The Bahamas “never came through” and placed the properties acting as collateral for the existing loans in jeopardy.

“As a result of that, the companies had a period of defaulting on various amounts and lost several millions of dollars in properties,” Mr Gomez revealed. “We were left basically holding the bag.”

The ex-minister added that, “in the middle of litigation”, Bank of The Bahamas then assigned several of the mortgages to Bahamas Resolve, the Government-owned special purpose vehicle (SPV) created to facilitate the two taxpayer-funded bail-outs of the BISX-listed institution in 2014 and 2017.

Describing this as a “very peculiar way of doing business”, Mr Gomez said the two family trusts had “never contested the mortgage debt” to Bank of The Bahamas - only some assessments of interest and penalties.

He revealed that they had repeatedly urged Bank of The Bahamas to agree a “set-off” between the sums it, and the family trusts, were each claiming the other owed but to no avail.

Mr Gomez, arguing that the trusts were owed more than the bank, said his family’s trustee, accountant Philip Galanis, and Mr Jenrette had been talking to the BISX-listed institution while he was in the Cabinet but were ignored.

Voicing surprise that Bank of The Bahamas had seemingly only suddenly become aware of the default judgment, Mr Gomez added: “At no time have we been aloof or less than transparent about what our claim is and what our position is.

“I don’t know what defence they are relying on at this point, and they cannot rely on the mortgages as they no longer own them. Resolve is not a party. They’re in a bit of a bind there. I’ve never seen anything like this. It’s as though the bank believes that, as they’re a government entity, they can do as they like. We’ve given them a road map to having it resolved without doing it the hard way.”

Mr Gomez said Bank of The Bahamas had been served with all necessary legal papers the moment the judgment was first obtained. He added that the BISX-listed institution had initially succeeded in having it set aside, but he managed to have the ruling reinstated.

“They are appealing two years later to have that judgment set aside when they failed to do what they were supposed to do and comply with the directions given,” he added.