Recovering the Loot through Civil Action: Lessons from the Jamaican Financial Sector Crisis

• Author: B. St. Michael Hylton, Q.C.
• Pages: 242-261

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RECOVERING THE LOOT

THROUGH CIVIL ACTION:

Lessons From

The Jamaican Financial Sector Crisis

B. St. Michael Hylton, Q.C.Introduction

During the late 1990s a number of indigenous nancial institutions

in Jamaica became insolvent. Some were restructured and sold, some

merged with other entities and others closed down altogether. is has

been variously described as the ‘nancial sector meltdown’ and ‘the

nancial sector crisis’.

A public debate has raged ever since as to the reasons for the

collapse of these institutions. Was it due to the government’s high

interest rate policy or the central bank’s negligence, as some insist, or to

the mismanagement or even fraud by the managers of certain nancial

entities? An examination of the pros and cons of that debate would be

outside the scope of this chapter.

What is beyond debate, however, is that the litigation arising from

that crisis has contributed signicantly to Commonwealth Caribbean

jurisprudence. ere have been numerous cases in both the criminal

and civil courts and many are still ongoing.

is chapter will focus on the civil proceedings by the Government

of Jamaica against the former directors and managers of three groups

of nancial institutions: the groups which are often referred to as ‘the

Blaise Financial Entities’ or ‘the BFEs’ formerly controlled by Donald

and Janet Panton, ‘the Century Financial Entities’ or ‘the CFEs’,

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Recovering the Loot rough Civil Action

formerly controlled by Donovan Crawford and ‘the Eagle Financial

Entities’ or the ‘EFEs’, formerly controlled by Paul Chen Young.

e Government of Jamaica, through two government owned and

funded companies, Financial Institutions Services Limited (FIS) and

FINSAC Limited (Finsac), intervened when these failed institutions

became insolvent. FIS took over the liabilities and assets of the Blaise

and Century Financial Entities and Finsac acquired the shares in the

Eagle Financial Entities. FIS and Finsac (directly and through two of the

Eagle entities) later commenced litigation against some of the former

directors and managers of the BFEs, CFEs, and EFEs. In summary, the

following is the status of these cases as at December, 2008.

After various interlocutory applications and appeals (one of which

went all the way to the Judicial Committee of the Privy Council) the

claim against Donovan Crawford and others was tried and judgment

given for approximately J$3 billion in May 1999. His appeals against

the judgment to the Court of Appeal and the Privy Council were

dismissed and since February 2006, steps have been taken to execute

the judgment which is in excess of J$5 billion (inclusive of interest).

e claim against Dr Chen Young was also delayed by a number

of interlocutory applications, including six appeals to the Court of

Appeal. After a trial which lasted 28 days over a period of 12 months,

judgment was given in May 2006 against Dr Chen Young for a total of

approximately J$1billion. An appeal against that judgment is pending.

e suits against Donald and Janet Panton and other former

ocers of the BFEs started rst but came to trial last. After numerous

applications and appeals, including three appeals to the Privy Council,

the claims nally came on for trial in May 2006. At the end of the

Claimant’s case, the Defendants agreed to a settlement involving the

transfer of numerous assets to FIS. Steps are now being taken to enforce

the settlement agreement.

ese cases had a number of factors in common. Each involved a

group of corporate entities including a commercial bank, a building

society and other entities which solicited and accepted funds from

the public. e deposit-taking entities were owned by a complicated

network of companies and were ultimately owned or controlled by one