Auditors flagged $1.2M unsecured CIFA ‘loans’

(CNS): A director with Rankin Berkower, which conducted the Cayman Islands Football Association’s audits, explained to a jury this week how he spotted red flags in the 2014 annual review of CIFA’s books and reported his concerns to the Anti-Corruption Commission. As the trial of Canover Watson and Bruce Blake on charges of fraud and money laundering moved into its third week, the crown focused on loans to CIFA that morphed into sponsorship deals. Prosecutors contend that these were part of a scheme by Watson and Blake to hide money stolen from the regional football body, CONCACAF.

The crown also suggests that these ‘fake loans’ are also tied up with the fortunes of Watson and Blake’s close friend, Jeff Webb. The real loan that CIFA had with Webb’s former local employer, Fidelity Bank, was a stumbling block to his promotion from CIFA president to CONCACAF president and FIFA vice president. That loan was secured by CIFA’s land. But as well as making Webb look bad, it undermined CIFA’s chances of getting a FIFA grant for its Centre of Excellence.

An email between bank executives that was shown to the jury revealed the bank was aware that a forthcoming change in FIFA rules meant that no regional association would receive grant money for grassroots development projects if the related properties were encumbered.

“Given Jeff’s position and since the security we hold for the CIFA facility is indeed part of the GOAL Project, Jeff needs to get himself out of a tricky situation to avoid criticism,” one bank official had written to another senior executive. They also discussed the likelihood of Webb succeeding Sepp Blatter as FIFA president, “providing there is no dirt on” Webb and that he was biding his time.

Soon after this correspondence within the bank, Watson, who was at the time an official at both CIFA and CONCACAF, told the bank executives that CIFA’s $1.6 million loan would be paid off by the end of 2013, with some of the money coming from a sports equipment manufacturer. Email communication also showed that Watson had promised the bank two payments of $600,000 to reduce the CIFA loan balance and, most important of all, get the lien on the CITA centre lifted by the bank.

As promised, two payments for $600,000 were made from CIFA’s account to Fidelity before 2013, and as a result, the bank lifted its hold over the football HQ and land in Prospect.

When Matthew Adam, from Rankin Berkower, took the stand this week, he told the court that when the two unsecured loans of $600,000 each from Cartan Int’l and Forward Sports, both based in Panama, showed up in the associations’ 2014 accounts, this gave him cause for concern. He said the loan deals were unusual because no one from CIFA but Blake had signed them and because both of the companies lending the money were based at the same address in Panama.

When he queried the loans, he was told that they had both been converted to sponsorship deals with no outstanding liability to CIFA. But Adam said that to complete the audit he still needed written confirmation from the lenders or a letter of forgiveness to be sent directly to his audit firm. He explained the auditors needed documentation directly from the lenders confirming the change of circumstances.

Giving evidence in chief, he told the court that instead, he was given a letter from Blake that was purported to be written by David Elmore, a representative from Cartan Int’l, saying that CIFA owed no money and had no liability for the loan. Adam did not know that the companies were both shell companies that the crown alleges were created and secretly owned by Watson.

Adam said he had tried to call Elmore on the Panama number of the letter but was unable to make contact, so he contacted the US-based Cartan company instead. He then learned that the Panama-based Cartan Int’l was not connected in any way to the Cartan sports tour operator based in the US, which he learned had a long-standing sponsorship agreement with CIFA but had never made a loan deal. He also learned that Elmore had not signed the letter the auditors had inquired about.

When nothing was forthcoming from Forward Sports, Adam said he managed to get contact details from CIFA for Shakeel Khawaja. When he emailed Khawaja asking for a letter of forgiveness on the loan, he received an email back in which the Forward Sports sales agent said he knew nothing at all about a loan or a sponsorship deal between CIFA and any Forward Sports company.

Given the concerning conflicts and contradictions relating to the loans, Adam said he arranged a meeting with Blake but also alerted the Anti-Corruption Commission. When he met with Blake, he said, Watson had also attended. He showed the men the email correspondence he had received from both Elmore and Khawaja, which contradicted the claims that had been made by Blake in his role as the CIFA general secretary at the time, and told them that he had reported it to the ACC.

Adam said Blake seemed very nervous and concerned about the correspondence shown to him but Watson was calm and told him that he had all of the documentation, which would explain everything.

Watson subsequently met with Philip Rankin, a partner of Rankin Berkower, and showed him a collection of documents, which he claimed explained the various links and the due diligence on the two companies that had made loans to CIFA that were converted into sponsorship deals. In a complex configuration, Watson also showed Rankin various documents that appeared to indicate that at least one of the loans converted to sponsorship was from money that came to Watson for unexplained work for Cartan that was paid to CIFA instead of Watson.

The case continues.