How the NDC bled State Insurance Company

An interim report issued by the Pricewater House Coopers (PWC), a multi-national accounting firm in the country, has revealed how the State Insurance Company (SIC), pillaged state resources by using insurers? premiums as credit guarantee bonds for certain private companies in the country.

What happened was that when those companies needed to purchase any items from their suppliers, they would request the SIC to provide them guarantees or collateral in the form of SIC bonds to the banks to enable them to transfer those monies from their bankers.

To date, a total amount of ?49.3bn which SIC guaranteed to those firms between the period 1995 to 2000, have not been recovered, this has made the Agricultural Development Bank (ADB), and the Ghana Commercial Bank to institute separate legal actions against the State Insurance Company to retrieve their money.

Although the SIC does not deal in estate development, nor the importation of goods and services for sale, it departed from its core business (insurance brokerage), and went into providing credit guarantee bonds for transactions which did not bring any benefit to the company. The end result is that banks have instituted legal action against the SIC to get their loans defaulting private Ghanaian Companies paid back to them.

The SIC loan guarantees were provided during the administration of the National Democratic Congress (NDC), mainly under the managing directorship of Lionel Mobila, now on retirement. In effect, instead of allowing the private companies to provide their own collaterals before taking loans from the banks, the SIC did that on their behalf.

As of now, SIC continues to honour its obligations under the Bonds, and as of May 2001, a total sum of ?8,095,612,461, had been settled and paid on behalf of the defaulting clients to the various banks, without the insurance company being able to make recoveries from its re-insurers.

Some of the outstanding defaulting companies are Danny Ofori Attah?s Data Telecom which collected ?1,453,500,000 out of which ?807,000 is being claimed, while SIC has paid ?2,300,000,000 and recovered only ?75,000,000.00. Another notable company is Transport and Commodity General Ltd., to which SIC guaranteed an amount of US$1,018,000. SIC has paid ?400,000,000 while the case is pending in court.

?Daily Guide? newspaper is investigating the backgrounds of the directors of these companies. Other companies which bled SIC to its financial haemorrhage are: Shaaba Enterprise: It took US$200,000.00 from the Trust Bank, and made SIC to provide a credit guarantee for that transaction. The amount outstanding in the credit guarantee from SIC to the Bank is US$235,504.59.

SIC has since paid, on behalf of Shaaba Enterprise, an amount of US$178,824.49 + US$4,000.00 (customers fund), which, in cedi terms, translates to ?1,638,000,000.00. The company recovered only ?320,000,000.00 from Shaaba Enterprise.

SIC paid this claim by virtue of the credit guarantee to Shaaba Enterprise on 19 April 2000. One other Ghanaian company which SIC used its customer?s fund to engage in credit guarantee business with is Osiadan Company Limited.

The insurance company advanced a credit bond of ?1,000,000,000.00 to the company, through CDH Discount Ltd. To date, Osiadan has not honoured its commitment to the Discount House (CDH Ltd). SIC has since 22 December 2000, paid an amount of $75,000 (?675,000,000) through The Trust Bank (TTB) cheque No 46987 to discharge its obligation under the bond.

All in all, SIC engaged in the credit guarantee bond transactions with 36 companies from 1 January 1995 to 31 August 2000, and out of the reported 36 cases, 31 were written between the years 1998 and 2000, predominantly the period of the last administration, which commenced on 1 October 1998.