By Troy Torres
(Tumon, Guam) Gov. Lou Leon Guerrero fought to double Guam's shares in a bank that has been in non-compliance with the Internal Revenue Code since 2001. Sen. James Moylan wants to use the recently-authorized $1 million snuck into the budget by some Democrats for the Pacific Islands Development Bank instead to fund critical services for the people of Guam.
The PIDB is a regional bank owned by the governments throughout Micronesia that makes loans throughout the member islands in support of Micronesian economic development. Despite the age of the bank, it has not been able to help any more than even a tenth of a percent of the residents of the islands through consumer loans or mortgage loans. In fact, the bank's portfolio, according to the its latest report, shows a business operation with a large charge off rate, loan growth that is double that of asset growth, and shrinking capital.
Yet, Ms. Leon Guerrero practically forced the issue of doubling Guam's investment during the debate on the Fiscal Year 2020 budget. Ms. Leon Guerrero included the $1 million appropriation in her budget submittal. Appropriations chairman Sen. Joe San Agustin removed the provision in his substitute budget bill. Ms. Leon Guerrero wrote to the legislature, demanding that the section be placed back in, despite the absence of any appropriation to fund her jinxed local war claims appropriation.
Herein lies Mr. Moylan's point. Considering the brisk benefits to Guam by the PIDB and all the problems faced by struggling residents of Guam, wouldn't that $1 million be better spent on solutions to local priorities?
"While we appreciate this government’s intent in assisting neighboring communities with development opportunities, the reality is that until we clean up our house, assisting others financially becomes a greater challenge," Mr. Moylan told Kandit. "We clearly have a shortage of uniformed personnel in our various public safety agencies, an evidently growing drug epidemic, and law enforcement officials continue to seek support for much needed equipment, that the $1,000,000 being expended annually to fund the Pacific Islands Development Bank (PIDB) would certainly be more beneficial staying on island and in keeping our communities safe."
According to the 2018 Annual Report of the PIDB, which includes its financial audit by Deloitte and Touche, the several nations, states, and territories of Micronesia each purchased shares into the bank decades ago. Guam's membership was authorized by Public Law 22-148, signed by former Gov. Joseph F. Ada December 29, 1994. Ms. Leon Guerrero had won her first election to the Guam Legislature one month prior to the signing of this law.
It was then, when Guam authorized the purchase of 1,000 shares valued at $1 million in capital stock into the bank. According to the report, Guam's shares represent 10.5 percent of total member shares. The Commonwealth of the Northern Mariana Islands and the Republic of Palau each have made the same investment as Guam. Only the Republic of the Marshall Islands (1,992 shares), the Federated States of Micronesia State of Pohnpei (1,300 shares), and the FSM State of Yap (1,439 shares) have a larger investment. Rounding out the list are the FSM States of Kosrae and Chuuk, and the Marshallese's Kwajalein Atoll.
Only Chuuk State has not fulfilled its obligation under the charter to contribute its promised investment in full, according to the report.
Guam's promised investment was fulfilled years ago. The new investment will double Guam's shares into the bank, despite the financial audit showing that the bank's loan receivables have increased dramatically.
The PIDB was chartered in Guam; its headquarters is located within the First Hawaiian Bank building in Maite, where the PIDB pays hefty fees: more than $5,000 a month for rent. It is a U.S. chartered 'bank' that does not itself hold its own cash and cash equivalent assets. In 2001, the Guam Department of Revenue and Taxation granted the bank tax exempt status as an IRS Section 501(c)(3) non-profit organization. In many respects, PIDB functions like a credit union. It is supposed to benefit the residents of Micronesia.
According to the Deloitte audit contained within the 2018 report, the PIDB has never been in compliance with financial reporting requirements for non profit organizations, which jeopardized its tax exempt the first year it received the designation. That was 18 years ago. Kandit has reached out to DRT director Dafne Mansapit-Shimizu to ask why DRT has not pulled the bank's tax exemption.
The PIDB invests its cash and cash equivalents in another bank, though the report does not say which one. Several banks service Guam. There are two major banks in the CNMI. However, in order for loans to be underwritten in any of the other islands of Micronesia, only one bank exists for that purpose: the Bank of Guam. Since the creation of the PIDB, Bank of Guam has been opening branches throughout the islands, where the PIDB operates.
Ms. Leon Guerrero, the former CEO and president of the Bank of Guam has been one of eight members of the PIDB board of directors since 2011, when she was appointed to the position by former Gov. Eddie Calvo. In 2019, Ms. Leon Guerrero vacated her position on the board of directors to become a member of the more powerful board of governors of the bank. The 2018 annual report even celebrates her election due to her support of the PIDB.
The question is, 'Which bank on Guam benefits from the deposits of cash and cash equivalents from the PIDB? From which bank are loans written and interest on loans kept?'