VZCZCXRO4202
RR RUEHGR
DE RUEHKG #0005/01 0032045
ZNR UUUUU ZZH
R 032045Z JAN 08 ZFF4
FM AMEMBASSY KINGSTON
TO RUEHC/SECSTATE WASHDC 5784
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 KINGSTON 000005 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA/CAR - JTILGHMAN 
WHA/EPSC - LMARTILOTTA 
TREASURY FOR - SARA GRAY 
 
E.O. 12958: N/A 
TAGS: PREL PINR SOCI ETRD ENRG ECON EINV XL JM
SUBJECT: JAMAICA: CEASE AND DESIST, CASH PLUS IS IN TROUBLE 
 
REF: A. 07 KINGSTON 1641 
 
     ¶B. 07 KINGSTON 1712 
     ¶C. 07 KINGSTON 1749 
 
 
SUMMARY 
-------- 
 
¶1. (SBU) Serious cracks are forming in the dubious 
investment scheme Cash Plus as it faces its first liquidity 
crisis and a Government of Jamaica (GOJ) cease and desist 
order (reftels).  After several weeks of late interest 
payments to participants, Cash Plus is asking participants 
to roll over their interest payments for 90 days in order 
to allow the entity to reorganize.  Adding to Cash Plus 
woes, the GOJ has secured three victories in its efforts to 
regulate the scheme.  First, the Jamaican Supreme Court 
held on Monday December 24 that Olint Corporation (see 
reftel C) and LewFam Investments, both alternative 
investment schemes involved in foreign currency trading, 
fall under the provisions of the Securities Act and 
therefore must secure revelant licenses and open their 
books to regulators.  The precedent paves the way for the 
regulation of other alternative investment schemes like 
Cash Plus.  Second, the Financial Services Commission (FSC) 
was able to get Cash Plus to turn over financial 
information disclosing its assets on December 20 after 
previous demands went unheeded.  Third, based on the 
information it received from Cash Plus and the new court 
ruling, the FSC issued a cease and desist order on December 
28 against Cash Plus, asserting that its operations are in 
breach of the Securities Act.  The FSC has claimed for 
years that legal loopholes have tied its hands in regard to 
regulating these schemes, the loopholes now appear closed. 
End summary. 
 
------------------------- 
Cash Plus Lacks Cash Flow 
------------------------- 
 
¶2. (SBU) Cash Plus borrows money from individuals with a 
promise of monthly returns between 10 to 18 percent 
(reftels).  In recent weeks, Cash Plus interest payments to 
participants have been delayed and many of the checks 
issued were returned for insufficient funds. The local 
press reports that skittish investors are waiting outside 
of Cash Plus' offices demanding their money.  Cash Plus 
Chairman, Carlos Hill, blames the cash flow problems on 
installation of a new account payment system and failures 
on the part of jealous commercial banks to cash checks 
issued by Cash Plus in a timely manner.  The new cease and 
desist order has raised the stakes on Hill's cash flow 
problems.  In full page newspaper ads on December 30, Cash 
Plus announced that it has come "under severe attack in a 
manner that is unprecedented in Jamaica" which has 
"disrupted the smooth operations of the company."  Hill, 
who has been the focus of increased media attention 
regarding his criminal convictions in the United States for 
financial crimes (reftel b), is asking participants to roll 
over their interest payments for three months to enable 
Cash Plus to "regularize its operations as a profitable 
conglomerate of companies."  Hill promises participants 
that they will receive a stake in the company equivalent to 
the amount of their loan and a first lien against the 
assets of the new entity. 
 
----------------------------------------- 
Three Year Liabilities of USD 328 million 
----------------------------------------- 
 
¶3. (SBU) The Gleaner newspaper reported on December 30 that 
unaudited account statements for Cash Plus indicate 
interest liabilities for the next three years of USD 328 
million.  Cash Plus also lists another USD 328 million in 
assets and USD 210 million in shareholder equity. 
According to the Gleaner, the documents indicate that 
short-term debts are USD 400,000 more than current assets. 
Cash flow issues will only worsen if new deposits dry up as 
increasingly skittish investors refuse to add money to Cash 
Plus accounts.  (COMMENT: It is still unclear how much 
money Cash Plus actually has under its control and if these 
funds are still in Jamaica.  In a press report in early 
December, one of the lawyers for Cash Plus, K.D. Knight who 
is also a current senator with the opposition Peoples' 
National Party (PNP), said Cash Plus has over USD 56 
million in its accounts.  Cash Plus has been reluctant to 
talk about its holdings and has repeatedly claimed to own 
assets in which it has not actually closed, but increased 
 
KINGSTON 00000005  002 OF 002 
 
 
scrutiny by the FSC may bring some of this information to 
light). 
 
--------------------------------------------- 
Supreme Court Ruling Paves Way for Regulation 
--------------------------------------------- 
 
¶4. (SBU) The 112 page ruling handed down by Justice Norma 
McIntosh is a major shift in granting the GOJ power to 
regulate alternative investment schemes in Jamaica.  The 
FSC and other representatives of the GOJ have told Emboff 
that they lacked the ability to regulate these schemes 
because they exist within loopholes of the law. The court 
held that Olint and LewFam are now subject to regulation 
and fall under financial scrutiny of the FSC.  This will 
require these schemes to open their books to regulators and 
justify how they have been able to make such unprecedented 
monthly returns.  This case began in March 2006 when the 
FSC issued a cease and desist order against Olint and 
LewFam for operating without the requisite licenses 
pursuant to section 7 and 8 of the Securities Act.  Olint 
and LewFam countered that their activities relate to 
foreign currency trading, which is not a security as 
defined by section 2 of the Securities Act and therefore 
their operations do not fall under the regulatory scope of 
the FSC.  This is that same argument that other alternative 
investment schemes like Cash Plus having been making 
against the FSC (reftels).  With the most recent cease and 
desist order against Cash Plus, the FSC now appears to 
believe it has the legal authority to bring these schemes 
under control. 
 
---------------- 
CEASE AND DESIST 
---------------- 
 
¶5. (SBU) Pursuant to section 68(1B) of the Securities Act 
the FSC issued its cease and desist order on December 28 
against Cash Plus and its employees and agents and more 
specifically Carlos Hill and Khalil Harris.  The FSC states 
that its investigation indicates that Cash Plus is engaging 
in securities activities in breach of the Securities Act 
section 7 (which prohibits engaging in a securities 
business without being a licensed securities dealer) and 
section 10 (which prohibits an individual from carrying out 
the functions of a dealer's representative without first 
being registered for that purpose with the FSC). The FSC 
also asserts that Cash Plus is issuing unregistered 
securities to the public in breach of section 26 of the 
Securities Act. The FSC is publishing the notice in 
newspapers advising the public to refrain from investing 
with or through persons that are not registered or licensed 
under the Securities Act.  Violating the cease and desist 
order is punishable by fines and or imprisonment. 
 
------- 
COMMENT 
------- 
 
¶6. (SBU) The relatively new Jamaican Labour Party-led 
government is in an unenviable position as it seeks to 
regulate the two dozen alternative investment schemes 
operating in the country.  If Cash Plus does collapse in 
the coming weeks, Hill will be quick to blame GOJ 
intervention as the cause of its decline.  The FSC tried to 
warn Jamaicans about the risks of these schemes over the 
past few years, but claimed it lacked the legal authority 
to do more.  Meanwhile the schemes have grown to near 
epidemic proportions luring in hundreds of less 
sophisticated investors.  As the GOJ makes the long over 
due move to bring these schemes under control, the likely 
collapse of some, will create a whole new set of economic 
and social challenges for the already beleaguered JLP 
administration. 
 
JOHNSON