AUDITOR Chanka Seeterram yesterday testified that he doctored the Hindu Credit Union's (HCU) financial statements in order to hide a $31 million loss and buy the cash- strapped credit union some time.
Seeterram said the decision which was made behind closed doors was for the greater good.
Seeterram made the statements as he took the witness stand at the enquiry for the second consecutive day.
The $31 million loss was as a result of the revaluation of property.
During cross-examination by commission junior counsel Marion Smith, Seeterram said he believed announcing the multi-million-dollar loss would have caused a financial crisis in the cash-strapped credit union, so he opted to help the HCU buy some time to get their act together.
SMITH: You haven't identified the accounting standard that permits this practice
SMITH: Do you know?
SMITH: Did you look at the time?
SEETERRAM: I think this was done by management probably deliberately in the sense that if that loss was worked into the accounts in the current year the net surplus of $6 million would have ended up in a $25 million deficit.
SMITH: So management deliberately in your view put it where we see it at Page 466.
SEETERRAM: I would have to say yes.
SMITH: But what is your opinion, because you are the auditor, part of your task isn't it to assess that sort of decision?
SMITH: And to assess the validity of that approach.
SMITH: So I ask again, did you carry out that sort of assessment?
SEETERRAM: This was a very delicate matter that I had to decide upon, in that the Hindu Credit Union at that point in time was experiencing a run. We were in 2006 and it was instilling numerous problems where people were demanding funds and what not.
If this account had reflected a loss for the current year I thought they felt that there would definitely be a run of some magnitude that they could not sustain whatsoever.
I insisted that it had to be brought into the accounts regardless of the fact that the loss occurred in 2006.
I felt very strongly that it had to come into the 2005 accounts and they felt the only way possible is that since there were retained earnings in there maybe it could be shown as a prior year adjustment in there.
This was what I called a compromise in the understanding that it would possibly buy some time for Hindu Credit Union to get their act together to be able to do what they thought was necessary to turn around the company because I felt if this was shown in the profit and loss account ... to show this massive loss inside there ... they could not face the outcome.
SMITH: Let's be clear Mr Seeterram, it should not be there.
Seeterram said the $31 million loss should have rightfully been included in the profit and loss account.
SMITH: Your concern was that if you insisted upon that (including the $31 million loss in the profit and loss account) that would have been the end of the HCU.
SEETERRAM: I was looking at the bigger picture, yes.
Smith asked Seeterram if he felt the move was in the best interest of HCU members.
"What I felt is that the management needed some time to check their options that were available. And the options that were available was that the way the HCU was going at the time they could not continue and they needed external help and they needed to buy some time to get that help," Seeterram said.
Seeterram said it was a "very difficult decision".
He eventually advised the HCU to seek assistance from the State to correct their financial difficulties.
Seeterram said he spent 13 years as a partner at Pannell Kerr Forster during a 17-year stint at the company. Pannell Kerr Forster is now Ernst and Young.
Seeterram said he has been an auditor for 43 years.
He is the chairman of Habitat for Humanity and aided the government with the preparation for this year's 50th anniversary celebrations.
Deputy Inspector of Financial Institutions at the Central Bank, Wendy Ho Sing, also testified yesterday.
Ho Sing said the HCU ownership of Bankers Insurance was illegal as the credit union did not receive the requisite approval from the Central Bank. See Page 4