From Matangi Tonga Magazine, Vol. 16, no. 2, September 2001.

Matangi Tonga interviewed Tonga Trust Fund trustee Hon. Tevita Tupou, (Minister of Law and Attorney General) and Jesse Dean Bogdonoff, the fund’s technical advisor, on September 26.

Pesi Fonua – The new proposal of the Tonga Trust Fund is for an investment to be guaranteed by Lloyds of London, what really is this investment to be guaranteed by Lloyds?

Tevita Tupou – We buy [for a certain amount] new life insurance policies with a face value of $38 million. In five years time Lloyds of London has promised to pay us $38 million and they will take back those policies, but during the five years we will be paying an annual premium to Lloyds which is 4% of the $38 million.  

What is the difference between this new investment, which is guaranteed by the Lloyds of London, and the US$20 million Promissory Note the TTF bought from Millennium Asset Management Services, which was backed with life insurance policies, which were supposed to be worth $55 million, and held in trust for the TTF by the National City Bank in Minneapolis, Minnesota?  

Tevita Tupou – With the previous investment, Millennium promised to pay us $26 million at the end of two years. They promised to pay us $26 million because they were going to use our money to buy policies, which they estimated in two years time would be worth $29 million. They would keep $3 million and give us $26 million, but then there was some misinformation with the company about the value of the policies.

J. D. Bogdonoff – The legal counsel who advised and sold the policies to the company misrepresented the value of the contracts to the company and they are taking a legal action against the counsel.

Tevita Tupou – The new investment [that will be] guaranteed by the Lloyds of London is different from the previous investment because we are buying the policies and they will be kept here at the National Reserve Bank of Tonga.

The 16 insurance life policies that were bought with TTF funds are they still being held by Millennium?

Tevita Tupou – We can terminate the agreement now, and demand that they pay us what they owe us, and they can turn around and say sorry we can’t and we don’t want to, and this is all you can get from us. We then can go at them legally, but by suing them, and declare them bankrupt, and all that will cost us money.

Is there a clause in the Promissory Note that stipulates what can be done in the case of a default payment?

J. D. Bogdonoff – They have to replace the policies that do not meet the criteria of the $26 million.

Tevita Tupou – When the two year period is finished, we the holder of the Promissory Note can demand that we want our money that you promised, then they say sorry we don’t have the money, this is all we have got, then it is for us to take our legal proceedings to get our money.

J. D. Bogdonoff – Who would make that decision?

Tevita Tupou –  The trustees. We will recommend it to Privy Council. But the cost involved will be enormous.

J. D. Bogdonoff – But you will do that to an uncooperative debtor, but this is a company that says look we want to pay you. Noriega [Millennium President] offered to come on this trip but he was advised not to come at this time.

Tevita Tupou - Where is the Promissory note?

J. D. Bogdonoff - You should have the original note.

Don’t you think it is a problem for the trustees to operate in the aggressive money market while you are still required to be answerable to the House and to government?

Tevita Tupou – No we are not answerable to the House, we are answerable only to the Privy Council.

J. D. Bogdonoff – The question is, that aren’t these investments too complicated and the trustees should be doing other things? But that is my job.

With regards to the amendments to the General Loan and Stock Act and the Tonga Trust Fund Act that were made on 13 September 1999. It has been argued that it was retrospective and it could not legalise a decision that was already made in July for the TTF to invest in trustee securities?

Tevita Tupou – The decision to invest was made before that law came into existence, but there are various interpretations of Trustees Security, and ours at Crown Law is different from that of the USA and the British, but because our law is tied to the British, the British interpretation is that only investments in British companies are secured. The other unfortunate thing was that I was not at the Privy Council meeting and nor was Baron Vaea. It is a matter of saying whether it was legal or not.