Accountants punished for sloppy work at ENNIA

PHILIPSBURG -- The Accountants Chamber in Zwolle has kicked two accountants who approved several annual accounts of insurance company ENNIA on dubious grounds for 6 and 4 month respectively out of the registry. The Central Bank of Curacao and St. Maarten filed a complaint against the accountants - Victor Bergisch and Eric Vesseur - after it took control of ENNIA in 2018 when the court put the company under the emergency measure.

Victor Bergisch (see LinkedIn photo below) was a partner at accountants firm KPMG from 2003 to 2010 and a partner at Baker Tilly Dutch Caribbean from 2011 until March 2021. He has a master’s degree in auditing from Nyenrode Business University.

Eric Vesseur was a managing partner at Baker Tilly Dutch Caribbean from February 2013 until February 2021. Earlier in his career he was a manager at KPMG from 1985 until 1996.

The Central Bank filed its complaints against the two accountants on December 22, 2020, and the Accountants Chamber handled the case on October 8, 2021. On January 21, 2022 it released its ruling.

Until March 2017, KPMG was the controlling accountant for the ENNIA companies. In March of that year it expressed concerns about the appraisal of Mullet Bay and about the value of inter-company claims. ENNIA reacted by terminating KPMG and by hiring Baker Tilly Dutch Caribbean as its successor.

The Central Bank stated in its complaint that Bergisch and Vesseur came up short with their control of several annual accounts: they did not represent a true picture of ENNIA’s financial position. The accountants did not act on red flags like the incorrect appraisal of Mullet Bay and the doubtful representation of latent tax liabilities.

The accountants also put their own independence at risk by accepting a remuneration for their work that significantly exceeded 15 percent of the total turnover of Baker Tilly, the Central Bank stated in its complaint. The Accountants Chamber ruled however that it was unfounded.

Bergisch and Vesseur knew however that ENNIA had terminated the cooperation with KPMG because of a dispute about the appraisal of Mullet Bay and not, as the company wanted them to believe, because they never finished their work.

They also had other information at their disposal that should have put them on high alert. KPMG wrote in a report that management was not always honest towards its accountants and that the shareholder (Hushang Ansary) not always showed an understanding for the guidelines from the supervisor the Central Bank). “They have been insufficiently critical about the integrity of management and the shareholder. This complaint is founded,” the ruling states.

The accountants also were aware of the importance of an adequate appraisal of Mullet Bay for ENNIA’s financial position. Between 2002 and 2016 Mullet Bay went through ten appraisals. The value in these appraisals varied wildly: from $68.3 million to $436.1 million. The square meter-price jumped from $75 in 2002 to an all-time high of $627 in 2014. But when the Central Bank asked the reputed surveyors of Cushman & Wakefield to appraise the property in 2018, they came up with a value of just $50 million, of a bit over $75 per square meter.

In May or June of 2017, the accountants agreed that a value of $436.1 million, or $620 per square meter, was justified.

The inflated value of Mullet Bay also had an effect on ENNIA’s latent tax liabilities. The annual accounts for 2014 and the concept account for 2015 report that, because of the increased value of Mullet Bay (at least on paper) there was a latent profit tax liability of 2 percent for a period of ten years.

The increased value was calculated against the historical purchase price of the property of $2 million. The thing is: ENNIA had not even applied for a tax holiday and the regular profit tax rate in St. Maarten is 34.5 percent. By applying the 2 percent-tariff, ENNIA’s assets increased in value by 249 million guilders ($139.1 million). This created more room for withdrawing money from the company.

The Central Bank furthermore complained about remarkable and unjustified costs, among other things salaries for people who did not work for ENNIA, payments to supervisory directors and the private use of airplanes.

At the end of 2014, Richard Gibson Sr. stepped down as supervisory director. The company gave him a golden handshake of 2 million guilders (around $1.1 million). “That should have been a reason for an investigation into possible fraud or bribery,” the Central Bank stated in its complaint, but the Accountants Chamber found no proof for it. At least the bribery indications should have been investigated, the Central bank argued, because Gibson became Minister of Finance in St. Maarten en later also interim Minister of Justice, while ENNIA’s largest investment was located in St. Maarten: Mullet Bay.

Bergisch and Vesseur pointed out that Gibson only became a minister in 2015. Yet the Accountants Chamber ruled that they should have asked critical questions about this golden handshake and they did not do that. Therefore, the complaint about this issue was ruled founded.

After ENNIA was placed under the emergency regulation (and thereby under control of the Central Bank), Bergisch and Vesseur invoiced ENNIA for a total of 162,000 guilders ($90,500) for work ENNIA had not asked them to do.

In fact, the invoices were related to requests for information from the Central Bank. By law, the accountants were obliged to supply this information. The Accountants Chamber declared itself not competent to issue a ruling about these invoices and referred this particular dispute to civil court.

The Chamber ruled in its conclusion that the Central Bank’s complaints were partially justified: “The accountants have violated technical and other professional guidelines. That is at odds with the fundamental principle of professional competence and due diligence.”

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