The more one considers the CL Financial bailout, the less comfortable one feels.  It was no surprise to see the main points of last week’s column publicly confirmed by the key participants.

What can one possibly say to the confirmation that the assets pledged in the MoU were pledged elsewhere? That was confirmed by both the Governor of the Central Bank and Michael Carballo, CL Financial’s Group Financial Director.

These are some of the puzzling aspects of this complex situation-

• Methanol Holdings Trinidad Limited (MHTL) – There appear to be stark contradictions between the 6^th April statements of the Governor of the Central Bank and the recent MHTL press release (available at http://www.ttmethanol.com/web/assure.html).  The signatory on the MHTL press release is their CEO, Rampersad Motilal, who is also listed as a CLF Director in their 2007 Annual Report.  There have been recent press reports that Mr. Motilal recently resigned as a Director of CL Financial.  The Governor stated that methanol prices are so low that to try to sell those shares now would be to limit the returns on the sales.  MHTL states that  its operations continued to be strong with all their plants having excellent first quarter performance, with its low cost profile allowing it to maintain overall profitable operations for 2009 even if the softened methanol prices continue.  The press release went on to state that the company’s financial position, especially its liquidity position is very strong.  Which one of these accounts should we trust?  What are the MHTL shares worth?

• Republic Bank Limited (RBL) – These shares were pledged as part of CLF’s collateral in the 30^th January MoU, but we have only silence on the agreed disposal.  Indeed, the RBL share price is stable at $86 per share since November 2008 and one has to wonder why the delay in the agreed disposal.

• CLICO – As stated in last week’s column, the newly-appointed CEO of CLICO, Claude Musaib-Ali, revealed on Ash Wednesday that over $5.0Bn is missing from CLICO’s Statutory Fund and that those monies cannot be located.  A week ago, the Governor stated that the size of the CLICO bailout is now estimated to be $5.0Bn.  I am assuming that these taxpayers’ funds are being used to fill the gap left by the missing Statutory Fund monies.

• CL Financial’s stance – At the beginning of this process we were led to believe that CL Financial was being pro-active and cooperative in their dealings with the State.  Indeed the Governor even made this point directly in his prepared remarks at the 30^th January press conference “…I would like to acknowledge the high level of cooperation that we have received from Mr. Duprey…”  Since then CLF has now been exposed as paying dividends after requesting the State bailout, challenging the injunction obtained by the State over their assets with a powerful legal team and, to top it all, pledging the same assets twice.  The Governor spoke on 23^rd April – “If you ask me whether CL Financial did everything that was honourable and beyond reproach, the answer is no! The answer is no!”  [See – http://guardian.co.tt/business/business/2009/04/24/cl-financial-bailout-cost-5-billion-over-two-years ]My word.  But there is yet another account coming from Michael Carballo, expressing surprise at the Governor’s statements – “We have a good relationship…and we have always sought to operate in good faith.  All information presented has been authentic and above board…”  In that case we may not need a Bob Lindquist to find out ’Where is the missing $5.0Bn the Treasury is now replacing?’  One can only wonder – What next?

• A matter of interest – It seems clear that some consensus has now been formed to defer the sale of CLF assets so as to transfer the burden to the Treasury.  The MoU, which we were led to believe is the main document, now appears to have become secondary, despite the existence of no new facts.  What could possibly be the rationale for such an iniquitous decision?  If we proceed from where we are, it is clear that CL Financial has negotiated for itself an unsecured, massive line of credit from our Treasury.  Any one who has had to borrow money without security knows how difficult it is to get such a loan.  Even if you are lucky and someone big in the bank favours you, the interest rate is going to be extremely high.  Given the background to this fiasco, the lack of security and the reported conduct of the chiefs at CLF, what is the rate of interest being paid by this high-risk borrower?  We need to know that interest rate and now, please.

The weakening of moral authority

Finally, we come to an inevitability we all have to face, even if there is seldom any appetite to discuss it.  Yes, I am talking about the future and our aspirations.  There is a real danger that we – and I am deliberately using the collective ‘we’ – could allow our ‘Fit and Proper’ guidelines to remain yet another law which is ‘on the books’ but ‘nobody ever get charge’.  Here we have Directors and Officers of a finance company who –

• have paid dividends after appealing for a massive State bailout;
• pledged assets twice, which is something no ordinary person would ever be allowed to get away with;
• claim to be cooperating with the State yet there is still $5.0Bn missing and silence on the refund of those odious dividends.

This country has intentions or stated ambitions to become an International Financial Centre.  This sorry episode is a litmus test as to our seriousness.