This week’s title is as deliberate as it is appropriate. The focus last week was on certain aspects of the 12th June agreement with CL Financial to show the fundamental shift from the original MoU of 30th January.
This week, it is time to focus on the parties to the new agreement and the way in which they are dealing with each other. The differences in treatment are plain and pregnant.
CL Financial are said to have secured the support of about 66% of its shareholders in relation to that agreement. CL Financial published a Notice to Shareholders of a meeting to be held on 30th June to seek the approval of 75% of the shareholders to the 12th June agreement with the State to appoint a new Board with the mandate described in last week’s column. The shareholders were to be offered an opportunity to read the agreement and make up their minds as to whether they would vote in support of it.
There was a subsequent Notice to Shareholders which stated that the Board had decided to defer the voting-meeting to respond to certain concerns which had been put to them by shareholders: the shareholders were still invited to attend on the 30th to read and consider the agreement. It was reported in this paper that a shareholder had written to the CL Financial group finance director, Michael Carballo, to make certain demands in return for his vote in support of the agreement. There are also other reports of a block of shareholders, led by a Duprey family member, making demands before their support could be assured.
As I write, there is no word as to when CL Financial will be holding the decisive meeting to solicit shareholders votes on the new agreement.
Some serious questions now arise and these would include –
- The rationale – As outlined last week, the new agreement marks a significant shift from the goals and terms of the original MoU. What is missing here is the rationale behind the shift in strategy. It is not to say that there can be no grounds for changing the terms of agreement in the course of large-scale and complex situations, but rather, that there ought to be a cogent rationale for such a drastic shift. What is the reason to move from a scenario of support with consequent liquidation of assets to match the cost to the Treasury, to one of restoring asset value? Are we being told, in not so many words, that the assets of CL Financial are in fact insufficient to meet its liabilities? Is it fair, in all the circumstances, for the public to make that assumption?
- The new audits – Some time ago, we were informed by the Minister of Finance that audits were being performed on the CL Financial group by Ernst & Young and KPMG. There have also been several reports that the renowned forensic accountant, Bob Lindquist, was engaged to audit CLICO. Where are the audit reports of those firms? Surely, by now the Minister of Finance and the Central Bank would have had those interim audit reports.
- The New Agreement – Are we to take it that the new agreement is an irrevocable commitment by the State? Do CL Financial’s shareholders possess the sole right to veto?
- Lack of Public information – The new agreement remains invisible to the public and there is no word as to when it is to be published. Given that we taxpayers are to pay for this entire operation, it seems highly unsatisfactory to me that we are not yet in a position to evaluate the agreement.
- The question of scale – The newly-reappointed AG is reported to have said that he is concerned over how our country will deal with a $97Bn commercial enterprise in the context of a $150Bn national economy. What is the true nature and extent of the commitment we have now entered?
- The character of the parties – As explained last week there are legitimate, sobering concerns over the conduct of and relationships between the parties to this huge agreement. The conduct of CL Financial’s chiefs and the shareholding in that group by the Minister of Finance would give any reasonable person cause to pause. The huge donations made by CL Financial to the ruling PNM is yet another reason to frown. The treatment being enjoyed by the CL Financial shareholders at this point, having been paid dividends from a group which would seem to have been essentially insolvent, to now being invited to consider the new agreement, is vexatious. Hence the title of this week’s column.
Where is the taxpayer in this huge, long-term and expensive set-up? I am, once again, demanding that we, the public, be given the information necessary to support the new agreement. This is a glaring case of democratic deficit, in which our elected rulers feel free to enter onerous agreements without affording us the basic information which company law would demand on behalf of shareholders. There is little doubt that the new agreement will impose heavy burdens on our economy and widespread support will be essential to preserving the investor confidence and legitimacy which is at the heart of this unprecedented mission. There is no better way to start winning that support than to start sharing information with the public in the same fashion as enjoyed by the CL Financial shareholders. We do not want a party with General Admission having the worst view and only the VIPs enjoying the best view…especially when we in General Admission are paying the price of the whole party. Not so.
We have all read the public statements by the newly-reappointed Attorney General, John Jeremie, that he is intent on taking the necessary action to enforce the law if wrong-doing is discovered at CL Financial.
We need to determine if our newly-returned AG is indeed a serious upholder of our laws.
Mr. Jeremie, it is reliably reported that CL Financial paid its shareholders dividends of $3.00 per share on 16th January, some 3 days after writing to the Central Bank for urgent financial assistance from the State. Now that the State-appointed Directors are on the CL Financial Board, it is possible to obtain evidence of that, with or without the co-operation of the Minister of Finance (herself a CL Financial shareholder). I am putting it to you that, as a matter of urgency, we need to hear from you on three questions –
- Firstly, is such a payment of dividends a legal act? Can such an act be considered to be fit and proper?
- Secondly, did that reported act take place?
- Thirdly, what steps, if any, are you now prepared to take against the CL Financial Directors who authorized payment of that dividend?