The word Condonation has been turning through my mind since the start of this fiasco. It refers to a pattern of conduct in which someone who could, or should, have done something to stop wrongdoing does nothing. The silence of the person practicing condonation effectively allows the continuance of the wrongdoing, even if that person’s actions do not quite amount to conspiring with the wrongdoer.
To put it plainly, in those families where children are abused by one parent, it is almost always the case that the other parent knew. The continued silence of one parent allows the abusive one to continue. Even if the other parent did not commit any act of abuse, theirs is a series of inactions which allow wrongdoing to continue. It could be argued that the silence can imply forgiveness. Yes, that is condonation.
In relation to the CL Financial bailout, there is plenty of apparent condonation. So much so that fresh perils could now be coming toward us.
My starting-point for these concerns was the startling story that a group of investors in the Stanford International Bank Limited have filed a lawsuit against the Antiguan government, claiming some $8.0Bn USD. The lawsuit also alleges that the Antiguan authorities “became a full partner in a fraud and reaped enormous financial benefits from the scheme“. My main reading for that case came from the Trinidad Express column by David Jessop on 18th July 2009 ‘A case that hits home’ – that column can be accessed at http://www.trinidadexpress.com/index.pl/article_opinion?id=161505942.
One of the telling points in that Antigua situation is that that case is filed in the USA and so one has to wonder whether the small-island arrangements can withstand a US-style court case.
Some people might even be asking what has this Antigua case got to do with us here in T & T. After all, our government has pledged to bailout all policyholders and depositors, right? Not so fast, because it is a condition of the CL Financial bailout that we are not assisting overseas policyholders and depositors. Whatever the level of comfort being enjoyed by locally-domiciled policyholders and depositors in CLF Financial, those who invested from overseas will have to get compensated in some other way. Will they choose a Stanford-type lawsuit?
The implications of this possibility are sobering, when we consider the Antigua case further. When we consider the tangled web of connections here in our country, can we seriously expect to survive US-style litigation?
We have a Minister of Finance who is also a shareholder of the failed group, together with a Governor of the Central Bank who warns of investments which are ‘too good to be true’, yet holds deposits with CIB. The Minister of Finance, in her defensive statement to those accusing her of conflict of interest, makes it clear that when she realized that the group was in trouble, she put her family interests before those of the nation.
In addition we have a ruling party which accepted substantial donations from the CL Financial Group and yes, the party’s Treasurer was also the Finance Director for the group. The CL Financial group distributed dividends to its shareholders after writing to the Central Bank for urgent financial assistance and as yet, none of its Directors have been censured. The shareholders of CL Financial have also been allowed to keep their dividends as the group drifted toward the rocks.
Some of the assets pledged to match the cost of the bailout are already pledged elsewhere, something the CL Financial negotiators must have known. The Governor of the Central Bank is reported to have said that all the assets are pledged elsewhere – see http://guardian.co.tt/business/business/2009/04/08/govt-left-empty-handed-cl-financial-bailout . Despite the prohibition against selling any assets, CL Financial is found to have been trying to sell its shareholding in CLICO Energy just 5 days after signing the MoU. This was reported at http://guardian.co.tt/news/general/2009/03/24/duprey-energy-fire-sale-raise-severance-money .The ‘fit and proper’ guidelines published by the Central Bank are not implemented in the CL Financial case.
In addition, the new CEO of the principal company, CLICO, tells us that some $5.0Bn is missing from that company’s statutory fund and cannot be found. This was reported at http://guardian.co.tt/news/general/2009/03/01/where-money-gone . There has been no further official word on the missing funds, despite the involvement of Bob Lindquist, KPMG Forensic and the continuing assistance of the CL Financial chiefs.
None of this has been denied or contested.
It is all so incredible that no fiction writer, not even one of the more outlandish ones, could ever concoct such a story. A perceptive editor might even reject it, but the fact is that we have to deal with these elements.
In an earlier column in this series, I commented on the democratic deficit which allowed our elected rulers to proceed with virtual carte blanche, the law being the only impediment. Some would say that that arrangement is a workable one which allows the ruling party appropriate scope within which to run the country. That is not a debate for this space, suffice to say that the CL Financial situation is posing a fresh series of questions. Those questions arise in the aspect of scale – to get proverbial for an instant
Q – ‘Where does an Elephant sit?’
A – ‘Anywhere it wants, silly!’
Point being that an elephant is so huge that if it decided to sit, we would all have to make way for it, whatever the inconvenience. In both cases, the Stanford Investment Bank and the government of Antigua, as well as the CL Financial group and our own government, the company was so huge that it exerted a serious influence on national affairs.
Economists use the terms ‘externalities’ or ‘external costs’ to refer to quantifiable costs which are not directly considered as an aspect of the matter under examination. In this case, the externality is that none of the 3 major political parties are speaking on this monumental event. The silence is choking and even the government, with all its huge publicity machinery, is only speaking when it has to. Apart from some early ‘sound-bites’, the UNC is absolutely silent. Even a party with such a stable of noted ‘firebrands’ is silenced by the deep relationship between Lawrence Duprey and its leadership. In the case of the ‘third party’ CoP, it is even more galling since they have a ‘front bench’ of unmatched depth in the fields of finance and economics. One can only wonder at the reason for their silence.
That silence is a huge externality imposed on us all by the very size of the CL Financial group. The irony is that the very issue which needs to be debated is the one on which we are silent. That is a colonial pattern of public discourse and it is inimical to our nation’s development. Such are the consequences of condonation.
3 thoughts on “Condonation”
Congratulations on the continuing effort displayed by your weekly contributions to the Business Guardian. I agree with and accept every point made so far but I want to side step slightly and address the CL Financial issue from another perspective.
I have not seen anyone speak about the opportunity to make CL Financial the basis of a 2nd Sovereign Wealth Fund similar to TEMASEK Holdings of Singapore. See a description of that company here.
Once it is accepted that there is going to be a long period before the TnT government recovers all of its investment/loan to CL then it makes sense to look at converting monies advanced into a regular majority shareholding. An alternative is to have CL issue Preference Shares to the State. Any such investment (or set of investments if it is felt that holding the relevant equity in the operating companies directly makes more sense) can be held in NEL or can be held separately. This helps deal with some of the concerns articulated by Afra Raymond in the Guardian.
In my view, the significant operating companies in the CL portfolio are all fundamentally, good long-term investments albeit heavily indebted. The only way to bring them through this mess is to pay-off the debt. There must be a method of paying back the debt and the fairest method for the people of TnT is by taking equity in the CL Group. It also provides a significant portfolio of externally directed investment based on internally (Caricom) generated funds which can be built upon for the benefit of Trinidad and Tobago and the wider Caricom region. As a start, the operating companies can be bundled as to their respective sectors and listed on the regional stock exchanges. The immediate benefits are obvious – payment down of some of the debt, widening and deepening of the number and sectors represented.
Even on the basis of substantially reduced asset values as a result of the problems of the Group together with the world wide recession I think that there is a good opportunity here. I think this suggestion is worthy of some objective and dispassionate discussion.
At the very least it can provide a basis to pose some very specific questions to the Minister of Finance and the Central Bank. These are just a sample. What is the nature of the equity injection into Clico and separately CL Financial itself? What is the extent of the injection to date? What are the arrangements for repayment? Which of the companies in the group have been sold off by the new management/board? Why have they been sold? What is the consideration for the sale? What are the specific arrangements with respect to the indebtedness of overseas financial subsidiaries? Do you propose to provide quarterly status reports and if not why not?
thats why we have to deal with the arrogant,insular,and obscene measures in the “document” that is the Budget 2010
Thanks for joining-in, Bro…there is a hint of desperation in the air and we have to brace for even more ‘amazing scenes’…