CL Financial Shareholders’ Agreement

Second MOU between CLF and Govt of TT
FOR YOUR INFORMATION: A copy of the official agreement between C.L. Financial Limited and the Government of Trinidad and Tobago has finally been delivered to me per my request under the Freedom of Information Act. This CL Financial Shareholders’ Agreement (SA) of 12th June 2009 which I requested on 16th November 2009 under the Freedom of Information Act was sent to me by the Ministry of Finance on 11th March 2010 and my emailed response to the Minister of Finance is on the home page of this blog.

My preliminary comments are –

  1. Quantum – The SA is silent as to quantum, which would seem to mean that the group will enjoy unlimited access to taxpayers’ funds. The 2010 budget statement on 7th September states an estimated allocation to the CL Financial bailout of $5.4Bn – but subsequent events have only added to the confusion. To wit, the $50M USD for the British-American Insurance recovery (as per 2nd November ECCU press release) and the ‘up to $510M’ announced to be available to meet the pensions due to ex-Caroni workers. Question being whether the $5.4Bn includes the subsequently-announced amounts or are those to be added-on?
  2. Security–At the preamble to the SA – on page 5 – we are told that “…valuable consideration…” is being offered by CLF as per the original MoU. Of course, given the Governor’s revelations on 7th April 2009 – see – that is simply not so. Indeed, it seems clear that the cupboard is bare and that this CLF group has no unpledged assets of any value.
  3. Interest–No mention of interest at all. We are therefore now advancing an unlimited quantum of taxpayers’ funds, for which no security has been provided and those funds are being advanced at ZERO interest. Given the well-established rule that late payment of taxes makes a taxpayer liable to 20% interest and the interest rate the Federal government charged AIG for their bailout funds – it was 8.5% above the benchmark LIBOR, which was at 3.0% – it is clear that this represents a massive concession to the CL Financial group. Quite apart from the bailout itself, the 325 shareholders of this group are also benefiting from this unprecedented and unexplained facility of ZERO percent interest rate.
  4. Accounting–Section 4 of the SA sets out the procedure for a proper system of accounts, culminating at 4.4.5 – “…shall ensure that an annual report of CLF is prepared and dispatched…in manner consistent with standard corporate practice…”  The accepted interpretation of this language informs us that the word ‘shall’ denotes an obligatory, non-voluntary duty.  If that is the case, when can we expect publication of the 2008 annual report, accompanied by audited accounts, as per ‘standard corporate practice’?
  5. The role of the Shareholders–The MoU of 30th January, at Para (c) of its preamble, spells out its aims as “…to protect the interests of depositors, policyholders and creditors of these institutions…”  According to the second sentence of the Ministry of Finance press release of 12th June 2009 – this is the penultimate document in the ‘Quick-Guide’ in the CL Financial bailout section of this website – “This new agreement is designed to give substance to the Memorandum of Understanding (MOU) of January 30th 2009.” The SA of 12th June 2009 was the subject of that press release.  The SA, at Para A. of its preamble, states the intentions of the parties as having been set out in the MoU of 30th January 2009 and ends by “…their stated understanding, inter alia, that certain steps be taken to correct the financial condition of CLICO, CIB and BA in order to protect the interest of depositors, policy holders, creditors and shareholders of these institutions…” (These two words are put in bold as my own emphasis).  I questioned that official version in ‘Fit and proper?’, ‘Party of parties’ and ‘Figuring it out’ – all available on this blog.  Now that we have the actual SA to work with, it is clear that the statement in 12th June press release is extremely misleading.  The SA does not just ‘…give substance to…’ the original MoU, it in fact is an entirely different species of agreement.  The SA constitutes a written guarantee to protect the 325 shareholders of this CLF group.
  6. Assisting the incoming Management–Clauses 2.3.3 and 2.3.4. of the SA, require the outgoing CL Financial chiefs to render all assistance to the incoming Board and Management in terms of all records and accounts etc.  The question here is ‘Have the new Board and management been receiving the full assistance of the previous CLF chiefs?’  If not, what is being done about it?  If yes, where is the $5.0Bn missing from the CLICO Statutory Fund?
  7. Analysing the lacunae–The events in the interregnum and their consequence are extremely important aspects of this matter.  I say so because the intervening period – i.e. between 30th January and 12 June 2009 – was one in which several important and shocking facts came to light. Some of these were –
    • Payment of Dividends – $3.00 per share paid on 16th January – i.e. three days after Duprey wrote to the Central Bank Governor for urgent financial assistance.
    • Over-pledging of assets – As cited above, the Central Bank Governor revealed that CL Financial’s assets were all fully pledged.
    • $5.0Bn is missing from CLICO’s Statutory Fund – According to the newly-appointed CEO of CLICO, Claude Musaib-Ali (he has since resigned, effective 14th February 2010) the CLICO Statutory Fund had $5.0Bn missing – see
    • Attempted sale of assets as per CLICO Energy – Also, CL Financial attempted to sell its shares in CLICO Energy, which was in breach of the terms of the MoU. At clause H. and 6.1, the outgoing CL Financial Directors agree to use their best endeavours to reverse the sale of those shares.

    With the exception of the last item, none of these other three serious matters are addressed at all in the SA.  Silence on the payment of dividends.  Over-pledged assets are described as being ‘valuable consideration‘.  Silence on the missing $5.0Bn from CLICO’s Statutory Fund.

    Those four events, having been revealed in the gap between the MoU and the SA, should have informed the stances taken by the parties.  To my mind, these actions by CL Financial are indicative of insincere behaviour intended to outwit and cheat the taxpayer.  The Ministry of Finance press release describes the SA as ‘…giving substance to…‘.  Nothing could be further from the truth, since the SA in fact creates new levels of entitlements and protections for the CL Financial shareholders.

    As taxpayers, we ought to have been able to rely on the State negotiators to propose terms which would have extinguished the equity of the CL Financial owners and taken other steps to restore the correct position.  Instead, the SA has not sought to address their assaults on good faith and ‘fit and proper’ behaviour.  We have now been bound into a long-term arrangement to restore the fortunes of one of the Caribbean’s riskiest adventurers.

Readers, please take note. In terms of its size, timing and terms, this CL Financial bailout is a grievous attack on the very integrity of our Treasury.

SIDEBAR: Heads we lose, tails they win…

The EQUITY position

In a situation like this, where a company is effectively both illiquid and insolvent, the incoming investor/lender has enhanced rights.  Effectively, such a company is dead – just like someone whose heart has stopped beating – and any assistance or lending is usually on very onerous terms.  The only exception would be in the case of related-parties who are able to agree special terms which no one else could accept.

That seems to have been the case here, since we had the CL Financial group out of cash, with its assets fully pledged, but yet able to get the full financial assistance of the State, without being forced to relinquish the rights of its shareholders.

One is reminded of the telling statement by the Governor at the press conference to announce the bailout on 30th January 2009, as to the fact that one of the main reasons for the collapse of the CL Financial group was ‘…excessive related-party transactions…’.  It seems to me that this is exactly what we, the entire nation of Trinidad & Tobago, have now entered into.

The capacity to learn from the past is one of the main signs of maturation, but we are not displaying those qualities here at all, at all.

We do not seem to have learned from the central lesson of that tragic collapse.

The PUBLIC position

Another troubling aspect of this SA is that it does not properly allocate risk and reward between the parties.  Again, readers are asked to remember that the mis-matching of risk and reward was also one of the elements which brought down the CL Financial group.

  1. First example, let us use an Optimistic Modelin which the State intervention in CL Financial is successful. That would look like this –
    • All policyholders’ and depositors’ claims are satisfied;
    • All asset values are restored;
    • Republic Bank Limited and Barbados National Bank continue to thrive as leading banks in their sectors;
    • CLICO, British-American etc are restored as dynamic companies with healthy market share;
    • Angostura, Methanol Holdings, Home Construction Ltd and the other non-financial parts of the CL Financial group are also restored to health;
    • Overall, the CL Financial group returns to profitability.

    If that happened, the State investment in CL Financial would have been beneficial to the 325 shareholders, but all the State would be entitled to receive, for having risked its own capital, would be a repayment of those sums, with no interest.

    In this situation, the SA has allocated to the State all the risk, a massive injection of capital, responsibility for management, yet even in the case of a successful outcome there is no return either by way of interest on the funds advanced or equity in the rejuvenated enterprises.

  2. Second example, let us use a Pessimistic Modelin which the State intervention in CL Financial fails. That would look like this –
    • Many policyholders’ and depositors’ claims are frustrated;
    • Assets are sold by mortgagees and decline in value;
    • Republic Bank Limited and Barbados National Bank are disposed of to meet the demands of creditors;
    • CLICO, British-American etc fail to regain their place in the markets;
    • Angostura, Methanol Holdings, Home Construction Ltd and the other non-financial parts of the CL Financial group are adversely affected by the group’s troubles and also decline or are disposed of;
    • Overall, the CL Financial group is slowly broken up.

    If that happened, the State investment in CL Financial would have been a loss for the taxpayer, since it would be impossible to recover our funds.

    In this situation, the SA has allocated to the State all the risk, a massive injection of capital and responsibility for management.  The only thing the State has to look forward to here is the blame and the losses.

Heads we lose, tails they win…


27 thoughts on “CL Financial Shareholders’ Agreement

    1. Thanks for your comments, Michael –

      The 30th January 2009 MoU did not mention interest on the funds advanced at all. This is is an unsecured, unlimited advance of taxpayers’ funds at ZERO percent interest, with the shareholders enjoying a written promise of protection. Even for this place, that is a first.

      As I said – ‘Heads, we lose and Tails, they win…

  1. The reference to valuable consideration is merely a legal term which is making sure that the document is binding as a contract between the parties. You will see it in most contracts, in some form or another.

    1. Hello to you St. George’s Dragon – whoever you really are,

      I do appreciate that the phrase is a ‘stock’ one with that meaning, but that is the very point, since, according to the Governor of the Central Bank of Trinidad & Tobago, CL Financial had NO valuable consideration. That lack of consideration is far more than a terminological nicety, since it meant that CLF were simply unable to enter into a binding contract – legally and financially they had lost the means to do real deals.

      That is at the root of my outrage, because the Shareholders’ Agreement uses that phrase, after it was revealed that the CLF cupboard was bare, to create an odious obligation on our State.

      That is why I emphasized it as a serious defect in the agreement.

      I am looking forward to your open participation in this important discussion.


  2. Hello Afra: Do you know which partner at PWC signed off on the accounts for 2007? Has this partner been quizzed or had any comment at all on this subject?

    1. Hello Gregory,

      No, I have no idea which PWC partner signed off on that CL Financial 2007 audit. No comment or response from the firm thus far and I am not holding my breath at all.

      There is a comprehensive and malodorous ‘Code of Silence’ in effect here, to the detriment of the wider society.

      I will continue this work as long as my resources will allow.

      Thanks for your questions and please join into the discussion again


    2. Hello Gregory,

      You should take a look at one of my previous articles – ‘Finding the Assets’ – to see what is the apparent gap here.


  3. Dear Afra,

    As a CLF shareholder, it has been interesting to read your analysis and interpretation of the ongoing debacle. Sadly, the more one asks, the more questions arise.

    The matter of CLICO’s statutory fund deficit is not new. It has existed since 1994, a fact that all commentators have overlooked. How did they get away with it for so long? Was in really because “proper” regulatory legislation did not exist? Did the Central Bank and the Supervisor of Insurance do their jobs? Did the substantial donations to the PNM and UNC have anything to do with the CLICO being given a free pass? The same situation seems to have existed in the other territories where CLICO and BA operated.

    You made reference to the initial MoU between CLF and the GORTT and you are correct, it is essentially worthless, hence the rush for the 2nd agreement to give substance to it. But who was the facilitator in obtaining the MoU? How did the supposedly intelligent people at the CBTT get hoodwinked into signing off on what was literally a blank cheque to CLF with no assets or guarantees to show for it? Lawrence Duprey made a great show of praising the Minister of Finance, the CBTT and Supervisor of Insurance who all smiled and lapped up the praise. Not a single person there had any clue as to what they were doing. Talk about “madoff” with the money! Thankfully somebody took the time to check the supposed assets.

    Keep digging Afra, but be warned, the stench will only get worse and you already know, nobody will ever be called to account for what went on. And we expect foreigners to send their money to Trinidad’s IFC to be managed and safeguarded. What a joke.

    1. Hello Paulie,

      Thanks for your comments and here is my first question –

      CLF wrote to the Central Bank for urgent financial assistance on 13th January 2009, paid dividends of $3.00 per share on the 16th and then there was the ‘bailout’ Press Conference on the 30th – In between all of those vital points and literally amidst ‘the change’, CLF held its AGM at Trinidad Hilton on 23rd January. We were told that Michael Carballo deputised for an absent Lawrence Duprey on that occasion.

      Question – Given the group’s impending collapse and the payment of dividends only 7 days before, what was the mood/sentiment/outlook taken at that meeting by the CLF Board? Did Carballo simply read Duprey’s very ‘Brave Dange’ statements in the 2007 Annual Report? Did shareholders know about the situation?

      I look forward to your reply.


  4. Hello Afra,

    Firstly a correction to my earlier post, CLICO’s statutory fund was in deficit since 1992 and not 1994 as previously stated.

    I attended the CLF AGM at the Hilton and as I recall, none of the “big boys” including Lawrence Duprey attended. We were told that Lawrence was travelling on important business. The feeling was that, although the dividend has been cut from $5 to $3 per share and that the group as a whole was feeling the effects of the global downturn, it was able to weather the passing storm and that the effect on the bottom line when the upturn began would be significant. None of us had any knowledge of the true state of affairs and none of the directors present indicated that anything was wrong. Mr. Carballo, in response to a shareholder’s query as to how he could extract value from his shareholding (apparently you could use the shares as collateral with CIB for loans) remarked that although he owned no CLF shares, he was interested in obtaining some.

    1. Paulie…

      That is just fascinating…I don’t think you could make this stuff up, even if you were high or you were to really, really try.

      From what you are saying, there are 2 likely possibilities, either of them being unappealing in the extreme – firstly, the CLF Directors knew full well the true, dire position of the group and set about to give a false impression to the assembled shareholders or secondly, that they were themselves unaware of the ‘Duprey letter’ and therefore ‘set up’ to perform as they did.

      Of course, it is also clear that the ‘Code of Silence’ extends to that AGM, since its timing and reporting significance make it a critical element in the debacle. I wonder if anyone/CLF filmed or recorded the proceedings? Were there cameras and so on there?

      Have you any views on those possibilities? Is there a likely option I missed?



  5. Hi Afra,

    To quote Warren Buffet, “you only find out who is swimming naked when the tide goes out”.

    As I recall, the people on the podium were Michael Carballo, Gita Sakal, Clinton Rambersingh, Bhoe Tewarie and Roger Duprey. The AGM’s used to be filmed but I cannot remember if the last one was. Of those people, I suspect that at least Carballo and Sakal must have known what was going on. Remember, CLF had directors and executive directors. How much the others knew is open to speculation.

    CLICO was the cash cow with a large, constant cash inflow every month that was milked to pay for everything else. Questions must be asked of the auditors PWC, the CBTT and SoI since nobody who should have been aware of the problems, realised anything was wrong until the tower of Babel started to fall in on their heads.

  6. The company that used to film the AGM’s was Video Associates but I don’t know if they did the last one.

  7. Afra,
    As usual…thanks for doing the homework for us – the man in the street.
    I particularly appreciated the clarity received from your commentary in the sidebar, ‘Heads you win, tails they lose.’
    I guess you can say that we…’caught between the devil and the deep blue sea!’

    What a ting !!!!

  8. I read these comments with alacrity and amusement/bemusement.
    I see Trinidad’s central problem, front and center here: we disbelieve what we seein clear as day, in bright sun. And come up with all kinds of rationale to help and support our disbelief. Fuss we disbelieve; things can’t be as bad as that; we cannot be taken in front, left, right, back and center. You can’t sodomize a rape victim. Oh yes, you can. The Rape was CL Financial’s operations. The Sodomy is the Government’s “takeover”

    In other words, we are trying to make sense when there is none, but for the dregs that are left after the tide is gone: dealmakers, topline shareholders, treasury and pawns. The citizens are the pawns. The Exec Directors and topline shareholders (government and opposition cabal), who are also the dealmakers…are sitting around the Treasury deciding what else we go take.

    CL Financial was the biggest sousou I have ever seen or heard of in my life (and my career was in Africa), and the people at the bottom thought they were really in for a penny, to get their pounds. American youths used to say “Psyche” when something expected was pulled away.

    The government’s support of CL Financial happened ONLY (I think) because the whole Caribbean would have fallen in a financial crisis, like dominoes–the one they said was not affecting us here…and they would have had such s*&& on their faces on the world stage..that is what I see.

    Duprey is a Criminal which no one has yet to say in public; and all were in league with him…all the people the auditors, Central Bank; between gross and incomplete incompetence (Peter Principle) and interest to gain for being at the top and at the table, is what is the source and reason for this mess.

    Feel I am not expressing myself adequately
    Afra thanks for this, but my sense of things are played out by all you discovered in the shareholder agreement and your approach by item:

    Why and What sensible fidicuary would give unstated quantum?
    What oversight would put citizens at such risk, twice if not thrice (first by being CL payors, then by its demise, and third by ensuring to prop up their failure)?
    How no security?
    How no interest as if that money is “theirs”?
    The long reel of misinformation, who knows what, when?

    These kinds of arrangements only happen in select frameworks: mafia, of one kind or another…

    Afra constantly references the taxpayer and all seem not to want to read the writing on the paper—they do not figure.

    this is the case, from beginning to end, with Maybe, shifting seats and decision makers, from beginning to end, was a Bag. Marbles played between boys. The largest sousou made to sustain their feeding.

    I get a picture in mind of the poor citizens in the Nigerian Oil Delta who try to catch the remnants of oil leaking in their decimated lands for use in their hovels and end up getting blasted to bits or killed…that is citizens around CL Financial trying to see what dregs are left when in all actuality there are none. Refer to Pessimistic Model Above, which was always the Operation Manual.

    What we have not remembered is (this sousou) was stalled by the world economic financial crisis —Duprey and his merry gang could not get more takers (loans) to keep building the pyramid. Poor people do this by getting one credit card to buy out the other.

    I need an editor, but try and see if you can see my sense for the over-writing.
    Afra, I have sent this out. It does need to be made public far and wide, for those who did not read the signs before, one more drop of information to ignore, in disbelief.

    thoughts apart from a PhD/Economics

  9. as i have always maintained – they use the cover of friends and associates to do everything wrong – and as always said – quote – no one in trinidad ever gets locked up – remember the past – international trust – trade confirmers – after a lull and all the great meetings and deliberations – another phoenix will rise from the ashes to take investors $$
    pwc just like ey in the enron affair will be never even held accountable
    why were none of the big boys at shareholders meeting
    they knew what was going on but as usual have someone like mike carballo do the dirty work – he was being paid enough
    until we say enough is enough
    it will continue in the future
    where is anthony fifi of hcl and 1 woodbrook place in all of this
    smiling all the way to the bank
    long live the clubhouse and pnm

  10. It’s really sad that this institution has been mismanged to such an extent.

    This whole debacle occurred with some of our so-called sharpest entrepreneurs. I still laugh at going out and some of the Clico/ CL people wanting to buy out the place and saying we will make you millions if we invest with them.

    The whole group seems to have been mismanaged or managed like a rum shop with the average man on the street investing due to Fifi’s/Duprey/John’s stature or salesman look (nice cars/money etc)

    Is the PWC team liable/culpable in any way? These same professionals that speak about wrongdoing and corruption seem to have added to the incompetence in some way. The saying don’t throw stones if you live in a glass house.

    I don’t believe it is really a political issue but a Trini issue manifested in our view of ‘so called successful people’.

    Should we not be looking to divest the whole group?
    When will we start prosecuting or laying criminal charges?
    Will PWC be held accountable to name a few organisations?
    Does the Gov’t have the right team in place to ensure that a balanced outcome is acheived.

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