CL Financial bailout – Examining the Horns

Once again, I am returning to the need for us to grow a culture of responsible behaviour as a vital part of national development.

Responsible Reasoning

William Lucie-Smith
William Lucie-Smith

The idea that the CL Financial bailout is just like the one in the USA is a durable one, which has been very useful to those people who are seeking satisfaction.  Nothing could be further from the truth.  That is a false view and what is more, extremely misleading to the public, who rely on informed members of society to share that information conscientiously.  Rightfully or wrongfully, many people here look upon the USA and the doings of its government with a sense of approval, to the point that if Uncle Sam does it that way, there must be some good sense in that.  That idea that our bailout is ‘just like the one in America‘ must be challenged, defeated and put out of its misery.

On Wednesday August 18th, William Lucie-Smith, the Express columnist wrote on this very topic, his sub-title being ‘A new strategy required’.  That column can be found at
Lucie-Smith is a chartered accountant, former Managing Partner of PricewaterhouseCoopers and currently is a Director of both Republic Bank and Sagicor – he is described in his byline as ‘specialising in corporate finance’.

That article started with the claim that the CL Financial bailout was in some way similar to the US government’s bailout of its financial sector.

…The original plan was to guarantee policyholder funds and make loans available to Clico, so that confidence would be restored and the group businesses turned around. This is what happened in the United States with the vast majority of TARP funds being repaid in full with interest…

Given the huge stakes in this matter, the promotion of such misleading views is nothing less than public mischief.

Here are some of the main points of the CL Financial bailout which are, in every respect, completely different from the USA situation –

  • No Public Explanation – Apart from Duprey’s single, brief speech at the press conference to announce the bailout on 30th January 2009, there has been no proper forum at which the CL Financial chiefs have been made to give an account of this catastrophic collapse.  Neither has there been an attempt to set one up.  That is in direct contrast to the highly-publicised and televised Congressional hearings at which the chiefs of these failed financial institutions have been questioned as to their actions and the serious consequences.  We have all seen those TV shows.  Even the new CL Financial management is little better, compared with the USA where the Treasury must make a monthly report to Congress on the bailout.
  • No limit on quantum – No limits have ever been set on the CL Financial bailout.  Every firm in the USA bailout had its borrowing limits specified at the outset.  As an example, see Citigroup’s terms at  Or the wider bailout, at
  • No interest – Neither of the Agreements specifying the terms of the CL Financial bailout even mention interest.  As Lucie-Smith himself stated, the recipients of the US bailout had to repay taxpayers’ monies with interest.
  • No pre-payment of creditors – An interesting feature of the US bailout was that the failing financial institutions were made to stand the first tranche of losses before any taxpayers’ monies were injected.  In other words, they had to sell some of their assets first before tapping into Uncle Sam’s Treasury.  In contrast, CL Financial has been able to tap right into Treasury funds without any significant asset disposals – yet another point that Lucie-Smith himself makes.
  • No time-limit for repayment – Neither of the Agreements specifying the terms of the CL Financial bailout give any stated payback period.  The US bailout set out repayment periods for all recipients of taxpayers’ funds.
  • No security taken – No significant CL Financial assets have been disposed of, as per the agreements – yet another point that Lucie-Smith himself makes.  In addition, the Governor of the Central Bank has himself confirmed that all of the CL Financial group assets are encumbered – see
  • No dilution of equity position of CL Financial shareholders – Despite the massive extent of the CL Financial bailout – it is effectively an open-ended commitment – there is no dilution of the shareholders’ equity.  In the US bailout, the troubled  companies were forced to give equity to the Federal Government.  In order to receive taxpayers’ money in the USA, Fannie Mae (the huge mortgage company) gave 79.9% of its equity; while AIG (at that time the world’s largest insurer) gave over 85% of its equity; 36% of Citibank belonged to the US government in February 2009 – pages 229, 401-2 and 530 of Andrew Ross Sorkin’s ‘Too big to Fail’ refer.  CL Financial shareholders have not been made to dilute their equity.  If I, writing as an interested citizen, could know this, it seems that any specialist in corporate finance would also know these details.

The only resemblance to the US bailout is in name only.  Real Trini-ting.    Duprey and his cohorts negotiated a Blank-Cheque Bailout at zero interest, without losing any of their assets.  That deal is absolutely unique.

Our taxpayers have effectively made a huge single loan (probably the largest in the Region’s history) to the wealthiest individual in the Region at Zero interest.  Virtually every relevant professional body and Civic Society organisation has remained silent on this bold-faced attack on our Treasury.  Nothing from the Accountants, Lawyers, Bankers, Economists, Trade Unionists or Religious bodies.  The one recent exception to this has been the call by the Trinidad & Tobago Transparency Institute (TTTI) for investigations into the Angostura disaster.

The CL Financial bailout has been cloaked in the robes of benevolence and stability, resulting in a situation which has minimised the floods of lawsuits which would have been confronting some of those responsible parties – Auditors, Attorneys, Company Directors and Officers.  In reality, the common-wealth of our entire society has been pledged to rescue a fortunate few.

The CL Financial bailout is in urgent need of re-negotiation, to say the least.  “It wrong like a biscuit.

In the same way it was wrong for the last administration to use taxpayers‘ money to rescue the CL Financial chiefs from the real consequences of their decisions, it would be equally wrong for this newly-elected government to also bailout those affected by HCU’s demise.  Two wrongs could never make a right.

Cocktail of Consequences

Angostura Rums

Angostura is the Caribbean’s flagship rum and bitters company.  It was a Caribbean icon, manufacturer of Angostura Bitters, as well as classic rums like 1919, Royal Oak, 1824, VAT 19 and Old Oak – Angostura was acquired by CL Financial in 1998.

The 2008 audited accounts were finally published at the end of July 2010 and the extent of their losses are cause for grave concern, seemingly a harbinger of the state of the entire group, 18 months into the bailout.

Coming after an extended wait for the 2008 audited accounts, the Guardian headline on 4th August 2010 was stunning: ‘Angostura declares $1.28Bn loss’ – see

The Express headline, on the same date and story, made me smile – ‘Angostura sales rise’ – see

It was said to be the largest loss in the history of our stock market and it represents colossal destruction of investors’ capital and national wealth.  It seems that the source of the losses was a receivable due from its parent company, CL Financial – according to the Deputy Chairman’s report – see

…[the] precarious financial position of our parent company…impaired the collectability of circa $1,185M in receivables from the CL Financial group…

The Notice to Shareholders of 26th June 2009 – see – stated that the receivable from the parent company was $633M.  So you have to wonder what is the reason for that receivable almost doubling.

The interests of the minority shareholders have been subordinated to those of the majority shareholder, CL Financial, which was able to acquire the leading Jamaican distiller, Lascelles Mercado, by deploying the Angostura assets.  This episode is one which raises issues of minority shareholder rights which are unlikely to disperse.  As Justice Carlton Best is reported to have said, in relation to his lawsuit against CLICO for a $57,000 fixed deposit they failed to honour upon maturity – ‘It feels like robbery without a firearm’.

Who advised the Angostura Board on this transaction?  How can we accept the declaration that those funds are now irrecoverable?  How could a parent company, said by its auditors to have assets worth in excess of $100Bn at the very same accounting date (31st December 2008) be unable to repay a mere $1.185Bn.

Yes, it is true, the same accountants – the esteemed international firm, PriceWaterhouseCoopers – are auditors for both CL Financial and Angostura.  But more on that in the sidebar.

It is almost a metaphysical query – can a responsible class always escape judgement?

SIDEBAR: Auditing the Auditors

PricewaterhouseCoopers (PwC) is the world’s largest professional services firm in the accounting and finance industry.  PwC audits the accounts for UDeCOTT, CL Financial, Angostura and at one point I can even recall the Hindu Credit Union announcing that that firm was to be their internal auditors.  Clearly, PwC is a main player in the big leagues here in Trinidad & Tobago.  Let me declare here that they are also my [Afra Raymond, not Raymond & Pierre] accountants.

On 30th June that firm issued a letter, under the hand of Colin Wharfe, its new Senior Partner, to announce four new appointments.  The letter also explained that four of the most senior Partners had all retired on 30th June, those were –

  • Graham Mitchell, former Senior Partner, after 28 years’ service;
  • Jewan Ramcharitar, after 34 years’ service;
  • Peter Inglefield, after 34 years’ service;
  • Gerald Olliverre, after 32 years’ service.

The new appointments were announced in full-page press adverts, which omitted the retirements. See letter here –

A version of this commentary appeared in print on August 26, 2010, on page 17 of the Business Guardian.

10 thoughts on “CL Financial bailout – Examining the Horns

  1. Hoy Vey!!
    Sounds like a version of the Heritage and Stabalization Fund????
    You keep putting money in, you never take it out!!

  2. unburdening the State – dismantle CL and suggest the timeframe
    This is helping to supply us with a serious debate on our economy, the cult of sheltering the strong and our addiction to side-of-the-road maccoing of accidents and mishaps. This debate is not happening in our Parliament, and it is certainly not happening elsewhere in the media (as has been pointed out).
    The former Manning regime will defend nothing – as clear an indication of secrecy as you can wish… And given the possible litigation to come, maybe they shouldn’t even try.
    T&T cannot afford the free bailout of CL Financial. The problem originates not so much with secrecy as with hapless admiration of Duprey – from many many quarters not least the State itself.
    And the People’s Partnership Administration which has its own clutch of CL connections seems unwilling to make a fist of debating how we should proceed. For all his statements on the Budget to come, 2% encumbered with CLF related commitments, Dookeran hasn’t signaled a willingness to discuss unburdening the State – dismantle CL and suggest the timeframe.
    The politics of dismantling CL will never get any easier than now.
    This debate which this AR Blog has pitch-forked us into has relied on some fairly frightening numbers. The debt of Angostura limited $1.18 billion; the plummet in CLF Asset value $100 billion to 23 Billion (and falling) to name just 2. No one has quantified the knock on effects related to the pension schemes. And of course the sheer effluxion of time can warp or act as a multiplier to taxpayer commitment of funds.
    And if the State remains in the grip of year on year $14 billion deficits, what then?
    End the fanatical CL dream now.

  3. It takes real patriotism to face up to the somewhat unpalatable truth that CLF has simply failed; that the precise reasons for that failure have been deliberately shrouded; that taxpayers are now on the hook for the whole interest free loan to CLF.

    Political partisans and hired guns on both sides are always ready to run with messages that pander to popular misconceptions. The fiscal problems that threaten our country’s future are real. CLF, long touted as an example of local business savvy, is past its sell-by date and should be allowed to go down. It is mainly a gross failure of public policy that insists on anything else. The same lack of regulation and latitude afforded CLF the room to grow and – to grow out of control – propels us to permit the business to go down; as businesses which risk everything by curious arithmetic often will.

    1. Novack,

      The moment is ripe for a real public discussion on all this, but I fear that the expected HCU bailout will eclipse the good sense…and the work will go to a new place.


  4. Sadly, this entire CLF situation is like a open sore………..the more you pick at it, the more it festers.

    It’s strange (I write sarcastically) that Mr. Lucie-Smith has such profound insights into what was wrong with the Duprey model and CL Financial. I was at the the CLF AGM when PWC were presented as the auditors. This was a surprise since at the previous AGM Ernst & Young were returned as auditors. Why was E+Y changed? I have never received an answer. Given all the shortcomings that Mr. Lucie-Smith identified one wonders why PWC never identified them before or why they never put their foot down in the same manner that they have only recently done with the Angostura accounts.

    1. Paulie,

      Thanks for both your comments – the only thing is, I do not think that E&Y have been CL Financial’s auditor’s for over a decade now.


  5. That is correct.

    However one wonders if CLF wanted someone who would give them the answers that they wanted to hear.

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