The new situation is charged with peril and one is reminded of Naipaul’s father, the intrepid journalist from A House for Mr. Biswas whose favourite tagline was “…amazing scenes were witnessed…”
Finance Minister, Winston Dookeran, addressed Parliament on the Finance Bill (No. 2) 2010 on Wednesday 24th November. It was a lengthy and detailed statement, which put things into a necessary perspective. For me, it was important that Dookeran gave priority to the claims of the contractors and of course, the last item being the claims being made by the various groups representing Clico policyholders.
The Finance Minister held his position as set out in the 2011 budget, which was no surprise when one considers his statement that the various submissions received from the policyholders’ groups did not withstand scrutiny. I only had two significant concerns in terms of outstanding items which require proper attention.
- The first of those was the continuing failure to produce the audited accounts for the CL Financial group – by now the 2008 and 2009 accounts are long overdue. The absence of those important figures means that the many heated discussions taking place, in the media and privately, are all uninformed. The questions are simple – Are the 2008 and 2009 audits for the CL Financial group completed or not? Yes or no? If they are, when are they to be published? If not, what is the problem with completing these?After all, as I wrote about the 12th June 2009 CL Financial Shareholders’ Agreement in this space on 1st April 2010 –
…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?…
- The second concern I had was with the special window being opened to assist the Credit Unions, some of whom had invested in excess of 10% of their funds in the EFPA, an annuity approved for individual investors. We need to know just which Credit Unions took those imprudent investment decisions. There is no way we can merely legislate or pay our way out of this crisis, the problem runs deeper, into fundamental matters such as the attitudes of the leadership group in the society. Some of those details might emerge during the upcoming Commission of Enquiry, but it would be to Dookeran’s credit if he released the names of those Credit Unions and the amounts to be refunded.
The immediate statements of the Clico Policyholders’ Group (CPG), which targeted Dookeran, are a perturbing sign. For whatever reason, the CPG is ignoring the settled principle of Cabinet’s collective responsibility. That stance seems to be detrimental to effective negotiation and I am beginning to wonder if some person or persons in the Cabinet is ‘giving them basket’.
The threatening statements from the CPG as to the damage their proposed lawsuit can do to our country’s economy are nothing less than scandalous. We are now witness to a grim game of brinksmanship.
We have all heard the arguments and rumours surrounding this bailout, so no point repeating those. It certainly seems that those are going to be ventilated in a high-profile series of lawsuits. I only hope that the hearings remain open and do not take place in a sealed Court. That is what happened in the very first lawsuit after the bailout, in which the Central Bank was attempting to get CL Financial to comply with the terms of the bailout. The stakes are too high now for any concept of privacy to prevail in this matter.
The Minister of Finance also announced that the conditions under which the financial relief would be offered were being considered and it is good to know that there is to be no unconditional relief at our collective expense.
My thoughts on that aspect are that the State must conduct itself in an exemplary fashion and not be placed at any further disadvantage, having already shouldered this enormous, exceptional payout.
There are now anti money-laundering (AML) laws which require depositors to make declarations as to the Source of Funds, all in an effort to prevent the proceeds of crime from entering the legitimate economy. In my view it is necessary for the government to be satisfied that the various sums being claimed by these policyholders were properly declared under the AML laws. We have had shocking reports about the elementary management controls which were either absent or awry in the CL Financial group, so it would not surprise me if their AML-compliance was lax. That needs to be thoroughly checked. It would not be acceptable for our taxpayers’ monies to be used to rinse ‘dirty money’.
Also, the claimants who owe on their taxes – VAT, PAYE, Corporation Tax, Income Tax and so on – should not be refunded. As Dookeran said in that address, if everyone paid the taxes due, our budget would not be in deficit. We cannot go deeper into deficit without these elementary precautions being taken.
Finally, there is the issue of the many borrowers from Clico, British-American, Clico Investment Bank (CIB). In the case of CIB alone, we are told that about $1.0Bn of those loans are ‘non-performing’ – which means that the borrowers are not repaying their loans. It would be perverse for some of those non-performing borrowers to receive refunds from the State. This is a live part of this situation, since in the case of CIB itself, the very Inspector of Financial Institutions swore in his affidavit filed in the winding-up action for that failed bank –
…With respect to the Creditors of the Petitioner, the Petitioner has met the statutory obligations for the Board of Inland Revenue (except for Corporation Tax Returns for 2007, 2008 and 2009 which are being prepared and remain outstanding)…
That is a glaring example of the kind of wanton wrongdoing at the heart of this mess. CIB fails to file its Corporation Tax returns for three years, yet keep their banking licence and arrange for the taxpayer to bail them out when it all goes sour.
Some claimants may try to invoke the ‘corporate veil’ to shield themselves from various breaches committed by their companies, but this is an exceptional situation in which the State is making an offer. In my view, the corporate veil ought properly to be ignored, so that the long-standing commercial principle of ‘set-off’ can be applied to the claimants.
The Colman Commission of Enquiry and its effects on the Code of Silence will be my next topic.