CL Financial bailout – Amazing scenes

Winston Dookeran vs Peter Permell. Original photo courtesy Trinidad Guardian. Illustration by NiCam GraphicsThe 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.

  1. 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?…

  2. 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.

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10 thoughts on “CL Financial bailout – Amazing scenes

    1. Hello to you this early morning, Indra,

      Nothing strange in that at all, at all – this tale is really about a deep Civilizational Crisis which has beset us, hence the requirement for vigour, clarity and constancy which has animated my work.

      Point being that the rot is very deep indeed. I will be returning to the question of motivation in the coming weeks.

      Thanks for joining-in and please spread the word.

      Afra

  1. The more and more that the various CLICO policy holder interest groups agitate for full repayment, the more I am suspecting that they are simply trying to force/blackmail the government into giving into their demands. Why? Because they, as does everyone else, know that CLF and CLICO are insolvent and that there are a number of outstanding debts and guarantees that have yet to come home. CLF has ignored a demand from the liquidator in the Bahamas to live up to its guarantee which is valued at up to US$58 million. Legal action in this regard will no doubt start shortly. There must be others that have not yet made the papers.

    Permell & Co want to ‘try a thing‘, rush the GoRTT into paying them in full and then run, leaving the GoRTT out of pocket and having to deal with the other (secured) creditors. Why hasn’t Permell and his legal team sued Duprey, Monteil, Sakal, Baldini, et al? These are/were the directors of the company who took the money. Why give them a free pass?

    Lastly…for Mr Permell, caveat emptor!

  2. “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. ”
    Just to point out that these policy premiums were not likely to have been paid by cash (notes and /or coins), but by cheque, either personal or manager’s cheques. It is the responsibility of the issuing bank to check the source of funds when you deposit. When you write a cheque it draws on funds in your account, the payee can assume your bank is aware of the source of those funds. The ALM laws anre not intended to to give all and sundry a right to your private information. They tend to be brought up with real cash transactions of more than a specified amount.

    1. Hello again, Angeli,

      I do agree with you that funds derived from a bank cheque should not be subject to further AML-type examination or verification, which is a point I have made several times in public.

      Despite those apparently reasonable objections, the present position is that many of us in the commercial world – real estate practitioners and insurance companies included – are also obliged to comply with AML rules…here is a relevant quote from our Central Bank Governor on the matter –

      “…Among the banking system, for example, the foreign banks are seen to have fairly sophisticated AML systems since they need to meet their head-office standards. In general, the local banking institutions have less robust AML systems, though it is fair to say, that they have been working hard to strengthen these arrangements.

      Unfortunately, the insurance sector, as a whole, has not seen money laundering as a major challenge, largely because, some argue, they receive payment mostly by cheques, which are drawn on banks, and which themselves are subject to money laundering procedures. The fact is however, that many insurance intermediaries deal in cash (for example, in collecting insurance premiums) and herein lies one potential source of money laundering…

      This is from a lecture on ‘Anti Money-laundering and combating the financing of terrorism’ by Ewart Williams, delivered on 14th January 2010 – it can be accessed at http://www.bis.org/review/r100122e.pdf. Please note that the emphasis is mine.

      Thanks again for joining-in and please spread the word.

      Afra

  3. When in Dec 31st 1994, “OLD BWIA” ended and the new airline “NEW BWIA” began, the CLICO – OLD BWIA 1971 Staff Pension Plan also ended. This 1971 Staff Pension Plan had generated approximately $376 millions (of profit) surplus. Under the Valley Agreement, OLD BWIA workers were to get a third of that surplus in 1995.

    Up to today, it seems that efforts are still being made to deprive OLD BWIA workers of monies from that one third portion of the surplus, namely those monies which were meant to buy (for the OLD BWIA workers) shares amounting to 15.5% of NEW BWIA, with an option to buy a further 10% of NEW BWIA, and to thus become BWIA majority shareholders.

    There are concerns about why CLICO, NEW BWIA, the plan actuary Buck Consultants and WISE (West Indies Stockbrokers Limited), and others … are keeping NEW BWIA Valley Agreement “Shares” information secret from the OLD BWIA workers who have a right to know where their monies (tens of millions of dollars) went more than 15 years ago. The Unions have asked by writing and not received a reply. A veil of secrecy gives the impression that there is something to hide.

    Last year, in the newspapers there was an offer of an ex-gratia payment 20 cents per share to all BWIA minority shareholders and former employees. Many names were included of persons who never bought BWIA shares. It appears that there is a deliberate to confuse {A} {BWIA shareholders and former employees who bought out of their own pocket “BWIA shares” sold on the local stock exchange, (April, 1999)}, with (B) [CLICO – OLD BWIA 1971 Staff Pension Plan Surplus members who were entitled to the March 29th 1995, “Valley Agreement NEW BWIA Shares” which never came to pass].

    Members of the 1971 Staff Pension Plan could not have bought “March 29th 1995, Valley Agreement NEW BWIA Shares” because the Shares part of the “March 29th 1995, Valley Agreement” was never honoured. For the entire time since March 29th 1995, OLD BWIA workers never received NEW BWIA shareholder benefits. “Valley Agreement NEW BWIA Shares” certificates were never issued to those OLD BWIA workers. OLD BWIA workers were never invited to a NEW BWIA shareholders meeting.

    Mr. Jerry Hospedales, Chairman, BWIA West Indies Airways Limited, C/o The Divestment Secretariat Ministry of Finance, Eric Williams Financial Complex, Independence Square might shed light on this.

    It is my feeling that OLD BWIA workers should therefore not be made to pay for shares that they never received.

    Based on the above, the monies of the OLD BWIA 1971 Staff Pension Plan members (valued at $1USD for each Valley Agreement NEW BWIA Share), which were withheld from those same members for the purpose of buying NEW BWIA shares, should be returned to those same members.

    IT IS TIME TO END THE MOCKERY OF JUSTICE THAT HAS EXISTED FOR TOO LONG.

    1. Yes, Cameron,

      You say that CL Financial is putting out the right side of the story and then direct us to a blog (yours?) which says the opposite…

      Please clarify.

      Afra

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