CL Financial bailout – Testing the Code of Silence

The Code of Silence has formed the subject of several columns in this series.

I am referring to the unwritten agreement amongst the leadership group in our society to maintain silence in matters of white-collar crime.  The guiding principle of the Code being that the members of that group must never be exposed to the same scrutiny and penalties as the common criminal.

That Code of Silence is poisonous to the progressive development of our society.  Unless we can bury the notion that white-collar crime pays, our society is doomed to lurch from crisis to crisis.  White-collar crime will never be truly challenged until the Code of Silence is tested to destruction.  I welcome anything which would dismantle the Code of Silence.  Literally anything.

The Commission of Enquiry into the various financial collapses which have beset us – Clico, British-American, Clico Investment Bank, Caribbean Money Market Brokers, the CL Financial group and the Hindu Credit Union – was announced by the Prime Minister in her 1st October address to Parliament.

On 17th November, Sir Anthony Colman QC was sworn in as the new sole Commissioner – he replaced the original choice – Sir Gavin Lightman QC, who had an apparent conflict of interest.  The Secretary to the Colman Commission is Judith Gonsalves, who served the Uff Commission in that role.  It is reported that Colman intends to hold open hearings and that those should start sometime in this month.

So, we are seeing three powerful channels emerging –

  • CIB winding-up action – ongoing litigation from National Insurance Board and National Gas Company to stop the Central Bank’s winding-up action.  Those court actions have been set for hearing in April and the sum of money at stake is an estimated $1.8Bn.
  • Policyholders challenges – The various policyholders’ groups have now declared their intention to take legal action to recover the monies they feel are owed to them.  The sum of money at stake in that series of actions is estimated to be $12Bn.
  • The Colman Enquiry – This is an overall, public investigation into the causes of the large-scale financial collapse as listed above.  Given the continuing failure to produce the accounts, the total sums of money involved are unknown.

So, what is the likely effect of these lawsuits and the oncoming Colman Commission of Enquiry on the entrenched Code of Silence in our society?

To begin with, I expect a series of legal challenges to the very hearings of the Commission, with the likely grounds being the long-established principle that no person should suffer ‘double jeopardy’, in terms of two sets of charges to be answered.  It will be an attempt to completely derail the entire Commission of Enquiry.

I would not be very surprised if certain state agencies also sought to shut the enquiry down.  That would be a repeat of the unprecedented recent situation in which UDeCOTT went to court to challenge the Uff Commission.

The beneficiaries of the Code of Silence will make great efforts to avoid any deep examination of its members and the public needs to be alert to this point.  There is absolutely no shame in that group and we should also prepare ourselves mentally for the ‘memory loss’ defence of the kind we saw from Hafeez Karamath in the recent Uff Commission.

After generations of operating unexamined, the very bowels of the society’s leaders are about to be opened up to a disgusted and skeptical public.  The motivations, links and payoffs between these leaders are to be exposed to view.  The exposure is going to be critical.  Given the speed with which our legal system operates, the exposure is likely to be lengthy.  Given the range of active media in our society, the details are going to be all over the place.

So, what is at stake here?  What else can we expect, apart from legal challenges?

To begin with, I believe that the sums of money involved are several times more than in the Uff Commission.  In addition, the slowing economy and the pattern of behaviour have set the public into a very critical mood.

In my view, these are some of the people we would see publicly cross-examined in the Commission of Enquiry and various lawsuits –

  • Lawrence Duprey. Photo courtesy the T&T Review
    Lawrence Duprey

    Most important of all, the Chief of Chiefs, Lawrence Duprey – Will he or won’t he show up for the many hearings?  What can we expect to hear?  Can Duprey offer an explanation for the shocking discrepancy between the $100BN+ asset valuation as at the end of 2007 and the $23.9Bn asset value he specified in his letter of 13th January 2009 to Ewart Williams? A mere 56 days separate the publication of those 2007 accounts – on 18th November 2008 – from Duprey’s letter, which has been hidden from view, despite my two Freedom of  Information applications.  The only reason we have some idea of this discrepancy – no…that is the wrong word, maybe staggering decline is better – is the anxiety of the then Minister of Finance to clear her name from allegations of Insider Dealing.  That anxiety led the Minister to read this letter into Hansard on 4th February 2009.

  • Andre Monteil
    Andre Monteil

    Second most important of all, the Chair of Chairs, Andre Monteil – Monteil is now in retirement as a farmer and his testimony is surely one of the most awaited in recent times.  As former PNM Treasurer, CL Financial Group Finance Director, Chairman of Education Facilities Company, National Housing Authority, then Housing Development Corporation and Clico Investment Bank, it is difficult to imagine a player who was more central.  It is almost like a spy movie called ‘The Man who knew Too Much’.

  • Patrick Manning
    Patrick Manning

    Patrick ManningWhen one considers the huge donations reportedly made by CL Financial to the PNM and the tangled web of this entire affair, it is difficult to see how Manning can escape serious, hard questions on many aspects. For instance, his 2002 decision to stop  enquiries into HCU by then Minister in the Ministry of Finance, Conrad Enill, will surely be open to question.  Manning’s recent bizarre behaviour might well be the beginnings of a defence.  We will see.

  • Karen Nunez- Tesheira
    Karen Nunez- Tesheira

    Karen Nunez-Teshiera – The Minister of Finance who had to go to Parliament twice to attempt to clear her name in this matter.  Firstly, from allegations that she withdrew her money from CIB early, having had inside information.  Secondly, from allegations that as a CL Financial shareholder, she was biased in her dealings with the bailout, having failed to recuse herself from the discussions.  Not one person I know, even blindly-loyal PNM-ites, is willing to openly defend the behaviour of Nunez-Teshiera. Not one.  Imagine that.  I think the phrase is “…A jury of one’s peers…”  I wonder whether her Cabinet colleagues knew that the Minister was a shareholder?  We won’t have to wait long.

  • Carl Hiralal
    Carl Hiralal

    The Regulators – from both the Supervisor of Insurance, and the Inspector of Financial Institutions, Carl Hiralal.  Just imagine the Supervisor explaining how Clico kept its licence all those years its statutory fund in serious shortfall.  Or the Inspector justifying how CIB can fail to file its tax return and yet keep its licence.  Mr. Hiralal must be considering his position most carefully at this point.

  • Ewart Williams, Governor of the Central Bank TT. Photo courtesy Trinidad Guardian.
    Ewart Williams

    Central Bank Governor – Imagine Ewart Williams reconciling his several statements on Clico being a problem case since 2004, with his having two fixed deposits at CIB.  Williams must also be having a few reflective moments.

  • The Directors – What is to be the position of the Directors of these failed companies?  According to an affidavits filed in the Central Bank’s winding-up action, CIB made an undocumented loan with no interest rate or repayment period agreed.  That loan was in the sum of $162M USD – yes, about $1.03Bn of depositors’ funds were lent to Angostura (a related party) with no documentation.  It would be interesting to hear the Directors explain the degree to which that sort of advance is compatible with their fiduciary duty.  It is important to note that the phrase fiduciary duty in this case refers to the obligation of those CIB Directors to act with the depositors’ interest as their first priority.  But remember that CIB was wholly-owned by CL Financial.  So, can one properly reconcile the fiduciary duties owed to depositors with those owed to the sole shareholder?  It is a veritable conflict to be loaning depositors’ monies to the main shareholder, but that is why the loan agreements and credit committees exist.  So as to provide safeguards against incautious loans, which can jeopardise depositors’ funds, so as to ultimately destabilize the bank itself, as in this case.  There was no agreement.  None at all.  For a loan exceeding one billion dollars.  All of the safeguards to balance the several duties of the prudent Director seem to have been ignored in this situation.  Just imagine the Chairman who presided over the meeting of CIB’s Board which approved that loan, answering a series of critical questions, explaining just what they were doing dispensing with depositors’ funds in that loose fashion.  I can scarcely wait.
  • The Auditors – The various PWC professionals who prepared and signed those audits.  Will we see the release of the hidden accounts?  How much longer can they remain concealed?  There must be some quiet desperation creeping into Balisier House and PWC, just edging forward, along Victoria Avenue.
  • Robert Mayers
    Robert Mayers

    Robert Mayers – When he retired on 7th December 2008, did he or did he not know that Caribbean Money Market Brokers (CMMB) was heading for a financial collapse?  Of course, we now know from the official statements that CMMB collapsed a mere 7 weeks after Mayers left office as its Managing Director.  So, which is it to be?  Is it that the collapse came like a bolt of lightening from a clear blue sky?  Were there any warning signs?  Do CMMB’s accounts give any clues?

  • Dr. Bhoendradatt Tewarie
    Dr. Bhoendradatt Tewarie

    Dr. Bhoendradatt Tewarie – He is former principal of UWI’s St. Augustine campus and now heads UWI’s Institute for Critical Thinking.  Dr. Tewarie was a Board Director of the parent company, CL Financial, at the time of the collapse.  Was he aware of Duprey’s letter to the Central Bank Governor, a mere 3 days before that Board authorized payment of a dividend to CL Financial’s shareholders?

  • The same characters and many of the same questions are in the HCU part of the story.

The members of that Code of Silence are probably considering how best to escape the consequences of their actions and inactions.  It will be a truly unique Christmas season for some of them.  There are probably not enough lawyers in the country to handle this tidal-wave of legal actions.

The stakes are huge and the burning question for me is – Can this be the first time that prominent people go to jail?  Serious sentencing?  Will any stolen monies be recovered?

Can the Code of Silence survive this challenge?

The Code of Silence must be destroyed if we are to progress.

SIDEBAR: Who is Anthony Colman?

Sir Anthony Colman
Sir Anthony Colman

Take a read at his comprehensive website including his CV. http://www.siranthonycolman.com/

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13 thoughts on “CL Financial bailout – Testing the Code of Silence

    1. Thank you, Rhoda – please spread the word.

      Have you subscribed yet? There is a box which invites your free subscription – near the top-left part of each page.

      Afra

  1. Mr. Raymond,

    As someone who suffered greatly under Monteil trying to wheedle my property from under me while my mortgage was with CLICO, I do look forward to him and all his other company principals being hauled before the enquiry and made to answer pertinent questions. Not looking for a witch hunt but for these guys, if culpable, to pay for their misdeeds.

  2. Dear Mr. Raymond, I could not support your position more. However, I had a couple deposits with CMMB. While the scandal was being exposed, I insistently inquired whether my money was safe. I was assured that it was. This proved to be absolutely the case. As far as I am aware, they did not collapse. In fact I am about to withdraw my last small deposit with them because they are being wholly taken over by First Citizens whose interest rates are lower. The interest they offered were never extravagant and I was thought a fool for staying with them. lloyd king

    1. Hello Mr. King,

      You are raising a most interesting issue…’Did CMMB collapse, or did they not?

      If we refer to the MoU signed on 30th January 2009 – see http://www.finance.gov.tt/content/mr03183E.pdf – there is only a single reference to CMMB, in which the CL Financial group agrees to sell its shares in CMMB, along with a list of other assets.

      The Governor’s statement made that day refers only to the transfer of third-party assets and liabilities of CIB and CMMB to First Citizens’ Bank.

      The third reference was at the first press conference held by the Central Bank Governor on this matter, 13th March 2009 – see http://www.central-bank.org.tt/news/speeches/2009/sp090213.pdf – his opening sentence was –
      …This is the first in a series of media conferences that the Central Bank intends to schedule to update the national community about progress with respect to resolving the financial difficulties in CLICO, CIB and CMMB…” In saying so, it is also interesting that British American Insurance was not mentioned in that list, even though they were discussed later on.

      Finally, the Terms of Reference of the Colman Commission were specified as “…The terms of reference of the Commission of Enquiry include looking into the causes, reasons, and circumstances leading to the deterioration of the financial conditions at CLICO, CLICO Investment Bank Ltd, British American Insurance Company (Trinidad) Ltd and Caribbean Money Market Brokers and HCU which threatened the interest of depositors, investors, policyholders, creditors and shareholders and the circumstances, factors, causes and reasons leading to the January 2009 intervention by the Government for the rehabilitation of the companies…” at http://www.trinidadexpress.com/news/Colman_begins_CLICO_probe_next_month-108834729.html.

      It is reasonable to ask why it became necessary to transfer CMMB’s third-party assets and liabilities (which would have included depositors like you) to another financial institution. More to the point, it would seem from the events that only a State-owned financial institution was willing to partake. If CMMB were healthy and whole, it would never have been even mentioned in all of this.

      Now, of course if someone could just point me to CMMB’s accounts.

      In the round, I think CMMB did collapse.

      Thanks for joining-in.

      Afra

  3. Well I am not as optimistic as you are Afra. Great piece-I have been following your Clico/Cl pieces from the get -go. Outstanding work-great reasoning-but as to breaking that Trinbago version of Omerta-ha ha-no sah, that ent goin to happen. Jail you say for dem big pappy-nah nah dah eh goin an happen either. I will quicker believe in God than any white collar Trinibago crook doing time in ah local jail. I can guarantee the citizens of this republic the greatest amount of legal dingolaying anywhere in the commonwealth is about to begin-Ish and Steve’s version of the legal dingolay was the entre-looking forward to this main course. Dreamin,dreamin

  4. Does anyone really think that this Commission of Enquiry will reveal anything? Or that individuals like Manning, Monteil, Teshiera will ever be publicly questioned? Such things do not happen in a banana republic, and we are nothing else if not that. There will be no accountability, there will be no reckoning. This entire situation will become political, and less about the monies owed to people, and bringing those responsible to justice.

    The notion of trying to bring Duprey to account through the local court system is laughable. Can you imagine this billionaire who has supported, financed and made so many of the power brokers in our society, standing in front a local judge? You’re talking years to even get to that point, if at all. If some of those CLICO policyholders think they would not live to see the end of the 20 years that Government has offered on bonds, they are unlikely to live to see the end of that case either!

    The only justice is if the US begins an investigation of CLICO, Duprey, or any of the persons on that list and find something untoward. And even then, where are Ish and Steve?

    It is clear that Trinidad lacks the expertise locally to investigate something as massive as CLICO. But while the country spends hundreds of millions on studies and consultants for the most innocuous projects, those in charge have not gone out to Foreign firms that specialize in these sorts of investigations. They exist throughout the world, in the UK, in the US. But those who profess to be serious about getting to the bottom of these issues choose not to hire them.

    The same can be said of UDeCOTT, which continues to barrel down the rails to what destination, no one knows. The end of 2010 and this monster still has no board to guide its actions. It has a ‘temporary’ chairman who was named in the Piarco Airport Enquiry. The Trinidad public still has no account as to its liabilities, no one knows the extents of contractual obligations, or potential litigation. You spent millions of tax payer’s money on a Commission of Enquiry which indicated that quite possibly events were of a criminal nature, and still nothing can be done? There have been no charges laid against anyone and the key named player is probably sipping Mai Tais on a beach somewhere with a new yacht.

    Many seem to be suffering from extremely well learnt and well considered incompetence.

    The reality facing Trinidad is that there is no such thing as ‘Corruption’.
    It is all just business among friends.

  5. Travelling in a taxi recently, I heard a man of the “people” say he was leaving it all to the Man Upstairs, often known as the heavenly Father or Jah. This pathetic streak helps to explain why there is so much passivity. It shows up an important way in which 1970 did not change consciousness in T&T. Notice that the Union leadership are not speaking out. Beyond the misdeeds of the elite, there festers a mentality problem. But maybe you don’t want to go there.

    Lloyd

  6. Afra,

    I am challenging your conclusion that CMMB collapsed and believe the evidence can be found in First Citizen’s 2009 annual report.

    Anthony

  7. Afra,

    I am challenging as inapposite your conclusion that CMMB collapsed and believe the information can be found in First Citizen’s 2009 annual report.

    Anthony

    1. Yes, Tony, you are right that I did not consider First Citizens’ Bank’s (FCB) 2009 Annual Report in responding to Lloyd King.

      The questions raised in my initial response to King remain open for answer. Why did CMMB feature in the bailout itself, or the Commission of Enquiry’s reported Terms of Reference?

      As to the post-bailout events, I am considering page 77 of FCB’s 2009 annual report – see https://www.firstcitizenstt.com/dms/AnnualReports09/FC-Annual-Rpt2009-3/FC-Annual-Rpt2009-3.pdf – and Note 1 to the accounts ‘General Information’ is giving me pause – the relevant paras are cited –

      “Effective 2 February 2009, the Bank assumed control of Caribbean Money Market Brokers (CMMB) Group. The Bank primarily acquired 55% of CMMB’s equity shares via a Share Purchase Agreement with CL Financial dated 22 May, 2009 and 45% was acquired via a Vesting Order dated June 2009 issued by the Minister of Finance in order to transfer CLICO Investment Bank’s shareholding in CMMB to the First Citizens Group. The CMMB Group comprises CMMB Limited, CMMB Trincity and CMMB Barbados.

      CMMB Limited is incorporated in the Republic of Trinidad and Tobago. Its principal business includes dealing in securities and such other business as is authorised pursuant to its registration under the Securities Industry Act 1995 of the Republic of Trinidad and Tobago.

      Effective 2 February, 2009, the Bank assumed control of CMMB Securities and Asset Management Limited (CSAM). CSAM is incorporated in the Republic of Trinidad and Tobago and its principal business includes dealing in securities on the Trinidad and Tobago stock and exchange and such other business as is authorised pursuant to its registration under the Securities Industries Act 1995 of Trinidad and Tobago.

      The Company’s registered office is 1 Richmond Street, Port of Spain, Trinidad and Tobago.”

      The meaning of that series of statements is unclear to me…FCB assumed control of the CMMB Group (which we are told has 3 parts) on 2nd February 2009. Ditto for CMMB Securities and Asset Management (CSAM)…is that part of the CMMB group or not? I am not at all clear on what, if any, is the difference in these companies.

      But, apart from that note, the real meat of the matter is found at Note 39 on page 131 – ‘Business Combination’ – the opening para of which, in reference to CMMB, reads –

      “…The acquired business contributed revenues of $369.9 million and net profit of $91.9 million to the group for the period from 2 February 2009 to 30 September 2009…”

      The acquired business is obviously CMMB and that profit rate, at just about 25% of turnover, is below FCB’s overall 45.5% profit rate disclosed at page 73, in the Consolidated Income Statement.

      The CSAM performance, disclosed on the next page of the same note, is less impressive –

      “…The acquired business contributed revenues of $3 million and net loss of $0.16 million to the group…”

      But the body of that Note is contained in its details of Net Asset Values, to quote –

      “…The details of the fair value of the assets acquired and arising from the acquisition are as follows…”

      The Fair Value of Net Assets for the two acquisitions is disclosed as being:

      CMMB Fair Value = ($187,444,000)
      CMMB Carrying Value = $74,949,000
      CSAM Fair Value = $14,219,000
      CSAM Carrying Value = ($14,218,000)

      (I abbreviated the table to show its headings and totals only.)

      Fair Value is the estimated market value of the assets and liabilities, with an adjustment for any ‘special purchaser’ advantages or disadvantages.

      Carrying Value is what used to be called ‘Book Value’ – i.e. acquisition cost less any depreciation.

      The largest negative entry in that accounting is Other Funding Instruments, disclosed at $5.464Bn. Do you know what these were?

      Point being, that, even if we ‘net-off’ the two companies, these figures disclose a negative Net Asset Value of about $173M.

      More to the point – which was CMMB’s state at the date of the bailout – the table in Note 39 also discloses CMMB’s cash and cash equivalents to be NIL at the time of the bailout. CSAM’s are disclosed to have been about $7.3M.

      Here I am trying to make sense of a statement in the ‘Director’s Report for the year ending 30th September 2009’, at ‘Results and Dividends – see https://www.firstcitizenstt.com/dms/AnnualReports09/FC-Annual-Rpt2009-1/FC-Annual-Rpt2009-1.pdf at page 18.

      “…The Group’s total assets were $27.8 billion as at the end of September, 2009 up $11.9 billion or 75%. This increase was mainly as a result of the acquisition of CMMB which accounted for just over $7.6 billion of the Group’s total assets…”

      I am unable to reconcile the contents of Note 39, which specify a negative Net Asset Value of at least $173M, with this statement as to the additional $7.6Bn in total assets.

      The conflict in the narrative is evident even in the very CEO’s statement –
      At page 13, we read –

      “…During the year, the most significant event for the Group was the acquisition of Caribbean Money Market Brokers (CMMB), the largest brokerage house in Trinidad and Tobago. The acquisition contributed to growth in assets, profits and funding…”

      Then, at page 14…

      “…we were called upon by the Central Bank to assist with the payments to depositors of CLICO Investment Bank (CIB) and to acquire CMMB, both of whose customers were seriously affected by the necessary interventions made by the authorities to stabilize the system…”

      How were the CMMB customers ‘seriously affected by the necessary interventions’?

      As far as I can see, nothing in FCB’s 2009 Annual Report leads me to doubt my original conclusion. I am sure more details will emerge during the Colman Commission, the Terms of Reference for which were again requested from the AG’s office this week.

      It would really be refreshing to have someone (Robert Mayers, maybe?) assist us in gaining a clearer picture of the events.

      If you have access to the earlier renditions of CMMB’s accounts, the picture might become clearer.

      Thanks

      Afra

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