The current talking-point is the major lawsuit launched by the Central Bank against CL Financial sowatees, Lawrence Duprey and Andre Monteil.

From what has been in the press, the lawsuit seems to be aimed at recovering huge sums of money alleged to have been improperly taken from the CL Financial group.

There has been a mass of press comment and the reactions have ranged from relief at the launch of the lawsuit to great skepticism as to its duration, cost and effectiveness.

In the Business Guardian View of June 9, entitled ‘The path of good intentions‘, the Editor-in-Chief of that newspaper set out cogent grounds for his skepticism on the new Central Bank lawsuit.  The old saying comes to mind – The road to hell is paved with the very best intentions.

For my part, I am doubtful of the choice of targets in the apparent attempt to deal with this financial fiasco.

The early questions emerging from this action by the Central Bank are for me ‘Why this lawsuit?’ and ‘Why now?’.

In the case of the CL Financial fiasco, the basic ‘fit and proper’ requirements have been ignored by the Central Bank, exposing us all to continued levels of risk.

The fit and proper requirements set a standard for those people who are responsible for the safe custody and investment of our monies.  If they are upheld as an important part of the financial system’s architecture, they contribute to stability and confidence.

If they are not upheld, for whatever reason, we are all left to wonder, what is the point of having yet another set of rules which are not being enforced?

Here is an outline of the bare facts –

• The ultimate Trinity – Lawrence Duprey was the majority shareholder, CEO and Chairman of the Board of the CL Financial group.  In those multiple senses, he was the Chief of chiefs and the main figure of authority.
• The Duprey letter – That elusive bailout request of 13 January 2009, signed by Lawrence Duprey, on CL Financial letterhead is the most solid piece of the puzzle. The plain meaning of that letter is that the CL Financial group had run out of money and was in imminent danger of insolvency.  The reading of that letter into the Hansard on 4 February 2009, appeared to have been motivated by the desire of the then Minister of Finance, Karen Nunez-Tesheira, to protect her reputation from allegations of insider-dealing.  That the signature on that letter was Lawrence Duprey’s is important.  Having made three fruitless applications under the Freedom of Information Act, it seems clear that there is no will to disclose the Duprey letter.
• The bailout negotiations which were consequent on the request are additional proof of the ‘failed or failing‘ companies.
• The 30 January 2009 MoU was irrefutable proof that 5 companies had failed – CL Financial, Clico Investment Bank (CIB), British American Insurance, CLICO and Caribbean Money Market Brokers (CMMB).
• Given the background, a finding by the Central Bank that the Directors and Officers of those 5 failed companies are no longer fit and proper would have been incontestable.
• That action would have sent a strong and unmistakable signal that this type of costly failure cannot occur without some sanction.  Of course we know of the deep links between the PNM party, then in government, and the CL Financial group.  I have also written about the fact that these CL Financial chiefs are embedded into all our political parties and that is one of the externalities of this entire fiasco.
• The Central Bank never took that line of action against the CL Financial group. Throughout all this time, the Central Bank has never disclosed its reasons for not implementing these elementary safeguards, which led to the position of four of the former Executive Directors of CMMB being able to obtain a licence to open yet another investment house in late 2010, KSBM.

The CL Financial group has failed on a colossal scale, so what are the penalties to be levied against their Directors and Officers?

The sidebar shows a Central Bank letter of May 2011, which is clear and strong in calling for the rigorous application of the fit and proper standards to all Directors and Officers of insurance companies.  That letter was signed by the Inspector of Financial Institutions, Carl Hiralal, so the call for upholding of the correct standards came from the very top regulator.  No right-thinking person could object to its contents.  I think it is a strong and necessary letter.

The emerging issue for me here, given these events, is the extent to which our Central Bank could be under political control.   What is the desirable level of political control to which the Central Bank should be subject?

Those questions on the degree of independence of the Central Bank would inevitably lead to consideration of the charged issue of campaign finance/political party funding.  There is considerable evidence that CL Financial made large political donations and that is a key part of the story here.

So, to summarise on the new lawsuit, the Central Bank did not take the effective, incontestable actions available to it in the CL Financial matter.  It chose instead, having steadfastly maintained its silence on its inaction, a complex, risky and expensive course of action.  Why?

What are the results of this new lawsuit?

1. The Central Bank at last appears to be taking decisive action
2. The forensic reports are now placed outside the consideration of the Colman Commission, which can limit damage to the CL Financial chiefs and the regulators, auditors etc. That is because the Colman Commission is televised with its daily proceedings posted onto its website, while the High Court is proceeding under antiquated rules which prohibit any private recording devices, cameras or even the use of pen and paper!
3. The potent issue of ‘double jeopardy’ will no doubt rear its head, sooner rather than later, with the probable effect of derailing the Colman Commission.

The big question for me, given their positions, is whether the Governor of the Central Bank and the Inspector of Financial Institutions are themselves fit and proper to continue in their ruling on this matter.  If any decision has to be made on this CL Financial matter, it will only be human for them to give some consideration to how that decision might possibly affect their individual interest, as the responsible people for such a significant period in the build-up to this fiasco.