The Duprey Letter

clf-cbtt letterThis is the CL Financial letter of 13th January 2009, signed by their ‘Trinity Chief’ Lawrence Duprey, for readers’ comments. I dub Lawrence Duprey the ‘Trinity Chief’ since he was the majority shareholder, Chairman of the Board and CEO of CL Financial.

I made three applications for this document under the Freedom of Information Act. The first was to the then Minister of Finance, who held over 10,000 shares in CL Financial, Karen Nunez-Tesheira. The reply to that application directed me to the Central Bank, to whom the letter was addressed, which was an obvious ploy to thwart my enquiry, since Central Bank is immune from the Freedom of Information Act. My two subsequent applications (2 & 3) to the current Minister of Finance, Winston Dookeran, have done little better – those were never even acknowledged.

It seems to contain the same text as the one Karen Nunez-Tesheira read into Hansard on 4th February 2009 – see ‘Finding the Assets‘ – except that the table in the copy is titled “CL Financial Group – Assets Available for Restructuring“.



9 thoughts on “The Duprey Letter

  1. The first statement in the opening paragraph was not true. At the time there would have been no evidence (documentary or anecdotal) to support it. The statement starting after the words “and is causing” did not apply universally to the insurance sector in T&T or to other large financial institutions. Setting aside that incorrect premise, the statement in the second paragraph has no foundation or meaning other than the CLF Group had liquidity problems. Therefore the letter, on its own, did not provide a basis for GORTT intervention. This because:
    1. The financial system as a whole was not under stress ; no one else had reported any difficulties
    2. There was no reason to believe that the financial system in T&T would “follow a similar pattern to other countries”
    3. There was no support for the contention the statement “In the event that the financial crisis deepens in the local market”
    4. The request in the penultimate paragraph was not urgent or necessary or even relevant.
    A. If there was systemic risk (which in hindsight there was not) it was the risk that the CL Financial Group would fail to meet its obligations to local financial institutions to the extent that would cause distress to the latter. That applied to FCB being the only major local FI that would have been distressed. The other major local FI creditors (UTT, NIB and Republic Bank) were and have been fully capable of handling any delay or default in CLF meeting its financial obligations. The Credit Union deposits were relatively small in proportion to total assets of all Credit Unions.
    B. There could have been no significant concern that depositors would default on commercial bank obligations because most were (a) sophisticated investors and (b) deposits under $ 75,000 were insured and (c) the commercial banks would have been able to re-schedule debt as the CLF/Clico depositors constituted a small percentage of bank borrowers.
    C. If the CB and GORTT had feared there was a problem then they should have insisted that CLF’s first recourse should have been to exhaust all possibilities on the local and overseas financial markets. The GORTT should have been the last resort and in any event, need not have attempted to provide assistance without involvement of the financial markets.

    1. All good observations. I like they way Duprey acts as though the CBTT are his personal bankers.

      One “problem” with this letter is that it gives no inkling that CLF was in dire straits and in urgent need of support (as noted by M. Collins) so why the bailout announcement on 30 January 2009? Did the CBTT have prior knowledge as to the impending disaster that CLF was facing even though Mr Williams denies this? Or was the CBTT fully aware for many months prior to the letter as to the true state of CLF but was restrained not by the legislation but by the politicians / political party from acting? Did the politicians / political party now push the CBTT to assist CLF?

  2. At the end of the letter, Duprey thanks Williams for his “continued support”?

    Was the Governor of the CBTT Duprey’s friend and ally or regulator? Exactly what did Williams know and when did he know it?

  3. Well done on the CLF letter Afra, but perhaps you meant to describe Duprey as the “holy trinity”? After all, the PNM and UNC seem to have been beholden to him and the policyholders’ money that he dispensed as his own.

    The letter however raises questions as to what the CBTT and MoF knew and when. If, after 2+ years both political parties still cannot produce 1 years accounts (for 2008) for CLF, are we really supposed to believe that they “discovered” that CLF was about to default and sink and then came up with a plan of action to save it within 18 days?

    BTW, why is Monteil’s name still on the letterhead as a director if he resigned over a year earlier?

  4. Afra, this letter – specifically the table, makes the point which the people of T&T need to note very carefully.

    CL does not and did not have 100 billion of assets available to it. It could not use for its own purposes the $30 billion of loans and other assets on RBL’s books. It could not use the assets of Methanol because there was a 49% partner. Those who pointed at $100 billion in assets including Ramesh Maharaj were either ignorant of basic accounting or deliberately trying to mislead.

    It may have been a $100 billion company but that was because it owned the majority share in RBL and Methanol and so was able to consolidate ALL the assets of those companies on its books. That does not mean that those assets are available to the distressed arms of the group to support a bail out. What was available to CL was the VALUE of their 55% shareholding in RBL – but wait…most of those shares were already pledged to support existing borrowings. The number in the table of $23 billion seems just about right, but these are by and large illiquid assets.

    It is clear from this letter that the issue was not one of liquidity but one of solvency. The facts were misrepresented by CL and the Government of the day accepted this misrepresentation.

    If you owe me money payable on the 30th June and you need funds in order to make the payment because you can’t sell assets to realize cash then that is a liquidity event. Liquidity events are by nature short-term.

    If I have to restructure the group, adjust asset and liability matches, trying to avoid selling companies because I fear a loss in value, then that is a solvency issue.

    Let me ask you the question another way – if this is not a solvency issue, then what is?

    I own a hotel, it consists of land and buildings, the property is integral to my earning revenues to continue in business. Occupancy is down and I run out of cash. I can’t get additional funding, I am forced to sell assets, assets which if sold reduces my ability to earn money to repay by debts – I am therefore insolvent. How is this any different?

    The problem is that this issue of insolvency has not been debated at any level to the depth that it is supposed to have been. We still have people claiming that CL has sufficient assets that can be sold and EFPA policyholders can be repaid and we all live happily ever after.

    In line with the issue of insolvency is the methodology that CLICO used to value its liabilities. The issue of the accounting and actuarial treatment of CLICO’s liabilities have not seen the light of day and yet this is the key to any objective analysis of this matter.

    We continue to live in hope – keep it up.

  5. he says it was a liquidity crisis? Is it not perhaps actually an insolvency one and that is an untruth?.

    in andre bagoo’s newsday article today he says Monteil and Duprey did not want to disclose the financial hole at the heart of CL to minister nunez. And that Duprey ducked all meetings with her.

    Why might he do that? Is it true? if it is could it be because CL was and is massively over-leveraged due to something like the derivative trading and ponzi schemes we see that was happening at many of the world’s financial institutions. and this financial black hole is being hidden rather than marked to market

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.