Last week we learned that Lawrence Duprey and his fellow CL Financial shareholders are victims of a badly-handled bailout. According to the Duprey version, the State must halt all asset disposals and he must regain control of the CL Financial group of companies. In what seemed to be an immediate response, Minister of Finance & the Economy, Colm Imbert, said he was so alarmed at the gross mismatch in the bailout figures that he decided to order a forensic audit on the entire process. These two contrasting stories are the latest big news on the CL Financial bailout.
I have always objected to the CL Financial bailout and it has become a strong example of how the Public Interest can be perverted under a series of disguises.
The Duprey Gambit is just the latest attack on good values in our country. It is a nasty, shocking outbreak of moral hazard. It needs to be dismantled and discredited, nothing less will do.
The Imbert Initiative looks like a welcome move to examine the details of this scandalous waste of Public Money. The proposed forensic audit seems to signal some official appetite for disclosure. However, if this is to properly protect the Public Interest, there are some ‘litmus tests’ which can show the official commitment to disclosure
This article will examine those two proposals so that some meaning might emerge from this utter, deliberate confusion.
The Duprey Gambit
The CL Financial group was the largest commercial group ever in the Caribbean and its collapse in January 2009 had an immense impact across our region. Apart from Lawrence Duprey’s single, brief speech at the press conference to announce the bailout on 30th January 2009, there has been no proper forum at which the CL Financial chiefs have been made to give an account of this catastrophic collapse. Duprey has offered no cogent explanation for this failure, only a series of bizarre periodic interviews. I can even remember one amazing November 2012 interview in which he claimed to be ‘flat broke’ at the same time as enjoying his new life of philanthropy. I have never heard of a flat broke philanthropist, but that just goes to show.
Even when the Commission of Enquiry was established under the Chairmanship of Sir Anthony Colman, both CL Financial chiefs, Lawrence Duprey and Andre Monteil, refused to appear to answer questions. Both men invoked their right to avoid self-incrimination, but they were both represented by high-calibre attorneys who seemed to take every point during that Enquiry. At one point, I can remember a slightly bemused Colman describing those two chiefs as ‘The Dynamic Duo‘ and asking CLF’s former Corporate Secretary, Gita Sakal, whether she would agree that ‘Duprey was Batman and Monteil was Robin‘. The room echoed with our startled laughter, but Sakal did not answer.
One of the greatest pieces of mischief in all this is the recurrent attempts to compare our bailout to the Wall Street one. Apart from the refusal to offer any public explanation, there are two further details which separate the CL Financial bailout from the US example.
The CL Financial shareholders have never lost their shares. Which is why they can be confronting us with all kinds of options and proposals, not to mention threats of lawsuits and so on. In the US bailout, the troubled companies were forced to give equity to the Federal Government. In order to receive taxpayers’ money in the USA, Fannie Mae (the huge mortgage company) gave 79.9% of its equity; while AIG (at that time the world’s largest insurer) gave over 85% of its equity; 36% of Citibank belonged to the US government in February 2009.
In addition, in the Wall Street bailout of AIG for example, the Public Money advanced to cover AIG’s exposure was lent at 11.5% interest. At that time, LIBOR (the base rate) was 3%, so it was a clear signal from the State that the bailout was being conducted on the most punitive terms. These details were found in Andrew Ross Sorkin’s ‘Too big to Fail’. In contrast, our government agreed to bailout CL Financial at ZERO-percent interest. In the language of the financial world, that implies a ‘sweetheart deal’. To my eye, it really resembles a marriage. Definitely, the parties appear to be related.
There are three implications of the zero-interest rate enjoyed by CL Financial –
- firstly, the public interest was seriously prejudiced by our government effectively ignoring the time value of money;
- secondly, the amount of interest which would have accrued over the ensuing seven years would have placed the company completely in the State’s hands – i.e. the interest of the shareholders would have been extinguished by the effluxion of time and,
- thirdly, the CL Financial Shareholders’ Agreement of 12th June 2009 has been extended several times and for me, that raises the pregnant question of why the State did not subsequently negotiate a proper interest rate for these vast sums of Public Money being lent to the wealthiest person in the Caribbean. I will return to this issue.
One of the most sobering things about this unfolding crisis is the extent to which the public interest has been diluted to almost a mere talking-point. For those readers who are wondering just how could Lawrence Duprey be insisting on regaining control of his companies, it is interesting to consider this explanation from Michael Carballo, the then Group Finance Director of CLF –
“…Carballo said the government was in control of the management and running of the Caribbean conglomerate, but what has not changed is the ownership.
‘The shareholding hasn’t changed. There is no intention to change the shareholding. It’s an agreement for about three years whereby the assets are managed and restructured and then the company will be returned to the shareholders,’ he said…”
— “Lascelles untouched – Duprey remains chairman.” Jamaica Gleaner. Wednesday June 17, 2009.
Finally, the simple fact is that Lawrence Duprey and the other CL Financial chiefs would not be allowed to regain control of the financial parts of this empire since they can not be considered as ‘fit and proper persons’. That means that CLICO, British American, Republic Bank, COLFIRE cannot lawfully return to the ownership and control of those persons, as detailed in ‘Steal of a Deal‘, earlier in this series.
The Imbert Initiative
I have long campaigned for full disclosure of the details of the bailout – all the details of all of the payments must be published. I therefore have to say that Minister Imbert’s call for a forensic audit of the payments made under the bailout is welcome. That is exactly what I was calling on him for in ‘Finding the Facts‘.
Imbert explained at the post-Cabinet briefing on Thursday 28th April 2016 that the gross differences in the stated amounts paid in the course of the bailout had so concerned him that he had decided to proceed with a forensic audit.
We are now witness to a new appetite for disclosure on the details of this CL Financial bailout and that is good. If we are proceeding along that road, these are the ‘litmus tests’ I am proposing so that this progress can be accepted –
- The CLF Shareholders’ Agreement has been amended several times since its establishment in June 2009. I obtained a copy of that Agreement in March 2010 via the Freedom of Information Act and I am now requesting Minister Imbert to publish the subsequent amendments, extensions and revisions.
- Colman Commission Report – There was a report in June 2015 that the completion of the Colman Commission’s Report into the failure of CL Financial was being effectively strangled by a lack of resources. I am reliably informed that proper resources have since been made available for completion of that important Report. The Colman Report into CLF must be published.
- Forensic Audit – The Report of the forensic audit into the CL Financial bailout must also be published when it is completed.
- CBTT (Amendment Act) – One of the most serious steps taken in this entire affair was the Central Bank (Amendment) Act passed in September 2011 to prohibit any lawsuit against or judicial review of the Central Bank’s actions. In November 2013, the High Court ruled that Act to be unconstitutional in a case brought by Andre Monteil’s Stone St Capital, but the State has appealed. The State must reconsider this course of action and withdraw its appeal.
- Freedom of Information Ruling – In July 2015, the High Court ruled in favour of my Freedom of Information request to obtain the details of the bailout, but the then Minister of Finance appealed. I have requested that the new Minister withdraw that appeal and publish the requested details.
- Interest – Finally, we come to the issue of the various demands and proposals from Lawrence Duprey and the other CLF shareholders. It is my view that the Minister of Finance must now insist on a proper rate of interest for the Public Money advanced in this scandalous situation. That rate of interest must be well in excess of the base rate.
The stage seems set for a legal mangle of epic proportions – we will soon see.