During my earlier writings on the CL Financial bailout I was very critical of the apparent silence of the Institute of Chartered Accountants of Trinidad & Tobago (ICATT) in the midst of that huge financial crash. I took a very dim view of ICATT’s failure to make any clear statements at that time, during the period in which my friend, Anthony Pierre, was its President. To his credit, Pierre later appeared on my ‘Sunday Talk’ TV show on CNMG on 24th October 2010 to discuss the bailout together with former CLICO Sales Director, Emmanuel ‘Manny’ Lawrence, and gave a great deal of insight.
This week’s column examines the struggles which have arisen from ICATT’s commendable attempts to exert its disciplinary procedures against one of its members, Chanka Seeterram, who testified at the Colman Enquiry on his role as auditor of the failed Hindu Credit Union. Chanka Seeterram is a Chartered Accountant of long standing, who was in his early career attached to Ernst & Young, now practicing as Chanka Seeterram & Co. in St Augustine.
This is the first time I am writing on the HCU, as I was advised to refrain from doing so by my attorneys due to the defamation litigation by both myself and our firm, Raymond & Pierre Ltd, against Harry Harnarine and the HCU group. That litigation arose from Harnarine’s scandalous statements against me and our firm on HCU’s Radio Shakti, spanned 2005-2013 and culminated in the High Court making a bankruptcy ruling against Harnarine.
This matter, related to ICATT’s disciplinary procedures, arose from Seeterram’s testimony on his HCU audits prior to the collapse of that credit union. The actual complaint was made by former Minister in the Ministry of Finance and PNM Treasurer, Mariano Browne, in the form of a brief email to ICATT on 24th October 2012 –
“Please refer this matter to the Investigation Committee.”
Browne was referring to the Trinidad and Tobago Guardian article of that date on Seeterram’s testimony, “Depositors in dark about $31M loss”. ICATT started an investigation of the matters arising and Seeterram sought a judicial review of that decision to investigate. On 31st May 2017, the High Court ruled in favour of ICATT and Seeterram has now appealed that decision.
These are decisive extracts from the Colman Report into HCU, published on 16th July 2014 –
…F179: The audited 2005 stand-alone financial statements for the year to September 2005 record a net surplus of $6,019,878, in the Statement of Income and Expenses an “Appreciation in value of investment and Investment Properties” of $25,583,749, that figure being derived from an appreciation of about $53 million and a capital depreciation in value of about $27 million and, in the Statement of Changes in Members “Equity and Reserves”, an amount of about $31 million described as a “a Prior Year – Deficit on Revaluation of Fixed Assets”. This last figure and its description were first explained by Mr Chanka Seeterram in a written response to questions put by the Commission by saying that there had been a professional valuation in 2004 of properties sold in 2005 but that prices obtained were less than the valuation. HCU management therefore reflected the drop in value in the statement of changes in Members Equity and Reserves as a prior year adjustment. The consequence of transferring to a prior year adjustment the realised loss in the 2005 year was to create a profit of $6,019,878 in the 2005 year, whereas, if there had been no such transfer, there would have been a deficit for 2005 of about $25 million.
F180: In the course of his oral evidence Mr Chanka Seeterram conceded that he knew of no accounting principle or standard that permitted such a course, that this treatment involved a “very delicate” matter for him to decide upon and represented a “compromise” which would “would probably buy some time for [HCU] to get their act together to be able to do what they thought was necessary to turn around the company. Because I felt if this was shown – they felt if this was shown in the profit and loss account, to show this massive loss inside there, they couldn’t face the outcome”. He conceded that this treatment was wrong but was needed to buy time for HCU in order to check their options and it was agreed, possibly on his advice or as a result of discussions with him, that they ought to approach the Government for financial advice or assistance “Because I felt it was the only source of help they can get; and they needed the help”.
F181: When Mr Chanka Seeterram gave oral evidence, at his own request, on a second occasion, he provided a completely different explanation for the “Prior Year Deficit” statement….
F182: This Commission rejects Mr Seeterram’s subsequent attempt to explain this distortion in the financial statements for the year to 30 September 2005. His initial explanation was expressed as clearly recollected detailed and explicit. His subsequent explanation was entirely unconvincing. Whether this proceeded from reconstruction due to faulty recollection or from deliberate invention need not be decided. By the time these audited statements were passed by him in September 2006 it must have been apparent to him that HCU had no future unless it could be bailed out by GORTT or some other source. Were there to appear in the stand-alone accounts a deficit of $25 million, the Credit Union would be unlikely to survive “they couldn’t face the outcome”. The manner of treatment of the losses on these properties was in the view of this Commission more probably than not a cosmetic device designed to shield HCU from the appearance of insolvency…
(The emphases are mine)
The grounds used by Seeterram to challenge ICATT included the assertion that ‘the Browne complaint‘, as it became known, was invalid, due to its brevity; as well as whether ICATT had exceeded its powers in investigating him.
There are many more points arising from this Colman Report, but three will suffice in closing –
- Firstly, when can we expect the publication of the Colman Report into the failure of CL Financial?
- Secondly, When can we expect the recommended investigations and prosecutions of the parties named in the HCU Report?
- Finally, It is surely a notable landmark that ICATT has taken this steps to preserve the integrity of their profession, but the niggling question lingers. Given the widely-reported testimony on these issues, would ICATT have started an investigation without a formal request?
© 2017, Afra Raymond. All Rights Reserved.
AfraRaymond.net 
Afra,
Excellent piece as always. I wish to advance the discussion of the failure of my profession however. Mr Seeteram has been rightly condemned but others whose work resulted in even greater losses have not only been condemned but seem to be the government’s favoured consultants. I refer to Price Waterhouse Coopers (PwC). They were the auditors of CLICO who failed to notice the deficit in the Statutory Fund.
Contrast their treatment here with that in the UK where they also failed in their audit of the Statutory Fund at JP Morgan. Even though no losses were incurred by policyholders, PwC were hit with a record fine with attendant loss of reputation. It was reported as follows “Market leading accounting firm PricewaterhouseCoopers has been stung with a record £1.4m fine for “very serious” misconduct over its audit of JP Morgan Securities (JPMSL).” You can find the report at https://www.bloomberg.com/news/articles/2017-08-16/pwc-fined-6-6-million-in-largest-ever-sanction-from-regulator.
It does not end there though. Again in August of this year this was reported – “PricewaterhouseCoopers LLP was fined 5.1 million pounds ($6.6 million) for misconduct over its audit of RSM Tenon Group Plc in the largest-ever sanction issued by the U.K. accounting regulator.” and “The record penalty comes only three months after PwC incurred another record fine for misconduct over its audit of Connaught Plc, a FTSE 250 company that went into administration in 2010. The FRC issued a 5 million-pound sanction against the auditor over the Connaught work in May, marking the then-largest-ever penalty from the regulator.”. You can find the report at https://www.accountancyage.com/aa/news/2135609/record-fine-pwcs-jp-morgan-audit.
PwC is a serial offender that thrives in sweet T&T. The professional bodies have nothing to say, nor does any of our regulatory tigers. PwC is first in line for every lucrative contract from successive administrations.
Lawd put ah hand
David and Afra,
If we substitute ‘PwC’ to PNM or UNC in David’s last paragraph the elected ‘serial offenders’ have a longer, though similar history. Thirty pieces of silver had paid many deaths.
The fact that ICATT waited to respond to this HCU issue four years after it was already so glaring in the public domain, can make anyone question the necessity of such an organization here in T&T.
Without a doubt ICATT should have taken a very proactive approach in treating with Seeterram’s acts of misstatement as an auditor, whose violations at a first glance, based on the information above, not only defied accounting concepts and conventions like Prudence and Matching Principle, by overstating HCU’s profit, understating HCU”s losses and recording some of it in a financial year to which it did not relate and by doing so engendered further possible violations of Financial Reporting Standards like IAS 40 Investment Property, IAS 16 Property, Plant and Equipment, and IFRS 13 Fair Value Measurement.
And if that was not enough, fundamental codes of ethics for audit like integrity, objectivity and professional behavior were also breached .
Consequently, this action beguiled many of HCU’s clients in this country and kept them from knowing the true state of the Credit Union, and may have also caused them to lose even more millions of dollars, by not finding out the collapse of HCU was imminent, sooner.Such Treacherous Acts of Financial Professional Misdemeanor should on no grounds be overlooked or treated lightly or as an afterthought and more so by a body like ICATT!
I am personally dissatisfied with ICATT’s late response on the issue Mr. Raymond. The Institute of Chartered Accountants of Trinidad and Tobago was established in 1970 by an Act of Parliament and the following Objectives of the Institute can show clearly why ICATT should have taken a proactive approach on the matter:
OBJECTS
3.(a) to regulate the ethics, discipline, professional conduct and standards of its members and students;
(e) to advise and assist the Government of Trinidad and Tobago, the University of the West Indies, other professional organisations, Statutory Bodies, Business Organisations, Trade Unions and Charitable Bodies upon any question within the province of the profession;
ICATT was not supposed to wait and act only upon Mariano Browne’s complaint, had they been doing their job efficiently! A job which states as a matter of ACT, that:
4. (1) The Institute may make rules for the proper conduct of its proceedings and discharge of its duties, and functions and in particular for: –
(a) the admission and resignation of members of the Institute;
(b) prescribing the rights and privileges of members;
(h) regulating the appointment, retirement and remuneration of an Auditor or Auditors;
((n) providing machinery for the exercise of disciplinary authority over members and students of the Institute by expulsion, suspension or the imposition of any other penalty after due enquiry;
(0) the classification of members of the Institute;
(P) providing standards of professional conduct for members and students of the Institute;
Click to access icatt_actofincorporation.pdf
So why is Mr. Seeterram still practicing is a good question we all ask? Is it for the same reason certain audit firms which fall within the BIG Four category,and though penalized for improprieties in Accounting in the UK and the USA still practice here? Mr. Raymond,in Trinidad and Tobago we have an organization in place to treat with the issue in a timely manner, and still no penalties have been meted out, and no one has been removed or excluded from practicing Accounting or Auditing in these glaringly scandalous circumstances in T&T ,and ironically so, because the said ICATT, spends much time excluding persons with degrees in Accounting and Finance from Accredited Universities, from signing off on financial statements and entering its “fraternity” in a rather discriminatory manner,which is not in the least bit based upon competence and which of course, preserves the money hierarchy so that under-qualified second year ACCA students trump degree holders for jobs. But maybe such discrimination is also LAW in T&T…
It is my belief that if said energies were focused on the legal mandate given to ICATT by the government of this country, there would be less instances of financial discrepancies and misbehavior by accountants and auditors. I say less because for the period 2010-2017 the government of T&T has had to hire independent bodies, to unveil mass instances of accounting errors in State Owned Enterprises which were audited by members of professional bodies like ICATT, some are big four companies and the rest hold prestigious British titles.So tell me why is it ,that they did not find the errors and why have they not also been penalized?
Is fraud of no concern of this body?The truth be told, if accurate reporting and internal controls is on the priority list ,these alone should minimize such instances of alleged fraud and save the taxpayer’s pockets from paying these foreign auditors.
So I ask is ICATT really complying with the Act of this nation which it was so inaugurated to uphold?
I couldn’t help but notice an agreement mentioned on the www that ICATT has delegated its role of monitoring firms to ACCA .If this is true, it is an unequivocally, highly inappropriate and obscenely contradictory and ridiculous move. Not even Britain, the homeland of ACCA would delegate such an important role of overseeing Financial Standards of accountants and auditors in England to that body. Britain has an organization called (FRC) Financial Reporting Council which treats with similar discrepancies and misbehaviors in accounting and audit, but here in Trinidad the tail wagging the dog. To add insult to injury Mr. Raymond,no where in the ACT 33 of 1970 was subletting of ICATT’s roles or responsibilities allowed/encouraged.I further highlight from the http://www.icatt.org/downloads/icatt-introduction-to-monitoring.ppt document:.
“ICATT’s approach to audit regulation is modeled on the approach adopted by ACCA
The approach is intended to improve standards, not to penalize firms”
http://www.icatt.org/downloads/icatt-introduction-to-monitoring.ppt
Mr. Raymond, ICATT is in good company because it seems quite normal for many things in this county to go unmonitored and everybody get’s paid!Business as usual !Right?
If HCU was carefully monitored in the first place by the by the Commissioner for Co-operative Development in the Ministry of Labour and Small and Micro Enterprise Development, who under the Co-operative Societies Act Chapter 81:03. supervises Credit Unions to the point of auditing them or assigning said auditors,had done some more homework, Seeteeram may have been a non-issue…
rgd.legalaffairs.gov.tt/laws2/alphabetical_list/lawspdfs/81.03.pdf (section 51)
But now that he is an issue and ICATT has the power to act independently of the complaint made by Browne, when oh when will Seeteeram be sanctioned?
Is this going to take another decade?
I hope not!
But with the non-penal approach to monitoring, taken by ICATT maybe we are all just a part of some game of financial hopscotch where everyone gains but the public pockets