Between November 2008 and June 2009 CL Financial entered a downward spiral. From TT$100.666Bn in assets to TT$23.Bn in less than two months. Here we set out some of the key developments from slip to slide.
CL Financial Shareholders’ Agreement of 12th June 2009
From:
Afra Raymond <afra@tstt.net.tt>
To:
Nunez-Tesheirak@gov.tt
Date
Fri, March 12, 2010 6:26:03 PM
Madam Minister,
I am writing to thank you for sending me the CL Financial Shareholders’ Agreement of 12th June 2009, as requested in my Freedom of Information application of 16th November 2009.
I have now published this onto my website – www.afraraymond.com – for public information and to develop a better understanding of its implications.
Finally, I am taking the opportunity to point out that my second Freedom of Information application, for Mr. Lawrence Duprey’s 13th January 2009 letter to the Central Bank Governor, was filed on 1st March. It would be a positive move, in the direction of transparency and public accountability, if you were to release that document to me within the statutory timeframe of one month.
Quantum – The SA is silent as to quantum, which would seem to mean that the group will enjoy unlimited access to taxpayers’ funds. The 2010 budget statement on 7th September states an estimated allocation to the CL Financial bailout of $5.4Bn – but subsequent events have only added to the confusion. To wit, the $50M USD for the British-American Insurance recovery (as per 2nd November ECCU press release) and the ‘up to $510M’ announced to be available to meet the pensions due to ex-Caroni workers. Question being whether the $5.4Bn includes the subsequently-announced amounts or are those to be added-on?
Security–At the preamble to the SA – on page 5 – we are told that “…valuable consideration…” is being offered by CLF as per the original MoU. Of course, given the Governor’s revelations on 7th April 2009 – see http://guardian.co.tt/business/business/2009/04/08/govt-left-empty-handed-cl-financial-bailout – that is simply not so. Indeed, it seems clear that the cupboard is bare and that this CLF group has no unpledged assets of any value.
Interest–No mention of interest at all. We are therefore now advancing an unlimited quantum of taxpayers’ funds, for which no security has been provided and those funds are being advanced at ZERO interest. Given the well-established rule that late payment of taxes makes a taxpayer liable to 20% interest and the interest rate the Federal government charged AIG for their bailout funds – it was 8.5% above the benchmark LIBOR, which was at 3.0% – it is clear that this represents a massive concession to the CL Financial group. Quite apart from the bailout itself, the 325 shareholders of this group are also benefiting from this unprecedented and unexplained facility of ZERO percent interest rate.
Accounting–Section 4 of the SA sets out the procedure for a proper system of accounts, culminating at 4.4.5 – “…shall ensure that an annual report of CLF is prepared and dispatched…in manner consistent with standard corporate practice…” The accepted interpretation of this language informs us that the word ‘shall’ denotes an obligatory, non-voluntary duty. If that is the case, when can we expect publication of the 2008 annual report, accompanied by audited accounts, as per ‘standard corporate practice’?
The role of the Shareholders–The MoU of 30th January, at Para (c) of its preamble, spells out its aims as “…to protect the interests of depositors, policyholders and creditors of these institutions…” According to the second sentence of the Ministry of Finance press release of 12th June 2009 – this is the penultimate document in the ‘Quick-Guide’ in the CL Financial bailout section of this website – “This new agreement is designed to give substance to the Memorandum of Understanding (MOU) of January 30th 2009.” The SA of 12th June 2009 was the subject of that press release. The SA, at Para A. of its preamble, states the intentions of the parties as having been set out in the MoU of 30th January 2009 and ends by “…their stated understanding, inter alia, that certain steps be taken to correct the financial condition of CLICO, CIB and BA in order to protect the interest of depositors, policy holders, creditors and shareholders of these institutions…” (These two words are put in bold as my own emphasis). I questioned that official version in ‘Fit and proper?’, ‘Party of parties’ and ‘Figuring it out’ – all available on this blog. Now that we have the actual SA to work with, it is clear that the statement in 12th June press release is extremely misleading. The SA does not just ‘…give substance to…’ the original MoU, it in fact is an entirely different species of agreement. The SA constitutes a written guarantee to protect the 325 shareholders of this CLF group.
Assisting the incoming Management–Clauses 2.3.3 and 2.3.4. of the SA, require the outgoing CL Financial chiefs to render all assistance to the incoming Board and Management in terms of all records and accounts etc. The question here is ‘Have the new Board and management been receiving the full assistance of the previous CLF chiefs?’ If not, what is being done about it? If yes, where is the $5.0Bn missing from the CLICO Statutory Fund?
Analysing the lacunae–The events in the interregnum and their consequence are extremely important aspects of this matter. I say so because the intervening period – i.e. between 30th January and 12 June 2009 – was one in which several important and shocking facts came to light. Some of these were –
Payment of Dividends – $3.00 per share paid on 16th January – i.e. three days after Duprey wrote to the Central Bank Governor for urgent financial assistance.
Over-pledging of assets – As cited above, the Central Bank Governor revealed that CL Financial’s assets were all fully pledged.
$5.0Bn is missing from CLICO’s Statutory Fund – According to the newly-appointed CEO of CLICO, Claude Musaib-Ali (he has since resigned, effective 14th February 2010) the CLICO Statutory Fund had $5.0Bn missing – see http://guardian.co.tt/news/general/2009/03/01/where-money-gone.
Attempted sale of assets as per CLICO Energy – Also, CL Financial attempted to sell its shares in CLICO Energy, which was in breach of the terms of the MoU. At clause H. and 6.1, the outgoing CL Financial Directors agree to use their best endeavours to reverse the sale of those shares.
With the exception of the last item, none of these other three serious matters are addressed at all in the SA. Silence on the payment of dividends. Over-pledged assets are described as being ‘valuable consideration‘. Silence on the missing $5.0Bn from CLICO’s Statutory Fund.
Those four events, having been revealed in the gap between the MoU and the SA, should have informed the stances taken by the parties. To my mind, these actions by CL Financial are indicative of insincere behaviour intended to outwit and cheat the taxpayer. The Ministry of Finance press release describes the SA as ‘…giving substance to…‘. Nothing could be further from the truth, since the SA in fact creates new levels of entitlements and protections for the CL Financial shareholders.
As taxpayers, we ought to have been able to rely on the State negotiators to propose terms which would have extinguished the equity of the CL Financial owners and taken other steps to restore the correct position. Instead, the SA has not sought to address their assaults on good faith and ‘fit and proper’ behaviour. We have now been bound into a long-term arrangement to restore the fortunes of one of the Caribbean’s riskiest adventurers.
Readers, please take note. In terms of its size, timing and terms, this CL Financial bailout is a grievous attack on the very integrity of our Treasury.
SIDEBAR: Heads we lose, tails they win…
The EQUITY position
In a situation like this, where a company is effectively both illiquid and insolvent, the incoming investor/lender has enhanced rights. Effectively, such a company is dead – just like someone whose heart has stopped beating – and any assistance or lending is usually on very onerous terms. The only exception would be in the case of related-parties who are able to agree special terms which no one else could accept.
That seems to have been the case here, since we had the CL Financial group out of cash, with its assets fully pledged, but yet able to get the full financial assistance of the State, without being forced to relinquish the rights of its shareholders.
One is reminded of the telling statement by the Governor at the press conference to announce the bailout on 30th January 2009, as to the fact that one of the main reasons for the collapse of the CL Financial group was ‘…excessive related-party transactions…’. It seems to me that this is exactly what we, the entire nation of Trinidad & Tobago, have now entered into.
The capacity to learn from the past is one of the main signs of maturation, but we are not displaying those qualities here at all, at all.
We do not seem to have learned from the central lesson of that tragic collapse.
The PUBLIC position
Another troubling aspect of this SA is that it does not properly allocate risk and reward between the parties. Again, readers are asked to remember that the mis-matching of risk and reward was also one of the elements which brought down the CL Financial group.
First example, let us use an Optimistic Modelin which the State intervention in CL Financial is successful. That would look like this –
All policyholders’ and depositors’ claims are satisfied;
All asset values are restored;
Republic Bank Limited and Barbados National Bank continue to thrive as leading banks in their sectors;
CLICO, British-American etc are restored as dynamic companies with healthy market share;
Angostura, Methanol Holdings, Home Construction Ltd and the other non-financial parts of the CL Financial group are also restored to health;
Overall, the CL Financial group returns to profitability.
If that happened, the State investment in CL Financial would have been beneficial to the 325 shareholders, but all the State would be entitled to receive, for having risked its own capital, would be a repayment of those sums, with no interest.
In this situation, the SA has allocated to the State all the risk, a massive injection of capital, responsibility for management, yet even in the case of a successful outcome there is no return either by way of interest on the funds advanced or equity in the rejuvenated enterprises.
Second example, let us use a Pessimistic Modelin which the State intervention in CL Financial fails. That would look like this –
Many policyholders’ and depositors’ claims are frustrated;
Assets are sold by mortgagees and decline in value;
Republic Bank Limited and Barbados National Bank are disposed of to meet the demands of creditors;
CLICO, British-American etc fail to regain their place in the markets;
Angostura, Methanol Holdings, Home Construction Ltd and the other non-financial parts of the CL Financial group are adversely affected by the group’s troubles and also decline or are disposed of;
Overall, the CL Financial group is slowly broken up.
If that happened, the State investment in CL Financial would have been a loss for the taxpayer, since it would be impossible to recover our funds.
In this situation, the SA has allocated to the State all the risk, a massive injection of capital and responsibility for management. The only thing the State has to look forward to here is the blame and the losses.
This is my second application, under the Freedom of Information Act, for access to a vital document in this CL Financial bailout. The first application was made on 18th November 2009 for the Agreement dated 12th June 2009 between our government and the CL Financial group – it can be accessed here.
On this occasion I am applying for access to the letter written by Lawrence Duprey, Executive Chairman of the CL Financial group, to Ewart Williams, Governor of the Central Bank of Trinidad & Tobago, on 13th January 2009. That letter was read into the records of our Parliament on 4th February 2009 by the Minister of Finance as featured in ‘Finding the Assets’‘. My reading of that letter is that CL Financial stated its asset value to be $23.9BN at the time of writing. Given that the asset value of the CL Financial group was stated to be some $100.7Bn as at the end of 2007, this is a central part of the riddle we need to solve.
The Central Bank is exempted from the provisions of the Freedom of Information Act and it is likely that this immunity will be cited to deny my application. My point is that the Minister of Finance, having deliberately removed that letter from the legal cloak of secrecy enjoyed by the Central Bank and read the letter into the Parliament’s records, can hardly claim that providing me with a copy is in any way inimical to the resolution of this matter.
It seems to me that a refusal to provide the copy of Mr. Duprey’s letter will only deepen the atmosphere of suspicion and distrust.
Afra Raymond is interviewed on the “High Noon” show on Power 102 Fm in Trinidad and Tobago, hosted by Larry Lumsden, on the CL Financial bailout and its possible ramifications for the the society.
As we move forward into the deep waters of the CL Financial bailout, the picture becomes murkier and less encouraging. It seems to me that we have never had a government which spends more on PR and advertisements, yet on this most important issue, the picture is nothing but baffling.
This week I will focus on three of the main areas which need urgent explanation –
THE LEADERSHIP QUESTION – The old leadership of CL Financial appears to have departed the bright lights, which is a far cry from the very visible positions taken when the bailout was announced. Lawrence Duprey spoke at the press conference on 30th January 2009 and photographs of him, together on that day with his colleague, Andre Monteil and the Central Bank Governor have been published in this newspaper. The said Mr. Monteil, former Finance Director of the CL Financial group up until his retirement in March 2008, is now turning his interests to farming – see http://guardian.co.tt/news/general/2009/06/07/my-integrity-can-t-be-impugned-monteil. As to the new leadership, that has now been scattered to the winds, with the rapid-fire resignations of Steve Bideshi as CL Financial CEO, Michael Carballo as group Finance Director and Claude Musaib-Ali as CEO of CLICO.The picture is truly confusing, especially when one considers the official statements, apparently made to provide information. We are being asked to believe that the departures of Bideshi and Musaib-Ali were both anticipated, but there is no explanation as to who is to replace these top-level officials. Who is really in charge of these huge, troubled companies? Is that an unreasonable question?
A MATTER OF INTEREST – Several critics of this series have asked why am I against the bailout? They go further to ask, isn’t the same thing happening in the USA and UK? Well, I think that the resemblance is only coincidental and superficial. I have been reading ‘Too big to fail’, Andrew Ross Sorkin’s bestselling account of the Wall Street meltdown. One of the most interesting points in that book is the terms of the Federal government bailout granted to AIG. At a time when the benchmark LIBOR was 3%, AIG was offered finance at an extra 8.5% – a punitive interest rate of 11.5% for the use of US taxpayers’ funds. Those funds were secured by all of AIG’s assets and there was also a government veto over any AIG dividend payments. In short order, the company was owned and controlled by the US government. That episode can be read as a message from the Bush administration that they would only bailout in extremis and on punitive terms. Another point to consider here is that our own laws specify a rate of interest due on any taxes owed – that rate is 20%.So what is the interest rate being paid by CL Financial to the State for the massive financing they are benefiting from? The first MoU is silent as to interest and the second MoU has apparently been deemed confidential. Why the silence on the interest rate for this bailout? There needs to be a statement on this urgently.
SALE OF ASSETS – The first MoU had, at its centre, a financing arrangement which required CL Financial to dispose of assets, in a listed sequence, to refund the funds advanced by the Treasury. We then learnt, in between the first and second MoUs, that all of CL Financial’s assets were fully pledged. The source for this is none other than the Central Bank Governor – http://guardian.co.tt/business/business/2009/04/08/govt-left-empty-handed-cl-financial-bailout – and we are bound to wonder at the way in which this new information influenced the negotiations for the second MoU. It seems that in the first place, the State thought it was to recover the funds it advanced to CL Financial by disposal of its assets. That belief now appears to have been misplaced and one has to wonder what influence that had on the second MoU. Did that 12th June document call on the private assets of the CL Financial chiefs? Given that the CL Financial assets are fully pledged and there is a suspicious silence on whether any interest is being charged and the shareholding is apparently to remain in private hands, one is bound to wonder how exactly and when is the State to be repaid for this massive loan?
When British American Insurance Company, a key part of the CL Financial group, was declared insolvent at the end of October 2009, that was after the international firm of accountants, KPMG, had examined their books. The governments of the Eastern Caribbean Currency Union issued a press release – http://www.normangirvan.info/wp-content/uploads/2009/11/eccu-clico-statement.pdf – which included this sobering statement – “In the event of a liquidation of BAICO, policyholders will not be paid in full. Indeed, it is probable that if BAICO was liquidated, policyholders will only get 10 cents on their dollar. This means if you have an annuity of $1000, you would only receive $100.”
I just wonder what are the real figures for the entire CL Financial group, given the sheer refusal, by all the responsible officials, to discuss the 2008 audited accounts for the group.
It seems to me, based on the available information, that the interests of the taxpayer have been subordinated to those of policyholders, depositors and most odious of all, the 325 private shareholders of CL Financial.
SIDEBAR: Devilish details
The first MoU was signed on 30th January and is published by the Ministry of Finance at http://www.finance.gov.tt/documents/news/mr03183E.pdf. The second MoU was signed on 12th June 2009 and, although certain details were set out in the Ministry’s press release, it has never been published. That is odd, to say the least, if one considers the second sentence of the press release – “This new agreement is designed to give substance to the Memorandum of Understanding (MOU) of January 30th 2009.”
Michael Carballo was emphatic that the shareholding had not been affected by the new MoU – “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.” That was in the Jamaican Gleaner of 17th June 2009
As we enter the wrong side of the boom, it is a little like traveling to the dark side of the moon. Familiar navigation points fade from view and we are forced to use bearings that are new.
Karen Nunez-Tesheira, MP, Minister of FinanceThe quality of our political rulers has now joined in unholy matrimony with the sheer recklessness of their anointed deal-makers to put our economy into an entirely new and perilous place.
At these moments of turmoil and impending crisis, it is always interesting to observe closely what key people are not saying. Yes, the pauses and silences can be very instructive in these situations.
I do believe that our national appetite for melodrama, bacchanal and commess is being played upon to distract us from the seriousness of the situations facing us.
The main example is the CL Financial bailout, which was announced a little over a year ago when the first Memorandum of Understanding (MoU) was signed on 30th January 2009. Given the subsequent revelations as to the withdrawals of funds by important people and the shareholdings of the Minister of Finance in CLF, it is impossible to say exactly when the actual bailout began. All we can say for sure is that we, the public, were told of a bailout on 30th January 2009.
There has been a cascade of bewildering and disturbing events – those are set out at my blog, www.afraraymond.com – and we are now at a position of deep confusion. The resignations of three top-level executives of the group and the subsequent bald press releases are most disturbing. They speak of disputes and jostling taking place in terms of this huge group we are now committed to rescue. For the record, those resignations were –
12th January – Steve Bideshi, CLF Group CEO, effective 31st January
19th January – Michael Carballo, CLF Group Finance Director, also effective 31st January
3rd February – Claude Musaib-Ali, CEO of CLICO, effective 14th February
The growing sound we are hearing is that the Bob Lindquist forensic report into the dealings of CLICO etc. is to be completed at the end of February. Many people for whom I would normally hold some respect are anxiously awaiting that report to see what possible wrong-doing might be revealed.
In my view it is an error at this time for us to be awaiting the publication or selected leaking of such a document.
We need to press for the Audited Accounts of the CL Financial group as at 31st December 2008. Those accounts should be signed-off by the same professional firm which did the 2007 audit, the internationally-renowned PriceWaterhouseCoopers.
That is the most important single document, since it will fix an asset value at the end of 2008. That is –
Lawrence Duprey. 13 days before Lawrence Duprey, the group’s Executive Chairman, wrote to the Governor of the Central Bank to request urgent financial assistance. That letter was accompanied by a table setting out the group’s asset values – totaling $23.9Bn – and was read into the Hansard by the Minister of Finance on 4th February. See – http://www.ttparliament.org/hansards/hh20090204.pdf at page 628.
16 days before a dividend of $3.00 per share was paid to the CL Financial shareholders.
30 days before the historic press conference to announce the bailout, at which it was repeatedly stated that the CL Financial group had $100Bn in assets.
Despite its obvious importance in the mystery of the missing money, there is complete silence as to the progress of the 2008 audit. It is almost a full year overdue and the only accounts we hear of are the forensic and confidential ones. The CL Financial group’s audited accounts were always published anyway, so why can we not have a clear, official statement as to when the 2008 audited accounts will be published? What is the mystery?
This country is now bailing-out a group which has failed and/or refused to provide its annual audited accounts and that is unacceptable in terms of the proper expenditure of our taxpayers’ funds.
Let us mark this moment well, because if the 2008 audited accounts are allowed to fade into obscurity, please do not think that we, the citizens, will be treated any better with the 2009 accounts. Please take note that this is a recipe for even greater levels of corruption than what besets us now.
There are also other facts, now in the record, which cry out for early attention, without need for special reports or melodrama.
Was the payment of a dividend to CL Financial shareholders, after writing to seek urgent financial assistance, an illegal act by its Board of Directors? Yes or no? If yes, then what actions are to be taken to both a) recover those sums of money and b) punish the Directors of CL Financial for their illegal act? If no, we need to hear how that could possibly be the case. If that dividend payment were legal, our tiny Republic would once again be setting a new precedent for the world to observe. Is it possible, as incredible as it might seem, that the Board of CL Financial did not know that Duprey’s letter had been sent to the Central Bank?
The State is in control of the CL Financial group and ought to be able to present a picture as to who broke their deposits in the last 90 days. That is guaranteed to be an interesting read and no need for any forensic report there, either. Maybe more importantly, who borrowed from the floundering group in its last days and on what terms. Another piece of the puzzle which is easily within grasp, but the mysterious silence is persistent.
The Governor of the Central Bank has, on several occasions, publicly and clearly stated his deep concern at the actions of the CL Financial chiefs – look at these 2 examples –
Speaking on 10th November 2009, at a conference on The Global Financial Crisis – “I prefer, however, to focus on the governance issues because, without doubt, the failure of Clico was a failure of Governance … it was absence of controls from the Board of Directors.” See – http://www.central-bank.org.tt/news/speeches/2009/sp091110.pdf.
The Central Bank issued updated regulations as to the qualities of person considered to be fit and proper to serve as Directors or Senior Officials of Financial companies – that is at http://www.central-bank.org.tt/news/releases/2005/mr050510.pdf. At 3.1, it states –
“In accordance with governing legislation a person is considered to be fit and proper if the person essentially is of good character, competent, honest, financially sound, reputable, reliable and discharges and is likely to discharge his/her responsibilities fairly.”
The Governor of the Central bank has spoken, in unmistakable terms, about the conduct of these CL Financial officials – so what is the delay in exercising his powers under the fit and proper regulations? If we are to believe his statements, and I have no reason to doubt the Governor’s word, there is no lack of evidence that the CL Financial chiefs were not operating in accordance with the official rules as to fit and proper conduct.
We do not need to wait for any forensic report to be leaked or any opinion from expensive foreign lawyers. Sweet as the melodrama can be, it is a most dangerous distraction in this case.
SIDEBAR: The UDeCOTT element
As per the CL Financial fiasco, we are all waiting on the completion of the report of the Uff Commission of Enquiry into the Public Sector Construction Industry, with particular attention to UDeCOTT and Cleaver Heights. That report is due to be presented to the President at the end of this month and, as important as it no doubt is, the primary issue is in danger of becoming conveniently obscured. I have raised the question before, is UDeCOTT insolvent? Why the inordinate and unexplained delay in publishing their audited accounts? The last time UDeCOTT published audited accounts was in 2006 – so no account for 2007, 2008 or 2009. State guidelines require that State Enterprises publish their audited accounts by the end of April of the next year.
There is no good reason for the non-publication of any of these accounts. They are bound to help us solve the mystery of the missing money.
Jerry George a freelance journalist from SVG has been following and reporting on the CLICO/British American story and its impact on the Eastern Caribbean countries. He came to Trinidad on the anniversary of the Bailout to interview Afra Raymond. Jerry is the Host and Producer of UP NEXT! which is aired on SVGTV in St Vincent and the Grenadines. Video courtesy UP NEXT! with Jerry George.
VIDEO: First Up Simulcast Interview – 21 January 2010
Fazeer Mohammed and Jessie May Ventour interview Afra Raymond on the simulcast of First Up on Talk City 91.9 FM radio and C Television on the topic, “What’s the Deal with CL Financial” touching on the continued silence of the professional class, politicians and labour unions on the ongoing debacle of the CL Financial bailout. Video courtesy Caribbean New Media Group Limited.
My last column on this important matter was published on 31st December, almost a month ago, with several major developments since then. The main development in my view is that we had some truly remarkable statements from the Governor of the Central Bank.
The messages on the CL Financial group are now so confused that the most charitable phrase possible, is that the public is getting ‘mixed messages’.
The Top-level resignations – The group CEO, Steve Bideshi – a former senior manager at Citigroup – was reported on 12th January to have tendered his resignation, effective 31st January. See – http://guardian.co.tt/news/general/2010/01/13/bideshi-quits-cl-after-6-months or http://www.trinidadexpress.com/index.pl/article?id=161581443. We are told that his reason for resigning is the breakdown of negotiations for his compensation package. Our governments have a serious track-record of agreeing and then secreting the terms of compensation for its high-fliers. Just think of Caribbean Airlines, PetroTrin and UdeCOTT. It is unbelievable that government was unable to agree terms with this one CEO. Arguably, Mr. Bideshi was heading the largest and most complex group within the State’s control.
Bideshi and Carballo were the two top executives at CL Financial. What is going on?
To date there has been no proper explanation as to the causes of these major resignations or clear statement on the way forward. To have both the group CEO and Finance Director resign within a week of each other, effective within less than a month, speaks of turmoil and jostling. That kind of thing would not happen if the situation was stable. The purpose of this bailout was said to be the avoidance of systemic risk and the maintenance of confidence in our financial system. The official silence on this startling development only adds to the impression of ‘more in the mortar than just the pestle’.
An absolutely fundamental clash of ideas seems to be emerging, but that is beyond the scope of this week’s column. One week ago, I appeared for the first time on the electronic media (CNMG/91.1FM) to discuss these issues. It seems that there is a ‘Code of Silence’ on this issue with the political parties all having agreed to not discuss it in any sustained or meaningful way. Our civic bodies are little better, with a remarkable silence from our professional bodies (most notably, the Institute of Chartered Accountants of T&T), trade unions and institutes of higher learning.
The question of wrong-doing – The Governor is reported to have expressed his frustration at the slow pace of the ongoing forensic audits into the group’s financial affairs. He went so far as to promise to act if wrongdoing is revealed. The first point to be made is that we need the audited accounts as at 31st December 2008 and that will light up many of the darker areas of this series of issues. The second point is that wrong-doing has already been exposed in two substantive respects –
CL Financial dividends – The group paid dividends to its shareholders three days after writing the same Governor for urgent financial assistance. Is it the Governor’s view that it was legal and prudent to pay dividends in that situation of virtual insolvency?
Directors’ legal responsibility – Under the Companies Act, Directors can be held liable for mismanagement. They have a legal liability to properly manage the affairs of the companies under their direction. Speaking on 10th November 2009 at a conference on “The Global Financial Crisis: Institutional Management and Regional Opportunities” – see http://www.central-bank.org.tt/news/speeches/2009/sp091110.pdf – the Governor, in his closing remarks, said –
“I prefer, however, to focus on the governance issues because, without doubt, the failure of Clico was a failure of Governance … it was absence of controls from the Board of Directors. Clico shows what damage could occur when prudence is clouded by unbridled ambition. Clico shows what can happen in the virtual absence of a risk management framework and the absence of internal controls. Clico shows that we need to rethink corporate governance … not only in Trinidad and Tobago but in the region as a whole.” (Please note that the emphasis is the Governor’s.)
If one is unable or unwilling to pick the ‘low-hanging fruit‘, which are well within grasp, why should we believe you will take action in more complicated and contested cases?
The financing mechanism…Are assets being sold, or not? – The other aspect the Governor spoke on was the difficulty in getting payouts for a significant number of depositors and policyholders. That has been widely reported in the press according to this newspaper’s reports on the Governor’s statement – “He said some of the payouts to CL Financial stakeholders were taking longer than the authorities had anticipated because the company was facing a liquidity problem and the pace of disposing of the assets to cover the payouts was going very slowly.”Up until now, I had assumed that the payouts were being funded by the Treasury via the Central Bank and that those monies would be recovered by sale of CL Financial assets – all in accordance with the MoU. We are now getting a top-level statement that if assets are not sold, the payouts cannot proceed. Is this another way of saying that the Treasury support has reached its limits or is it a sign of deeper conflict?
On Thursday 15th October 2009, Mariano Browne, Minister in the Ministry of Finance, spoke at the post-Cabinet press briefing – see http://guardian.co.tt/business/business/2009/10/16/browne-no-plans-govt-increase-shares-rbl – and his reported statement was very clear – ‘Browne also said government had no intention of selling any of the assets of Clico, one of the three CL Financial-owned companies that was being bailed out. “One needs to be judicious in terms of the managing of the assets at CL Financial Group, given the depressed state of the market both here and internationally. There is certainly no intentions (sic) of selling the assets. The position is to manage them and manage them well,” he said.
It is either that there has been an unannounced, significant shift in policy on this important matter or there really is a scene with ‘turmoil and jostling’. Both statements cannot be true.
We were told in the 2010 Budget that the monies allocated to the CL Financial bailout were some $5.1Bn, which is a huge amount of money. I am beginning to wonder what is the total amount of money really allocated to this bailout and if we are ever going to recover it. Just to make 2 examples, we have had the British-American Insurance Company’s insolvency, announced in November 2009, and the government’s subsequent commitment to put $50M USD towards that regional effort to construct a new company. Also, on Christmas Eve we heard of the $400M commitment to pay CLICO pensions due to ex-Caroni workers. What are the real totals?
This is my second application, under the Freedom of Information Act, for access to a vital document in this CL Financial bailout. The first application was made on 18th November 2009 for the Agreement dated 12th June 2009 between our government and the CL Financial group – it can be accessed here.
AUDIO: High Noon Interview – 26 February 2010
VIDEO: Up Next Interview – 07 February 2010
AfraRaymond.net 