Second submission to the Commission of Enquiry into the failure of CL Financial Limited, et al

14^th February 2011

Afra Raymond’s second submission to the Commission of Enquiry into the failure of CL Financial Limited, Colonial Life Insurance Company (Trinidad) Limited, Clico Investment Bank Limited, Caribbean Money Market Brokers Limited, and The Hindu Credit Union Credit Union Co-operative Society Limited

My name is Afra Martin Raymond and I am a Chartered Surveyor, being a Fellow of the Royal Institution of Chartered Surveyors. I am Managing Director of Raymond & Pierre Limited – Chartered Valuation Surveyors, Real Estate Agents and Property Consultants. I am also the President of the Joint Consultative Council for the Construction Industry (JCC), an umbrella organisation which represents the interests of Engineers, Surveyors, Architects, Town Planners and Contractors in this Republic.

This submission is being made in my personal capacity and does not represent the position of either Raymond & Pierre Limited or the JCC.

My work on this vital issue has all been based on the public record and can be seen at www.afraraymond.com.

I am willing to give oral evidence before the Commission.

My areas for focus in this submission are –

Fiduciary Duty of Directors and Officers

The burning question is – When did the Directors and Officers of CL Financial (CLF) know that the group was heading to collapse? When did the Directors and Officers of the failed subsidiaries know? What did they know and when did they know it? How much warning did their management controls give them?

The question is pertinent and the time-line is instructive –

31^st March 2008 – Andre Monteil retires as CLF’s Group Finance Director.
6^th August 2008 – Anthony Fifi retires as Managing Director of the Home Construction Limited group, which is wholly-owned by CLF.
Mid-October 2008 – CLF purchases Jamaica Money Market Brokers’ 45% shareholding in CMMB. Please note that CLF owns 40% of JMMB.
7^th November 2008 – Michael Carballo, CLF’s Group Finance Director gives an interview to the Business Guardian that the group had assets of $100Bn and could weather any storm.
18^th November 2008 – CLF 2007 Annual Report is published – its Consolidated Balance Sheet disclosed a Total Asset Value of $100.666Bn.
8^th December 2008 – Robert Mayers proceeds on pre-retirement leave from CMMB, pending his scheduled retirement, on 28^th February 2009, as Managing Director.
13^th January 2009 – Lawrence Duprey, CLF’s Executive Chairman writes, detailing an asset value of $23.9Bn, to the Governor of the Central Bank to seek urgent financial assistance. See ‘Finding the Assets‘ published on 23^rd August 2009 for the text of that letter.
16^th January 2009 – CLF pays a dividend of $3.00 per share.
23^rd January 2009 – CLF has its Annual General Meeting at Trinidad Hilton.
30^th January 2009 – The bailout is announced at a Press Conference at the Central Bank.

So, there is this contradictory financial manoeuvre in the dying stages of the group. I am speaking about the CMMB share purchase, in which CLF purchases Jamaica Money Market Brokers’ 45% shareholding in CMMB at a reported $41.37M USD. That price equates to 16.5 times earnings, given that CMMB’s profit as at March 2008 was $35M. It is impossible to reconcile that earnings multiple with CMMB’s exceedingly low profit rate and the rapidly-approaching collapse.

Was a professional, independent valuation of those shares obtained prior to the purchase? How can it have been a proper discharge of their fiduciary duty to shareholders for the CLF Directors to have agreed such a massive, questionable purchase without proper advice?

That transaction drew $262M out of CLF’s rapidly-depleting coffers on terms which are suspect. It demands close examination.

Another inescapable episode is the last CLF Annual General Meeting, the timing could hardly be better for an insight into the sensibilities of these chiefs. At the date of that AGM, Friday 23^rd January 2009, the bailout letter was 10 days’ old, the dividend cheques were one week old and the bailout itself was a week ahead.

What was the atmosphere at that meeting? Were the shareholders told frankly of the major challenges and that the group had been forced to seek a State bailout? Did the Directors offer an explanation for the failure of the group?

It would be important to examine that AGM very carefully.

The Second issue is the treatment of departing Directors and Officers. Note that three of the most important and senior CLF chiefs departed in the 12 months prior to the collapse. It is most unlikely that those departures were mere good fortune or coincidence.

It is difficult to probe and verify such agreements when they are oral, much less when they are between parties who are actively collaborating. Memory can be notoriously unreliable.

I am submitting that those departures can be examined from the documents if one were to approach from the compensation aspect. What I mean is that these chiefs would have been paid upon departure and that would likely have been documented.

If that approach were taken, the suggested questions would be

How much did Messrs. Monteil/Fifi/Mayers receive upon retirement?
Was that sum reduced to reflect the impending crash?
Were the amounts arrived at by a ‘set’ formula?
Were the amounts arrived at by an interpretation of an employment contract which divorced pay from performance?

This would make it possible to have some insight into the way these chiefs treated with themselves, their shareholders and the other stakeholders of the group.

Executive Flexible Premium Annuity (EFPA)

I have written extensively on the EFPA, its growth and the effect of that size upon the entire CL Financial group.

I have no further points to make on those aspects. My submission here is on the point of set-off and the burden to the taxpayer.

My submission is that in relation to the intended payments from the State to EFPA claimants is that the State must conduct itself in an exemplary fashion. The State must not be placed at any further disadvantage, having already shouldered this enormous, exceptional payout.

There are now anti money-laundering (AML) laws which require depositors to make declarations as to the Source of Funds, all in an effort to prevent the proceeds of crime from entering the legitimate economy. In my view it is necessary for the government to be satisfied that the various sums being claimed were properly declared under the AML laws. We have had shocking reports about the elementary management controls which were either absent or awry in the CL Financial group, so it would not surprise me if their AML-compliance was lax. That needs to be thoroughly checked. It would not be at all acceptable for our taxpayers’ monies to be used to rinse ‘dirty money’.

Also, the claimants who owe on their taxes – VAT, PAYE, Corporation Tax, Income Tax and so on – should not be refunded.

Finally, there is the issue of the many borrowers from Clico, British-American, Clico Investment Bank (CIB). In the case of CIB alone, we are told that about $1.0Bn of those loans are ‘non-performing’ – which means that the borrowers are not repaying their loans. It would be perverse for some of those non-performing borrowers to receive refunds from the State. This is a live part of this situation, since in the case of CIB itself, the very Inspector of Financial Institutions swore in his affidavit filed in the winding-up action for that failed bank –

…With respect to the Creditors of the Petitioner, the Petitioner has met the statutory obligations for the Board of Inland Revenue (except for Corporation Tax Returns for 2007, 2008 and 2009 which are being prepared and remain outstanding)…

That is a glaring example of the kind of wanton wrongdoing at the heart of this mess. CIB fails to file its Corporation Tax returns for three years, yet keep their banking licence and arrange for the taxpayer to bail them out when it all goes sour.

Some claimants may try to invoke the ‘corporate veil’ to shield themselves from various breaches committed by their companies, but this is an exceptional situation in which the State is making an offer. In my view, the corporate veil ought properly to be ignored, so that the long-standing commercial principle of ‘set-off’ can be applied to the claimants.

I am submitting to the Commission that everyone over seeking bailout funds exceeding $75,000 be subject to a BIR audit for themselves and any business interests that they may have earned revenues from and they should be denied a taxpayer-funded bailout if they were found to have not paid their taxes.

Political Party Financing

It is my submission that the means by our political parties are financed is at the very heart of this affair.

Governance models, regulatory frameworks and accounting conventions are all important parts of the interlocked issues, but those pale into insignificance beside the influence of this major party financier.

There can be no doubt that CLF was one of the leading contributors to political parties in this country.

In the case of the United National Congress (UNC), which is the leading element of the existing coalition government, their last leader was convicted and imprisoned for failing to declare substantial donations received from Lawrence Duprey – see here and here.

In the case of the People’s National Movement (PNM), there have been published reports as to the payment of sums of the order of $20M to that party by CLF in the 2007 general election – see here and here.

In the case of the former political party, the entire CLICO issue was raised by the respected economist Trevor Sudama MP in the 2002 budget debate. Sudama was a UNC Cabinet member and posed the question as to whether CLICO, having been found to be insolvent by the Supervisor of Insurance, should be allowed to continue in business. Sudama was strongly opposed in the debate and eventually removed from the Cabinet. This can be corroborated from Hansard (p. 757 and 800) and the reports of the Supervisor of Insurance.

In the case of the PNM, the link was even deeper, with the same individual being that party’s Treasurer, CLF’s Group Finance Director and Chairman of two banks – Home Mortgage Bank and CLICO Investment Bank as well as two major State enterprises in the construction sector – Housing Development Corporation and the Education Facilities Company Limited. That individual is Louis Andre Monteil.

It is clear from the many statements of the Governor of the Central Bank that they were very limited in what they could do as regulators and it is difficult to escape the impression that an undue influence was brought to bear in the case of CLF.

The last Minister of Finance, Karen Nunez-Tesheira – a former law lecturer – was found to have withdrawn her own and her family’s monies from the CLF group just before the crash, was a shareholder of CLF and accepted dividends after the bailout was requested by the beleaguered group.

Only when Nunez-Tesheira was confronted by an informed and relentless media did she admit any of those transactions. We have never had an account of those dividends.

There is a long-standing and widely-accepted doctrine of Cabinet secrecy. It is my submission that this is one of those exceptional cases in which the very purpose of the Enquiry will be frustrated unless the Terms of Reference are robustly interpreted. In this case the situation demands an examination of the conduct of these matters at the political level.

For a proper understanding of this issue, it is essential that Karen Nunez-Tesheira, Trevor Sudama and Louis Andre Monteil be cross-examined on this political aspect. It is my view that former Prime Ministers Basdeo Panday and Patrick Manning must be questioned if we are to properly apprehend the extent of the financiers’ influence.

I am basing that submission on part (i) of this Enquiry’s Terms of Reference -To enquire into “…the circumstances, factors, causes and reasons leading to the January 2009 intervention…”. There is no way to satisfy the first part of your mandate, to understand the root causes of the crisis, without getting into this fundamental issue. Political Party financing is at the centre of the fiasco. The learning from the Wall Street crisis on this question is unequivocal as to the pernicious influence of these political financiers and lobbyists.

For this Enquiry to achieve the required level of interrogation, information and insight, it must pierce the conventional veil of Cabinet secrecy. To do that, you need to take a robust view of your Terms of Reference.

I do believe all the items in this submission to be true and correct.

……………………………………………..

Afra M. Raymond B.Sc. FRICS

www.afraraymond.com

Afra Raymond’s first submission to the Commission of Enquiry into the failure of CL Financial Limited, et al

10^th February 2011

Afra Raymond’s first submission to the Commission of Enquiry into the failure of CL Financial Limited, Colonial Life Insurance Company (Trinidad) Limited, Clico Investment Bank Limited, Caribbean Money Market Brokers Limited, and The Hindu Credit Union Credit Union Co-operative Society Limited.

This submission is being made in my personal capacity and does not represent the position of either Raymond & Pierre Limited or the JCC.

My work on this vital issue has all been based on the public record and can be seen at my blog www.afraraymond.com.

I am willing to give oral evidence before the Commission.

The articles – These are 42 No. newspaper articles on the CL Financial bailout, its background and consequences.

The TV/Radio Shows – I have done seven TV interviews on the CL Financial bailout and those are available at the ‘Multimedia’ page of my blog.

Up Next! TV interview with Brian Branker, former Executive Chairman of British American Insurance Company Ltd (BAICO) – This is the first time, to my knowledge, that one of the CL Financial chiefs has gone onto the record to speak about these events. The interview is available at http://vimeo.com/15145888.

The 30^th January 2009 MoU – This is the original bailout document and a signed pdf is here – http://www.finance.gov.tt/content/mr03183E.pdf.

The 12^th June 2009 CL Financial Shareholders’ Agreement – this is the subsequent agreement, erroneously described by the Ministry of Finance as ‘giving substance to’ the original MoU, but later found to have enshrined a decided shift in favour of the shareholders – https://afraraymond.net/wp-content/uploads/2010/03/mou21.pdf.

I do believe all the items in this submission to be true and correct, save and except for the Up Next! Interview, which comprises the views and observations of Brian Branker.

……………………………………………..

Afra M. Raymond B.Sc. FRICS

www.afraraymond.com

CL Financial bailout – Smashing the Code of Silence

I have been preparing my submissions for the Colman Commission and took some time-out to start reading the Report into the USA’s financial crisis. Of course I am referring to the Financial Crisis Inquiry Report, which was published at the end of last month, about a year after its first hearings.

Even though I have barely scratched the surface of this 662-page work, it has already been a deeply fascinating read, filled with cautionary insights. The first conclusion of that Report is worth citing –

“We conclude this financial crisis was avoidable.

The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble. While the business cycle cannot be repealed, a crisis of this magnitude need not have occurred. To paraphrase Shakespeare, the fault lies not in the stars, but in us.

Despite the expressed view of many on Wall Street and in Washington that the crisis could not have been foreseen or avoided, there were warning signs. The tragedy was that they were ignored or discounted…”

It is an epic failure in that the world’s strongest and most diversified financial system was brought, literally, to its knees by a tidal wave of greed. Some of the main features were –

Slack regulators, who had looser and looser control of market activity, yet did little or nothing to propose the need for better controls.
Corrupt politicians, who accepted huge political donations from the financial institutions – yes, both parties – so that there was an absence of real debate on major policy shifts and consequences
A sheer overdose of hubris in an atmosphere in which it seemed, against all good sense, that tangible risk had been abolished. The catchphrase among market players was ‘IBGYBG – I be gone, you be gone’ – denoting a total abandonment of the notion of customer service. In many cases the salespersons knew what they were selling was of such poor quality that their own firms were betting against it.

If any of this sounds familiar, yes, you are right; it is almost the same as our own crisis. The old aphorism ‘When Uncle Sam catch a cold, the Caribbean get pneumonia’ comes to mind.

I have to say that the reading is a sobering experience as one starts to reflect that the deep and broad USA economy has been crippled by these ‘smartmen’ and their political minions. So what hope do we have of resisting those elements? That is the question we need to grapple with in this rounds.

But for all the parallels, there are two important differences –

Firstly, the guilty actors are not going to own-up. This is one pie they won’t want a piece of. They may try to seek exoneration in a version of the truth which locates blame somewhere on Wall Street. Those assertions need to be strongly challenged; they represent a piece of pure mischief.
Secondly, the US crisis is far smaller, proportionally, than our own. The Minister of Finance stated in the 2011 Budget (pg. 8) that the CL Financial bailout was costing our country more than 10% of its Gross Domestic Product (GDP). In comparison, the US bailout was estimated, in December 2010, by their Treasury Secretary to be costing about 1% of that country’s GDP. These facts show the double-mischief of these bold-faced people trying to tell us that this is just like in America.

According to those sources, this crisis is costing us 10 times more than the Wall Street one we keep on about. The relevant Ministry of Finance Press Release of 17th January 2011 states, “…With the Government’s planned bailout of CLFG (CL Financial Group), Standard and Poor’s expect net general government debt will rise to 28% of GDP in fiscal 2011 from 15% in fiscal 2010, though it will remain below the 36% median for ‘A’ rated sovereigns…” That is a difference of 13%. Yes, that is 13 times more than the USA…

This crisis will require us to properly compare and contrast those situations.

It has been two years, but at last the Commission of Enquiry into the T&T financial collapse is about to start its hearings. For the first time and against all their schemes and plans, the main agents of the Code of Silence are going to be forced into the direct sunlight to face questions and of course I mean the several court cases and the Colman Commission as discussed in ‘Testing the Code of Silence‘.

The final date for submissions to the Colman Commission is Monday 14th February, which means that all written evidence must be filed by then. I am not sure if electronic evidence, like the 55-minute interview Brian Branker (former Executive Chairman of British American Insurance Co.) gave on Up Next! in September 2010 is allowable, but it seems worth it to try. So this is my call for the producer of that show, Jerry George, to please do submit it. If you are interested, it is at http://vimeo.com/15145888.

I expect that by now the main actors in this Code of Silence are all rehearsing their lines and agreeing who will speak on which piece and in fact which parts to be silent on. In my opinion we can expect nothing but self-serving and defensive statements, if not outright lies, from the main actors in this mess – the CL Financial chiefs, the wayward Regulators and of course, the auditors. The burning question is therefore how is the public interest going to be defended and advanced? By whom? On what terms?

To make the obvious comparison with the Uff Enquiry, we are looking at the same kind of procedure. The decisive difference is that, in this case, the balance of forces is entirely different.

You see, in the Uff Enquiry there were the forces of the State and its agents all lined up to defend their way of operating – that included UDeCOTT, Calder Hart, National Insurance Property Development Company (NIPDEC), Housing Development Corporation (HDC) and of course the State itself was in the Enquiry in the person of the Attorney General. On the other side there were the Joint Consultative Council and Dr. Keith Rowley, MP. All those parties were strongly represented. There were also independent forces at the Enquiry – the Trinidad & Tobago Transparency Institute (TTTI), Carl Khan and myself – the only two witnesses whose testimony stood without hostile cross-examination.

Due to the balance of forces in that forum, the Uff Enquiry was satisfactory in that all versions were strongly contested under cross-examination and also by conflicting testimonies – the Enquiry was forced to decide on the veracity and relevance of evidence…there was no easy middle road or settling for a version because no one had spoken against it.

Here, in the Colman Commission, we face an entirely different order of challenge. Let me explain –

Firstly, the quantities of money involved are several times larger – at least ten times more, in my estimation.
Secondly, the entire establishment seems to have capitulated to the ‘Duprey Dream’. That is a state in which no serious questioning of the actions of the CL Financial chiefs is undertaken. In the USA experience, this phenomenon is described as Regulatory Capture. It is one in which regulators are actually ‘occupied’ by forces who are the people they are supposed to police. That is not unfamiliar to us here in Trinidad & Tobago, but that is why we must fight against it. It is a true nadir of absolute corruption. A roaring silence of the formal and informal regulators.
Finally, based on that record, the Colman Commission will be dominated by these people, the ones who caused the entire mess. If that is the case, there is a real danger that the truth could be compromised or even sacrificed. That peril is what we have to work against.

Some of us have insisted on this Enquiry as a necessary step in preventing a repetition and further looting of the society. The facts and the versions of the facts are about to be tested in the crucible of the Colman Commission.

The only way we can avoid the US fate, and possibly worse, is by doing our very best to learn from the bitter experience. Those of us, who have insisted on this crisis being a real turning-point, must make the most of this moment. In my opinion, that can take place on two levels –

The publicity level, with lobbying to ensure that the process receives the maximum possible exposure, generally, and spot-lobbying to ensure that the key players in the mess are spotlighted when it is their turn to testify. The sole Commissioner was reported to have said that the hearings will be televised. How can we check on and ensure that takes place? Also, we should be insisting on a similar arrangement to Uff with the transcripts being on-line.
The evidential level, at which we need to make submissions to contend with the rotten and dishonest discourse from the utterly unresponsible parties who are ultimately responsible. We not only have to contend with and destroy the ‘Anansi-stories‘, we also have to advance our own arguments into the spaces and places they do not want us to go into.

The key person from whom I would like to see a submission is the respected former MP and economist Trevor Sudama, who was the first person to put onto the public record these serious concerns over the health of the CL Financial group. That was in the 2001 Budget debate and of course we all know that Sudama and his colleagues – Ramesh Lawrence Maharaj and Ralph Maraj – were strongly attacked, ostracized and ultimately forced from the political Head Table. All by their own party colleagues.

Mr. Sudama, we need your input in this vital matter. The background for your intervention in this matter, your debate on it and the political attack must form part of the record in this Enquiry.

Some of the key commentators who should put in written submissions are Camini Marajh of the Express, Andre Bagoo of Newsday and Anthony Wilson, the Ag Editor-in-Chief of this newspaper.

Our professional Institutions have been pointedly silent and I would hope to see submissions from –

Institute of Chartered Accountants of Trinidad & Tobago – To be fair, the ICATT President, Anthony Pierre, joined me as a guest to discuss this crisis on Sunday Morning Politics on 26th September 2010 .
The Law Association
Bankers’ Association of Trinidad & Tobago
Association of Trinidad & Tobago Insurance Companies,

Our institutions of higher education should join in with their perspectives –

Arthur Lok Jack School of Business, part of UWI
School of Business and Computer Studies
School of Accounting and Management
Caribbean Centre for Monetary Studies, also a part of UWI
UWI’s Economics Department
UWI’s Government Faculty

I am going to close by sketching just one parallel.

To go back to the main points of the Wall Street experience as outlined above, we hear of these complex debt swap instruments and their toxic consequences. The fatal flaw of these instruments, according to the reports I have read, seems to be that they seemed to be a good way to invest with high returns and little or no risk. The truth turned out to be just the opposite.

It all seems remote from our own situation, but that is not the only way to look at it. The most controversial single item in this entire situation here has been the EFPA, an annuity duly approved by the Supervisor of Insurance. When we consider the promotional literature for that product, it is nothing less than scandalous that a leading company should have been allowed to advertise an investment product with exceptional rates of return and the repeated phrase ‘guaranteed investment’. There is absolutely no such thing as a guaranteed investment. It is a complete contradiction in terms, but yet it went out to tens of thousands of people, who suspended their disbelief and went along for the ride. That is the Trini parallel with those complex debt swap instruments.

You see?

VIDEO: Morning Edition Interview – 7 Dec 2010

Afra Raymond sits with hosts, Fazeer Mohammed and Felipe Nogueira on the Morning Edition television show to discuss the code of silence surrounding the CLICO bailout. Video courtesy TV6

Programme Date: 07 December 2010
Programme Length: 0:23:20

CL Financial bailout – Testing the Code of Silence

The Code of Silence has formed the subject of several columns in this series.

I am referring to the unwritten agreement amongst the leadership group in our society to maintain silence in matters of white-collar crime. The guiding principle of the Code being that the members of that group must never be exposed to the same scrutiny and penalties as the common criminal.

That Code of Silence is poisonous to the progressive development of our society. Unless we can bury the notion that white-collar crime pays, our society is doomed to lurch from crisis to crisis. White-collar crime will never be truly challenged until the Code of Silence is tested to destruction. I welcome anything which would dismantle the Code of Silence. Literally anything.

The Commission of Enquiry into the various financial collapses which have beset us – Clico, British-American, Clico Investment Bank, Caribbean Money Market Brokers, the CL Financial group and the Hindu Credit Union – was announced by the Prime Minister in her 1^st October address to Parliament.

On 17^th November, Sir Anthony Colman QC was sworn in as the new sole Commissioner – he replaced the original choice – Sir Gavin Lightman QC, who had an apparent conflict of interest. The Secretary to the Colman Commission is Judith Gonsalves, who served the Uff Commission in that role. It is reported that Colman intends to hold open hearings and that those should start sometime in this month.

So, we are seeing three powerful channels emerging –

CIB winding-up action – ongoing litigation from National Insurance Board and National Gas Company to stop the Central Bank’s winding-up action. Those court actions have been set for hearing in April and the sum of money at stake is an estimated $1.8Bn.
Policyholders challenges – The various policyholders’ groups have now declared their intention to take legal action to recover the monies they feel are owed to them. The sum of money at stake in that series of actions is estimated to be $12Bn.
The Colman Enquiry – This is an overall, public investigation into the causes of the large-scale financial collapse as listed above. Given the continuing failure to produce the accounts, the total sums of money involved are unknown.

So, what is the likely effect of these lawsuits and the oncoming Colman Commission of Enquiry on the entrenched Code of Silence in our society?

To begin with, I expect a series of legal challenges to the very hearings of the Commission, with the likely grounds being the long-established principle that no person should suffer ‘double jeopardy’, in terms of two sets of charges to be answered. It will be an attempt to completely derail the entire Commission of Enquiry.

I would not be very surprised if certain state agencies also sought to shut the enquiry down. That would be a repeat of the unprecedented recent situation in which UDeCOTT went to court to challenge the Uff Commission.

The beneficiaries of the Code of Silence will make great efforts to avoid any deep examination of its members and the public needs to be alert to this point. There is absolutely no shame in that group and we should also prepare ourselves mentally for the ‘memory loss’ defence of the kind we saw from Hafeez Karamath in the recent Uff Commission.

After generations of operating unexamined, the very bowels of the society’s leaders are about to be opened up to a disgusted and skeptical public. The motivations, links and payoffs between these leaders are to be exposed to view. The exposure is going to be critical. Given the speed with which our legal system operates, the exposure is likely to be lengthy. Given the range of active media in our society, the details are going to be all over the place.

So, what is at stake here? What else can we expect, apart from legal challenges?

To begin with, I believe that the sums of money involved are several times more than in the Uff Commission. In addition, the slowing economy and the pattern of behaviour have set the public into a very critical mood.

In my view, these are some of the people we would see publicly cross-examined in the Commission of Enquiry and various lawsuits –

Lawrence Duprey

Most important of all, the Chief of Chiefs, Lawrence Duprey – Will he or won’t he show up for the many hearings? What can we expect to hear? Can Duprey offer an explanation for the shocking discrepancy between the $100BN+ asset valuation as at the end of 2007 and the $23.9Bn asset value he specified in his letter of 13^th January 2009 to Ewart Williams? A mere 56 days separate the publication of those 2007 accounts – on 18^th November 2008 – from Duprey’s letter, which has been hidden from view, despite my two Freedom of Information applications. The only reason we have some idea of this discrepancy – no…that is the wrong word, maybe staggering decline is better – is the anxiety of the then Minister of Finance to clear her name from allegations of Insider Dealing. That anxiety led the Minister to read this letter into Hansard on 4^th February 2009.
Andre Monteil

Second most important of all, the Chair of Chairs, Andre Monteil – Monteil is now in retirement as a farmer and his testimony is surely one of the most awaited in recent times. As former PNM Treasurer, CL Financial Group Finance Director, Chairman of Education Facilities Company, National Housing Authority, then Housing Development Corporation and Clico Investment Bank, it is difficult to imagine a player who was more central. It is almost like a spy movie called ‘The Man who knew Too Much’.
Patrick Manning

Patrick Manning – When one considers the huge donations reportedly made by CL Financial to the PNM and the tangled web of this entire affair, it is difficult to see how Manning can escape serious, hard questions on many aspects. For instance, his 2002 decision to stop enquiries into HCU by then Minister in the Ministry of Finance, Conrad Enill, will surely be open to question. Manning’s recent bizarre behaviour might well be the beginnings of a defence. We will see.
Karen Nunez- Tesheira

Karen Nunez-Teshiera – The Minister of Finance who had to go to Parliament twice to attempt to clear her name in this matter. Firstly, from allegations that she withdrew her money from CIB early, having had inside information. Secondly, from allegations that as a CL Financial shareholder, she was biased in her dealings with the bailout, having failed to recuse herself from the discussions. Not one person I know, even blindly-loyal PNM-ites, is willing to openly defend the behaviour of Nunez-Teshiera. Not one. Imagine that. I think the phrase is “…A jury of one’s peers…” I wonder whether her Cabinet colleagues knew that the Minister was a shareholder? We won’t have to wait long.
Carl Hiralal

The Regulators – from both the Supervisor of Insurance, and the Inspector of Financial Institutions, Carl Hiralal. Just imagine the Supervisor explaining how Clico kept its licence all those years its statutory fund in serious shortfall. Or the Inspector justifying how CIB can fail to file its tax return and yet keep its licence. Mr. Hiralal must be considering his position most carefully at this point.
Ewart Williams

Central Bank Governor – Imagine Ewart Williams reconciling his several statements on Clico being a problem case since 2004, with his having two fixed deposits at CIB. Williams must also be having a few reflective moments.
The Directors – What is to be the position of the Directors of these failed companies? According to an affidavits filed in the Central Bank’s winding-up action, CIB made an undocumented loan with no interest rate or repayment period agreed. That loan was in the sum of $162M USD – yes, about $1.03Bn of depositors’ funds were lent to Angostura (a related party) with no documentation. It would be interesting to hear the Directors explain the degree to which that sort of advance is compatible with their fiduciary duty. It is important to note that the phrase fiduciary duty in this case refers to the obligation of those CIB Directors to act with the depositors’ interest as their first priority. But remember that CIB was wholly-owned by CL Financial. So, can one properly reconcile the fiduciary duties owed to depositors with those owed to the sole shareholder? It is a veritable conflict to be loaning depositors’ monies to the main shareholder, but that is why the loan agreements and credit committees exist. So as to provide safeguards against incautious loans, which can jeopardise depositors’ funds, so as to ultimately destabilize the bank itself, as in this case. There was no agreement. None at all. For a loan exceeding one billion dollars. All of the safeguards to balance the several duties of the prudent Director seem to have been ignored in this situation. Just imagine the Chairman who presided over the meeting of CIB’s Board which approved that loan, answering a series of critical questions, explaining just what they were doing dispensing with depositors’ funds in that loose fashion. I can scarcely wait.
The Auditors – The various PWC professionals who prepared and signed those audits. Will we see the release of the hidden accounts? How much longer can they remain concealed? There must be some quiet desperation creeping into Balisier House and PWC, just edging forward, along Victoria Avenue.
Robert Mayers

Robert Mayers – When he retired on 7^th December 2008, did he or did he not know that Caribbean Money Market Brokers (CMMB) was heading for a financial collapse? Of course, we now know from the official statements that CMMB collapsed a mere 7 weeks after Mayers left office as its Managing Director. So, which is it to be? Is it that the collapse came like a bolt of lightening from a clear blue sky? Were there any warning signs? Do CMMB’s accounts give any clues?
Dr. Bhoendradatt Tewarie

Dr. Bhoendradatt Tewarie – He is former principal of UWI’s St. Augustine campus and now heads UWI’s Institute for Critical Thinking. Dr. Tewarie was a Board Director of the parent company, CL Financial, at the time of the collapse. Was he aware of Duprey’s letter to the Central Bank Governor, a mere 3 days before that Board authorized payment of a dividend to CL Financial’s shareholders?
The same characters and many of the same questions are in the HCU part of the story.

The members of that Code of Silence are probably considering how best to escape the consequences of their actions and inactions. It will be a truly unique Christmas season for some of them. There are probably not enough lawyers in the country to handle this tidal-wave of legal actions.

The stakes are huge and the burning question for me is – Can this be the first time that prominent people go to jail? Serious sentencing? Will any stolen monies be recovered?

Can the Code of Silence survive this challenge?

The Code of Silence must be destroyed if we are to progress.

SIDEBAR: Who is Anthony Colman?

Take a read at his comprehensive website including his CV. http://www.siranthonycolman.com/

CL Financial bailout – Amazing scenes

Winston Dookeran vs Peter Permell. Original photo courtesy Trinidad Guardian. Illustration by NiCam Graphics The new situation is charged with peril and one is reminded of Naipaul’s father, the intrepid journalist from A House for Mr. Biswas whose favourite tagline was “…amazing scenes were witnessed…”

Finance Minister, Winston Dookeran, addressed Parliament on the Finance Bill (No. 2) 2010 on Wednesday 24th November. It was a lengthy and detailed statement, which put things into a necessary perspective. For me, it was important that Dookeran gave priority to the claims of the contractors and of course, the last item being the claims being made by the various groups representing Clico policyholders.

The Finance Minister held his position as set out in the 2011 budget, which was no surprise when one considers his statement that the various submissions received from the policyholders’ groups did not withstand scrutiny. I only had two significant concerns in terms of outstanding items which require proper attention.

The first of those was the continuing failure to produce the audited accounts for the CL Financial group – by now the 2008 and 2009 accounts are long overdue. The absence of those important figures means that the many heated discussions taking place, in the media and privately, are all uninformed. The questions are simple – Are the 2008 and 2009 audits for the CL Financial group completed or not? Yes or no? If they are, when are they to be published? If not, what is the problem with completing these?After all, as I wrote about the 12th June 2009 CL Financial Shareholders’ Agreement in this space on 1st April 2010 –

…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?…
The second concern I had was with the special window being opened to assist the Credit Unions, some of whom had invested in excess of 10% of their funds in the EFPA, an annuity approved for individual investors. We need to know just which Credit Unions took those imprudent investment decisions. There is no way we can merely legislate or pay our way out of this crisis, the problem runs deeper, into fundamental matters such as the attitudes of the leadership group in the society. Some of those details might emerge during the upcoming Commission of Enquiry, but it would be to Dookeran’s credit if he released the names of those Credit Unions and the amounts to be refunded.

The immediate statements of the Clico Policyholders’ Group (CPG), which targeted Dookeran, are a perturbing sign. For whatever reason, the CPG is ignoring the settled principle of Cabinet’s collective responsibility. That stance seems to be detrimental to effective negotiation and I am beginning to wonder if some person or persons in the Cabinet is ‘giving them basket’.

The threatening statements from the CPG as to the damage their proposed lawsuit can do to our country’s economy are nothing less than scandalous. We are now witness to a grim game of brinksmanship.

We have all heard the arguments and rumours surrounding this bailout, so no point repeating those. It certainly seems that those are going to be ventilated in a high-profile series of lawsuits. I only hope that the hearings remain open and do not take place in a sealed Court. That is what happened in the very first lawsuit after the bailout, in which the Central Bank was attempting to get CL Financial to comply with the terms of the bailout. The stakes are too high now for any concept of privacy to prevail in this matter.

The Minister of Finance also announced that the conditions under which the financial relief would be offered were being considered and it is good to know that there is to be no unconditional relief at our collective expense.

My thoughts on that aspect are that the State must conduct itself in an exemplary fashion and not be placed at any further disadvantage, having already shouldered this enormous, exceptional payout.

There are now anti money-laundering (AML) laws which require depositors to make declarations as to the Source of Funds, all in an effort to prevent the proceeds of crime from entering the legitimate economy. In my view it is necessary for the government to be satisfied that the various sums being claimed by these policyholders were properly declared under the AML laws. We have had shocking reports about the elementary management controls which were either absent or awry in the CL Financial group, so it would not surprise me if their AML-compliance was lax. That needs to be thoroughly checked. It would not be acceptable for our taxpayers’ monies to be used to rinse ‘dirty money’.

Also, the claimants who owe on their taxes – VAT, PAYE, Corporation Tax, Income Tax and so on – should not be refunded. As Dookeran said in that address, if everyone paid the taxes due, our budget would not be in deficit. We cannot go deeper into deficit without these elementary precautions being taken.

…With respect to the Creditors of the Petitioner, the Petitioner has met the statutory obligations for the Board of Inland Revenue (except for Corporation Tax Returns for 2007, 2008 and 2009 which are being prepared and remain outstanding)…

The Colman Commission of Enquiry and its effects on the Code of Silence will be my next topic.

CL Financial bailout: A Season of Unreason

We are now entering a bizarre endgame in this rounds of musical chairs. The children’s game has returned for us adults, but with a vengeance.

As I wrote on 10th September in this space, the real question is ‘When exactly did the CL Financial group collapse?’.

To understand this huge matter we need to put things in the correct order –

Firstly, the CL Financial chiefs left others holding the risks. Some dates and names, to support the theory –
- L.A. Monteil – retired at the end of March 2008
- M.A. Fifi – retired in August 2008
- Robert Mayers – retired in December 2008.
What did they know and when did they know it?
Secondly, there was a series of large-scale, rapid withdrawals of funds which preceded the start of the bailout. That pattern of activity would have speeded-up the collapse. It would be very interesting to see details of who broke their deposits and failed to ‘roll-over’ in that crucial final stage.
Thirdly, post-January 2009, we have the massive payout of State funds, as detailed in the Guardian editorial of 25th October. Who was the recipient of those funds? Who benefited? On 1st October, the Prime Minister promised to publish that list and we await with interest.
Now, with the PP government taking the decision to review the bailout process, we have entered a truly bizarre stage of this matter. This is the part where all those trusting people who were told to wait and have faith, are realizing that the people in the know have already withdrawn and secured themselves. Some of those people in the know were the same ones who were telling the faithful to keep on waiting. What a thing.

There now appear to be at least four groups representing these investors –

The Clico Policyholders’ Group (CPG) – which is the most visible one with Peter Permell, Manny Lawrence and Norris Gomez etc.
The Clico Policyholders’ Protection Association (CPPA), which is the one with Harold Sookhan and Ramesh Lawrence Maharaj.
South Action Group – with Solomon Hem Lee
Denbow Group – a small number of Clico investors who are being represented by Dr. Claude Denbow SC.

Some of the positions being taken by the various groups are indicative of the degree of desperation of the parties, hence the title of this article. The general view emerging from these groups seems to be that the CL Financial group is basically healthy and profitable, so there should be no issue about returning their investment.

I do not know what those views are based on and it is impractical to continue basing our discussions on the series of rumours and draft reports and suchlike. We need good quality information to make a quality decision and that is not negotiable. We need to insist on that as a minimum.

After the first round of organizing and attorneys’ letters, followed by the Prime Minister’s important address on 1st October, we are now into what appears to be an even stranger place.

Two of the stranger proposals emerging from the CPG’s Port-of-Spain meeting on 24th October were –

Prem Beharry of the CPG was reported in the Trinidad Guardian to have said – “…Ryan ALM are saying they would take US$600 million and would convert it to the best debt instrument in the world which is US Treasury Bills,” Beharry said.
“The Ryan ALM group is saying, within three months if they are engaged, they would be able to sell those bonds and get in cash of US$1.8 billion which is equal to the debt of TT$10.5 billion—that money would be used to pay all the policyholders…” That is literally too good to be true. It is the same approach that created this mess in the first place – both at the CL Financial group and Hindu Credit Union. It seemed to me that the CPG was recommending that the government put $600M USD of our taxpayers’ money into this scheme. Yes, I said scheme. Maybe if it was really so good they should have just accepted the discounted rates being offered in the budget and invested those funds with Ryan ALM. After one time is really two times, yes. I recently read that one Prem Beharry was appointed to the National Gas Company Board.
Another proposal, this one reportedly stated by Peter Permell, the CPG’s most prominent spokesperson was for the state to pay 40% immediately with the balance being payable in 5 to 7 years. The persons waiting for delayed payments would earn interest of 4-4.5% on those unpaid balances and also be entitled to a 51% share of any uplift in the value of sold assets. No, there was no proposal for those CPG members to share in any losses if assets had declined in value.

It may all just be a series of negotiating positions, but it seems pretty clear that no one from these various investors’ groups intends to take a discount or ‘haircut’ on the monies owed to them. The unstated assumption is that if someone has to stand the bounce or take a haircut, that someone must be the taxpayer. That could never be the correct position. So, we need the facts.

The most startling development is the Central Bank’s full page adverts on Thursday 28th October, repudiating the claims that it had offered any guarantees in this situation. The reaction was immediate, with the CPPA publishing large adverts in opposition the next day and a new anti-bailout group emerging for the first time – at last! The CPG’s response was a nadir in their campaign, with the Trinidad Guardian reporting that – “…Permell went on to say that they do not care where the Central Bank gets the money from once they guarantee the policyholders’ contracts…” – I could scarcely believe what was on the page before me. Even the most militant Trade Unionists use more reasonable language.

Which brings us right to the meat of the matter, the order of things. What is the reason that the investors’ groups are now at the front of the line for assistance from this government? I could be wrong, but it is easy to get that impression when one hears of Cabinet discussing the matter twice in one week, certain groups giving threatening timetables and so on. I do not know if our Cabinet – PNM, UNC or PP – has ever given such a total priority to any matter in the past.

There are other claims on the limited monies available to the State. All of those claims existed before these investors groups. All.

Many people have poor water supply. Outstanding payments to contractors and suppliers are in excess of $7.0Bn, according to Central Bank estimates. Insufficient money for OPVs – the estimated cost of $3.0Bn is too much for the country to bear, so national security is falling behind. More guns and drugs entering our homeland. Public Servants claims are about $3Bn and that is also a strain on the Treasury. Not enough police cars. Sad situation in the public hospitals.

The CPG issued a 2 page advert in the Guardian on Thursday 4th November and it deserves careful reading. It was good to see their call for the publication of the correct financial information before making a decision. They set out their proposals for the relief of CPG members – those are the latter of the two above, with the added condition that they be given two seats on the boards of CL Financial and Clico.

The CPG claims that its proposals place no additional burden on the taxpayers, which is a good thing, if that is truly so. The CPG’s proposals are silent as to how the monies already spent are to be recovered.

The real test will be if the accounts and asset valuations reveal the group to be insolvent. Will the various investors’ groups accept that or are we in for a long, bitter fight?

SIDEBAR: The Commission of Enquiry

The Attorney General recently announced that he had withdrawn Sir Gavin Lightman QC as the sole Commissioner, due to an apparent conflict of interest. Lightman had appeared for Clico in a 1991 court case and the PNM did well to have stopped this before it went too far.

Two important further points, though –

Firstly, this is the second such occasion. In the first case, the Commission of Enquiry into 1990 was announced with retired Appeal Court Judge Mustapha Ibrahim as its chair, until he pointed out that he too had a conflict of interest. There needs to be some more care taken on this count.
Secondly, the terms of reference need to be qualified, since the AG was reported to have said that “…The COI, he said, covers CL Financial, Colonial Life Insurance Company (Clico), Clico Investment Bank, British American Insurance Company and the HCU…” Having been frustrated in my efforts for the past fortnight to get confirmation of the Terms of Reference from the AG’s Ministry, I am forced to rely on press reports. Question being, why is CMMB being omitted?

CL Financial bailout: These Turbid Times

Last week I wrote about the Code of Silence observed by our ruling class. I gave examples to support my idea, but there was not enough space to mention everyone.

The Bankers Association of Trinidad & Tobago (BATT) and the Association of Trinidad & Tobago Insurance Companies (ATTIC) are also part of the situation.

We have a long history of our rulers making huge, stupid, destructive decisions without any commitment to transparency or accountability. That lack of transparency is what allows corrupt to flourish. We can never eliminate corruption, but if we are serious about reducing it, we need to proceed differently.

Maybe, just maybe, this is the kind of colossal event which could force some of us to drastically change our ways, despite the positions we now assume. This is a moment of national peril and the continued observance of the Code of Silence is going to cost our country plenty money.

As it is, we already have been bound to a rotten bailout of the wealthiest individual in the Caribbean by our Treasury at ZERO interest. Anybody looking to set up a small business has to face the bank and pay interest. None of that for Lawrence Duprey and the CL Financial chiefs. They have been able to enrich themselves and when the entire thing went wrong, they were able to negotiate a handsome handshake for themselves and then leave the mess for our government to clean-up.

That is the plain meaning of the bailout. Is not policyholders we bailing-out, is the richest, smartest characters in the country. The bailout script is unfolding so well that almost the entire discussion is now about the fairness/unfairness of the government’s position with respect to retired policyholders etc.

Real Anansi antics.

The CLICO Policyholders Group (CPG)
Competing agendas? There was an EFPA group and a CLICO Policyholders group formed just after the budget on 8^th September, but they soon merged under the latter name. I am now seeing what appears to be a substantial split with 2 competing meetings being organised for 10am today – one in Port-of-Spain and the other in San Fernando.

The CPG group has been very successful at getting their views known and making the media circuit, with the eventual meetings with the advisory group set up by the PM.

The main concern being advanced by the CPG is for the recovery of the funds deposited with CLICO and there has been no reply whatsoever to the point that, despite its labelling, the EFPA was largely sold and understood as a deposit. The accounting rule of thumb as to ‘substance over form‘ in interpretation is an irrefutable part of the debate on this, but CPG have been silent on this point.

Almost all the many people with whom I have discussed this issue, have been very plain in their language – ‘I had my money deposit with CLICO‘ and so on. But the word Policyholder is more likely to attract sympathy, so the games continue.

We already spent $7.3Bn in cash since the bailout was announced. Please note that nobody is even talking about how the State is going to recover that loan. The only talk is about how are they, the depositors, going to recover their monies.

There is a real principle of financial equity being shredded to pieces in the conduct of this bailout and it was disappointing that Mr. Dookeran, as an Educator in the field, did not take the opportunity to expand on this.

The intent is plainly to deprive the Treasury of its limited funds so that the assets of 15,000 people can be preserved.

So, What about those negotiations?

When the Prime Minister spoke on 1st October, she created an advisory group (headed by Minister of Food Production, Vasant Bharath) to meet with the policyholders to seek other options.

The Prime Minister was to meet with concerned persons and activists on Wednesday 7th October in Chaguanas, but that meeting was cancelled at short notice, with no alternative dates given.

What we are left with is lengthy, secret meetings to discuss the review of the bailout terms, with no concrete information emerging. That secrecy is totally unsatisfactory. It smacks of secret deal-making and does nothing to inspire the confidence which is supposedly the very purpose of this exercise.

The last regime, with all of their noble intentions and devout Ministers, lost their way in a morass of muddled purposes, secret deals, mixed-up with misleading and false public statements from the highest office in the land. We all know how that ended. The question is whether we have learned anything from that bitter experience. The Peoples’ Partnership were the main beneficiaries of those PNM errors, have they learned from that?

Our money is being spent on this massive exercise and it is not good enough to emerge from these closed meetings with agreed phrases like ‘constructive or meaningful’. This emerging pattern speaks of disrespect for the acumen of our people.

To re-state my equation:

Expenditure of Public Money – Accountability and Transparency = CORRUPTION

Imagine these bold-faced people declaring that when they are done and settled, the terms will be announced to us who paying for the whole thing. The first sign of a bad marriage is when the husband is the last to know – some say, the wife. But the main point is that the public cannot be the last to know.

The simple and painful fact is that public confidence in our leaders is at an all-time low. The time-honoured notion that a leader is someone wiser, more mature, less reckless and of overall higher ideals has been tested to destruction by events. In this particular case, it is easy to understand the charged atmosphere, hence the need for extra ventilation and transparency.

I was recently emailed by a well-meaning group asking that I start setting out some ideas of how CLICO might be rescued and I had to remind them that without basic information, all we can do is argue emptily with each other. All to the amusement of the masterminds of this, the greatest economic crime in our nation’s history.

I was even ‘phoned, while writing this, by an acquaintance who is a leading member of the CPG to join him and an un-named UK guest in a TV studio on Monday morning to discuss all this. Yes, I dismissed the request – too much secret-thing for my taste – and challenged the caller to name the person, supposedly a top UK expert.

What would be ‘constructive and meaningful’ would be to publish these long-outstanding reports so that we in the public can inform ourselves on the vital issues –

The original Duprey letter of 13th January 2009.
The audited accounts of the CL Financial group for the years ending 31^st December 2008 and 2009 – Have PwC completed that? When are they to be published?
The Mottley Report – There was a team of three advisers – Wendell Mottley, Colin Soo Ping Chow and Steve Bideshi – appointed to examine the CL Financial group and we need to know what were the findings of this group.
Given that we are being asked to bailout and clean-up Mr. Duprey’s crisis, I feel we need to be told the names and details of those who benefitted from the $7.3Bn paid out so far, as well as those details for the borrowers of the $1.0Bn of ‘non-performing loans’ in CIB’s portfolio.
Finally, we also need to have the position of the CLICO Policyholders’ Group published. What exactly are they claiming?

We have seen reports in the press about the very long Cabinet meeting on Thursday 21st at which the CLICO issue was said to be part of that agenda.

It would be totally unacceptable for a deal to be sealed without properly informing us, the taxpaying public, as to the true background.

The People’s Partnership has already distinguished itself, positively, by announcing Commissions of Enquiry into the attempted coup in 1990 and the Financial collapse (CL Financial and HCU). This is no time to get diverted into back-room deals.

I am working for betterment and from you, our elected rulers, I expect better.

Barbados Free Press spreads the word for AfraRaymond.com

Code of Silence was an article in two parts – the first dealing with the agents and effects of that Code and the second dealing with the unfolding case of AIC.

As usual, I sent the article to my main blogging-collaborator Barbados Free Press (BFP) who split it apart into those halves. Maybe they felt that the bond default by AIC Barbados in the second half deserved a separate focus for their readers – who knows?

So, BFP published Code of Silence surrounds CL Financial bailout on Saturday 16th and Michael Lee-Chin’s AIC Finance – Another CL Financial CLICO situation in progress? on Monday 18th.

Later that day, the AIC story was picked-up by Forbes.com and that story is here, Forbes picks up Barbados Free Press news feed!

CL Financial bailout: The Code of Silence

Throughout this series of articles on the CL Financial bailout I have touched on the existence and effect of a Code of Silence amongst our ruling elite.

This is sometimes called the Information Age, with the latest news and ideas being ‘pinged’ or ‘tweeted’ across the Social Networks. The new reality demands a complete shift in our attitudes to information. Our leadership class has blatantly refused to share their information and insights at moments of crisis, which shows the challenge facing us if we are to progress. Just to give two examples, think of the many secret reports from all the Commissions of Enquiry before the Uff Commission and the steadfast refusal of our political leaders, for many years, to even consider a Commission of Enquiry into the Coup. It is widespread and literally sickening to all right-thinking people.

We have had a new start and some reason to hope for change, by the PP government’s appointment of Commissions of Enquiry into the 1990 Coup and the financial collapse (CL Financial and Hindu Credit Union).

Even now, alongside those hopes, the new government has still not published the Bernard Report into the Piarco Airport Project.

Despite the progress, we cannot be complacent, the slope is slippery and the stakes are high.

The Code of Silence is deep and powerful in the case of the CL Financial bailout.

On 3rd October, I set out a few of the failures on the part of the regulators. Those failings are real and serious, but sometimes a shift in focus can be beneficial.

If we look beyond the legally-empowered regulators, there are other informal ‘regulators’ upon whom society relies to make decisions. Those would include Civic Society Organisations, Trade Unions, Institutions of Higher Learning and Professional Bodies. Society has been able to rely on these because they are seen to represent collective knowledge and insight, rising above individual interests to attain broader perspectives.

Those bodies, with one notable exception, have been silent throughout this CL Financial fiasco and have failed the broader society in this colossal matter. I am being forced by these events to re-examine my fundamental assumptions on the degree of our reliance on these bodies. This is the real nadir of corruption, when we seem to have lost our way in the long grass and we not even talking about the politicians and so on. This one is not about them. It is about us and our feet of clay.

Let me explain –

Law Association – This is one of the leading Professional Bodies and their silence has been deafening. The President of the Law Association is former Independent Senator, Sunday Express columnist and eminent Senior Counsel, Martin Daly. Daly is widely regarded as a fearless and irreproachable voice on many matters.
The tangled web in this CL Financial bailout has included early withdrawals, overlapping Directorships between depositors and bankers, payment of dividends after asking for state financial assistance, misleading negotiating positions taken by the CL Financial chiefs, a huge zero-interest payout to the CL Financial chiefs which left their shareholdings intact, attempts to sell assets in breach of the MoU. Most of all, the serious and inescapable conflict of interest of the then Minister of Finance, who is an attorney – every single attorney I have spoken with agrees that this was a clear case of conflict of interest.

Yet, not a word from the Law Association. Am I alone in expecting any better?

Institute of Chartered Accountants of Trinidad & Tobago (ICATT) – The entire collapse is shot through with a failure of accountants at several levels and yet this professional body has been silent on all this. After ignoring my open letter and other attempts to start some dialogue on this, Anthony Pierre, ICATT’s President, agreed to appear on a TV interview with me on CNMG. That interview was broadcast on Sunday 26th September 2010 – it can be viewed at http://wp.me/pBrZN-qW – in the ‘Sunday Morning Politics’ slot. When I put the question to him as to the errors and/or omissions of the professional accountants in this huge collapse, Pierre took the position that there was no cause for concern. I do not accept that position, but of course the Commission of Enquiry and hopefully the publication of those long-overdue accounts will shed some more light.

University of the West Indies (UWI) – There has been very limited engagement from UWI on this matter, which is a pity when one considers that the areas of study there include economics, finance, law, business management and accounting.
Of course, the former Campus Principal and now Director of UWI’s Institute of Critical Thinking is Dr Bhoendratt Tewarie, who was also a member of CL Financial’s pre-collapse Board. That is the same Board which approved payment of a dividend 3 days after CL Financial’s Executive Chairman wrote to the Central Bank for urgent financial assistance. Dr Tewarie is also reported to have been at the final Annual General Meeting of CL Financial, held at Trinidad Hilton on 23rd January 2009. The timing couldn’t be better for a report to shareholders – after all, the Central Bank had been written to 10 days before, the dividends approved a week before and the bailout itself was just 7 days away. So what happened at that AGM? Were shareholders given an honest report from the custodians of their capital?

The late Professor Dennis Pantin did write several times on the CL Financial collapse and bailout in his Sunday Guardian column. Dennis made the early call for a Commission of Enquiry into this entire mess and that has now been acted upon.

Sen. Dr. Patrick Watson
Another UWI figure in the whole mess is Dr. Patrick Watson, who is Professor of Economics and Director of the Sir Arthur Lewis Institute for Social and Economic Studies (SALISES). Professor Watson is a government Senator in the current Parliament, who after maintaining his silence on this economic catastrophe since January 2009, has now become most vocal since the budget speech.

Is a straight case of nearer to Church further from God.

Trade Unions – The two groups which one can normally expect to have a public position on these long-term, large-scale issues are the Oilfields Workers’ Trade Union (OWTU) and of course, the Federation of Independent Trade Unions and NGOs (FITUN). Neither of those bodies rose to the challenge and we are the poorer for it.

Trinidad & Tobago Transparency Institute (TTTI) – Yes, the TTTI did make a strong statement calling for improved accountability in the bailout process. That is a Civic Society body doing its job.

What really happened?
But apart from us in the Civil Society, there is another level of the Code of Silence being practiced in that some of the very people who were in charge of this huge crash have rejoined public life, saying nothing about the crash.

They have been recycled. Yes, I know that recycling is good, but this one is toxic.

Caribbean Money Market Brokers (CMMB) – Robert Mayers was the former Managing Director of CMMB, who retired on 8^th December 2008 – see http://legacy.guardian.co.tt/archives/2008-12-09/business2.html – which is less than two months before that company collapsed. Mayers is a most articulate and willing public speaker, who was recently discussing the national budget on the electronic media.

We have heard nothing from Mayers on how the collapse presented itself and there is no concerted attempt to pass on any lessons learned to a younger generation of citizen.

Clico Investment Bank (CIB) – Faris Al-Rawi and Mervyn Assam CIB was chaired by Mervyn Assam, recently appointed as a Special Ambassador with responsibility for Trade and Industry. Faris Al-Rawi, attorney-at-law, was a Director on that Board and he is now a PNM Senator.

Neither man has made any attempt to publicly explain CIB’s shocking insolvency, which was estimated by the Central bank to be of the order of $4.7Bn.

All those people appear to have been anointed, in what must have been a private ceremony, then re-presented as ready to serve. We deserve no less than a proper explanation from these Directors and Officers and I was pleased to see PNM Senator Penelope Beckles recently joining me in calling for them to be questioned publicly.

The case of AIC Finance
Ian Narine, writing in the Business Guardian on Thursday 14th October – http://guardian.co.tt/business/business-guardian/2010/10/14/there-enough-everyone – attempted to point out the way he had tried to warn the investing public on the perils of CL Financial. That column made interesting reading, but what would be the position of the press if any such situation were unfolding right now?

Just as an example, AIC Finance is owned and run by the Jamaican billionaire, Michael Lee-Chin, who came in for mention in Anthony Wilson’s 15th October 2009 BG View ‘Will Lee-Chin avoid Duprey’s fate?’ – see http://guardian.co.tt/business/business-guardian/2009/10/15/will-lee-chin-avoid-duprey-s-fate. I commented on that in the Trinidad & Tobago Review of 2nd November 2009 in ‘Duprey’s fate’ – see http://wp.me/pBrZN-43 or http://www.tntreview.com/?p=887 and the points are once again pertinent.

AIC Barbados, the regional holding company for the group, defaulted on a USD bond in 2009 – in other words, they were unable to pay their debts – see http://guardian.co.tt/business/business/2009/06/06/lee-chin-late-us47m-bond-payment or http://www.jamaica-gleaner.com/gleaner/20100818/business/business1.html.

AIC advert In the last part of September, AIC Finance has been advertising surprisingly high rates of interest in daily newspaper adverts which also offer ‘Preferential rates to Trinidad & Tobago Association of Responsible Persons (TTARP) members’.

COMPARISON TABLE for 12-month fixed deposit rates for amounts up to $500,000 as at 30^th September 2010

Financial Institution	Range of interest rates
First Citizens’ Bank	1.25% to 2.1%
RBTT	0.2% to 1.45%
Scotiabank	Up to 0.75%
Republic Bank	0.30% to 0.75%
Unit Trust Corporation (Money Market Fund)	2.15%
First Citizens’ Bank Abercrombie Fund	1.90%
Fidelity Finance (part of the Maritime group)	1.8%
AIC Finance	4.25%

If CL Financial could not sustain this strategy, how can AIC continue to offer these rates in today’s market?

That is the question.

According to recent press advertisements, the Board of Directors of AIC Finance Limited comprises –
Michael Montrichard
Krishna Narwani
Clarry Benn
Robert Almeida
Hugh Williams
Myrnelle Akan
Hugh Edwards

Further details are at http://www.aic.tt/page.asp?page=Board+of+Directors

A version of this commentary appeared in print on October 17, 2010, on page A31 of the Sunday Guardian.

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