Tag: CLICO

VIDEO: Up Next! Interview – 07 Feb 2010

VIDEO: Up Next Interview – 07 February 2010

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.

  • Programme Date: Sunday, 07 February 2010
  • Programme Length: 0:57:48

VIDEO: First Up Simulcast Interview – 21 January 2010

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.

  • Programme Date: Thursday, 21 January 2010
  • Programme Length: 0:37:53

CL Financial bailout – The Governor speaks

Ewart Williams, Governor of the Central Bank TT. Photo courtesy Trinidad Guardian.
Ewart Williams, Governor of the Central Bank TT

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.

    On 19th January, we were told that Michael Carballo, the group Finance Director, was resigning, also effective 31st January.  See – http://guardian.co.tt/business/business/2010/01/20/another-exec-leaves-cl-financial or http://www.trinidadexpress.com/index.pl/article?id=161584620. Carballo had the unique position of being the only senior executive to survive the crisis at the group and keep his position.  We were not given any reason for his departure, but we were told that Carballo is to continue acting as a Director on CL Financial’s Board.

    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.

    Early on in the bailout process, on 13th February 2009, the Governor of the Central Bank had promised regular updates to the media – see http://www.central-bank.org.tt/news/speeches/2009/sp090213.pdf.  For whatever reason, those have not been as regular as hoped for or as informative as the first.  Given that various teams of accountants have been working on the group’s books since the first MoU was signed, that is disappointing in terms of quality and quantity of information.  I was therefore very pleased to note that the Governor made certain statements on CL Financial later that same morning, Thursday 21st January.  See http://guardian.co.tt/business/business/2010/01/22/governor-promises-action-cl-financial-audit or http://www.trinidadexpress.com/index.pl/article?id=161585448.

  • 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 –
    1. 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?
    2. 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?

CL Financial – The bailout timeline

This is to be published on the last day of 2009 and it is intended to do two things – firstly, to provide an overview of the CL Financial bailout and secondly, to start a critical conversation on our work as writers and analysts.

The timeline of the events over the last year or so on the CL financial bailout is set out for ease of reference. The detailed material can be found in the earlier part of this series at www.afraraymond.com. In doing some other reading, I came across a valuable part of the story and that is the first item in the timeline.

TIMELINE – November 2008 to December 2009

  • Michael Carballo. Photo courtesy Trinidad Guardian
    Michael Carballo
    6th November 2008 – The Guardian publishes ‘Surviving the Storm’, an extensive review by Sandra Chouthi on the prospects for our local businesses on surviving whatever the global situation throws at them – see http://legacy.guardian.co.tt/archives/2008-11-07/bussguardian1.html. The first person interviewed for that article was Michael Carballo, Group Finance Director of the CL Financial group. Some of his quotes are remarkable, given the imminent collapse –
    • “Luckily, the group has not been impacted in any way via securities in any banks we have had to write down.”
    • Carballo said CL Financial, with $100 billion in assets, could weather any storm.
    • “We are not exposed in any one particular industry. That is our business model,” Carballo said.
  • 18th November 2008 – Publication of CL Financial’s 2007 Annual Report ‘The Next Wave of Growth’, which includes audited accounts showing profits after tax of $1.74Bn, with ‘cash and cash at bank’ of $9.486Bn.

2009

The ‘Express element’

It is common to criticise governments on the basis that they are out of touch and seem to operate in silos. Meaning that various departments of our governments often operate without taking account of each others’ plans and actions. That is indeed so, but we also have to be willing to change if we are to have a chance of changing our world.

In saying so, we in the media have been existing in a similar place where cross-linking and critical discourse is almost extinct. If we are not able or willing to start a critical, public conversation amongst ourselves, there would also be severe limits on our own growth and effectiveness. The times are very challenging and they pose a caution for us all in the media. Our country needs a quality media of integrity.

Of course, I am speaking of the work of Camini Marajh, the respected investigative reporter from the Express. This year we have been treated to 3 high-profile exposes on CL Financial by Ms. Marajh – on Gita Sakal, Patrick Patel and most recently, the Home Mortgage Bank/Angostura deal (those 3 articles are at http://www.trinidadexpress.com/index.pl/article?id=161566763, http://www.trinidadexpress.com/index.pl/article?id=161566759, http://www.trinidadexpress.com/index.pl/article?id=161569418), with heavy focus on the role of the CL Financial group’s former Finance Director, Andre Monteil.

It is clear from that series of articles that Ms. Marajh has access to private documents and Michael Carballo. Is it that readers will have to remain in suspense as to the key mysteries of the CL Financial fiasco? In my view, those would have to be –

Of course, one could maintain that the focus on the other aspects of the story are of greater importance and public interest. I am just wondering, in public, whether those questions have ever been put to Carballo and if so, what did he reply. It would be a real piece of investigative tonic if Ms. Marajh were to use her access to ask these burning questions.

It also needs to be said that Ms. Marajh’s last set on the Angostura purchase of the Lascelles Mercado group in Jamaica opened two aspects for further investigation.

I do not have the kind of space the Express affords my colleague, so this will be brief.
The first of these was the fact that Home Mortgage Bank seems to have guaranteed a transaction in which Angostura took over Jamaican rum manufacturer, Lascelles Mercado at a cost exceeding $600M USD. It seems that the HMB guarantee was set out in a December 2007 document. That sum was also said to be in excess of the financing headroom available to HMB, but that is not something I am going to pursue here. My concern is that the Home Mortgage Bank was established by an Act of Parliament to provide liquidity to the secondary mortgage market. How come a mortgage company, established to provide finance for the benefit of homeowners, could issue a guarantee to a conglomerate to buy a liquor company? How come? To my mind, that seems to be well outside the intended scope of the HMB as per its own company information – http://www.homemortgagett.com/loadpage.cgi?company_info. There is also the interesting point that this huge deal, with all its possible implications for the stability of the HMB, was not disclosed in the audited accounts (where it ought to have appeared as a Contingent Liability) or Chairman’s Review of their 2007 Annual Report – see http://www.homemortgagett.com/AnnualReport2007/HMBAnnualReport2007.pdf.

The second point is that the expose mentioned that the Angostura purchase was made at twice the listed price of the Lascelles Mercado shares. It is one thing for a company to take strategic decisions, using its own shareholders’ funds and paying ‘over the odds’ for assets, if that acquisition satisfies its objectives. That is one thing, but what we seem to have here is a mortgage bank guaranteeing a massive purchase of shares at twice the value. Was a due-diligence of the transaction done? If there was none, this would be a case in which shareholders’ and depositors’ monies were put needlessly at risk.

As far as I can tell, this is the kind of behaviour which led to the collapse of the entire CL Financial group. We in the media have a responsibility to do better.

Nothing but the truth

Basdeo Panday
Basdeo Panday, MP

The Leader of the Opposition, Basdeo Panday, recently laid a motion in Parliament seeking for HCU depositors to be granted a ‘bailout’ of the kind given to those who had invested with the failed CL Financial group. On Friday 30th October, the Minister of Finance made a major statement to Parliament, seeking to defend the government’s actions in the cases of these two failed Financial Institutions.

In terms of race, politics and finance, that statement by the Minister deserves our most sober consideration.

Before going further I need to make two things clear – firstly, I am not intervening on behalf of Mr. Harry Harnarine or the HCU. I am not a supporter of that cause. Not at all. Secondly, I do not support the bailout of either group – CL Financial or HCU. The idea that State resources should be deployed to assist investors who have lost money is a dangerous one. As a matter of principle, the concept of moral hazard has real weight in economic behaviour. The idea that investors should be rescued without paying the consequences of their choices is inimical to proper development. That general principle has been done violence by the CL Financial bailout.

As I have stated in my previous articles on this bailout, the record of the government in terms of separating the interests of depositors, policy-holders and shareholders is turbid.

The Minister’s rationale was set out in two limbs – the first being that the HCU dealings were not straightforward – indeed, one newspaper carried the headline ‘Devious HCU’– and secondly, that the CL Financial dealings were marked by “…tangible co-operation…”. This bailout is an extremely serious act being carried out by the government in breach of fundamental principle and we deserve nothing but the truth.

There are deep contradictions on every single point cited by the Minister to support the actions taken.

Here is what the Minister is reported to have said, together with the contradictions –

  1. Ample collateral – The Minister is reported to have said that HCU failed to offer ample collateral to the State. The Central Bank Governor is reported to have said, on 7th April, that all of CL Financial’s assets were otherwise committed – This was reported at http://guardian.co.tt/business/business/2009/04/08/govt-left-empty-handed-cl-financial-bailout.
  2. The Ernst & Young report – The Minister is also quoted as saying that “The auditors’ assessment was that the Hindu Credit Union was facing not a liquidity problem, but a solvency problem and all its assets were overestimated in value and encumbered.” As a rationale for the government’s actions, that is completely at odds with the 7th April statement of the Central Bank Governor. In fact we were told that the CL Financial group and various of its parts were being examined by Ernst & Young, KPMG and Bob Lindquist, the renowned forensic accountants. To date, no results of those accountants’ work have been released. We are being told that the CL Financial chiefs showed “…tangible co-operation…” in their dealings, so where are the audits? Why has the 2008 audit of the CL Financial group by PriceWaterhouseCoopers not been published?
  3. “…What is the Government to do? You dealing with…the major players, and they are not levelling with you…” That was the Minister’s statement about HCU, made in apparent exasperation. As I wrote in my column ‘Who is Who and What is What’ published here on 30th April – “At the beginning of this process we were led to believe that CL Financial was being pro-active and cooperative in their dealings with the State. Indeed the Governor even made this point directly in his prepared remarks at the 30th January press conference “…I would like to acknowledge the high level of cooperation that we have received from Mr. Duprey…” Since then CLF has now been exposed as paying dividends after requesting the State bailout, challenging the injunction obtained by the State over their assets with a powerful legal team and, to top it all, pledging the same assets twice. The Governor spoke on 23rd April – ‘If you ask me whether CL Financial did everything that was honourable and beyond reproach, the answer is no! The answer is no!’”

Obviously, some one of the major players is not levelling with us.

SIDEBAR

So the government bails out policyholders and depositors of the CL Financial group. That is widely welcomed, except for a few objectors, like myself. It seems to me that the interests of the CL Financial shareholders have been promoted in preference to those of the taxpayer. I am subject to correction, but if that is so, it would be a monumental mis-allocation of public funds and a seriously questionable act. The terms of the bailout are now being deliberately concealed from public view, although it is at our expense and supposedly being carried out for the benefit of the public.

That secrecy is toxic to notions of transparency, accountability and modernity. I will return to that secrecy issue.

Suffice to say that the terms of the bailout, the subsequent revelations and the concealment of the second MoU have combined with the Minister’s contradictory statement to yield a very unhealthy series of precedents.

The unspoken question at this moment is ‘Who is next?’. Last week’s BG View editorial highlighted some pertinent concerns as to the health of private pension plans and the strength of the regulatory process.

No one knows if CL Financial is just the first in a chain-reaction or simply a ‘one-off’. The burning question is, if there is another collapse of a large investment house – ‘Will they also be bailed-out?’ and, if yes, ‘On what terms?’

CL Financial subsidary British -American Insurance Company has “gone through.”

GOVERNMENTS OF THE EASTERN CARIBBEAN CURRENCY UNION (ECCU) AGREE ON STRATEGY FOR BRANCHES OF BRITISH AMERICAN INSURANCE COMPANY IN THE EASTERN CARIBBEAN

Introduction
For several months, the Governments of the Eastern Caribbean Currency Union (ECCU) have carefully monitored growing public concern about the financial situation of British American Insurance Company Limited (BAICO) and other subsidiaries of its Trinidadian parent company, C L Financial. BAICO itself is a private, limited liability company incorporated in the Bahamas. Nevertheless, the sheer size of BAICO and the significant exposure of the Eastern Caribbean have made it imperative for the ECCU Governments to adopt a proactive and collective approach to this challenge.

Continue reading “CL Financial subsidary British -American Insurance Company has “gone through.”” →

Duprey’s Fate

The Business Guardian editorial of 15th October raised the topical question as to ‘Will Lee Chin avoid Duprey’s fate?‘  http://guardian.co.tt/business/business-guardian/2009/10/15/will-lee-chin-avoid-duprey-s-fate

Michael Lee Chin. Photo courtesy Trinidad Guardian
Michael Lee Chin
Of course, one interesting feature of this entire affair is the fact that these two groups were headed by Black Caribbean men.  That is exceptional, as a matter of fact and it required a serious break from our past to develop the required levels of investor confidence.

But the differences are even more interesting than the similarities – for example, it seems that AIC Finance has declared the true position and alerted its stakeholders properly as to its exit strategy.

The characterisation of this situation as being ‘Duprey’s fate’ made me smile.  Quite frankly, that phrase seemed to be a device to create some public sympathy for Duprey when the facts are of another type altogether.

If the terms of the CL Financial bailout are examined, they are truly remarkable, even by our declining national standards.  The principal terms are –

  1. Amount – The amount of public money to be advanced is unspecified. Despite various official statements, this did not form part of the first MoU.  The press release on the second MoU of 12th June 2009 was also silent as to the amount of money to be advanced in this CL Financial bailout.
  2. Collateral – The original MoU specified that certain assets were to be disposed of to repay the funds advanced from the Treasury.  That position was soon overtaken by reality when the Central Bank Governor announced on 7th April that all of CL Financial’s assets were already pledged – http://guardian.co.tt/business/business/2009/04/08/govt-left-empty-handed-cl-financial-bailout. The second MoU and recent statements by Mariano Browne, Minister in the Ministry of Finance, make it clear that no fire sale of assets will be undertaken.  To quote the Minister, speaking on 15th October – “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” http://guardian.co.tt/business/business/2009/10/16/browne-no-plans-govt-increase-shares-rbl.  If we are to believe the Central Bank Governor and the Minister, there being no good reason to doubt either one, it seems that these advances are taking place without security.
  3. Interest rate – The first MoU and the press release on the second MoU are both silent as to the interest rate charged.
  4. Payback period – There is no stated period for repayment of the public funds advanced.  There have been recent announcements as to the government taking over management of the CL Financial group for 3 years.
  5. What fate? – Having arranged an urgent package of rescue financing on those terms, it seems that the shareholders of CL Financial have not had their equity position diluted and further, that Mr. Duprey has been allowed to keep all his personal assets. That is Duprey’s fate.

That summary is the best I can give, based on the limited information available to me.  If it is an accurate one, the CL Financial bailout is tantamount to a huge injection of public funds to bolster the private interests of only 325 shareholders, the main one being Lawrence Duprey.

That is a real shame, given the state of our nation’s finances.   The greater pity is that this is all taking place without proper public accountability or transparency.  So far the Minister of Finance has not replied to my various attempts to get further information on these matters.  But how much blame can we place on our rulers?

Our society is shaped by our collective aspirations, attitudes and actions.  But the notion of collective values is an increasingly doubtful one in this arena.  Insofar as the national economy is concerned, do we actually possess collective values and if so, who can say with certainty what those are?  More and more, it seems that the real question is ‘Whose values will prevail as we go forward’?  The progressive people in the society have a duty to make their voices heard, if we are to have a chance of influencing others.  If we influence others to improve standards, then that is a positive move towards the inescapable future.

This CL Financial fiasco has been marked by the silence of the responsible people in the society.  The nation seems to have been so heavily invested in the CL Financial group that the bailout was greeted with widespread relief.  So much relief, that we seem to have taken our critical eyes ‘off the ball’.  On 19th October I wrote an Open letter to the Institute of Chartered Accountants of Trinidad & Tobago (ICATT) to seek their involvement in calling for greater transparency and accountability in this entire bailout.  That letter can be found at www.afraraymond.com.  The week 19th to 23rd October was Accountants’ Week.  The President of the ICATT, Anthony Pierre, writing to open that Week, stated that ‘We have the opportunity to raise the bar on new standards in corporate governance, accounting, auditing and ethics” and “We do so mindful of our continued responsibility to contribute to the further development of our people, our institutions and our country”.

I also intend to seek the involvement of other civic society organizations in promoting the calls for greater transparency and accountability in this entire bailout process.

Afra Raymond

This series on the CL Financial bailout can be viewed or readers’ comments made at www.afraraymond.com.

Finding the Assets

This week, I am at last able to answer two queries which have bedeviled this series for some time.

Firstly, several readers have pointed out that there was  significant repetition of details in this series.  While it is true that that repetition was deliberate on my part, it is also true that there was a growing question…”When are you going to give us some fresh information?”

Secondly, my repeated requests for publication of the initial letter from CL Financial seeking the state’s financial support.  It seemed that those calls were being ignored and I did wonder why.  On June 11th, in ‘Do what is Right’, I wrote – “Could it be that that letter contains information which reveals too much about the true background to this tangled affair?  Madam Minister, what is your interest in further secrecy on this aspect?”.

In the course of researching another aspect of the bailout, I came across the letter about a week ago, so that is the fresh information for presentation this week.  Given that the Minister of Finance revealed that information in the first week after signing the Memorandum of Understanding, I was clearly wrong to suggest that she had any intention to conceal the letter.

The Minister of Finance was speaking in Parliament and seeking to rebut the allegations by opposition politicians that she had benefited from insider information.  This extract of her statement is taken from page 628 of Hansard of Wednesday 4th February 2009 – this can be found at http://www.ttparliament.org/hansards/hh20090204.pdf

With your leave also, I would like to read into the record of Hansard, a letter from Clico Investment Bank addressed to the Central Bank. That letter is dated January 13, 2009. It is on the letterhead of CL Financial, addressed to Mr. Ewart Williams, the Governor and signed by Lawrence A. Duprey, Group Executive Chairman.

“Dear Governor,

The severe global financial crisis has begun to impact our local and regional markets and is causing strain on liquidity in certain parts of the financial system in Trinidad and Tobago.

CL Financial being a significant part of the financial sector has been disproportionately impacted by these adverse conditions. Many of our customers are also affected and are consequently calling on their reserve cash positions.

Thus far, all our member companies have been able to deal with their commitments.  However, we wish to develop a comprehensive contingency plan to meet any further developments, if this trend were to follow a similar pattern to other countries.

As a result, CL Financial is taking urgent and decisive action.

We have conducted a review of the Group’s assets and the projected liquidity needs. While the Group remains strong in terms of the quantum and quality of its assets, these assets are not in a form that can be liquidated in short order without significant loss in value.”

And they gave a table setting out the estimated value, just by sector:

Real estate –          $2,505,000,000
Manufacturing Sector –          $6,300,000,000
Energy –          $7,048,993,014
Financial Services –          $8,060,000,000
Total:             $23,913,993,014

We are in the process of realigning the asset-liability structure of the Group to better match the current liquidity situation. This is a complex action plan that we are embarking on immediately, including initiatives such as merger of certain entities within the Group with strategic partners and/our sale of certain assets in order to raise liquidity.

As you would appreciate, these initiatives would need some time before they yield the desired results. In the event that the financial crisis deepens in the local market we may need urgent liquidity support to be made available to the group.

In this regard, we would like to discuss the approach of the Central Bank toward supporting the financial sector and by extension the CL Financial Group, if conditions were to deteriorate.

I thank you for your understanding in this matter and look forward to your continued support.”

That letter, as I said, was dated January 13, 2009

CL Financial Consolidated Balance Sheet is at page 23 of their Annual Report 2007 ‘The Next Wave of Growth’ –

http://www.clico.com/pdf/AR07/CL%20Financial%20Annual%20Report%202009.pdf

That Consolidated balance Sheet discloses Total Assets, as at 31st December 2007, as being $100.666 Bn – those financial statements were published on 18th November 2008.

Given accounting conventions as to intervening events and their reporting, it is startling, to say the least, that this balance sheet should have declined to $24Bn just 12 months and 13 days after their reporting date. Only 56 days after publication.  This is an aspect of the fiasco which has not been discussed in public, so far.

We need to hear some accounting of this extraordinary situation.  Just to select one item of interest, Loans and Advances are shown as $21.975Bn in the CLF 2007 accounts and yet only $8.0Bn is there at 13th January 2009.

My reading of this is that CL Financial’s assets declined in value from $100.7Bn at the end of 2007 to $23.9Bn at the beginning of 2009.  We have now agreed to restore asset value to the shareholders of CL Financial on terms which are as yet unpublished.

SIDEBAR: Out of Africa

The dominant media coverage of the wealthier countries can sometimes mask interesting developments.  I had been wondering how other developing countries were handling their own financial crises.

I was struck last week by extensive reporting of the action of the newly-appointed Governor of the Central Bank of Nigeria (CBN) in bailing-out 5 large, publicly-listed banks.  There is a widely-held view that Nigeria is one of the most corrupt countries.  CBN Governor Lamido Sanusi has taken several bold actions to restore confidence in the banking sector.  The main ones were –

  • Dismissal of 19 of the top executives of the rescued institutions, deploying seldom-used powers.
  • Publishing lists of defaulting borrowers, many of whom are prominent citizens and leading companies, along with a strong warning that all these loans must be repaid now.  Those who do not comply will face the Courts.
  • Making it clear to shareholders that the bailout funds are not for dividends at all, but to restore banking confidence.
  • A special police unit, to deal with Economic and Financial Crimes, is questioning the dismissed executives.  Those who are not being questioned are forbidden to leave the country.

This story is in the Wall Street Journal, The Financial Times and Reuters.

Condonation

The word Condonation has been turning through my mind since the start of this fiasco.  It refers to a pattern of conduct in which someone who could, or should, have done something to stop wrongdoing does nothing.  The silence of the person practicing condonation effectively allows the continuance of the wrongdoing, even if that person’s actions do not quite amount to conspiring with the wrongdoer.

To put it plainly, in those families where children are abused by one parent, it is almost always the case that the other parent knew.  The continued silence of one parent allows the abusive one to continue.  Even if the other parent did not commit any act of abuse, theirs is a series of inactions which allow wrongdoing to continue.  It could be argued that the silence can imply forgiveness.  Yes, that is condonation.

In relation to the CL Financial bailout, there is plenty of apparent condonation.  So much so that fresh perils could now be coming toward us.

My starting-point for these concerns was the startling story that a group of investors in the Stanford International Bank Limited have filed a lawsuit against the Antiguan government, claiming some $8.0Bn USD.  The lawsuit also alleges that the Antiguan authorities “became a full partner in a fraud and reaped enormous financial benefits from the scheme“.  My main reading for that case came from the Trinidad Express column by David Jessop on 18th July 2009 ‘A case that hits home’ – that column can be accessed at http://www.trinidadexpress.com/index.pl/article_opinion?id=161505942.

One of the telling points in that Antigua situation is that that case is filed in the USA and so one has to wonder whether the small-island arrangements can withstand a US-style court case.

Some people might even be asking what has this Antigua case got to do with us here in T & T.  After all, our government has pledged to bailout all policyholders and depositors, right?  Not so fast, because it is a condition of the CL Financial bailout that we are not assisting overseas policyholders and depositors.  Whatever the level of comfort being enjoyed by locally-domiciled policyholders and depositors in CLF Financial, those who invested from overseas will have to get compensated in some other way.  Will they choose a Stanford-type lawsuit?

The implications of this possibility are sobering, when we consider the Antigua case further.  When we consider the tangled web of connections here in our country, can we seriously expect to survive US-style litigation?

We have a Minister of Finance who is also a shareholder of the failed group, together with a Governor of the Central Bank who warns of investments which are ‘too good to be true’, yet holds deposits with CIB.  The Minister of Finance, in her defensive statement to those accusing her of conflict of interest, makes it clear that when she realized that the group was in trouble, she put her family interests before those of the nation.

In addition we have a ruling party which accepted substantial donations from the CL Financial Group and yes, the party’s Treasurer was also the Finance Director for the group.  The CL Financial group distributed dividends to its shareholders after writing to the Central Bank for urgent financial assistance and as yet, none of its Directors have been censured.  The shareholders of CL Financial have also been allowed to keep their dividends as the group drifted toward the rocks.

Some of the assets pledged to match the cost of the bailout are already pledged elsewhere, something the CL Financial negotiators must have known.  The Governor of the Central Bank is reported to have said that all the assets are pledged elsewhere – see http://guardian.co.tt/business/business/2009/04/08/govt-left-empty-handed-cl-financial-bailout .  Despite the prohibition against selling any assets, CL Financial is found to have been trying to sell its shareholding in CLICO Energy just 5 days after signing the MoU.  This was reported at http://guardian.co.tt/news/general/2009/03/24/duprey-energy-fire-sale-raise-severance-money .The ‘fit and proper’ guidelines published by the Central Bank are not implemented in the CL Financial case.

In addition, the new CEO of the principal company, CLICO, tells us that some $5.0Bn is missing from that company’s statutory fund and cannot be found.  This was reported at http://guardian.co.tt/news/general/2009/03/01/where-money-gone .  There has been no further official word on the missing funds, despite the involvement of Bob Lindquist, KPMG Forensic and the continuing assistance of the CL Financial chiefs.

None of this has been denied or contested.

It is all so incredible that no fiction writer, not even one of the more outlandish ones, could ever concoct such a story.  A perceptive editor might even reject it, but the fact is that we have to deal with these elements.

In an earlier column in this series, I commented on the democratic deficit which allowed our elected rulers to proceed with virtual carte blanche, the law being the only impediment.  Some would say that that arrangement is a workable one which allows the ruling party appropriate scope within which to run the country.  That is not a debate for this space, suffice to say that the CL Financial situation is posing a fresh series of questions.  Those questions arise in the aspect of scale – to get proverbial for an instant

Q – ‘Where does an Elephant sit?’

A – ‘Anywhere it wants, silly!’

Point being that an elephant is so huge that if it decided to sit, we would all have to make way for it, whatever the inconvenience.  In both cases, the Stanford Investment Bank and the government of Antigua, as well as the CL Financial group and our own government, the company was so huge that it exerted a serious influence on national affairs.

Economists use the terms ‘externalities’ or ‘external costs’ to refer to quantifiable costs which are not directly considered as an aspect of the matter under examination.  In this case, the externality is that none of the 3 major political parties are speaking on this monumental event.  The silence is choking and even the government, with all its huge publicity machinery, is only speaking when it has to.  Apart from some early ‘sound-bites’, the UNC is absolutely silent.  Even a party with such a stable of noted ‘firebrands’ is silenced by the deep relationship between Lawrence Duprey and its leadership.  In the case of the ‘third party’ CoP, it is even more galling since they have a ‘front bench’ of unmatched depth in the fields of finance and economics.  One can only wonder at the reason for their silence.

That silence is a huge externality imposed on us all by the very size of the CL Financial group.  The irony is that the very issue which needs to be debated is the one on which we are silent.  That is a colonial pattern of public discourse and it is inimical to our nation’s development.  Such are the consequences of condonation.

Emancipation

This week the meaning of Emancipation is considered alongside the CL Financial fiasco.  It is a painful, but necessary, task.  Those of us concerned to commemorate the Emancipation of African people from slavery must have the courage and clarity to reflect on our past, both the distant and the recent.  In reflection we can find direction and perhaps, the beginning of a solution.

How, if at all, is the CL Financial fiasco connected with the story of Emancipation?  I deliberately use the word ‘story’ since it is clear that there are many versions of this period in our history.  I say ‘our history’ because, whatever the race of today’s readers, the Emancipation journey is of vital concern to the progress of humanity.

There were notable and honourable African leaders who put up strong resistance to the efforts by Europeans to enslave their people.  But the sad and inescapable fact is that there were others who thought of the process differently.  It is a painful matter to discuss, but the fact is that some African rulers collaborated with the European slave-traders to capture and sell their people.  Not all, but enough to make the difference.  Without getting into the entire history, which is way beyond the scope of this column, the actions of that group of rulers were enough to ensure the success of the entire monstrous project.  The Atlantic slave-trade shaped large elements of today’s world and we have been trying to build a new one ever since.  Yes, an immoral and greedy group of rulers put a greater value on their personal enrichment than the well-being of those they were entrusted to lead.

The entire society paid the price for the selfish ambitions of these rulers.

One of the most striking things about the CL Financial fiasco is that Lawrence Duprey is one of us, an indigenous Caribbean man. Yes, a black man, with African blood flowing through his veins and that is something that has not formed part of our public discussion so far.  One of the strangest features of these times is how, despite the over-supply of media, critical issues are not discussed.  When one considers that the vast majority of the population of the region comes from an African background, it is striking that Lawrence Duprey is the only such tycoon in the region with his level of profile.  But wait, I almost forgot that there is another one.  Yes, I am speaking about Michael Lee Chin.

Whichever way you slice it, this is extremely telling and as a result Duprey carried a peculiar set of expectations.  Because of his unique profile as a black man, the fact is that Lawrence Duprey was the recipient of widespread admiration, envy and wonder.  That is our society and that is one of the ways we deal with its ugly realities.

To go further, the leading people in the CL Financial team were also black.  Yes, most of the CL Financial team have African blood flowing in their veins.  Yes, by now I can hear some readers saying things like – ‘But X or Y doesn’t think that they are Black’ or ‘So what?’ or ‘Exactly what is your point?’.  That kind of skepticism is expected when one discusses this kind of issue.  In fact it is my view that the underlying attitude is the very problem.

At the same time, let us note that the regulators are themselves black people.  Yes, the picture I am painting is that the main players are virtually all black people – the Cabinet, the Central Bank and the CL Financial/CLICO chiefs.

We African people have come from far, both metaphorically and physically.  We now find ourselves in a sorry place with this CL Financial fiasco.  We have a particular responsibility to do better this time around.  There is no escaping that fact.

CLICO was built around the ideal, by its founder Cyril Duprey (Lawrence’s cousin) that ‘Give a man service, give a man value and he will give you more business’.  Simple, but strong, those were the foundation stones of CLICO.  Truth prevailed and with hard work the company prospered.  CLICO developed unprecedented levels of investor confidence, as a black company (indigenous) in which one could have faith.  Given our history as African people, that level of investor confidence is no small or incidental thing.  It could only have been the result of solid vision and diligent long-term application, to name just two of the qualities of the founder.

CL Financial was established as a holding company and rapid diversification followed, with investments in a number of areas unrelated to conventional insurance business.    As a result of its success, CLICO was able to provide most of the cash to pay for the group’s unorthodox expansion.

At that stage, the activities of the group shifted to reflect the new ambitions of its new chiefs, most notably its Executive Chairman, Lawrence Duprey.  Those activities ultimately undermined the stability and health of the whole.

The Emancipation story has many lessons, but the central one, from my point of view, is that many of our rulers lost sight of the balance between private wealth/privilege and the public good.  Are we doing better now?  For us, in this Emancipation week, it is useful to consider the extent to which we have learnt from our past.

The actual behaviour of the CL Financial chiefs and the group’s shareholders in this moment is instructive.  At every turn, the public good has been shafted in favour of private wealth.  From the payment of dividends while CLICO’s Statutory Fund was in deficit to the payment of dividends to CL Financial shareholders after they wrote for urgent financial assistance from the State.  The pledging of assets which had already been pledged and the attempted sale of assets contrary to the original MoU.  The shocking statement of CLICO’s new boss that $5.0Bn was missing from its Statutory Fund and the utter silence subsequently as to its whereabouts.

All this shocking behaviour and no sign of any reprimand, charge or censure from our rulers.  Instead, we are told that our entire Treasury has been pledged to assist savers and restore shareholder value.  Trinidad & Tobago is a land of many firsts, but this is a tragic one.

How did we get to the point of pledging our common wealth to restoring value to a few privileged people who are showing no proper regard for the public good?

Do we have the moral fibre to recognize what has gone wrong in our past and behave differently?