Tag: conflict of interest

CL Financial’s Annual Return as at 17th February 2009

CL Financial Annual Returns 17 February 2009

This is the official copy of CL Financial’s Annual Return from the Companies Registry, as at 17th February 2009 – it bears the official stamps and is signed by CLF’s then Corporate Secretary, Gita Sakal.

The company had a paid-up capital of $7.5M, with that number of $1.00 shares in issue.

The 325 shareholders are listed alphabetically, as at 7th September 2008, with details of their occupations and addresses also supplied.  Of course, that list shows, at #289, the then Minister of Finance – Karen Nunez-Tesheira – as Karen Tesheira, Attorney-at-Law – holding some 10,410 shares.

Another thing that is striking is that Lawrence Duprey would appear to have only three blocks of shares in his ownership –

  • #47 – CL Duprey Investment Trust – holding 1,634,335 shares, but we are unable to find the details on that company.
  • #78 – DALCO Capital Management Company Limited of #37 Frederick Street, POS – holding 1,947,833 shares.  I am assuming that DALCO is a play on his initials – Lawrence Andre Duprey LAD, reversed.
  • #302 – Trustees of CL Financial Limited – holds 119,145 shares.

I am taking that to mean that Lawrence Duprey had under his direct control a maximum of 3,701,313 shares – i.e. 49.35% of the group’s entire shareholding…slightly less than half.

I am leaving it to the better-informed readers to help fill in the gaps in this story.

As to Andre Monteil, the recently-retired Group Finance Director, his 337,269 shares were transferred from Stone Street Capital Limited to First Street Capital Limited on 31st March 2008, the date he retired from the CLF group.  Both companies’ registered address is the same – 33b Perseverance Road, Haleland Park, Maraval.

Afra Raymond’s submission to be made a party to the Colman Commission

16th March 2011

Afra Raymond’s submission seeking to be made a party 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.

I have been conducting a campaign in the public interest on this important matter.  My work is unfunded and I have no assistance.  Indeed, I have no legal adviser at this Enquiry.

Having followed the issue so closely and attended the opening session on Friday 11th March, I am of the view that the parties thus far identified in this Enquiry are all seeking to advance their own interest.

I am here seeking to be made a party to this Enquiry, in seeking the interest of the silent majority, the taxpaying public, who have had to pay for this huge financial fiasco.

I am making this submission under rule 2. of the Commission’s Rules of Procedure, as a person whose “…participation in the Enquiry may be helpful to the Commission in fulfilling its mandate…”

I await your reply.

——————————-
Afra M. Raymond B.Sc. FRICS
Port-of-Spain

CL Financial bailout – Sunlight Disinfectant

If you think this title is for the latest brand of household cleaner, you would be wrong.  I drew that title from the famous statement by deceased US Supreme Court Justice Louis Brandeis, in reference to corruption and fraudulent dealings: ‘sunlight is said to be the best of disinfectants.‘

Of course, this is all about the impending Colman Commission of Enquiry into the failure of CL Financial and other companies (including CMMB) and the Hindu Credit Union.

We are attempting to understand our situation in this financial fiasco – how was the entire collapse caused?  Who is responsible?  What can we do to avoid a repetition?

Our House needs a serious cleaning and we need a new commitment to serious retrospection if we are to succeed in understanding this scandalous situation.

To set the stage, there are four principalities being represented in this Enquiry –

  1. CL Financial Chiefs – The people who had Direction and Control of the entire failed group – that would include the shareholders.
  2. The Regulators – The Supervisor of Insurance, Securities and Exchange Commission (SEC) and the Central Bank.
  3. The Auditors – PriceWaterhouseCoopers and Ernst & Young – the former being auditors for the CL Financial group and the latter acting for the Central Bank.
  4. The aggrieved Policy-Holders and Depositors – Several groups have been formed to seek the return of all the monies owed to these investors.

My first point about this Colman Commission is how welcome it is, as a tangible sign of a change in how our country is being run.  No, I did not vote for either group in the last election, but it seems to me that neither of the last two regimes (Manning or Panday) would have initiated a public enquiry into this financial fiasco.

As much as I approve the decision to have this public enquiry, the purpose of this article is to warn against some of the forces now being assembled to erode the enquiry’s effectiveness.  Even though, in this respect, political times have changed, we need to remain vigilant if the Colman Commission is to be effective.

To be sure, the four principalities I listed comprise very powerful players for whom this enquiry is a literal nightmare, since they will be obliged to explain some of their biggest decisions and actions, which they would never have had to explain to anyone outside of their own circle.

If the Enquiry takes place as intended, we are going to be afforded an unprecedented insight into the workings, dealings, arrangements and situations in our leadership class – all of it at a depth and range never before recorded.  Matters that had been only the subject of picong, ole talk and so-called urban legends will all now become part of the official record.  Yes, our Republic will be coming of age.

Our country is a Republic, which to me means that no class of citizen ought to enjoy rights which are superior.  But there has been a pattern of behaviour in this fiasco which has been very disturbing because it violates those Republican expectations.  Of course, I am referring to the fact that a three-tier system seems to have been in operation during the entire meltdown.

  1. The lowest tier comprises those many persons who are now fretting over their investments with this failed group.  Those people have to decide between continued protest action, legal action or just plain pleading to get some relief.  A significant number of them would have placed undue reliance on the CLF products and would be suffering extra stress because they put too many, or all, of their eggs in one basket.
  2. The middle tier is the lucky and/or well-connected people who were able to get back their money after the group collapsed.  When the Prime Minister announced this Enquiry on 1st October 2010, she promised to release details of who received the monies disbursed in that period – i.e. after 30th January 2009.  That list of names and who received what sums would be an absolutely explosive one.
  3. Of course, the top tier and the absolute insiders would be those who had early warning of the oncoming collapse and took steps to preserve their wealth.  That group would have to include the top CL Financial chiefs who left in the 12 months before the collapse – Monteil, Fifi and Mayers.  Major depositors and investors would also have been part of this privileged group.  The Governor of the Central Bank and the last Minister of Finance also withdrew monies just before the collapse.

Maybe I am entirely wrong and there was complete surprise when the CL Financial group collapsed.  But if that is the case, one is really contemplating a slack system of management systems and an entire swath of our ruling elite who are not ‘fit and proper’.  The question of who knew what and when, will be a main point of dispute, because either way you slice it, the picture is unappealing.

You can be sure that the people in the top layer will do anything in their power to protect themselves from the stern scrutiny of those in the lowest group, not to mention the public, who are paying for all this.

I wrote a previous column in this series, entitled ‘Taking in front‘ and on this occasion, in light of what is at stake, I, too, am taking in front.  Having suffered a defeat in that the Colman Commission has now been established, the members of the Code of Silence can be expected to try halting, delaying or just diluting the Commission.

Harry Harnarine, former HCU president. Photo © newsday.co.tt
Harry Harnarine, former HCU president. Photo © newsday.co.tt

We have already had former Hindu Credit Union (HCU) chief, Harry Harnarine, defeated in the High Court in an attempt to stop the Colman Commission.  I was not surprised to read reports that Harnarine is planning to appeal that decision.  We can expect other strong challenges as this historic process unfolds.

If the members of the Code of Silence are unable to derail the Commission itself, we should not be surprised if they try to cloak the proceedings in some kind of blanket to prevent too much information escaping.

Readers, please note that the process of asking the Court to prevent publication of a particular piece of evidence is a very swift one, with the ruling expected in the very same sitting.  That is because if those proceedings are too drawn-out, it can be actually self-defeating, since the matter which they are seeking to have concealed can be published and discussed while a decision is awaited.

That is the reason we need to beat this drum now.  We cannot wait for the filing of injunctions and then seek to publish.  By then, it would be too late.

The new algebra is simple and inescapable –

Expenditure of Public Money – Transparency = CORRUPTION

Whatever the negatives of the American Imperium, there are still aspects of that society which are worthy of emulation.  The example which comes to mind is the recently-published report of the Financial Crisis Inquiry Commission.

The preface of that Report contains an instructive paragraph, at page xii –

“…This report is not the sole repository of what the panel found. A website — www.fcic.gov — will host a wealth of information beyond what could be presented here. It will contain a stockpile of materials — including documents and emails, video of the Commission’s public hearings, testimony, and supporting research — that can be studied for years to come. Much of what is footnoted in this report can be found on the website. In addition, more materials that cannot be released yet for various reasons will eventually be made public through the National Archives and Records Administration…”

The US legislature is determined that the inner lessons and testimony on this important crisis are available to all interested parties for the years ahead.  That represents a solid commitment to a learning society, which will at least attempt to draw lessons from the bitterest of experiences.  In my opinion, that commitment is worthy of emulation.

Has our society reached the stage of maturation to commit to an entirely transparent process of retrospection?  That is the question which will be tested in the weeks and months to follow.

The entire proceedings of the Colman Commission must be held in public.  The proceedings must be on TV and available on the internet.  The Colman Commission needs a strong internet presence, with its own website.

Sunlight Disinfectant cleans brighter, you see?

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 1st October address to Parliament.

On 17th 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. Photo courtesy the T&T Review
    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 13th January 2009 to Ewart Williams? A mere 56 days separate the publication of those 2007 accounts – on 18th 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 4th February 2009.

  • Andre Monteil
    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

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

    Robert Mayers – When he retired on 7th 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

    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?

Sir Anthony Colman
Sir Anthony Colman

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

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 –

  1. 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?

  2. 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.
  3. 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.
  4. 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 –

  1. 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.
  2. 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.

lawrence dupreyAs 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 8th 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?

Sen. Vasant Bharath
Sen. Vasant Bharath

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 31st December 2008 and 2009 – Have PwC completed that?  When are they to be published?
  • Wendell Mottley, Colin Soo Ping Chow, Steve BideshiThe 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 – Closing the circle

Inquiring What Went Wrong. Illustration by NiCam GraphicsAmidst the raging debate on the rights of the disappointed depositors versus those of the anxious taxpayer, I am continuing to examine some more of the fundamental issues. Yes, I accept that there are depositors amongst the taxpayers, but those interests are not in alignment, hence the discussion.

By making a legislative proposal to frustrate the CLICO Policyholders Group (CPG) litigation, the government seemed to have conceded the merit of the protestors’ case. Those proposals have now been withdrawn and on Friday 1st October, the Prime Minister gave an extensive reply to the CPG. The strategic decision seems to have been to retreat from the narrow corridors of legality and strive for the broad perspectives of the entire nation. The apparent decision is to favour an act of persuasion over one of sheer power. Given our norms of governance in these parts, that is no small shift and it is a welcome sign, quite apart from my agreeing with the stance taken.

Most importantly, the Prime Minister announced a Commission of Enquiry into the collapse of both CL Financial and Hindu Credit Union (HCU).

Once again, I am going to refrain from discussing the legal issues, despite the tempting developments in this aspect of the matter. I am going to keep deepening this discourse so that we can have a better quality of discussion

What was the EFPA?

Firstly, it is necessary to spend a little time on the true nature of the Executive Flexible Premium Annuity (EFPA), since that product is what the majority of this dispute is about. The product was approved for marketing by the Supervisor of Insurance in 1990.

An annuity is an investment product for an individual, to save for a specified future expense by means of periodic payments. CLICO had an approval for a Flexible Premium Annuities, which was attractive to those people who had fluctuating incomes, but soon led to the sale of Single Premium Annuities. Those are investments in which the investor pays a single premium and receives the benefits after CLICO had held the funds for a short term.

So the single premium can be viewed as a deposit, which is what many of the agents called it. While the annuity, traditionally a long-term investment product, then assumed a norm in which most EFPAs were held for 5 years or less.

In saying so, it is interesting to consider the question of just how an organisation can purchase an annuity, which is an investment product for an individual. The fact that so many organisations did so, does damage to the notion that this EFPA was sold in conformity with its true nature.

So, in summary we have an approved annuity, which is mainly sold as a single-premium, short-term, high-interest investment product to anyone who wants one, including Credit Unions, private companies – several CLICO agents tried, repeatedly, to get deposits from our firm – and State-owned corporations. At some point that annuity morphed, by this series of changes, which seem, to me at least, to have fundamentally altered the character of the approved instrument

All of which returns to the basic accounting principle that when one is trying to interpret a situation such as this, the correct procedure is to be guided by the substance rather than the form of the transaction. That is the background to my assertion that the correct interpretation of the EFPA is as a deposit.

When you consider the very high interest rates offered and the unique way that CLICO altered the EFPA, one has to wonder how the regulator viewed these activities. But more on the regulators later.

What did CLICO become?

Even beyond the changes which the EFPA underwent in the hands of CLICO, the reverse was also to take place. That happened because CLICO changed the EFPA to suit the strategy of its parent company, CL Financial, but the parent group (and ultimately CLICO) in the end were irreversibly changed and then destroyed by the EFPA’s success. Let me explain –

In our system, there are 3 species of financial institution –

  • Banks and other Financial Institutions (approved as Deposit-taking Institutions by the Deposit Insurance Corporation);
  • Insurance Companies and
  • Credit Unions.

CLICO’s liabilities, as stated by the Finance Minister, were $6Bn to traditional insurance policyholders and $12Bn to depositors. The question being, given that two-thirds of their liabilities are non-insurance, how could it be legitimate to consider CLICO an insurance company? More to the point and looking forward, where does a company like CLICO fit into our regulatory framework? That is an important aspect for us to consider for the future of our financial services market.

What were the Regulators doing?

The Regulators! Coulda, Woulda, Shoulda!That is the burning question at this time and a large part of the blame for the CL Financial collapse must lay with the regulators.  In this case it seems that the Governor of the Central Bank and Inspector of Financial Institutions both have serious questions to answer.  The situation is really too much to even imagine, but a few examples –

  • The Governor repeatedly stated his doubts on the stability of the CL Financial group, yet admitted later, in a written statement – see http://www.central-bank.org.tt/news/releases/2009/mr090204.pdf – that he had deposited money at CLICO Investment Bank (CIB).
  • The Governor stating his strong disapproval the conduct of the CL Financial chiefs – The Governor spoke on 23rd April 2009 – “If you ask me whether CL Financial did everything that was honourable and beyond reproach, the answer is no! The answer is no!”  see – http://guardian.co.tt/business/business/2009/04/24/cl-financial-bailout-cost-5-billion-over-two-years .  Yet he has not invoked ‘fit and proper’ regulations to disqualify those offending people from holding office in any financial institution, which is within his ambit.
  • Carl Hiralal, Inspector of Financial Institutions, swears an affidavit in the CIB winding-up action in which, at para 23, he confirms that CIB had filed no Corporation Tax Returns in 2007, 2008 or 2009.  The plain meaning of which is that they did not pay their taxes, yet  were able to keep their banking licence and when it all went wrong, were also able to get a bailout.
  • The Statutory Fund – We have heard many statements since this collapse that the CLICO Statutory Fund was not paid-up in full and yet they too were able to retain their licences.
  • When, if ever, did the CLICO sales force stop selling?   Answer is they never did, and have continued to remain open for business despite their self-confessed insolvency.  Is it true that CIB was seeking deposits up to the last?
  • Mismatch of funding tenor and risk – It was clear that CL Financial, in addition to morphing an approved product beyond recognition, then ballooning those receipts up to over-balance the entire company, operated with a fundamental ill at the heart of the thing.  Having coaxed many investors to place their eggs in one basket, the very company they had trusted with their savings turned around and broke yet another fundamental financing rule.  CL Financial used short-term/high-interest funds to finance long-term investments, which was evident from its accounts.  Did the regulators have a risk ranking or some other tool to allow closer monitoring of these activities?
  • The Nature of the thing – Finally, we have the issue raised above – i.e. the EFPA that became something else and the insurance company that also became something else. Like some bizarre horror or science fiction movie, but is our country.  My question being that there must be some point at which an approved product stops resembling the original one, to the extent that the regulator needs to have the clarity and integrity to stop those sales.  In consequence of the prior failure, CLICO stop resembling CLICO and also became something else.

What is to become of these self-confessed, slack regulators?  The state has already saddled a considerable burden in assisting these depositors, but are we to have a continuation of this disastrous performance?

I ask the question because the CLICO pattern is not over, not at all.  There are still other doubtful financial institutions offering incredible rates of interest, with special incentives for the vulnerable.  Yes, it is still going on – see the sidebar.  Do we have the will to do differently?  Can we do better?

As a matter of urgency, we need to have published the full details of those who gained from the $7.3Bn already spent in this scandalous bailout.  We need names, addresses, amounts of capital and interest and date of payments as a minimum.  Those monies are public monies and if it was correct to insist on disclosure in the shocking case of the ‘Secret Scholarship Scandal‘ last year, it is equally right in this disgusting case.

‘What is good for the Goose is Good for the Gander’.

Expenditure of Public Money – Accountability and Transparency = CORRUPTION

We also need to have published the full details of the $1.0Bn of ‘non-performing’ loans on CIB’s books.

The Impossible Claim – denied?

The size of the outstanding claims is a total of about $18Bn, which is colossal when compared to the largest pool of money available to the state – i.e. the Heritage and Stabilisation Fund, which itself holds about $18Bn.  The state cannot bankrupt itself

SIDEBAR: The case of AIC Finance

AIC Finance is owned and run by the Jamaican billionaire, Michael Lee-Chin, who came in for mention in this debate 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 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 point is again pertinent.

AIC Finance defaulted on a USD bond last year – 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 advertIn the last fortnight or so, the same company 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’.  Those interest rates range from three to four times the rates being offered by the commercial banks.  If CL Financial could not sustain this strategy, how can AIC continue to offer these rates in today’s market?

That is the question.

SIDEBAR: Two points in the PM’s speech need emphasizing

The First, is in the positive, democratic interpretation of the revised bailout being offered to the estimated 250,000 people affected as policyholders and depositors.  All 225,000 policyholders – those with life, pension and health insurance policies – will have their claims honoured by the State.  10,000 of the 25,000 depositors are owed amounts less than $75,000 and those claims can be settled now.  Which leaves 15,000 depositors to choose between litigation or accepting the present offer of a discount on their monies.

In summary, 235,000 of the 250,000 claimants are being fully settled and that is 94%.

The Second, is in relation to the erroneous portrayal of the impact of discounting on the claimants who accept the government’s offer.  There seems to be an error in the calculations upon which the PM relied in making her statement –

“…We are going to give some help.  These installment instruments I am saying can be cashed in early at financial institutions.  Yes, they will be cashed in at a discount. But I have been informed by the hon. Minister of Finance, Mr. Winston Dookeran, that based on discussions with local financial institutions, that if the first five years of installment notes were cashed in, the discount could be as high as or as low as—when we look at it the glass is half-full or half-empty, depending on how you look at it—5 to 10 per cent.  What this means is for every dollar, you could get between 90 to 95 cents per dollars if you decide to discount.  I am so advised…”

Apart from my not understanding the selection of the first five years of investment notes as a point for discussion, the calculations are misleading, since the actual discount at those rates (with which I concur) will have a far greater impact – see http://wp.me/pBrZN-qh for a detailed explanation.

CL Financial bailout – The House on the Corner 2

Winston Dookeran sounds off on CLICO

—* Finance Minister Winston Dookeran, speaking on the CL Financial bailout, during his inaugural Budget Speech on 8th September 2010

More insights into CIB

The examination of CLICO Investment Bank (CIB) continues, based on the affidavits in the Central Bank’s winding-up action.

Firstly, as an overview, I consider the various versions of the accounts and their implications –

  • CIB’s 2007 audit – Was performed by PricewaterhouseCoopers (PwC) as at 31 December 2007, with the Balance Sheet showing Total Assets of $12.587Bn and Total Liabilities of $11.699Bn. Please note that those accounts were unqualified – PwC gave a ‘clean’ audit to CIB at the end of 2007. (See – https://afraraymond.net/wp-content/uploads/2010/09/cib_2007_accounts.pdf)
  • CIB’s Management Accounts – As at 31st January 2009, showed Total Assets of $12.264Bn and Total Liabilities of $10.692Bn. Those figures are broadly in line with the audit figures 13 months earlier, at the end of 2007. (See – https://afraraymond.net/wp-content/uploads/2010/09/cib_mngt_acc.pdf)
  • Ernst & Young’s Statement of Affairs – As at 31 January 2009, that showed Total Assets of $6.387Bn and Total Liabilities of $11.080Bn. Virtually $5.9Bn of assets seem to have vanished in a mere 13 months – a weekly rate of ‘withdrawal’ close to $105M – leading inevitably to the estimated insolvency of $4.693Bn. (See – https://afraraymond.net/wp-content/uploads/2010/09/cib_stmnt-of-aff.pdf)
  • The size of the CIB insolvency – Apart from its size as a proportion of the entire CIB Balance Sheet, this gap can give one an idea of the composition of the missing $76.1Bn from the CL Financial Balance Sheet – see ‘Finding the Assets‘ published in the Business Guardian on 19th November 2009.
  • The Return on Assets – This is a benchmark of company performance, being the net income as a proportion of the total assets. In the case of CIB, according to the PwC 2007 audit, the RoA is less than 1%.  That is an exceedingly poor rate of return which would normally denote weak management, but it seems that CIB functioned well as an operation to raise cheap finance for the CL Financial group.
  • Statutory Deposit – Note 4, at page 45, of CIB’s 2007 financials states a legal requirement for CIB to maintain a non-interest bearing Reserve Account with the Central Bank equivalent to 9% of its deposits and other specified liabilities. Given that the 2007 Balance Sheet discloses Customer Deposits and accrued interest of $5.509Bn, the Reserve Account ought to have been holding about $495M, as a buffer against just this sort of situation. Was that Reserve Account credited in accordance with the stated requirements? Were those funds expended first in the crisis, or has the Treasury taken the full cost of CIB’s failure?

That is an overview of the CIB position, which leaves the burning question – ‘Where did all this money go?‘  For $5.9Bn in assets to vanish in 13 months is an incredible failure of corporate governance and state oversight.  Given paras 5 and 6 of Hiralal’s affidavits – which effectively seek to claim that the events of the 15 January 2009 were unexpected – it seems that neither the auditors nor the regulators performed properly in this case.  But more on that later…

Devilish Details

Here are some details of where the money went and how it was handled.  This is taken from para 7 of the affidavit of Ernst & Young Director, Maria Daniel –

  • Financial Records –

    …The financial record keeping in CIB was weak.  The financial accounting system was not appropriately designed and implemented…

  • Bank Records –

    …Bank reconciliations were not properly prepared.  CIB’s reconciliations contained numerous errors that were not corrected on a timely basis …

  • Loan Portfolio –

    …In general the loan portfolio comprised a significant percentage of high risk real estate projects…and the rest of the portfolio was of poor credit quality.  Additionally, there was a lack of supporting documentation and/or appropriate security for many of the files inspected.  There was little evidence to suggest that the loan portfolio was being properly administered by management, and generally, recovery efforts on delinquent loans were inadequate…

  • Loan Arrears –

    …The arrears report as prepared and presented by CIB’s management as at 31 January 2009 showed only $111M in arrears, which is approximately 5% of the loan portfolio…

    That 5% bad-loan proportion would be considered acceptable by banking norms and would raise few alarms.  Given that CIB was in crisis, it seems unbelievable that this crucial indicator was at 5%, but the very next sentence reads –

    …However, upon further examination Ernst & Young identified at least $1Bn in loans that should have been classified as non-performing or on a watch-list…

    From those figures it seems that the true level of delinquency in the loan portfolio was of the order of 45% and one can only wonder what CIB’s management were trying with the 5% arrears story.

  • Investment Portfolio –

    …The profile of the investment portfolio was not commensurate with the liquidity requirements on the funding side of CIB’s balance sheet, with less than 1% of the portfolio invested in government securities and money market instruments…In addition, 88% of their investment portfolio, including the investment in Republic Bank shares, represented investments into other CLF Group companies…

I said ‘some details’ and the full affidavit can be viewed at https://afraraymond.net/wp-content/uploads/2010/09/cibey1.pdf.

Well, William?

Well, William?William Lucie-Smith, the erstwhile Managing Partner of PwC until his retirement in June 2004, commenting on the CL Financial bailout, recently stated “…Indeed I dont (sic) know why anyone assumes the books were wer (sic) wrong at any time and did not reflect accurately what was happening…”

Mr. Lucie-Smith, the people questioning the accuracy of those CL Financial books now includes Ernst & Young and our Finance Minister, not just this Chartered Surveyor.  Given the quantity and quality of the information presented here, I am wondering if you are going to stick with that opinion.  Will Lucie-Smith resile from those views?  That kind of reversal would require real character and integrity.
** See http://www.trinidadexpress.com/commentaries/CL_Financial_A_new_strategy_required_.html.

Where does the Truth Lie?

If PwC’s audits were properly done, based on true accounts received from CIB and the relevant accounting standards, then the Inspector of Financial Institutions has been at fault to allow this failed institution to retain its licence.  If, as an alternative, the Inspector relied on misleading accounts, then one could hardly lay the full blame onto them.  In the latter case, either CIB’s in-house accountants, or the auditing firm PwC bears a heavy responsibility for this entire crisis.  EYvsPwCCompare and contrast the different results of the PwC 31 December 2007 audited Balance Sheet and the E&Y 31st January 2009 Statement of Affairs.  The discrepancies between the CIB Management Accounts and E&Y’s Statement of Affairs of 31 January 2009 are astonishing.

One can be escapist and say ‘on the one hand this, but on the other hand that‘ for only so long before reality sets in.  The fact is the group collapsed because it ran out of money.  Exactly how it ran out of money is a huge story of our age, supposedly an enlightened and more educated one.  That is the $57,000 question.

But the allocation of responsibility would also have to go beyond the role of the auditors to include the failure of the Inspector to detect the fact that CIB had filed no Corporation Tax returns for 2007.  Or was it that the Inspector’s office did note that and simply took no action?

Auditing the Accountants

What is the role of ICATT in all this confusion?  I tried with an open letter on 19th October 2009 and several dialogues with various of their Board of Directors.  Is ICATT investigating any aspect of this fiasco?  Does ICATT have any concerns over the MoU/Shareholders’ Agreement and its terms?  Does ICATT exist solely to advance and protect the professional interests of its membership?  Is it unreasonable for the general public to expect ICATT to have spoken out on these burning issues?  With all respect to the people concerned, ICATT’s silence is resembling a cover-up.

What is the meaning of ‘Fit and Proper’?

Our laws sets the penalty for murder as hanging, so, even if one does not agree, it is clear that the penalty is final to both indicate society’s intolerance of taking another human life and to prevent a recurrence.

The ‘Fit and Proper’ regulations are meant to regulate the behaviour of the Directors and Officers of Financial Institutions, since they are the people to whom we entrust our monies.  Any recklessness or dishonesty on their part can lead to severe loss of capital and ‘Fit and Proper’ ensures that those acts are punishable by loss of your privilege to serve in those high-powered positions.  The Companies Act even makes it illegal for Company Directors to ‘mismanage’ the affairs of a company.

Look at the case of the failed insurer, Goodwill Insurance, the Central Bank took a winding-up action which ended in two of its Directors – Johann Lambkin and Lennard Woodley – being fined $20M and banned from serving as Directors or Managers in any company incorporated in here for 5 years – see http://webopac.ttlawcourts.org/LibraryJud/Judgments/HC/rajkumar/2009/CV_06_02529DD30July2009.pdf.

Why is the Central Bank not proceeding against the CL Financial Directors?

The Timing Thing

So far I have been writing about this CL Financial collapse as if it took place in January 2009 and that is a position in need of a re-think.

When a marriage ends, the first ‘official notice’ of that is when one of the parties files for divorce, but there is often a stage before that when one of them moves out or moves on, and a stage before that one at which they stop having sweet times together.

I think the CL Financial ‘official notice’ was when they wrote for help on 13th January 2009, at some point before that, key people moved out or moved on and at some point before that, the group was failing.

When did the CLF group actually collapse?