Tag: corruption

End-notes on the Uff Commission

The Uff Commission ended its hearings last week, amidst even more ‘amazing scenes’.

There are so many examples to draw on, but here are a few choices –

  • Dr. Keith Rowley, MP. Photo courtesy the Trinidad Guardian
    Dr. Keith Rowley, MP

    Cleaver Heights missing money – The entire reason this HDC project was included on the Uff Commission’s agenda is PM Manning’s $10M question to his former Housing Minister, Dr. Keith Rowley ‘Where the money gone?’ After months of evasion, the purging of an HDC Board, the resignation of the HDC’s CEO and the rustication of the UK-based expert, Gerry McCaffrey, the truth is out.  No money missing. Simple so. Given the denials by Noel Garcia, the then-CEO of the HDC, and his principal assistants, the question remains who informed the PM of that missing money. I do not expect our PM to either apologise to or re-appoint Dr. Rowley.

  • Cleaver Heights contract type – Another point which emerged recently is that Cleaver Heights started off as a Design, Finance and Construct and became a modified Design/Build contract without a financing component, seemingly without a corresponding adjustment in the contract sum.  If that is the case, it would be grounds for serious concern.
  • Carl Khan – The ‘surprise witness’, Carl Khan was unchallenged by either Calder Hart’s or UDeCOTT’s attorneys.  They adopted the ambiguous course of trying to cast doubt on that testimony, but yet declining to cross-examine Mr. Khan.  It seems that these attorneys are so ‘bright’, they want to have their dinner ‘both boiled and fried’.  We not so easy to destabilise.  We too have eyes.
  • The new creature – Lastly, it is interesting to consider the new creature all of this has laid bare.  There is now a species of Super State Enterprise, who seem to enjoy an exemption from the rules, norms and guidelines which would apply.  A State Enterprise which can mount a legal challenge to a Cabinet decision and the President of the Republic.  Imagine that.

More questions than answers – The open process adopted by this Enquiry was refreshing, so much so that it has yielded a real ‘windfall’ in terms of public awareness.  Even the least-interested or most-loyal citizens are now aware that something huge is wrong here.  We now see that our PM dismissed a Cabinet Minister on grounds which have all proven baseless, yet continues to publicly defend one of his key lieutenants, whose behaviour is now revealed to be questionable.  That outcome would have been entirely unthinkable to the government at the outset of this bizarre year.  It is a prime example of the Law of Unintended Consequences.

‘Who is Calder Hart?’

Calder Hart. Photo courtesy Trinidad Guardian
Calder Hart

Calder Hart is Executive Chairman of UDeCOTT, Chairman of the Home Mortgage Bank, Trinidad & Tobago Mortgage Finance, the National Insurance Board (NIB) and the National Insurance Property Development Company (NIPDEC).  He obviously enjoys the highest level of trust from the government.  So consider this extract from Calder Hart’s cross-examination, under oath, at the Enquiry on Wednesday 28th January 2009.  Hart is being questioned by Gilbert Peterson SC, attorney for Dr. Keith Rowley –

Continued Cross-Examination By Mr. Peterson:
Q.      Mr. Hart, I am examining your CV.  I see that you attended St. Francis Xavier University.  What degree did you obtain from that University?
A.       Bachelor of Arts in Economics.
Q.      Bachelor of Arts in Economics.  And I also see that you attended a course at MIT?
A.       That’s correct.
Q.      What was the scope of that course?
A.       Well, I think it’s down there as Urban Economics and Public Policy.
Q.      What was the duration of that course?
A.       I think it was either two or three weeks.
Q.      And the one at Alberta?
A.       The University of Alberta I gained managing human resources; the same amount of time, two or three weeks.
Q.      You would not describe yourself as a financial expert, would you?
A.       No, I would not describe myself as a financial expert.  But I would describe myself as a person with a body of experience.
Q.      Yes.  But your lawyers misdescribed you in these proceedings as a financial expert.  You would not agree with that description?
A.       I would not describe myself as an expert of anything.

That cross-examination can be found at page 53 of that day’s transcript – http://www.constructionenquiry.gov.tt/getattachment/6f957486-f0f4-4aad-b585-d644f3212806/COE-Construction-Industry-20090128-Merged-doc.aspx.

‘UDeCOTT’s accounts’

We have repeatedly been told that UDeCOTT is an exemplary and highly-efficient State Enterprise.  In light of those assertions, coming from the PM and his colleagues, we are entitled to be concerned as to their lack of financial transparency.  On 28th January 2009, Calder Hart was cross-examined, also under oath, by Alvin Fitzpatrick SC, attorney for the JCC.  Consider his testimony on the specific issue of UDeCOTT’s audited accounts –

Continued Cross-Examination By Mr. Fitzpatrick

Q.      Now, rather than go through all of them, would you accept that in respect of the audited accounts for the periods which are due at 31st December of each year and the all the accounts from 2003 to 2006 were signed off by your external auditors prior to the end of March of the following year?
A.       That’s correct.
Q.      That’s correct.  And your external auditors are Price Waterhouse?
A.       Yes.
Q.      Now, I notice that there are no audited accounts for the period ending December 2007?
A.       That’s correct.
Q.      Now, that is close to two years ago they are overdue.  Is that so?
A.       Just one year.
Q.      Just one year.
A.       Not quite a year.  Normally they would have been due in March.
Q.      They would have been due in March and they are now overdue?
A.       Yes.
Q.      Now, the period 2007 would have included a number of costs related to the Brian Lara Cricket Academy?
A.       Yes.
Q.      Would you agree that external auditors will not sign off on statements where they are not satisfied with the records or they have some concerns about the records?
A.       No, that’s not my understanding at all.  My understanding is that there were issues surrounding the notes to the accounts in terms of some of the areas where they wanted to change some of the interpretation of what we had been doing.  So there was a long discussion.  I think some of the problems had to do with getting all of the information reconfigured.  So my understanding is that probably before the end of next week we shall have our 2007 accounts.
Q.      I will be very glad to hear that.  So what you are saying is that the accounts have not been signed off by your external auditors, because they did not agree with the existing configuration of some of the figures?
A        Well no, I mean, you have to understand that PWC have been doing our accounts from day one.  But I think that what they wanted to do was to deal with some of the notes as well as the manner in which the structure of our operations—I think what has happened is that as we have moved to expand our financing in the international markets.  My understanding is that they are obviously ensuring that international standards are followed and in looking at them they want to restate some of the elements in it.
And my understanding is that has all been agreed between the accountants.  There were some issues surrounding some of the information and that sort of thing which they have now been satisfied with.  And we are expecting it obviously within the next couple weeks.
Q.      Let me see if I can summarize that.  It was quite a mouthful.  PWC have not signed off because there were some unresolved issues which have now been resolved?
A.       As I understand it, yes.
Q.      And, of course, PWC will not sign off on any financial statements unless they are satisfied that all the issues remain unresolved (sic)?
A.       Mr. Fitzpatrick, let me assure you, there is no flight of fantasy eh.
Q.      Thank you.  Well, I assume before we resume on the next occasion we will have those audited accounts?
A.       Yes.

This part can be found at pages 37 to 39 of the same day’s transcript.

No accounts yet for 2007, none for 2008 and we are near to the end of 2009.  If this is exemplary performance, what next?

Afra Raymond is Managing Director of Raymond & Pierre Limited and President of the Institute of Surveyors of Trinidad & Tobago.  Comments can be sent to afra@raymondandpierre.com.

The Uff Commission – The Final sitting

John Uff. Photo courtesy Trinidad Guardian
John Uff
The controversial Uff Commission is to start the final round of its hearings tomorrow. Please click here for the timetable. This Commission of Enquiry was established to examine and report on the Public Sector Construction Industry, with particular reference to UDeCOTT and the HDC’s Cleaver Heights housing project in Arima.

The huge sums of money involved and the egos of the parties all combined with irregular practices in this matter. The combination produced an unflattering and unforgettable picture of our nation’s leading players under the bright lights of the Uff Commission.

The legal challenge against and resulting resignation of Israel Khan as a Commissioner was just one outcome of the bold stance taken by the UDECOTT Board in this matter. The continuing legal challenges mounted by UDeCOTT against the Uff Commission have greatly diluted the credibility of this government, even in the eyes of its most loyal followers.

The failure to gazette the Enquiry was yet another strange aspect of the matter and, although that lapse has now been rectified, we are yet to hear a cogent explanation as to who was responsible and what was the reason for the failure. On this count alone, we are nurturing irresponsible behaviour by allowing this to pass quietly.

The Commission of Enquiry can only make findings based on the evidence which is properly submitted to it and that is where my concern is rooted. We are down to the final few days of hearings and it is my view that the proposed agenda for the final week of hearing is deficient since it leaves some seminal issues outstanding.

These are key points which could be addressed, even at this late stage, by the Commission issuing the necessary legal notices to have these items placed in evidence.

In order of importance, the outstanding issues are:

  1. UDeCOTT’s missing accounts – The main subject of the enquiry is the operation of UDeCOTT and we have not had their audited accounts for 2007 or 2008. The Performance Monitoring Guidelines for State Enterprises, published by the Investment Division of the Ministry of Finance, requires that these should have been published by now. UDeCOTT’s Executive Chairman, Calder Hart, while testifying to the Commission under oath on 28th January, stated that all the outstanding issues with the audit had been resolved and that those accounts would be published in “…a week or two…”. That testimony can be accessed from the CoE website at http://www.constructionenquiry.gov.tt/getattachment/6f957486-f0f4-4aad-b585-d644f3212806/COE-Construction-Industry-20090128-Merged-doc.aspx on page 43. For any Enquiry into the operation of UDeCOTT to make sound findings, those accounts need to be published now. At the least, UDeCOTT should write to explain the breach of the guidelines issued by its shareholder and the undertaking, given under oath by its high-performing Executive Chairman. Again, I ask, “Is UDeCOTT insolvent?”
  2. Bob Lindquist’s missing report – The original concern on the Cleaver Heights housing project arose when the Prime Minister raised concerns as to ‘Where the Money gone?’ and much was made of $10M or $20M which was said to be missing. The PM used the Budget debate in Parliament last year to ask the question of the former Minister of Housing – Dr. Keith Rowley. We were told that the Housing Development Corporation had appointed the respected forensic accountant, Bob Lindquist, to probe the project in question. The Minister of Planning, Housing and the Environment was reported to be silent on details when questioned on the results of that probe by reporters. [See – ‘Not me and the bacchanal’ published in Newsday on August 29th 2009 – http://www.newsday.co.tt/news/0,106338.html That is simply not good enough and the Commission needs to get Mr. Lindquist’s findings into evidence. We cannot have a satisfactory Enquiry if the government is able to control the flow of evidence.
  3. Housing Development Corporation’s output deficit – The Uff Commission’s terms of reference include ‘project delivery’ and the HDC has failed to account for this chronic deficit in satisfying its prime objective – Housing Development. The entire time spent by this Enquiry on housing has been only in respect of the Cleaver Heights project, but the HDC has never produced more than 50% of its target output in terms of the numbers of new homes built each year. The question remains as to whether the HDC is aware of the reasons for this continuing shortfall. This is a flagship state policy and the shortfall in numbers of new homes produced is itself deserving of proper attention from this Enquiry and the responsible State Enterprise. I submitted a series of written questions on this to the Enquiry and one would hope that some written response is forthcoming from the HDC or the Ministry.

The remaining Commissioners can take steps to preserve their reputations and have the key elements of outstanding information put into evidence. We await with interest.

Afra Raymond is Managing Director of Raymond & Pierre Limited and President of the Institute of Surveyors of Trinidad & Tobago. Comments can be sent to afra@raymondandpierre.com.

Freedom of Information request for MOU between CLF and the State

FOI ApplicationThis is my application, under the provisions of the Freedom of Information Act, for publication of the second MoU between CL Financial and the State.  At CMMB’s Budget Breakfast on 10th September, I asked the Minister of Finance when this would be published and she replied that there was no intention to publish it.  I followed up with an email to her on 19th September.  That email was the subject of a telephone call from one of the Minister’s staff to advise that a written reply was being finalised for me in the next few days.  Having had no reply, or any explanation of the delay, I published the Open letter to the Minister of Finance on 5th October in the Trinidad & Tobago Review.  This application is made in the belief that the public deserve to know the details of this arrangement.  The bailout is supposedly being conducted for our benefit and indisputably at our expense, yet there is now an open position that its details are to deemed ‘confidential’.  We, the taxpaying public, need to know who exactly are the beneficiaries of the bailout and what are the terms on which those benefits are being obtained.  Anything less than full and immediate publication is a recipe for utter confusion and corruption.

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?’

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.

Open letter to the Institute of Chartered Accountants of Trinidad & Tobago

Anthony Pierre
Anthony Pierre, president of ICATT

From: Afra Raymond <afra@tstt.net.tt>
Date: Sun, Oct 18, 2009 at 4:19 PM
Subject: ICATT and the CL Financial bailout
To:  Anthony Pierre, President

Dear Mr. President,

I am writing to you, as President of the Institute of Chartered Accountants of Trinidad & Tobago, to urge your involvement in the calls for greater transparency and accountability in the bailout process involving the CL Financial group.

Anthony, on the many occasions on which we have interfaced, I developed considerable respect for your integrity and sense of purpose.  Most recently, I took note of your critical intervention on the proposed new regulatory regime for the credit union movement.

I am of the view that we citizens and civil society organisations, such as ICATT, need to be active in promoting higher standards of professional and public conduct.  I know that those are values within which we can find common ground, because in so many respects we can do better.  Yes, we can.

As you know, I have been publishing a critical review of the CL Financial bailout in the pages of the Business Guardian and that now forms the core of my blog at www.afraraymond.com.  The collapse of the CL Financial group is certainly the largest financial crisis to beset our nation and the first MoU of 30th January 2009 was widely welcomed as offering relief to depositors and policyholders.  I expressed doubts on the grounds that we seemed to be ignoring moral hazard.

The second MoU, signed on 12th June 2009, has now apparently been deemed ‘confidential’.  That designation is inimical to vital concepts such as transparency and good governance, both of which form important themes of ICATT’s work generally and in this Accountants’ Week in particular.

I appreciate that your time is very limited, so there are only two articles to which I would invite your attention, both available on my website – ‘Finding the Assets‘ (published on 23rd August) and ‘Open letter to the Minister of Finance‘ (published on 5th October and also in that issue of the Trinidad & Tobago Review).  For ease of reference, I have attached copies of these articles.

My specific questions to the Minister of Finance, on which I am here lobbying for ICATT’s support and involvement are:

  1. CL Financial 2008 Audited Accounts – When are these to be published? What is the reason for the delay in doing so?
  2. The second MoU with CL Financial – The first MoU was published on the Ministry of Finance website on 9th April, 9 weeks after it was signed.  Using even that slow timetable, the new MoU is overdue for publication.  Some 18 weeks have now elapsed.  What is the reason for its omission from the Ministry’s website?  The second MoU creates new and onerous commitments for the country and its publication must no longer be delayed.  I emailed the Minister of Finance on 19th September to request clarification on this, but there has been no reply.
  3. Forensic Audits – We have seen various official reports of forensic audits being carried out at CL Financial and some of its subsidiaries.  Have these been completed?
  4. The interest rate – What is the interest rate being charged to CL Financial for this open-ended financial assistance?
  5. Status Reports – We have had no interim reports as to the disbursement of State funds or the disposal of CL Financial Assets.  When does the Ministry of Finance intend to start providing regular reports on the progress of the bailout to the public?
  6. The equity position – How is the equity position of the shareholders being adjusted in this deal?  Has their shareholding been diluted to reflect the position?  Has the State now taken an equity position in the group?  If not, what is the upside for the State in all this?

For the avoidance of doubt, given the recent confusion amongst our learned friends, please note that this is being published to my website.

Afra Raymond

Open letter to the Minister of Finance on The CL Financial bailout

Honourable Minister,

This government agreed a bailout of the CL Financial group and announced that on 30th January 2009.

It was an historic step and the stated reasons for so doing were to ensure the stability of the national/regional financial system.  The size of the CL Financial group at some $100Bn, as well as the sheer reach of its activities, were cited as part of the rationale for the bailout.  The interests of depositors and policyholders were to be safeguarded by this State intervention.

Since the signing of the Memorandum of Understanding on 30th January 2009, several serious concerns have come to light and those have been highlighted in the press.

This letter is intended to form part of the formal record in this matter.  Its principal concern is the actual size of the bailout commitment.  According to your statement to Parliament on Wednesday 4th February 2009, the Executive Chairman of CL Financial estimated its assets as being worth $23.914Bn.  That statement is taken from page 628 of Hansard and can be accessed at http://www.ttparliament.org/hansards/hh20090204.pdf.  Mr. Duprey’s estimate was stated by you to form part of his letter of 13th January, as Executive Chairman of CL Financial, to the Governor of the Central Bank.

What possible justification could there be for repeatedly stating that the CL Financial group had about $100Bn of assets, if Mr. Duprey estimated the figure to be $23.914Bn?

There are 3 possibilities here –

  1. Firstly, PWC’s Consolidated Balance sheet for the CL Financial group is accurate in disclosing an Asset Value of $100.666Bn.  CL Financial’s 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.  Those audited accounts, as at 31st December 2007, were published on 18th November 2008.
  2. Secondly, CL Financial’s letter of 13th January 2009 to the Governor of the Central Bank, signed by its Executive Chairman, Lawrence Duprey, is accurate in disclosing an asset value of $23.914Bn.
  3. Thirdly, if we accept that the first and second statements are both correct, we would have to somehow account for the dramatic decline in the CL Financial Asset values.

In his prepared address to the 30th January press conference to announce the CL Financial bailout, the Central Bank Governor was clear in his appreciation of Mr. Duprey’s stance in the matter “..I would like to acknowledge the high level of cooperation that we have received from Mr. Duprey in our efforts to address what must be a very difficult period for the CL Financial Group.”  It is reasonable to assume that the high level of cooperation referred to by the Governor would have been accompanied by levels of frankness, good faith and full disclosure.  It is therefore all the more puzzling when one considers the Governor’s statement, made in that very address –

“…For the record, ladies and gentlemen, the CL Financial Group has an imposing presence with potentially systemic consequences for the financial sector and the economy of Trinidad and Tobago and the entire region.

For example,

  1. The Group controls over ($100) billion of assets in at least 28 companies located throughout the Region and the world.
  2. The Group’s financial interests cover several industry sectors including banking and financial services, energy, real estate and manufacturing and distribution. The four largest financial institutions in the Group manage assets of over $38 billion, over 25 per cent of the country’s GDP.”

How can one possibly reconcile that official account, made to justify the bailout, with Duprey’s letter, clearly stating that the assets are worth $23.914Bn?

What could have caused such a dramatic decline in CL Financial’s asset values?  The intervening period could either be 12 months and 13 days or 56 days, according to how you count it.  Either way, it is a tremendous decline.  Our Treasury is now committed to restoration of asset values – as per the Angostura Notice to Shareholders of July 2009 – we must understand the reasons for the decline in asset values.

The audited accounts of the CL Financial group for 2008 are now easily overdue and it would be instructive to consider the Balance Sheet as at 31st December 2008.  That would be a mere 13 days before Mr. Duprey wrote to the Central Bank Governor.  Has CL Financial’s audit for 2008 been completed?  If not, why not?  If yes, why the delay in its publication?
This is an aspect of the fiasco which has not been discussed in public, so far.

Your urgent and public response is now needed on these important points –

  1. CL Financial 2008 Audited Accounts – When are these to be published?  What is the reason for the delay in doing so?
  2. The second MoU with CL Financial – The first MoU was published on the Ministry of Finance website on 9th April, 9 weeks after it was signed.  Using even that slow timetable, the new MoU is overdue for publication.  Some 16 weeks have now elapsed.  What is the reason for its omission from the Ministry’s website?  The second MoU creates new and onerous commitments for the country and its publication must no longer be delayed.  I emailed you on 19th September to request your clarification on this, but there has been no reply.
  3. Forensic Audits – We have seen various official reports of forensic audits being carried out at CL Financial and some of its subsidiaries.  Have these been completed?
  4. The interest rate – What is the interest rate being charged to CL Financial for this open-ended financial assistance?
  5. Status Reports – We have had no interim reports as to the disbursement of State funds or the disposal of CL Financial Assets.  When do you intend to start providing regular reports on the progress of the bailout to the public?
  6. The equity position – How is the equity position of the shareholders being adjusted in this deal?  Has their shareholding been diluted to reflect the position?  Has the State now taken an equity position in the group?  If not, what is the upside for the State in all this?

Afra Raymond

The Uff Commission – A Final Fix?

It might seem impossible, but we have been pushed into greater confusion by the events of the fortnight since the last Property Matters appeared.

Despite a fresh round of confusing denials, UDeCOTT are reported to have maintained their legal action to challenge the Uff Commission.   That challenge includes claims as to the alleged bias of the Commissioners.  UDeCOTT continues to deny that the purpose of these legal challenges is to de-rail the Uff Commission.  If those actions were to be sustained and to eventually succeed, the Uff Commission would be de-railed.  Some attorneys have pointed out to me that there have been no studied statements as to whether an Enquiry with a reduced number of Commissioners is still effective under the law.  Even so, justice must not only be done, it must appear to be done.  Point being, even if the Enquiry with a reduced number of Commissioners is lawful, it will hardly be able to command any moral authority.  It is my view that a successful legal challenge from UDeCOTT would have the effect of killing the Uff Commission entirely.

I am reliably informed that the hearings for this UDeCOTT challenge could take at least one year.

Some of the major highlights in the swarm of contradictory comments were –

  • Conrad Enill’s opaque statement on the State paying UDeCOTT’s legal fees.  The PNM Chairman referred the question to the Minister of Planning, Housing and the Environment, Dr. Emily Gaynor-Dick-Forde.
  • Attorney General John Jeremie made strong, stirring statements on his no-nonsense approach to white-collar crime.  Mr. Jeremie was adamant that all the necessary steps would be taken to ensure the proper completion of the Enquiry.
  • Minister Gaynor-Dick-Forde is reported to have given a telephone interview to affirm that ‘UDECOTT is right’ in making its legal challenge.  http://guardian.co.tt/news/politics/2009/09/26/udecott-right That incredible assertion can only dilute the limited authority of this Minister, who took prompt action to dismiss the entire HDC board of Directors earlier this year.  The Minister’s explanation was that there was a ‘governance crisis’ at the HDC.  If this behaviour by UDeCOTT does not count as a ‘governance crisis’ of the first order, we have to wonder about the quality of this Minister’s judgment.  Dr. Gaynor-Dick-Forde went so far as to say that the AG and UDeCOTT were saying ‘one and the same thing’.  This Minister is a highly-lettered scholarship winner and has affirmed herself to be a Christian with a ‘big C’.
  • Independent Senator and UDeCOTT Board member Michael Annisette, gave a strong defence to UDeCOTT in his contribution to the budget debate.  More on this later.

UDeCOTT also made a public statement to compare their legal challenge to Dr. Keith Rowley’s action vs. The Integrity Commission, when he was a member of the Cabinet.  That comparison is baseless and misleading, as are so many other statements in this sorry affair.  Just to list three important differences –

  1. Firstly, Rowley paid his own legal fees while UDeCOTT is using taxpayers’ money to defy the government.
  2. Secondly, Rowley sued in his private capacity – i.e. to preserve his reputation – while it is clear that UDeCOTT is suing as a body corporate.
  3. Thirdly, the Rowley lawsuit was against an independent Constitutional Commission, appointed by the President.  In contrast, UDeCOTT is challenging the acts of an Enquiry whose members have been selected and terms specified by the Cabinet.  The President issued the documents for the appointment of the Commission, but the entire Enquiry is a creature of the government’s creation.  For a State Agency to challenge such an Enquiry is utterly unprecedented and scandalous behaviour.

The original Cleaver Heights allegations have been discredited and the attempt to introduce fresh material on that project was compromised with the surprise appearance of Mr. Carl Khan as a witness on the CH allegations.  The last hearings of the Enquiry had the potential to reveal the extent of the waste and corruption which all citizens know to be a reality.

It is clear for all to see that this important Enquiry is being willfully undermined.  The damage to the credibility of the members of the Cabinet is immense.  Even docile and obedient party members are now asking ‘Who really in charge here?’.

Further legal and reasoned justifications will only deepen the loss of faith.  UDeCOTT Board members are acting in defiance of stated government policy.  Or are they in fact following a policy of concealment?  A Board which was acting in defiance of the PM would have been dismissed already.

Only swift, direct and unambiguous action by the PM can retrieve this fiasco.  The confusing antics by the others are fooling less and less people.

SIDEBAR: Is UDECOTT insolvent?

Amidst all the scandal and name-calling, I am reminding readers that UDeCOTT has filed no accounts for 2007 or 2008.  We are entitled to wonder why.

To continue from last week, I have been involved in a series of email enquiries on this question with Minister in the Ministry of Finance, Mariano Browne.  His replies have advised that all the remaining issues on this audit have been resolved, but that there are non-technical reasons why PWC cannot issue the accounts.  He has not advised what those ‘non-technical issues’ were.

This Property Matters series on UDeCOTT has been running for over 2 years and it is useful to step back from the details and return to first principles.

UDeCOTT is a State Enterprise which lists Value for Money, Professionalism and Accountability among its Core Values.

UDeCOTT has been carrying out a large-scale construction programme and has borrowed most of the funds for that.  While the projects were under construction UDeCOTT’s accountants calculated their value by adding the estimated value of the sites (as if they were vacant) to the cost of the completed works (that is called ‘value’ in the Quantity Surveying/Engineering parts of the construction profession).  That method is an acceptable one.

The problem is that upon completion, those projects have to be put onto the Balance Sheet at Market Value.  That means that the properties have to be valued at the estimated price they would fetch in the open market.  Those are the requirements of International Accounting Standards.  We have repeatedly said that not one of these projects represents value for money.  Not one.  The largely vacant International Waterfront Complex was financed via a 15-year bond which, by my calculations, would now be requiring a monthly payment of the order of $14.0M.  That project is UDeCOTT’s flagship and as such it formed a key part of the Executive Chairman’s report in 2006.  The phrase was – “…project financing on competitive terms without the requirement of a Government Guarantee or Government Letter of Comfort…”  In the absence of either of those, how is UDeCOTT paying the financiers for this project?  More to the point, how is the carrying-cost of the largely vacant complex being shown in the accounts.

The terms of finance secured by UDeCOTT were very competitive – the rental value of the complex, if it were occupied, would barely cover the debt service.  How is the high cost of maintenance to be factored into the property valuation and consequently, the accounts?

One of the recurring themes in this series on UDeCOTT has been the fact that the true ‘break-even’ rent of these projects are in fact unachievable in a market flooded by the very same space.  The plain meaning of that is they are all now liabilities in terms of market value, since their rent is insufficient to cover the real cost of land plus the building.

All these issues are present across the entire portfolio of projects many of which are now completing, post-2006.  If I am right, the accounting effect of all this will be a sudden decline in asset values and a simultaneous leap in debt-servicing/maintenance requirements.

Independent Senator and UDeCOTT board member Michael Annisette made recent comments on the indebtedness and accounts of State Enterprises – http://guardian.co.tt/business/business/2009/09/25/williams-regulate-state-debt

Michael Annisette, president of the Seamen and Waterfront Workers Trade Union, said if regulation is not followed through on a timely basis government must clamp down on those entities.

“I agree that monitoring must be exercised in a timely fashion. There must be oversight and superintending of the accounts in a sustainable and fundamental way, that’s the only way you can have checks and balances on these institutions.

“There are cases where action starts after the fact and not before. The action must be preventative and not reactive,” Annisette said. He said people who are given responsibility are not always accountable. Accountability demands a responsibility if you don’t account you pay the price. There must be a deterrent mechanism in place.” Annisette added. “…The state enterprises are simply ignoring these regulations and no one is following up to ensure compliance…”

Afra Raymond is Managing Director of Raymond & Pierre Limited.  Comments can be sent to afra@raymondandpierre.com

Email to Minister of Finance

From: Afra Raymond <afra@tstt.net.tt>
Date: Sat, Sep 19, 2009 at 2:38 PM
Subject: CL Financial second Mou dated 12th June 2009

To: Nunez-Tesheirak@gov.tt

Honourable Minister,

After your address to the CMMB Budget Breakfast on Thursday 10th September, I asked you when the Ministry of Finance intended to publish the second CL Financial MoU.

You replied that there was no intention to publish that document and you went on to say that the Ministry was seeking legal advice on this. I am relying on my memory here and that is, of course, subject to correction.

For the avoidance of doubt, I am here making a written request for your reply as to when the Ministry of Finance intends to publish this second MoU with CL Financial, signed on 12th June 2009. I would add, for your information, that the original press release on that MoU was emailed to me by the Ministry of Finance upon my request.

Thank you.

Afra Raymond

The Uff Commission – A Quality Finish?

To produce good, lasting results, it is vital that project managers pay particular attention at the closing stages, since the finish is often the most lasting impression which a project can make on its users.  Thus with the Uff Commission.

It requires fortitude to resist the distractions posed by the ongoing discussions on the proposed property tax revisions.  Those proposals were set out in the 2009/2010 budget, which was laid in Parliament on Monday 7th September.  Coincidentally, that was the same day that Professor John Uff, Chairman of the Enquiry, held his press conference.

Property Matters will keep its focus on the Uff Commission.

The first question arising is – ‘Whose job was it to ensure that the Enquiry was properly established in law/Gazetted etc.?’  Just about everyone I have spoken with either knows and is not saying or does not know and expects no answer.  That is a perturbing part of the reality out here, when one considers that this is supposed to be an educational process towards betterment of a significant national activity.

We have read reports of the obscure stance taken by the last Attorney General when faced with questions as to her possible responsibility.  Her quote is sobering – “My whole attitude to this is that I have reverted to private life and I have no comment (on what cause the non-gazetting)…”  That was reported in the Express of 10th September at http://www.trinidadexpress.com/index.pl/article?id=161529620.

We have also seen reports that the Attorney General has taken the necessary steps to ensure that the oversight is addressed and that is encouraging, for all the reasons stated in last week’s Property Matters.  The opposition UNC is also reported to have pledged their support for any measures brought to Parliament in this matter.  Both these are positive signs.

Restoring the Enquiry’s legality is an important part of a good finish to this important public work, but there is a vital ingredient, which has been missing so far.  I am referring to the constant resistance being mounted by UDeCOTT’s attorneys.  Given the PM’s strong statements to the effect that this government has nothing to hide, it is almost unbelievable that these attorneys acting for Calder Hart and UDeCOTT have taken certain positions.  Unbelievable, but true.  It is like a subsidiary company resisting or obstructing lawful instructions coming from its parent company.  The missing ingredient here would have to be that the Board of UDeCOTT be instructed to desist from such actions, since those are contrary to the atmosphere of transparency and probity which the PM is advocating.

As a reminder to readers, please note that UDeCOTT is one of the State Agencies within the Ministry of Planning, Housing and the Environment (PHE).  The Housing Development Corporation is another State Agency within that Ministry.  The point I am driving at here is to remind readers of the actions of that very Minister when the HDC were trying to complete its second submission to the Enquiry.  The entire HDC Board of Directors, save its Chairman, Andrew McIntosh, were dismissed.  The Minister cited a ‘governance crisis’ and no further explanation has been offered.  A new Board was appointed with the former Chairman staying in place and Abigail Cox re-appointed as a Director.  One can only wonder what kind of governance crisis could lead to the sudden dismissal of an entire Board of Directors and the retention of its Chairman.  How could any ‘governance crisis’ emerge, if the HDC Chairman had been an effective one?  If he was ineffective, what is the thinking of a Minister who would re-appoint such a Chairman?

The simple point is that the government can dismiss an entire Board of Directors for some infraction or other cause.  In that very Ministry they already have, in the course of the Uff Enquiry.  The retention of the UDeCOTT Board of Directors, in these circumstances, is a clear and present peril to the PM’s stated notions of integrity in public affairs.  That those UDeCOTT Directors remain in place is a clear vote of confidence from the PM.  Any further attempts by Mr. Hart’s or UDeCOTT’s attorneys to de-rail the Enquiry would be a recipe for a complete loss of the limited confidence the PM now enjoys.

Insofar as the Enquiry’s examination of the HDC’s performance, I make 2 points.  Firstly, I submitted questions on the project delivery shortfall to the Enquiry to direct to the Minister of PHE.  One would expect that the Enquiry would require that the Minister make a written reply to those legitimate queries.  Secondly, the Bob Lindquist report is also in question.  The renowned Canadian forensic accountant, Bob Lindquist, was hired by the HDC, amidst much fanfare, in January this year, to investigate the alleged missing funds from the Cleaver Heights housing project.  We have never been given an update on his findings, but have recently seen reports of this Minister refusing to answer questions as to whether the report has been completed or will be published.  I smiled while reading the Minister’s firm statement – “…We aren’t interested in all the bacchanal and back and forth people seemed to be focused on…” That story is at http://www.newsday.co.tt/news/0,106338.html.  We would also suggest that the Enquiry use its legal powers have the Bob Lindquist report submitted without delay.

Finally, we come to the big and truly disgusting one.  Yes, I am referring to UDeCOTT’s missing accounts.  According to the Ministry of Finance guidelines published in January 2008, State Enterprises are “…required to publish…audited financial statements…within 4 months to (sic) the end of their financial year…”.  UDeCOTT’s last audited accounts are up to the end of 2006.

On Monday 8th June, the Minister in the Ministry of Finance, Mariano Browne, addressed a corporate governance meeting for leaders of State Enterprises.  In doing so, Senator Browne set out some very clear points – “..you are now required to ensure the timely submission of board minutes, strategic plans, financial statements, cash statements of operations and loan overdraft portfolios…”.

Calder Hart told the Enquiry, under oath on 28th January, that all the outstanding issues for UDeCOTT’s 2007 accounts had been resolved and that those accounts should be available in about 2 weeks’ time.  Yet it seems that we are drifting into the closing chapter of this Enquiry without any accounts for either 2007 or 2008.  That is a breach of the published Guidelines and I am again suggesting that the Enquiry use its powers to seek some public account of these colossal sums of our money.

Afra Raymond is Managing Director of Raymond & Pierre Limited.  Comments can be sent to afra@raymondandpierre.com