CL Financial bailout – Charting the Ruins

…We have to make that honest assessment…Our society has become despondent, a resignation to decadence, where everyone owes everyone else a favour it seems… (1981)
…Who will rechart the ruin?… (1970s)

—Quotes from Leroy Clarke’s MACO interview 20 February 2016


Then they fill yuh head with all kinda story
Until truth becomes a mystery…
Now is time to Boom Up History!

Boom up History (3canal) © 2008 Machette Music

Correction

In my previous article, Camille Robinson-Regis was incorrectly named as a member of that Cabinet, when she was in fact serving as our High Commissioner to Canada.

The voices of our leading Artists urge us to search for meaning, if we are serious about building a civilisation out of the lies and ruin we inhabit. That kind of serious building requires a solid foundation which must contain sober reflection and acceptance of responsibility by both the people and the leaders. This is the Season of Reflection, so this week I am looking backward to go forward. A Sankofa pause to delve into these sobering CL Financial events to try to derive some meaning. We have now passed Emancipation, so the series is moving onward to Independence.

In this article I will examine the positions taken by various leaders as the CLF crisis gathered force, culminating in the declaration of the bailout on 30 January 2009. There is either a sobering naivete or a lack of rectitude in the highest chambers in our Republic.

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The main persons dealing with the crisis were the Cabinet, the CLF Chiefs and the Central Bank. The former Cabinet members from whom we need to hear are – Colm Imbert, who is the current Minister of Finance; Mariano Browne, then Minister in the Ministry of Finance; Conrad Enill, former Minister of Finance and Chairman of the PNM; Karen Nunez-Tesheira, then Minister of Finance. Continue reading “CL Financial bailout – Charting the Ruins”

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CL Financial Bailout – The Hidden Truth

We are now in what I call the Season of Reflection, which for me covers the period from Emancipation Day on 1 August to Independence Day on 31 August, right up to Republic Day on 24 September. Those celebrations appear in proper historical sequence in our calendar and every year I find this two-month ‘season’ to be a sobering period for deep reflection. This year, with this CL Financial judgment and the impending election seeming to converge, the reflections are piercing ones.

Sad to say, this CL Financial bailout is resembling a situation in which well-connected persons are getting what they can, anyway they can, but making sure not to get caught. Who were the beneficiaries of this lavish payout? What is this reluctance to release details?

That is the Code of Silence in effect.

Sen. Larry Howai, Min of Finance
Sen. Larry Howai, Min of Finance

I was not at all surprised at the reported statements of the Minister of Finance, Larry Howai, on the 22 July 2015 High Court judgment ordering him to provide the detailed information I had requested on the CL Financial bailout. The High Court granted a 28-day stay of execution and the Ministry is reportedly in consultation with its lawyers, claiming that “A decision will be made within the period of time allowed by the court,”. The article closed with this quote –

“…Finance Minister Larry Howai said in the statement it should be noted, none of the requests refer to “how over $25b was spent in the Clico bailout”…”

Given that the very request was for the detailed financial information which has been deliberately suppressed since 2009, it is of course impossible to say with any certainty just how much Public Money was actually spent on this CL Financial bailout. That is the inescapable fact at the centre of this scandal. The Minister’s tautology is really a powerful explanation of this point.
Continue reading “CL Financial Bailout – The Hidden Truth”

CL Financial Bailout – The Real Case

Sen. Larry Howai, Min of Finance
Sen. Larry Howai, Min of Finance & the Economy

In 2013 I sued the Minister of Finance & the Economy for his continuing failure or refusal to provide the details relating to the huge $25 Billion bailout of the failed CL Financial group.

On Wednesday 22 July 2015, the High court ruled in my favour by ordering the release of all the requested information.

The basic principle behind the Freedom of Information Act is that the information held by Public Authorities belongs to the public, unless one of the valid exemptions is applicable.

The Court also granted the State a 28-day stay of execution which seems intended to allow them the time to decide whether to appeal before they have to provide the requested information. Given the ongoing Information War and the high stakes to maintain the ‘Code of Silence’ in relation to this bailout, I would not be at all surprised if the State were to appeal against this ruling.

The unexplained gap

On 1 October 2010, the Prime Minister addressed Parliament to explain that $7.3 Billion had been spent on the bailout and that a further estimated $7.0 Billion was required to settle all debts. That is a 2010 estimate of $14.3 Billion to settle the CL Financial bailout, but the current estimated cost of the bailout is in excess of $25 Billion. That means that over $10.5 Billion more than the 2010 estimate has been spent, so where did all that extra money go? That information and the defined official policy of secrecy are at the heart of this scandal. Continue reading “CL Financial Bailout – The Real Case”

CL Financial Bailout – Steal of a Deal

The CL Financial bailout was a steal of a deal for the owners of that troubled company. After all, the wealthiest man in the Caribbean was able to obtain an interest-free loan exceeding $25 Billion in Public Money at a time when no one else would lend him. Our Treasury was effectively the ‘lender of last resort’, so those terms were hugely in favour of CL Financial and its controlling shareholder, Lawrence Duprey. What is more, the shareholders kept all their shares.

In the previous column, I stated my view that Mariano Browne had taken what seemed to be a position supportive of Lawrence Duprey’s attempt to regain control of CLICO. I also pointed out that Browne was a member of the Cabinet when that fateful and detrimental deal was made to bail out CL Financial in 2009 and called on the significant members of that Cabinet to explain their rationale. I went further to say that Browne was one of the five significant persons who had been requested to testify and refused to do so.

browne-karen-dupreyI am pleased that Mariano Browne has replied on the record, so this column will deal with those valuable points. For starters, it is even clearer than before that former Minister of Finance, Karen Nunez-Tesheira, has serious questions to answer in relation to her central role in this bailout. Given that financial training and experience formed a weak part of her profile, one can only wonder at what prompted Manning to appoint Nunez-Tesheira to that position. We will see. In addition, the terms which were negotiated between the State and CLF are essential to understand today’s dilemma with respect to Duprey’s ambitions. A related issue which needs clarity is the role of the powerful, unelected ‘bigger heads’ who are seemingly in control of our country.

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Duprey and his cohorts benefitted from an unprecedented degree of access to key decision-makers in the Cabinet and the Central Bank.

One of the enduring paradoxes in how our society is governed is the lopsided distribution of information. There is an abundance of relatively unimportant information, alongside a severe scarcity of critical facts on the big issues of the day. It seems that we are now ‘Amusing ourselves to Death‘, to borrow an insightful phrase from Neil Postman.

There is a world seen and a world unseen. The challenge is to discern the scope and influence of the unseen world. The current lexicon describes the unseen world as the ‘Deep State‘. I have no doubt that such a state of affairs exists in our country. So what do we know about the huge decisions in our society’s governance and how do we come to know those things?

For instance, the most serious decisions are taken by the Cabinet, which consists only of members of Parliament – some directly-elected as MPs and others appointed as Senators. Some of those decisions are announced at the Thursday afternoon post-Cabinet Press Conference. But the coverage is always partial with my suspicion being that stories are often presented so as to conceal their less-favourable aspects.

Cabinet seems to operate according to two conventions – the first being ‘Collective Cabinet Responsibility’ and the second being that the discussions of Cabinet are secret. The Freedom of Information Act gives Cabinet documents a 10-year embargo against publication. So, the first problem is that the highest decision-making Chamber in our Republic is essentially a secret one. I have always felt that the veil of secrecy which covers Cabinet’s deliberations is most times severely detrimental to our collective interests. This sordid CLF bailout fiasco fortifies that view.

Another critical aspect of the current arrangements is the role of the powerful Party Political Financiers, which is rarely revealed, but often suspected. In the case of the CL Financial group, we know that CLICO was a major funder of both major parties, which gives this bailout fiasco its lingering, bitter, flavour. There are few opportunities for us to get a real insight, beyond rumours, as to the true role of the party financier. Apart from the role of CL Financial as financiers, we also learned in the Colman Commission that Nunez-Tesheira’s 2007 campaign benefitted from Hindu Credit Union (HCU) financing.

The 2009 negotiations

One question I always ask is whether Karen Nunez-Tesheira told her colleagues that CLF had paid a dividend three days after it requested a bailout? As a shareholder, she would have been in receipt of dividends. If the Cabinet was told, they should have insisted on immediate repayment of any dividend since an insolvent company cannot pay a dividend. If the Cabinet was not told, we are dealing with a most deceptive course of action. Which was it?

So, what did Browne say about those negotiations?

…I have said that Duprey’s (and other shareholders) legal position is strong as the government depended on a MOA (memorandum of Agreement) the time frame of which has long since passed. On that basis, the shareholders have rights. Even if the state has expended money, the State and or its agents (the Central Bank) must do so in way that protects both the policy holders and the shareholders.

That was my advice in cabinet and at the Finance Policy Committee. The view of the Minister of Finance prevailed. I am of the opinion that Karen Nunez Tesheira was wrong then and is wrong now…

Browne is concurring with my view that the State’s position is weak in this bailout endgame, the key point being “…the shareholders have rights…”. Being bound by the first convention of ‘Collective Cabinet Responsibility’, Browne kept his silence during the raging controversy of the past 6 years, but he has now chosen to break the secrecy convention. I am grateful to him and it is telling that the most expert Cabinet member in that critical arena of finance and economics is now revealing his recollections of these critical events.

karenandlawrenceNunez-Tesheira needs to share the rationale for the bailout formula which let Duprey and the other shareholders keep their shares and loaned those huge sums of Public Money to the wealthiest man in Caribbean on an interest-free basis. What were the public policy considerations which could possibly have supported such a course of action?

Browne goes further to outline a situation in which he seems to have been excluded from the negotiations –

…And for the record I have not been part of any negotiations with Clico or CLF as part of the bailout action. Neither was I a part of the cabinet which took the decision to support the CLF/ CLICO Group. Those decisions were taken at a Cabinet meeting of which I was not a part on 29th January 2009 as I was in Barbados representing the Minister of Finance at a COFAP meeting. This bailout was always the province of the Minister of Finance and the Governor of the Central Bank and (sic) had no part in those decisions.

Further, Clico/CLF/Duprey made no contributions to the PNM during my tenure as Treasurer…

I can remember Browne telling me before that he had been involved in negotiations related to the CLF Shareholders Agreement of June 2009. That Agreement, at para A of its preamble, undertakes to protect the interest of shareholders. Note – Browne has since denied this claim of mine, so that has to be noted.

Of course, we know that Browne was part of the Cabinet which made those decisions, even if he was not in attendance at those particular meetings (I have no reason to doubt him), it is immaterial. As a member of that Cabinet he bears collective responsibility.

Duprey’s intended re-entry

Browne contested my statement that he seemed to be supporting Duprey’s attempt to regain control of CLICO –

…With regard to your opinion, I am am (sic) supporting nothing…The state only owns 49% of the company. If the shareholders act in concert there is nothing to prevent them from having an extra ordinary shareholders (EGM) Meeting and replacing the state appointed Directors. It is unlikely that Lawrence Duprey can pass the fit and proper rule and therefore cannot be appointed to CLICO’s Board, but he can be appointed to the CLF Board…

Browne listed the reasons which seemed to favour Duprey’s position, which position is fortified by his interpretation of the fit & proper rules. In his view, those rules would have prevented Duprey’s appointment to CLICO’s Board, but he would have still been eligible to sit on CL Financial’s Board. If we are considering a situation in which CLICO would still have CLF as its majority shareholder, that is an entirely misplaced view.

In the Central Bank’s ‘Fit and Proper Guideline‘, the question of ‘Who should be Fit and Proper?’ is addressed at page 2 –

“…4.1 According to governing legislation the following persons referred to in this Guideline as holding “key positions” are required to be fit and proper: -…
…4.1.4 Controlling Shareholder – may be an individual or a corporate entity

  1. Under the IA, any person who is entitled to control at least one-third of the voting power at any general meeting of the company.
  2. Under the FIA, any person who controls twenty five per cent or more of the voting power at any general meeting…

Before the bailout about 89% of CLICO’s shares were owned by CLF, so Duprey cannot regain control of CLICO, either directly or via a holding company, if the fit and proper regulations are enforced. As I said previously, the acid question is whether the Central Bank will summon the will to apply those rules without fear or favour.

This is no academic dispute, since Duprey has made it clear that he is seeking to regain control of CLICO, so that financial company and the rules which govern it, must be central concerns in this matter.

Sunlight is the best disinfectant. Come clean.

AUDIO: Election Hardtalk interview on Power 102FM – 16 Jul 2015

Power 102 FMAfra Raymond and Peter Permell are interviewed on the ‘Election Hardtalk‘ show on Power 102FMFM by Tony Fraser about the continuing impact of the CL Financial bailout on the economy and the request to get back the company by Lawrence Duprey. 16 July 2015. Audio courtesy Power 102FM

  • Programme Date: Thurday, 16 July 2015
  • Programme Length: 1:19:47

CL Financial bailout – Really learning from the past

CB-gov - TTCSII am responding to the points made by Central Bank Governor, Jwala Rambarran, in his 6 November speech to the T&T Coalition of Service Industries.

This speech attempted to both re-affirm the Central Bank’s important role in our economy –

…as the country‟s prime financial regulator, the Central Bank has an almost fifty year record of maintaining the safety and soundness of the financial system…

and to distinguish Rambarran’s tenure as Governor since July 2012 –

…These are just a few of the initiatives the Central Bank has been working on over the last fifteen months to rebuild confidence, strengthen financial stability and to help create our future financial system…

Rambarran’s focus was “…First, “How did it all happen?” and, second…“What is being done to prevent a similar event from happening again?…” Continue reading “CL Financial bailout – Really learning from the past”

AUDIO: “Forward Thinkers” on More 104.7FM – 24 October 2013

Radio More FM 104.7 Afra Raymond chats on the show ’Forward Thinkers‘ with David Walker on 104.7FM, dealing with the CL Financial bailout and my lawsuit against the Minister of Finance to get at the detailed information as to how the $24B in Public Money was spent. 24 October 2013. Audio courtesy More 104.7 FM

  • Programme Date: Thursday 24th October 2013
  • Programme Length: 0:45:41