CL Financial bailout – Evading Integrity

CL Financial bailout – Evading Integrity

On 18th April 2018 I published ‘Integrity Query’ in this space on ‘the apparent failure or refusal of The Commission to carry out its duties in relation to CLF as required by the Integrity in Public Life Act (IPLA)‘. My 10th September 2012 complaint to the Commission that it had not been performing its duties in relation to the Directors of CL Financial had seemingly vanished, with no real reply to be had.

Then, on 6th August 2018, The Commission gave its written response to my 2012 complaint. That brief reply stated that The Commission considered all available information relevant to my complaint and concluded that those directors were not governed by the IPLA – a further statement was made that CL Financial and its subsidiaries, including CLICO remained a private company in which the Government (sic) had a minority shareholding. (See embedded letter below.) This article delves into that entirely unacceptable reply and its meaning. Continue reading “CL Financial bailout – Evading Integrity”

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CL Financial bailout – the Integrity Query

ic-logoYet another worrying aspect of the CL Financial (CLF) bailout fiasco is the role of the Integrity Commission (IC) in these turbid dealings. I am referring to the apparent failure or refusal of The Commission to carry out its duties in relation to CLF as required by the Integrity in Public Life Act (IPLA).

I first raised the prospect that CLF might well be under the IC’s oversight on 28th May 2009, in an article entitled – Judgment Time – Moral Hazard part 3. I have been pursuing that concern steadily since September 2012 and yet the position of the IC is no clearer. On 9th September 2015, I again put the question – Is the integrity Commission being willfully blind towards CL Financial? Indeed, in my March 28th 2018 interview with the Trinidad Express, I stated, in relation to the governance aspects unearthed by my campaign –

“…What is more, our Integrity Commission also seems to have lost its way in failing to recognise that CL Financial is a company under State control. As a result, the Commission has sought no Directors’ declarations from the largest of the State controlled companies. I tell you…”

Given that these are very serious allegations to level against one of our nation’s Public Institutions, I will give the supporting details.
Continue reading “CL Financial bailout – the Integrity Query”

Is the Integrity Commission being willfully blind towards CL FINANCIAL?

Afra Raymond
#14 Highsquare Condominiums,
1a Dere Street,
Port-of-Spain
868 625 8168
afraraymond@gmail.com

5 May 2015
The Registrar,
Integrity Commission of Trinidad & Tobago,
Level 14, Tower D,
International Waterfront Centre,
1A Wrightson Road,
Port of Spain

Dear Sir,

FORMAL COMPLAINT

Non-compliance of Directors of CL Financial Ltd and its subsidiaries

with the Integrity in Public Life Act (IPLA)

I am once again seeking your update on the Integrity Commission’s handling of my complaint of 10th September 2012 in this matter. Please note that the public statement by the Governor of the Central Bank on Friday March 27th 2015 to provide details of the ‘Resolution’ of the CL Financial bailout, brings this matter of high public importance into prominence.

One of the most instructive lessons from the Wall St/City of London Financial Crash, is the true impact of ‘Regulatory Forbearance’ on allowing the incipient crisis to grow to the devastating extent to which it did.

‘Regulatory Forbearance’ refers to the situation in which the Regulator with responsibility for a particular set of participants in the financial market decides to disregard the clear signs of breaches in the pursuance of some other objectives, usually unspecified. This irregular practice effectively screened reckless participants from the degree of examination and control to which they were supposedly subject. That pattern of erroneous judgment, to use a charitable phrase, wreaked immense damage on the financial system and the many millions of unsophisticated investors who mistakenly relied on the Regulators to safeguard their essential interests. The fact that the affected financial markets were located in advanced jurisdictions should give us pause when we consider that in our minuscule country we seem to be beset by many examples of ‘Regulatory Forbearance’.

For all practical purposes the Integrity Commission is self-governing, in effect outside the purview of any monitoring authority. Redress against it to force prompt and proper action is beyond the resources of all except the wealthy. After repeated attempts I now have to go back to the Integrity Commission itself with the recorded history of this matter (all detailed in this letter) which speaks for itself. This cannot be what the Parliament intended or what the public expects from the operation of the IPLA.

These points are to be considered –

Priority

There are repeated reports, from the most senior Public Officials, that the CL Financial bailout has consumed in excess of $25 Billion of Public Money over the last six years. Those Public Officials include the present Prime Minister, two Ministers of Finance and two Governors of the Central Bank. The Ministry of Finance Press Release of 12th June 2009 declared that the CL Financial group of companies was under State control consequent on signing the CL Financial Shareholders’ Agreement earlier that day. Given that this vast sum of Public Money was expended within this group of companies which remain under State control, there is an irresistible case that this entire matter ought to have been of the utmost priority for the Integrity Commission.

Complaint

My original communication to you in this matter was sent on 10th September 2012 and clearly stated, as its final sentence “…I am therefore requesting, in the public interest, your confirmation that Directors of CL Financial and the companies within its control are required to file declarations or your confirmation that those Directors are not required to file or such other informative response that will satisfy this complaint of apparent non-compliance…”. Yet when, on 22nd May 2014, I questioned the fact that the Commission’s Annual Reports for 2012 and 2013 made no mention of my complaint, you informed me, via email of even date, that my query was not classified as a complaint. For the second time and for the avoidance of any doubt, mine is a formal complaint, so your records should now be rectified accordingly.

Composition of Commission

On 22nd May 2014, in explanation for the delay in handling my complaint, you wrote – “…However the Commission is not properly constituted ( a Commissioner having resigned and not yet replaced by his Excellency the President) at this time and therefore cannot make decisions. As soon as the Commission becomes properly constituted the matter will be placed before the Commission for a decision…”. The appointments of Pete London (Chartered Accountant) as a member of the Integrity Commission on 25th September 2014 and Mr Justice Zainool Hosein as its new Chairman on 21st November 2014 filled the Commission’s vacancies. The Integrity Commission is therefore now properly constituted and capable of making decisions as prescribed under the IPLA.

The request for legal advice

…Directors of…bodies in which the State has a controlling interest…” is one of the types of ‘Public Officials’ under the remit of the Integrity Commission, according to the ninth item of the Schedule to the IPLA. As noted earlier, the Ministry of Finance Press Release of 12th June 2009 declared that the CL Financial group of companies was under State control consequent on signing the CL Financial Shareholders’ Agreement earlier that day.

Your reply of 22nd May 2014 states “…With respect to your query we have sought and obtained legal advice…”. In light of that statement, I am seeking your clarification as to whether the advice sought ‘with respect to my query‘ was the first advice you sought in this matter. If your reply is in the negative and advice was sought in response to the Press Release of 12th June 2009, that advice could not have relied on the Appeal Court ruling in #30 of 2008, which was not delivered until 27th June 2013.

In addition, I would emphasise that the Integrity Commission’s Public Notice at pg 49 of the Sunday Express of 6th October 2013, states that the IPLA applies to State Enterprises. At the fourth para of that Public Notice, which was intended to clarify published concerns as to the implications of the aforementioned Appeal Court ruling, State Enterprises are defined as companies which are controlled by the State.

In the alternative, if the answer is in the positive and my September 2012 complaint was in fact the first trigger of the Commission seeking legal advice on this point, we would collectively be at a strange and awkward place. A place in which the Integrity Commission, which is vested with the sole legal responsibility to seek declarations from this exact species of Company Director, took no action between 12th June 2009 and 10th September 2012, for whatever reason. We would be contemplating an appalling vista to quote the haunting words of a late, leading jurist.

Please consider these two closing points before moving on from this aspect of this matter –

  1. Firstly, the Integrity Commission is intended to be guided by the provisions of the IPLA, so there could have been no expectation of guidance or instructions from the Executive in relation to the scope of its remit. At least one should hope not.

  1. Secondly, your email of 22nd May 2014 requested from me a copy of the CL Financial Shareholders’ Agreement and the implications of that request are sobering. My original complaint of 10th September 2012 is rooted in the juxtaposition between the provisions of the IPLA and the purpose of the said Agreement (which was embedded in that complaint). In any case, the said Agreement would have been readily available from the Ministry of Finance, which published it on 11th March 2010 in response to my Freedom of Information request of 16th November 2009. It is entirely reasonable to conclude, from your request of 22nd May 2014, that you did not, prior to that request, have the said Agreement in either your possession or contemplation. It seems impossible to rationalise how relevant legal advice on the question of the applicability of the IPLA to the Directors of companies within the CL Financial group could be sought in the absence of the CL Financial Shareholders’ Agreement.

In conclusion, I would again request your urgent, diligent attention to this most important matter. As any reasonable person would appreciate – ‘Justice delayed is justice denied‘ and there has been too much delay in this matter, for one reason or the other. Given the high public importance of this entire matter, I would at this stage request publication of those instructions and legal advices on the issue of the applicability of the IPLA to the Directors of CL Financial and it subsidiaries.

It is impossible to really challenge runaway elites and wayward public officials without dismantling the impunity which these people enjoy due to the failure or refusal of our Regulators and oversight bodies, Law Enforcement officials and the Judiciary to act promptly and properly. In the words of the older generation of teachers and parents – ‘The Upholder is worse than the Offender‘. The thing must not only be done, it must appear to be done.

In the circumstances, I am calling on the Integrity Commission to carry out the necessary investigation to establish the facts according to the Commission’s standards. I am also calling upon the Commission to ensure that, if that investigation establishes the allegations contained in my complaint as being factual, formal Reports will be made under the provisions of S. 31 (1) of the IPLA “to the appropriate Service Commission, Board or other Authority and to the Director of Public Prosecutions setting out such details and particulars as it thinks fit…

I await your early, substantive reply.

Yours faithfully,

………………………………..

Afra Raymond

www.afraraymond.wordpress.com

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.

mariano-to-afra1mariano-to-afra2mariano-to-afra3

mariano-to-afra4

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.

CL Financial Bailout – False Firing?

Prime Minister Kamla Persad-Bissessar greets former Clico chairman Gerard Yetming, second left, and former Senate president Timothy Hamel-Smith, second right, after they showed up at a UNC “foot soldiers” mobilisation meeting in Debe on Tuesday. Also in photo are Oropouche East MP Dr Roodal Moonilal and UNC campaign manager Rodney Charles, left. PHOTO: RISHI RAGOONATH
Prime Minister Kamla Persad-Bissessar greets former Clico chairman Gerard Yetming, second left, and former Senate president Timothy Hamel-Smith, second right, after they showed up at a UNC “foot soldiers” mobilisation meeting in Debe on Tuesday. Also in photo are Oropouche East MP Dr Roodal Moonilal and UNC campaign manager Rodney Charles, left. PHOTO: RISHI RAGOONATH

I smiled at the page three photo in another newspaper of the Prime Minister holding hands with recently-dismissed CLICO Chairman, Gerald Yetming, at a UNC meeting in Debe on Tuesday 23 June 2015. As serious as the situation is, I just couldn’t help myself.

Yetming was a UNC Minister of Finance during the Panday administration and had been appointed on 28 September 2010 as Chairman of CL Financial Ltd, the parent company of the ‘CLICO group’ being bailed-out by the State.

I declined many requests for comment on this controversial episode, since something about it did not seem quite right. The actual CLICO dismissals were incredible to my mind, not only because there did not seem to be any conflict between the stipulations in the CBTT’s 3 June Press Release and the reported beneficiaries – that is explained in the sidebar. It is even more bizarre when one considers that Yetming, in whom all confidence was apparently lost after allegedly-unauthorised payments to former CLICO Directors, still serves as Chairman of the parent company, CL Financial Ltd.

There is a widely-held view that the CL Financial chiefs should not be recovering any of their money from this huge collapse before the completion of the Colman Commission and the publication of its Report. I share the public concern that no money should be paid to the persons who were in charge of that sinking ship. Not one cent. Nothing should be paid to the CLF chiefs until we have had the proper opportunity to consider the findings of the Colman Commission. Even with its severe limitations, that Colman Report would be our closest opportunity to understand this epic financial crime. To pay out money to those Directors and Officers who were responsible before the Report is published would be reckless in the extreme and jeopardises the public interest. Continue reading “CL Financial Bailout – False Firing?”