CL Financial bailout is a grievous attack on the very integrity of our Treasury

“We have now been bound into a long-term arrangement to restore the fortunes of one of the Caribbean’s riskiest adventurers.”

“…it seems clear that the cupboard is bare and that this CL Financial group has no unpledged assets of any value.”

“We are… advancing an unlimited quantum of taxpayers’ funds, for which no security has been provided and those funds are being advanced at ZERO interest.”

“…the State (takes) all the risk, a massive injection of capital, responsibility for management, yet even in the case of a successful outcome there is no return either by way of interest on the funds advanced or equity in the rejuvenated enterprises.”

“..where is the $5.0Bn missing from the CLICO Statutory Fund?”

These are some excerpts taken from Afra Raymond’s latest article on the CL Financial – CLICO bailout. Afra used a Freedom of Information demand to obtain the June 12, 2009 CL Financial shareholders’ agreement with the Trinidad & Tobago government – and what a scam that agreement is.

Afra explains how we taxpayers are being raped to save the skins of a few big shot friends of government – and it’s not just the Trinis.

With the full and enthusiastic participation of their David Thompson DLP government, Barbados citizens are also being raped as our Prime Minister uses our money to bail out the Godfather of his children, long-time legal client and political supporter, Leroy Parris.

Barbadians of all ages, colours and political stripes should read Afra Raymond’s articles – but they should also think for themselves as they read the original documents that are posted on Afra’s website.

Florida: Just one of the Duprey family mansions

Taxpayers take all risks while the Bigshots keep their Mansions

My friends, you don’t have to listen to what Afra says. You don’t have to listen to what Barbados Free Press says. You can think for yourself so read the original documents and make your own list of questions and demands of the elected politicians who have pledged the wealth of your nation and your future in a bailout that lets Parris and the Dupreys and the rest of them keep their mansions and offshore bank accounts.

As CLICO's lawyer, PM Thompson helped build the house of cards

Then ask Barbados Prime Minister David Thompson to show all the CLICO – CL Financial bailout documents and business records that remain hidden from the taxpayers because Barbados does not have a Freedom of Information law.

Here is Afra’s latest article published in full. You really should visit his website and read it there, but we’ll leave it up here in full because… ya never know!

COMMENTARY on the CL Financial Shareholders’ Agreement of 12th June 2009
By Afra Raymond, Chartered Surveyor

Read this article at: www.afraraymond.com

FOR YOUR INFORMATION: A copy of the official agreement between C.L. Financial Limited and the Government of Trinidad and Tobago (PDF) has finally been delivered to me per my request under the Freedom of Information Act.  The CL Financial Shareholders’ Agreement (SA) of 12th June 2009, which I requested on 16th November 2009 under the Freedom of Information Act, was sent to me by the Ministry of Finance on 11th March 2010.  My emailed response to the Minister of Finance is on the home page of this blog.

My preliminary comments are –

Quantum – The shareholders’ agreement (SA) is silent as to quantum, which would seem to mean that the group will enjoy unlimited access to taxpayers’ funds.  The 2010 budget statement on 7th September states an estimated allocation to the CL Financial bailout of $5.4Bn – but subsequent events have only added to the confusion.  To wit, the $50M USD for the British-American Insurance recovery (as per 2nd November ECCU press release) and the ‘up to $510M’ announced to be available to meet the pensions due to ex-Caroni workers.  Question being whether the $5.4Bn includes the subsequently-announced amounts or are those to be added-on?

Security – At the preamble to the SA – on page 5 – we are told that “…valuable consideration…” is being offered by CLF as per the original MoU.  Of course, given the Governor’s revelations on 7th April 2009 – see http://guardian.co.tt/business/business/2009/04/08/govt-left-empty-handed-cl-financial-bailout – that is simply not so.  Indeed, it seems clear that the cupboard is bare and that this CLF group has no unpledged assets of any value.

Interest – No mention of interest at all.  We are therefore now advancing an unlimited quantum of taxpayers’ funds, for which no security has been provided and those funds are being advanced at ZERO interest.  Given the well-established rule that late payment of taxes makes a taxpayer liable to 20% interest and the interest rate the Federal government charged AIG for their bailout funds – it was 8.5% above the benchmark LIBOR, which was at 3.0% – it is clear that this represents a massive concession to the CL Financial group.  Quite apart from the bailout itself, the 325 shareholders of this group are also benefiting from this unprecedented and unexplained facility of ZERO percent interest rate.

Accounting – Section 4 of the SA sets out the procedure for a proper system of accounts, culminating at 4.4.5 – “…shall ensure that an annual report of CLF is prepared and dispatched…in manner consistent with standard corporate practice…“.  The accepted interpretation of this language informs us that the word ’shall’ denotes an obligatory, non-voluntary duty.  If that is the case, when can we expect publication of the 2008 annual report, accompanied by audited accounts, as per ’standard corporate practice’?

The role of the Shareholders – The MoU of 30th January, at Para (c) of its preamble, spells out its aims as “…to protect the interests of depositors, policyholders and creditors of these institutions…“.  According to the second sentence of the Ministry of Finance press release of 12th June 2009 – this is the penultimate document in the ‘Quick-Guide’ in the CL Financial bailout section of this website – “This new agreement is designed to give substance to the Memorandum of Understanding (MOU) of January 30th 2009.”  The SA of 12th June 2009 was the subject of that press release.  The SA, at Para A. of its preamble, states the intentions of the parties as having been set out in the MoU of 30th January 2009 and ends by “…their stated understanding, inter alia, that certain steps be taken to correct the financial condition of CLICO, CIB and BA in order to protect the interest of depositors, policy holders, creditors and shareholders of these institutions…” (These two words are put in bold as my own emphasis).

I questioned that official version in ‘Fit and proper?’, ‘Party of parties’ and ‘Figuring it out’ – all available on this blog.  Now that we have the actual SA to work with, it is clear that the statement in 12th June press release is extremely misleading.  The SA does not just ‘…give substance to…‘ the original MoU, it in fact is an entirely different species of agreement.  The Shareholders’ Agreement constitutes a written guarantee to protect the 325 shareholders of this CLF group.


Assisting the incoming Management – Clauses 2.3.3 and 2.3.4. of the SA, require the outgoing CL Financial chiefs to render all assistance to the incoming Board and Management in terms of all records and accounts etc.  The question here is ‘Have the new Board and management been receiving the full assistance of the previous CLF chiefs?’  If not, what is being done about it?  If yes, where is the $5.0Bn missing from the CLICO Statutory Fund?

“…several important and shocking facts came to light.”

Analysing the lacunae – The events in the interregnum and their consequence are extremely important aspects of this matter.  I say so because the intervening period – i.e. between 30th January and 12 June 2009 – was one in which several important and shocking facts came to light.  Some of these were –

Payment of Dividends – $3.00 per share paid on 16th January – i.e. three days after Duprey wrote to the Central Bank Governor for urgent financial assistance.

Over-pledging of assets – As cited above, the Central Bank Governor revealed that CL Financial’s assets were all fully pledged.

$5.0Bn is missing from CLICO’s Statutory Fund – According to the newly-appointed CEO of CLICO, Claude Musaib-Ali (he has since resigned, effective 14th February 2010) the CLICO Statutory Fund had $5.0Bn missing – see  HYPERLINK “http://guardian.co.tt/news/general/2009/03/01/where-money-gone” \t “_blank” http://guardian.co.tt/news/general/2009/03/01/where-money-gone.

Attempted sale of assets as per CL Energy – Also, CL Financial attempted to sell its shares in CLICO Energy, which was in breach of the terms of the MoU. At clause H. and 6.1, the outgoing CL Financial Directors agree to use their best endeavours to reverse the sale of those shares.

With the exception of the last item, none of these other three serious matters are addressed at all in the SA.  Silence on the payment of dividends.  Over-pledged assets are described as being ‘valuable consideration‘.  Silence on the missing $5.0Bn from CLICO’s Statutory Fund.

Those four events, having been revealed in the gap between the MoU and the SA, should have informed the stances taken by the parties.

To my mind, these actions by CL Financial are indicative of insincere behaviour intended to outwit and cheat the taxpayer.

The Ministry of Finance press release describes the SA as ‘…giving substance to…‘.  Nothing could be further from the truth, since the SA in fact creates new levels of entitlements and protections for the CL Financial shareholders.

As taxpayers, we ought to have been able to rely on the State negotiators to propose terms which would have extinguished the equity of the CL Financial owners and taken other steps to restore the correct position.  Instead, the SA has not sought to address their assaults on good faith and ‘fit and proper’ behaviour.  We have now been bound into a long-term arrangement to restore the fortunes of one of the Caribbean’s riskiest adventurers.

Readers, please take note.  In terms of its size, timing and terms, this CL Financial bailout is a grievous attack on the very integrity of our Treasury.

Two sidebars if you please…

The EQUITY position

In a situation like this, where a company is effectively both illiquid and insolvent, the incoming investor/lender has enhanced rights.  Effectively, such a company is dead – just like someone whose heart has stopped beating – and any assistance or lending is usually on very onerous terms.  The only exception would be in the case of related-parties who are able to agree special terms which no one else could accept.

That seems to have been the case here, since we had the CL Financial group out of cash, with its assets fully pledged, but yet able to get the full financial assistance of the State, without being forced to relinquish the rights of its shareholders.

One is reminded of the telling statement by the Governor at the press conference to announce the bailout on 30th January 2009, as to the fact that one of the main reasons for the collapse of the CL Financial group was ‘…excessive related-party transactions…’.  It seems to me that this is exactly what we, the entire nation of Trinidad & Tobago, have now entered into.

The capacity to learn from the past is one of the main signs of maturation, but we are not displaying those qualities here at all, at all.

We do not seem to have learned from the central lesson of that tragic collapse.

The public position – Heads we lose, tails they win…

Another troubling aspect of this SA is that it does not properly allocate risk and reward between the parties.  Again, readers are asked to remember that the mis-matching of risk and reward was also one of the elements which brought down the CL Financial group.

First example, let us use an Optimistic Model in which the State intervention in CL Financial is successful.  That would look like this –

All policyholders’ and depositors’ claims are satisfied;
All asset values are restored;
Republic Bank Limited and Barbados National Bank continue to thrive as leading banks in their sectors;
CLICO, British-American etc are restored as dynamic companies with healthy market share;
Angostura, Methanol Holdings, Home Construction Ltd and the other non-financial parts of the CL Financial group are also restored to health;
Overall, the CL Financial group returns to profitability.

If that happened, the State investment in CL Financial would have been beneficial to the 325 shareholders, but all the State would be entitled to receive, for having risked its own capital, would be a repayment of those sums, with no interest.

In this situation, the SA has allocated to the State all the risk, a massive injection of capital, responsibility for management, yet even in the case of a successful outcome there is no return either by way of interest on the funds advanced or equity in the rejuvenated enterprises.

Second example, let us use a Pessimistic Model in which the State intervention in CL Financial fails.  That would look like this –

Many policyholders’ and depositors’ claims are frustrated;
Assets are sold by mortgagees and decline in value;
Republic Bank Limited and Barbados National Bank are disposed of to meet the demands of creditors;
CLICO, British-American etc fail to regain their place in the markets;
Angostura, Methanol Holdings, Home Construction Ltd and the other non-financial parts of the CL Financial group are adversely affected by the group’s troubles and also decline or are disposed of;
Overall, the CL Financial group is slowly broken up.

If that happened, the State investment in CL Financial would have been a loss for the taxpayer, since it would be impossible to recover our funds.

In this situation, the SA has allocated to the State all the risk, a massive injection of capital and responsibility for management.  The only thing the State has to look forward to here is the blame and the losses.

Heads we lose, tails they win…

27 Comments

Filed under Barbados, Consumer Issues, Corruption, Crime & Law, Freedom Of Information, Offshore Investments, Political Corruption, Politics & Corruption

27 responses to “CL Financial bailout is a grievous attack on the very integrity of our Treasury

  1. Donald Duck, Esq

    Why have we not heard anything from the oversight commitee in Barbados?

    Who is on this oversight committee? Why is that so top secret?

  2. Donald Duck, Esq

    Why is it that persons are so reluctant to comment on the chaos CLICO has created in the financial community? Can persons who redeem their annuities get their money refunded when they want? Are claims being paid in a timely manner? If the answers are yes then I will stop quacking.

  3. Donald Duck, Esq

    Anyone read the Nation news paper today. British american Barbados will shortly be under judicial management. Clico life Barbados is likely to go there shortly thereafter. Both entities have been told to cease writing new business. Has the oversight commitee not failed? Your readers can’t say i did not warn ou. I suspect there is going to be more disturbing news to come such as the size of the size of the deficit on the statutory fund.

    Where is Mr Parris in all of this? Why not a squeak from him?

  4. Donald Duck, Esq

    The Minister of Finance has to level with us and tell us who is or was on the oversight committee?

  5. Donald Duck, Esq

    Is Villa Nova for sale? What about Sam lords? Did CLICO ever own it? Does Sam lords now have a new owner? Why not have Barbados Farms buy out Todds Estates? If not why doesn’t the government buy Todds for its housing needs?

  6. Donald Duck, Esq

    Does anyone have a record of the financials of British american in Barbados being published recently. CLICO life published an abbreviated version of theirs for 2008.

  7. Kammie

    I have never agreed wholesale with any decisions governments make. However, I must say that other Caribbean Countries look for us to leadership. Thus with this Clico/BAICO issue Ralph Gonzales is using our model and trying to save the policyholders funds. I am a major policyholder and also a former employee of Clico and have encouraged many persons to invest their funds in the FPA which is different to the EFPA. For 15 years the government and Supervisor of Insurance allowed Clico to sell this EFPA which is a deposit taking plan despite much protestation from Financial Institutions. The proverbial shit hit the fan under the DLP. This is a balanced view and not a political view.

  8. Donald Duck, Esq

    Why is everyone so silent on this matter?

  9. micky

    It appears as if they are not as interested as you are in Leroy Parris, David Thompson and all of your innuendo.

    We all know where a conversation with Donald Duck Esq will lead.

    Sorry but we have better things to do with our minds.

  10. Donald Duck, Esq

    Did the opposition not say in 2009 that clico should be placed under judicial management? why was it not done then?

  11. Donald Duck, Esq

    Micky

    Do tell us where a conversation with me will lead?

    I am not a B nor a D but a realist and if we don’t start looking at the CLICO issue seriously we will all suffer. Remember any bail outs or guarantees will have to come from you and me and Disney is not paying us sufficient for that to happen.

    Where is Minnie today!!!

  12. Donald Duck, Esq

    Why is my comment awaiting moderation?

  13. Josquin Desprez

    If persons associate a political bias with Donald Duck, Esq or not, he has asked some very important questions that need need to be answered.
    It seems to me that the DLP political yard fowls think that David Thompson and the DLP are above criticism.
    This web site has provided information that suggests that both political parties have exhibited some elements of corruption.
    But instead of examining these issues rationally, the DLP yard fowls prefer to turn a blind eye to many events that are unfolding in this island, and refer to the corruption of the last administration.
    Corruption under the BLP past was corruption, and corruption under the DLP present is corruption. Instead, the yard fowls would say that corruption happened during the 14 years of BLP rule and no one said anything, so persons are talking now, which means to say, give Thompson and his crew a chance.
    Yard fowls should cease their present quest in trying to compare David Thompson with Jesus. Thompson is just like any ordinary man, imperfect and a sinner, and like any other man, he will do wrong for which he must be criticised. Thompson himself thinks that every decision he has made is perfect, and he admonishes his critics. Thompson and DLP yard fowls are no better than the Mottley and the BLP yard fowls.

  14. Tell me Why

    Did I hear correct that around 100 people might be axed frm Clico? Why the silence? Let’s stop the politics with this institution an let the policy holders know the true position. I am worried because my life insurance along with the majority of my family future is tied up with this company.
    I am surprise that it was discussed during the estimates and our so-called national TV refused to mention it during the news. I await other views.

  15. Something(s) Happening

    Donald Duck, Esq

    March 17, 2010 at 10:36 am

    Did the opposition not say in 2009 that clico should be placed under judicial management? why was it not done then?
    ****************************************

    Hello Donald Duck Esq ( Excitable Serial Quacker…Esq )

    A better question for you to ask….

    How come under the BLP Administration the 2 largest Capital Works Projects ( Dodds Prisons & the ABC Highway ) Owen Arthur & Mia Mottley hired 2 companies that had criminal records in other jurisdictions ?

    Dodds Prisons was done by VECO company whose prinicipals were jailed in Alaska !

    The ABC Highway was done by 3S & Mabey Johnson whose principals were charged and jailed in Jamaica and the UK for bribery !

    It stands to reason that both Owen Arthur and Mia Mottley did not care one IOTA about due dilligence and good governance.

    I am so proud that the Bajan electorate spotted this and made the right choice on 15th January 2008 .

    Long Live the DLP !!!!

  16. Watchie

    Wa loss the opposition DLP at that time failed to do their work, hardly used to attend parliament and the true leader did not lead when in opposition. Got de answer. Ask Dougie if dat in de case.

  17. Donald Duck, Esq

    The moral of all of this is that there are always two sides to a story!!!

  18. Something(s) Happening

    Donal Duck answer the damn questions.

    How come the last BLP gov’t could only have found criminals to carry out capital works projects i.e Dodds & ABC Highway ?

    Stop the doodling and quacking…..the spotlight is on the shady dealings of the BLP.

    For Owen to say blame him is not enough…..remember in 2007 he was bragging of have the best team of Ministers at his disposal….actually he called them the “TEAM FOR THE TIMES ”

    Ah…I am too glad Bajans voted the BLP crooks out of office.

  19. Donald Duck, Esq

    If you have a problem with Dodds and the ABC highway then why not have a public enquiry. You had a special audit of hardwood and udc and we have not heard a thing!!!

  20. Donald Duck, Esq

    Is the Minister of Finance misleading the public with what he tells us about CLICO and what he does not tell us?

  21. Donald Duck, Esq

    How come leroy parris is still with clico when his television station announced last year he was retiring?

  22. Something(s) Happening

    Donald Duck, Esq
    March 19, 2010 at 11
    :29 pm

    How come leroy parris is still with clico when his television station announced last year he was retiring?
    ***********************************
    Because Mia Mottley has remained as the Attorney for Four Seasons…..without disclosing this bit of information while being a Cabinet Minister in Barbados.

    Huh ????

  23. Pearl

    My question is what if anything should the policy holders do? As Donald Duck said can they get any of their money back? Can they just stop paying without penalties?

    To be honest it does not matter about which political persuasion you have. It does matter about 100 people being out of work but that cannot match the amount of money policy holders and their families could lose. Can you imagine saving for years, thinking you’ll be comfortable in your old age and coming out with nothing? Too scary.

    Lets hope this all gets sorted soon and its the policy holders that are the winners.

  24. Donald Duck, Esq

    What is also worrying with clico ceasing to write new business is the lack of competition in the sector. There will now only be sagicor and guardian life offering life insurance to the people of Barbados. If there are any others please let me know. While such a development is good for the players left in the market, it cannot be good for the market.

  25. Josquin Desprez

    Something (s) Happening

    Do you really believe that if the past BLP administration did wrong, that this gives the DLP the right to do similar wrongs, and persons like you justify such actions?
    You are being a typical political yard fowl pimp. I hope for your sake that you are reaping substantial benefits for your stupidity and blind loyalty to a political party.

    Persons like you use the blog to insult and castigate fellow Barbadians all in the name of a political party. While the politicians are drawing two salaries, (one from their profession and the other from parliament) the cost of living does not affect them; it affects us the working class.

    For your efforts, i hope that the politicians supplement your income as a reward.

  26. Donald Duck, Esq

    Have you heard the news tonight that clico fighting back and appealing the order of the supervisor of insurance to stop writing new business? Clico says the gap in the statuteroy fund has been filled!!!! Clico holdings barbados is alleged to have stepped in!!! Has clico holdings published its accounts for 2008. Oh by the way what about the accounts of British american for 2008. have these been published in the gazette as they should be?

    Apparently if they stop writing new business about 100 staff will be sent home.

  27. http://bajanreporter.com/?p=9489

    “As Chairman of the Board of Directors, Mr. Leroy Parris has a duty to inform the public when the Directors became aware of the issue, what was being done by the Company to right that wrong and what timeline they had agreed with management to achieve that objective. Surely in a responsible insurance company following the appropriate legislation is important.”