Daily Archives: September 17, 2010

When did CL Financial and CLICO actually collapse? Answer: Long before it was announced…

“Virtually $5.9Bn of CLICO Investment Bank assets seem to have vanished in a mere 13 months – a weekly rate of ‘withdrawal’ close to $105M”

In his latest article, our friend Afra Raymond makes a simple observation that other news media seems to have missed or deliberately ignored.

CL Financial bailout

The House on the Corner Part II: More insights into CLICO Investment Bank

by Afra Raymond

The most pressing issue in the financial system is the CLICO fiasco

…This fiasco was caused by reckless corporate governance and the glaring failure of our financial regulatory institutions…

…This crisis was caused by an absence of risk management, excessive borrowing internally and externally to fund high risk speculative investments, and wrong financial reporting…”

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

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

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

  • CIB’s 2007 audit – Was performed by PricewaterhouseCoopers (PwC) as at 31st December 2007, with the Balance Sheet showing Total Assets of $12.587Bn and Total Liabilities of $11.699Bn.  Please note that those accounts were unqualified – PwC gave a ‘clean’ audit to CIB at the end of 2007.
  • CIB’s Management Accounts – As at 31st January 2009, showed Total Assets of $12.264Bn and Total Liabilities of $10.692Bn.  Those figures are broadly in line with the audit figures 13 months earlier, at the end of 2007.
  • Ernst & Young’s Statement of Affairs – As at 31st January 2009, that showed Total Assets of $6.387Bn and Total Liabilities of $11.080Bn.  Virtually $5.9Bn of assets seem to have vanished in a mere 13 months – a weekly rate of ‘withdrawal’ close to $105M – leading inevitably to the estimated insolvency of $4.693Bn. Continue reading
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