CL Financial, CLICO bailout: The rot is deep, the corrupt keep their Code of Silence

“There was no agreement.  None at all.  For a loan exceeding one billion dollars

Just imagine the Chairman who presided over the meeting of Clico Investment Bank’s Board which approved that loan… attempting to explain just what they were doing dispensing with depositors’ funds in that loose fashion.  I can scarcely wait.”

by Afra Raymond

Testing the Code of Silence

The Code of Silence has formed the subject of several columns in this series.

I am referring to the unwritten agreement amongst the leadership group in our society to maintain silence in matters of white-collar crime.  The guiding principle of the Code being that the members of that group must never be exposed to the same scrutiny and penalties as the common criminal.

That Code of Silence is poisonous to the progressive development of our society.  Unless we can bury the notion that white-collar crime pays, our society is doomed to lurch from crisis to crisis.  White-collar crime will never be truly challenged until the Code of Silence is tested to destruction.  I welcome anything which would dismantle the Code of Silence.  Literally anything.

The Commission of Enquiry into the various financial collapses which have beset us – Clico, British-American, Clico Investment Bank, Caribbean Money Market Brokers, the CL Financial group and the Hindu Credit Union – was announced by the Trinidad and Tobago Prime Minister in her 1st October address to Parliament.

On 17th November, Sir Anthony Colman QC was sworn in as the new sole Commissioner – he replaced the original choice – Sir Gavin Lightman QC, who had an apparent conflict of interest.  The Secretary to the Colman Commission is Judith Gonsalves, who served the Uff Commission in that role.  It is reported that Colman intends to hold open hearings and that those should start sometime in this month.

So, we are seeing three powerful channels emerging –

  • CIB winding-up action – ongoing litigation from National Insurance Board and National Gas Company to stop the Central Bank’s winding-up action.  Those court actions have been set for hearing in April and the sum of money at stake is an estimated $1.8Bn.
  • Policyholders challenges – The various policyholders’ groups have now declared their intention to take legal action to recover the monies they feel are owed to them.  The sums of money at stake in that series of actions is estimated to be $12Bn.
  • The Colman Enquiry – This is an overall, public investigation into the causes of the large-scale financial collapse as listed above.  Given the continuing failure to produce the accounts, the total sums of money involved are unknown.

What is the likely effect of these lawsuits and the oncoming Colman Commission of Enquiry on the entrenched Code of Silence in our society?

To begin with, I expect a series of legal challenges to the very hearings of the Commission, with the likely grounds being the principle that no person should suffer ‘double jeopardy’, in terms of two sets of charges to be answered.  It will be an attempt to completely derail the entire Commission of Enquiry.

I would not be very surprised if certain state agencies also sought to shut the enquiry down.  That would be a repeat of the unprecedented recent situation in which UDeCOTT went to court to challenge the Uff Commission.

The beneficiaries of the Code of Silence will make great efforts to avoid any deep examination of its members and the public needs to be alert to this point.  There is absolutely no shame in that group and we should also prepare ourselves mentally for the ‘memory loss’ defence of the kind we saw from Hafeez Karamath in the recent Uff Commission.

After generations of operating unexamined, the very bowels of the society’s leaders are about to be opened up to a disgusted and skeptical public.  The motivations, links and payoffs between these leaders are to be exposed to view.  The exposure is going to be critical.  Given the speed with which our legal system operates, the exposure is likely to be lengthy.  Given the range of active media in our society, the details are going to be all over the place.

So, what is at stake here?  What else can we expect, apart from legal challenges?

To begin with, I believe that the sums of money involved are several times more than in the Uff Commission.  In addition, the slowing economy and the pattern of behaviour have set the public into a very critical mood.

In my view, these are some of the people we would see publicly cross-examined in the Commission of Enquiry and various lawsuits –

  • Most important of all, the Chief of Chiefs, Lawrence Duprey – Will he or won’t he show up for the many hearings?  What can we expect to hear?  Can Duprey offer an explanation for the shocking discrepancy between the $100BN+ asset valuation as at the end of 2007 and the $23.9Bn asset value he specified in his letter of 13th January 2009 to Ewart Williams? A mere 56 days separate the publication of those 2007 accounts – on 18th November 2008 – from Duprey’s letter, which has been hidden from view, despite my two Freedom of  Information applications.  The only reason we have some idea of this discrepancy – no…that is the wrong word, maybe staggering decline is better – is the anxiety of the then Minister of Finance to clear her name from allegations of Insider Dealing.  That anxiety led the Minister to read this letter into Hansard on 4th February 2009.
  • Second most important of all, the Chair of Chairs, Andre Monteil – Monteil is now in retirement as a farmer and his testimony is surely one of the most awaited in recent times.  As former PNM Treasurer, CL Financial Group Finance Director, Chairman of Education Facilities Company, National Housing Authority, then Housing Development Corporation and Clico Investment Bank, it is difficult to imagine a player who was more central.  It is almost like a spy movie ‘The Man who knew Too Much’.
  • Patrick Manning – When one considers the huge donations to the PNM and the tangled web of this entire affair, it is difficult to see how Manning can escape serious, hard questions on many aspects. For instance, his 2002 decision to stop  enquiries into HCU by then Minister in the Ministry of Finance, Conrad Enill, will surely be open to question.  Manning’s recent bizarre behaviour might well be the beginnings of a defence.  We will see.
  • Karen Nunez-Teshiera – The Minister of Finance who had to go to Parliament twice to attempt to clear her name in this matter.  Firstly, from allegations that she withdrew her money from CIB early, having had inside information.  Secondly, from allegations that as a CL Financial shareholder, she was biased in her dealings with the bailout, having failed to recuse herself from the discussions.  Not one person I know, even blindly-loyal PNM-ites, is willing to openly defend the behaviour of Nunez-Teshiera. Not one.  Imagine that.  I think the phrase is “…A jury of one’s peers…”  I wonder whether her Cabinet colleagues knew that the Minister was a shareholder?  We won’t have to wait long.
  • The Regulators – from both the Supervisor of Insurance and the Inspector of Financial Institutions.  Just imagine the Supervisor explaining how Clico kept its licence all those years its statutory fund in serious shortfall.  Or the Inspector justifying how a bank can fail to file its tax return and yet keep its licence.  Mr. Hiralal must be considering his position most carefully at this point.
  • Central Bank Governor – Imagine Ewart Williams reconciling his several statements on Clico being a problem case since 2004, with his having two fixed deposits at CIB.  Williams must also be having a few reflective moments.
  • The Directors – What is to be the position of the Directors of these failed companies?  According to an affidavits filed in the Central Bank’s winding-up action, CIB made an undocumented loan with no interest rate or repayment period agreed.  That loan was in the sum of $162M USD – yes, about $1.03Bn of depositors’ funds were lent to Angostura (a related party) with no documentation.  It would be interesting to hear the Directors explain the degree to which that sort of advance is compatible with their fiduciary duty.  It is important to note that the phrase fiduciary duty in this case refers to the obligation of those CIB Directors to act with the depositors’ interest as their first priority.  But remember that CIB was wholly-owned by CL Financial.  So, can one properly reconcile the fiduciary duties owed to depositors with those owed to the sole shareholder?  It is a veritable conflict to be loaning depositors’ monies to the main shareholder, but that is why the loan agreements and credit committees exist.  So as to provide safeguards against incautious loans, which can jeopardise depositors’ funds, so as to ultimately destabilize the bank itself, as in this case.  There was no agreement.  None at all.  For a loan exceeding one billion dollars.  All of the safeguards to balance the several duties of the prudent Director seem to have been ignored in this situation.  Just imagine the Chairman who presided over the meeting of CIB’s Board which approved that loan, answering a series of critical questions, explaining just what they were doing dispensing with depositors’ funds in that loose fashion.  I can scarcely wait.
  • The Auditors – The various PWC professionals who prepared and signed those audits.  Will we see the release of the hidden accounts?  How much longer can they remain concealed?  There must be some quiet desperation creeping into Balisier House and PWC, just edging forward, along Victoria Avenue.
  • Robert Mayers – When he retired on 7th December 2008, did he or did he not know that Caribbean Money Market Brokers (CMMB) was heading for a financial collapse?  Of course, we now know from the official statements that CMMB collapsed a mere 7 weeks after Mayers left office as its Managing Director.  So, which is it to be?  Is it that the collapse came like a bolt of lightening from a clear blue sky?  Were there any warning signs?  Do CMMB’s accounts give any clues?
  • Dr. Bhoendradatt Tewarie – He is former principal of UWI’s St. Augustine campus and now heads UWI’s Institute for Critical Thinking.  Dr. Tewarie was a Board Director of the parent company, CL Financial, at the time of the collapse.  Was he aware of Duprey’s letter to the Central Bank Governor, a mere 3 days before that Board authorized payment of a dividend to CL Financial shareholders?
  • The same characters and many of the same questions are in the HCU part of the story.

The members of that Code of Silence are probably considering how best to escape the consequences of their actions and inactions. It will be a truly unique Christmas season for some of them.  There are probably not enough lawyers in the country to handle this tidal-wave of legal actions.

The stakes are huge and the burning question for me is – Can this be the first time that prominent people go to jail?  Serious sentencing?  Will any stolen monies be recovered?

Can the Code of Silence survive this challenge?

The Code of Silence must be destroyed if we are to progress.

Sidebar…Who is Anthony Colman?

Afra Raymond is a Chartered Surveyor.  This series on the CL Financial bailout can be viewed or readers’ comments made at www.afraraymond.com.

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5 Comments

Filed under Barbados, Business & Banking, Consumer Issues, Corruption, Crime & Law, Economy

5 responses to “CL Financial, CLICO bailout: The rot is deep, the corrupt keep their Code of Silence

  1. one can dream

    http://en.wikipedia.org/wiki/Seppuku

    If there was any honor or shame in the caribeean, a simple ceremony at the beginning of any inquiry with 100 or so tight lipped enablers or manipulators committing seppuku, might set the tone and save the Trinidadian taxpayers a lot of time and money.

    Movie rights alone could bring in millions!

  2. 84

    The sheer lack of comment on this subject says so much LOL!

  3. Anne

    This whole British American situation STINKS. Here in Bermuda the regulators are winding up the affairs of the Bermuda Branch. Many staff were made redundant back in August of 2009 through no fault of their own, yet had to wait EIGHT months to get a severance package. Despite this, the Agency Manager Wenda Krupp, was kept on during this winding-up action and is being paid a large salary. Mrs. Krupp has NO experience working in the Insurance industry so it boggles the mind that she was hired to work there in the first place, but it is unfair that this woman was allowed to keep her job while others were let go. The managers who all knew what was going on behind the scenes should have been the first to go.

    Four staff were kept on to help while the company is being wound up. These people are getting a salary and were also PAID BONUSES to stay on-while policyholders lost everything. Where is the money that is being used to pay bonuses coming from? Don’t even talk about KPMG who are the agents for the Official Receiver. How much are they being paid? Why are they allowing bonuses to be paid out?

    People need to know what’s going on. This whole situation stinks. Heads should roll because of this but it seems not-and there’s nothing the policyhlders can do about it. Utterly ridiculous.

  4. Debbi

    Wenda Krupp, the Agency Manager for British American Bermuda, worked at Capital G Bank, The Elbow Beach Hotel, King Edward Hospital, Saltus Grammar School and before being hired at B.A. was a self-employed ‘consultant’ in the field of Accounting, and has a CMA designation. Note that NONE of these places carried out insurance undertakings.
    She was hired at BA Bda. as an Accountant/Book-keeper. When the former manager was forced into retirement, she was given the job of manager only because her Asst. Manager had an extensive insurance background and experience. When he left, why was she allowed to remain as manager WITHOUT experience? What kind of people did British American have in senior positions???
    Then everyone wonders why the company went belly-up????

  5. Canajan

    As demonstrated in this link, the Code of Silence (cover up) in CLICO is simply a reflection of the Great American Way.

    Tax-payers will pay, and the perps will keep their ill-gotten gains.