When did CL Financial & CLICO insiders know that the group was heading for collapse?
by Afra Raymond
When you consider increasing lifespans, inflation and the greater likelihood of major medical expense, it is clear that proper retirement planning should be a major factor for most people.
Central to the growth and long-term success of the CL Financial group was its ability to mobilise the retirement savings of the Caribbean people in pursuance of its wider commercial objectives. I have been writing on how it all went wrong and who is to blame.
In preparing my submissions for the Colman Commission it occurred to me that the retirement planning of the 3 CL Financial chiefs is central to understanding the entire fiasco. It is rich in irony.
Fiduciary Duty of Directors and Officers
When did the Directors and Officers of CL Financial (CLF) know that the group was heading to collapse?
When did the Directors and Officers of the failed subsidiaries know?
What did they know and when did they know it? How much warning did their management controls give them?
The questions are pertinent and the time-line is instructive –
31st March 2008 – Andre Monteil retires as CLF’s Group Finance Director.
6th August 2008 – Anthony Fifi retires as Managing Director of the Home Construction Limited (HCL) group, which is wholly-owned by CLF. Fifi remained on the board of the parent company, CL Financial.
Mid-October 2008 – CLF purchases Jamaica Money Market Brokers’ 45% shareholding in CMMB. Please note that CLF owns 40% of JMMB.
7th November 2008 – Michael Carballo, CLF’s Group Finance Director gives an interview to the Business Guardian that the group had assets of $100Bn and could weather any storm.
18th November 2008 – CLF 2007 Annual Report is published – its Consolidated Balance Sheet disclosed a Total Asset Value of $100.666Bn.
8th December 2008 – Robert Mayers proceeds on pre-retirement leave from his position as Managing Director of CMMB, pending his scheduled retirement, on 28th February 2009, as Managing Director.
13th January 2009 – Lawrence Duprey, CLF’s Executive Chairman, writes, detailing an asset value of $23.9Bn, to the Governor of the Central Bank to seek urgent financial assistance. See Finding the Assets published on 23rd August 2009 for the text of that letter.
16th January 2009 – CLF pays a dividend of $3.00 per share.
23rd January 2009 – CLF has its Annual General Meeting at Trinidad Hilton.
30th January 2009 – The bailout is announced at a Press Conference at the Central Bank.
What was the treatment of departing Directors and Officers?
Three of the most important and senior CLF chiefs departed in the 12 months prior to the collapse. To be fair, Fifi was retiring from HCL, which has not been described as a failed company, despite its challenges. To understand the picture properly it will be necessary for the Colman Commission to examine the terms of the retirement of these CL Financial chiefs.
Those departures must be examined from the documents if they were to be approached from the compensation aspect. What I mean is that these chiefs would have been paid upon departure and that would likely have been documented.
The suggested line of enquiry is –
How much did Messrs. Monteil/Fifi/Mayers receive upon retirement? Does anyone believe that these chiefs left without compensation after years of service, at the highest possible level? The amounts actually received and the bases on which those sums were calculated promises to be very interesting.
How were those retirement payments calculated? – Were the amounts arrived at by a ‘set’ formula? Was that formula specified in their employment contracts?
Were those sums reduced to reflect the impending crash? – That alternative is the crux of the issue, coming to the point of what did they know and when. If the sums were reduced to reflect the poor performance of those failed companies, we need to question the misleading accounts given as to the group’s health right up to the very brink of the collapse.
Shifts in asset values
I am also wondering if the sudden drop in asset values from $100Bn + to just under $24Bn, in the space of less than 2 months is part of this aspect of the story. Only when we have those employment contracts published will we be able to consider whether there was any connection between the departures and the sudden drop in asset values.
Ultimately, we have to wonder as to the implications of the other alternative. If we learn that these CL Financial chiefs were able to depart the failing group with no reduction in their retirement payments, that would be very serious indeed. If that were the case, we would be contemplating employment contracts which divorced pay from performance. Given contemporary norms that link pay and performance, that would be an appalling vista. We would be seeing that our region’s largest investment group was saddled with a leadership which had constructed for itself the ultimate high-return, no-risk employment and retirement benefits, all at the expense of everyone else. The ultimate irony.
I am fully expecting that there will be further legal arguments to silence or shroud any efforts by the Colman Commission to delve into this aspect of things. Colman must be robust in his probe – he must follow the money.
Afra Raymond is a Chartered Surveyor. He is President of the Joint Consultative Council for the Construction Industry and Managing Director of Raymond & Pierre Limited. This series on the CL Financial bailout can be viewed or readers’ comments made at www.afraraymond.com.