CL Financial bailout – Swearing an Oath
by Afra Raymond
The former Trinidad and Tobago Minister of Finance, Karen Nunez-Tesheira (photo above), is once again in the news, due to her dispute with the Integrity Commission as well as her expected testimony at the next session of the Colman Commission.
The former Minister has had to defend against allegations of insider trading related to her early withdrawals from CLICO Investment Bank (CIB). There was a lengthy address to the Parliament on Wednesday 4th February 2009. The March 2009 revelation in the Guardian newspaper, that Nunez-Tesheira was a CL Financial shareholder was also the cause of further defensive statements (PDF) to Parliament on 27th March 2009. In the first wave of defense, there was silence as to the fact of Nunez-Tesheira’s shareholdings in CLF.
In November, her attorney attempted to challenge my position on this at the Colman Commission, but I maintained that ‘If the genuine attempt was to address the perception of corruption in a forthright fashion, all the information should have been given’.
In the second wave of defense, there was no mention of the fact that the insolvent CL Financial group paid a dividend to its shareholders after writing that fateful letter to the Central Bank for financial assistance. Again, through the unfolding scandal we are witness to responsible officials who chose to be selective in making the required full and frank disclosure. All to the detriment of the tax payer.
Those attempts to defend against the allegations were only partially successful, since there is little doubt that Nunez-Tesheira’s reputation has been damaged by the entire episode.
Nunez-Tesheira is now alleging that the Integrity Commission failed to properly notify her of exactly what possible charges have been notified to the Director of Public Prosecutions. I understand that the charges relate to an allegation that the CLF shareholding held by Nunez-Tesheira amounts to a conflict of interest in relation to the discharge of her duties as Minister of Finance at the time of the bailout.
If the former Minister’s concerns are true, that may negate the fundamental investigation, which would be a real pity in terms of settling the elementary accounts of that turbid period.
I have my own serious concerns, derived from the same set of facts, about the lessons to be learned from the decisions of that individual, Karen Nunez-Tesheira.
Ministers of government in Trinidad & Tobago swear an Oath of Office – under S. 84 of the Constitution – upon their appointment.
Section 84.
Form of Oath (affirmation) for
A Minister or Parliamentary SecretaryI, A.B.. do swear by………… (solemnly affirm) that I will bear true faith and allegiance to Trinidad and Tobago and will uphold the Constitution and the law, that I will conscientiously, impartially and to the best of my ability discharge my duties as ………… and do right to all manner of people without fear or favour, affection or ill will.
‘conscientiously, impartially’
To my mind, the only reasonable reading of the phrase ‘conscientiously, impartially’ is that personal, family, friends or other related commercial interests must never be present or considered when discharging public duties. The closing phrase specifies without fear or favour, affection or ill will, the plain meaning of which only reinforces the previous point.
I keep returning to the National Gas Corporation (NGC) Press Release of 4th February 2009 in response to widespread rumours that its heavy withdrawals had prompted the collapse of the CL Financial group. That Press Release rebutted those allegations, but was interesting in that it also spoke of CIB’s failure to return significant deposits in November and December 2008.
This citation from the Press Release –
That official NGC statement establishes that the CL Financial group was known to have been in very serious financial difficulties as far back as November 2008 – after all, over a three-month period CIB was unable to repay in excess of $250M in matured deposits. Given the high degree of trust between the CL Financial group and the government of the day, that breach must have been known at the very highest level.
Then I move to consider the extensive interview Nunez-Tesheira gave on 4th February 2009 to the Express on the broken deposits, the headline being truly priceless ‘Everybody knew CIB was in trouble’. That interview formed part of my submission at the Colman Commission, with neither its inclusion, nor my inferences from it, being challenged by Nunez-Tesheira’s attorney during his cross-examination on 10th November.
“…She then said: “On December 31, 2008, I withdrew an account which had matured on December 31, 2008”. Since then, Express investigations have discovered that Nunez-Tesheira had (not one) but two accounts with CIB, which matured (not on December 31) but was due to mature in April and August 2009 respectively. And she applied on December 30 to break these two deposits.
In an interview with the Express on February 4, Nunez-Tesheira also confirmed that her sister made an application on December 30 to break the $2.1 million deposit held in her late mother’s name, Una Nunez.
In that interview Nunez-Tesheira said: “Everybody knew CIB was in trouble.” But she stressed that she only received the formal brief on the issue of CL Financial troubles on January 14.
In an interview on the same day with this newspaper, she stated: “The information about CIB and the concerns about CIB, were out there in the public domain for a long time, and my sister being a banker, would have been one of the persons who would have heard the concerns about CIB.”
Asked if in hindsight she should have declared her investments in CIB and CMMB before making any statements in the Parliament on the issue, Nunez-Tesheira said she had no need to do so. “In answering that question, it would imply that there was something that somehow was untoward,” she said, adding that there was not(hing untoward)…”
In her statements to the Parliament Nunez-Tesheira was emphatic on these important points – from page 629 of Hansard of 4th February 2009 –
“….Prior to January 14 of this year, I can truthfully state that I had no personal, formal or informal information about the extent of the liquidity difficulties the Clico Investment Bank has found itself in, other than the information known and available to any other citizen of Trinidad and Tobago and those on the other side, for that matter. Like any other citizen of this country, I also have to attend to my personal affairs and I did so until December 30, 2008 with respect to my personal transactions with Clico Investment Bank…”
The emphasis is mine.
An Artful Statement
The emphasis on extent, as distinct from the existence of the liquidity difficulties, is crucial. The way that statement to Parliament is crafted, it is possible to have been aware of the existence of the liquidity problems and still claim to have been ignorant of the extent of those problems. In my view, Nunez-Tesheira’s choice of words is artful, since she is already on the record as to her motivations in ensuring that her family monies were withdrawn from CIB when she learned of the financial problems there.
The then Minister of Finance was also clear that she took official action only at the point when she was officially informed.
In my view, this sequence of facts represents a real, clear example of breach of public duty and breach of the ministerial oath of office. By her very own words Nunez-Tesheira was informed and believed that the group had problems, as a result of which, she took the necessary steps to protect her own family’s financial position. Following that, the then Minister was officially advised that the CL Financial difficulties were now going to be requiring a State bailout at which stage she took official steps to deal with the crisis.
In my opinion, the Oath of Office does not permit that course of action. Under the terms of that Oath, officeholders are required to properly discharge their duties at all times. A holder of ministerial office ought not to allow family interests to come into conflict with his/her duty to protect national/public interests. It seems clear to me that the actual course of decisions by Nunez-Tesheira in this episode is contrary to both the spirit and intent of the Oath of Office.
So, firstly, we have Nunez-Tesheira’s apparent decision that the information as to CIB’s financial crisis – wherever it came from – was solid enough to take immediate steps to protect personal interests. Apparently, the public, proper duties of that office awaited an official letter. I tell you.
Next, we have the payment of the final dividend by CLF and the burning question of whether her Cabinet colleagues were informed by Nunez-Tesheira that she was not only a shareholder, but also in receipt of dividends from the very group that was seeking a State bailout. Those are the questions which can only be answered by lifting the conventional veil of Cabinet secrecy.
If you are not outraged, you haven’t been paying attention…
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.
January 5, 2012: BFP made slight changes to the wording of this article. The original can be seen at Google cache. Robert for BFP
Barbados Free Press 
She wouldn’t do THAT!? …would she?
Given the nature of this scandal, including its on-going character, I wonder how it came to be that Ms Tesheira managed, on her resignation, to secure the post of law lecturer at the UWI ‘Centre of Excellence’ at Cave Hill. Does this raise questions about the judgement and, indeed, probity of the persons responsible for appointing her – Velma Newton, Dean of Faculty, and good ‘ole Hilary? Doubtless tomorrow’s lawyers will learn something though.
i heard that she lectures on ethics. not sure how true as i have not enquired but if it is true it would be a great laugh
Here is a news article from Offshore Alert, Miami based investigative e-zine: FORMER DIRECTORS OF BAICO BEING SUED FOR WILLFUL NEGLIGENCE AND OTHER FIDUCIARY CRIMES
The court-appointed managers of Bahamas-domiciled British American Insurance Company Ltd., which operated throughout the Bermuda-Caribbean region, are suing the insurer’s former directors and others for ‘recklessly gambling away’ hundreds of millions of dollars on speculative and dubious Florida real estate investments.
BAICO, which has tens of thousands of policyholders and whose estimated insolvency is US$300 million in the Eastern Caribbean alone, not including its operations in jurisdictions like Bermuda and the Cayman Islands, filed two civil complaints at the U. S. Bankruptcy Court for the Southern District of Florida on December 22, 2011, alleging breach of fiduciary duties, aiding and abetting breach of fiduciary duties, and fraudulent transfers.
In one action, BAICO is suing Brian Branker, Ramchand Ramnarine, and Vishnu Ramlogan, all described as residents of Trinidad & Tobago; Robert Fullerton, a resident of Broward County, Florida; Lawrence Duprey, a resident of Miami-Dade County, Florida; Shiva Ramberran, a resident of Osceola County, Florida; Charles Pratt, a resident of Palm Beach County, Florida, and Green Island Holdings, LLC, domiciled in Florida.
In the other action, BAICO and a wholly-owned British Virgin Islands-domiciled subsidiary, British American Isle of Venice (BVI) Limited, are suing Fullerton, Branker, Ramnarine, Ramberran, Pratt, and Green Island Holdings, LLC.
All of the individual defendants were directors of BAICO and/or Isle of Venice with the exception of Pratt and Ramberran, who allegedly helped to facilitate a dubious land deal that bankrupted the companies.
In both complaints, it was alleged that the former directors of BAICO and Isle of Venice drove the companies into “highly speculative and cash-intensive real estate investments in the state of Florida which, not only were against the best interests of the Companies, were actually fatal” to their financial existence. Their “gross mismanagement rendered the Companies insolvent”, it was claimed.
The “most egregious example” of mismanagement happened in July, 2007 when, against the advice of BAICO’s in-house counsel, Gabrielle Patrick, and despite the “severity of the negative financial condition” of the insurer, BAICO agreed to pay $295 million for the right to acquire 6,000 acres of land in Osceola County, Florida even though the owners of the land, Roy Partin and his family, were willing to sell it for $200 million and the property was subsequently appraised at $165 million, it was claimed. It later emerged that BAICO had agreed to pay a “fee” of $75 million to an intermediary, Charles Pratt.
The directors ignored several “red flags” and “clear evidence of deception” in pursuing the deal – known as Green Island – and knew that negotiations were not being conducted at “arm’s length”, it was alleged.
“As a result of this real estate investment, BAICO and Isle of Venice were rendered immediately insolvent,” it was alleged. “Indeed, at least $110 million in cash and $10 million worth of real estate investments were paid over by BAICO and Isle of Venice in order to attempt to maintain their interest in the Green Island development.”
The directors “purposefully entered into a transaction which they knew would be, and in fact was, financially terminal to BAICO and Isle of Venice”, it was alleged.
The directors had decided to “bet the farm” on what was a “sure loser”, it was claimed. “The losses were staggering and any rational director should have foreseen this and prevented the Companies from losing hundreds of millions of dollars on a bad bet.”
BAICO was incorporated in the Bahamas on June 11, 1920 but did not write or issue any policies locally, instead operating through branches and subsidiaries in Anguilla, Antigua and Barbuda, Aruba, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Curacao, Dominica, Guyana, Grenada, Montserrat, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad & Tobago, and Turks and Caicos Islands.
BAICO was placed under ‘judicial management’ by Bahamas Supreme Court on September 8, 2009 and has branches in judicial management, provisional liquidation or liquidation in several jurisdictions. The insurer was owned by Trinidad & Tobago-based CL Financial Ltd., which was one of the largest privately-held conglomerates in the Caribbean, operating banking, financial, insurance and other companies, including BAICO, Colonial Insurance Company, CLICO Investment Bank and Caribbean Money Market Brokers, in dozens of countries or jurisdictions until the group’s collapse, starting in 2009.
A Commission of Inquiry, headed by Sir Anthony Colman, was set up in Trinidad & Tobago on November 17, 2010 to look into the failure of the CL Financial Group and is still ongoing.
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