-but ‘bad investments’
President Bharrat Jagdeo yesterday said that he has seen no evidence yet of criminality at CLICO and his government will be supporting an opposition parliamentary motion to have a criminal investigation into CLICO (Guyana) as long as it is extended to Globe Trust.
When asked at a press conference yesterday if a criminal investigation would be conducted into CLICO (Guyana) in light of the findings by Judicial Manager Maria van Beek that the company was badly managed, Jagdeo indicated that he is willing to support such an initiative but that it would have to be extended into the affairs of Globe Trust and Investment Company Limited (GTICL).
Van Beek said in her report on CLICO (Guyana) , which she presented to the High Court on Tuesday, that “the Directors and management of the Company operated without a basic understanding of managing an insurance business or pursued a strategy that has resulted in significant losses to the Company.”
Speaking at the Office of the President, Jagdeo said that he is aware that the main Opposition has called for such an investigation and he stated that he is waiting for the Opposition Leader to bring his motion before the House. He said that he has said to “his Members of Parliament to support it but ask that it be extended to Globe Trust.”
He went on to say that so far there has not been proof of any form of criminality at CLICO, but a case of “bad investment” . He suggested that the same could not be said about Globe Trust, where he said that Directors of that company had clearly broken the law. Observers have however pointed out that CLICO (Guyana) was clearly in breach of the Insurance Act relative to its investment overseas and continued with it despite being warned by the Insurance Commissioner.
Globe Trust came crashing down after issuing many unsecured loans among other dubious practices. The BoG filed an application asking that an order be granted for the compulsory liquidation of GTICL as provided for under the Financial Institutions Act after an investment deal for the troubled institution failed to materialise. It was the second such application; the first was filed in 2002 after which numerous depositors had intervened.
Jagdeo stated that so far “we have not found any case of criminality at CLICO but have found cases of bad investment”. He said that it was not a situation where money was taken from the public domain and can’t be accounted for. Jagdeo stated that this is different from what is happening with the Stanford Investment Bank where claims are being made that it was a Ponzi scheme and that the CDs which some people invested in were fictitious.
The Hand-in-Hand Trust Corporation had invested $827M over the last year in the Stanford International Bank in Antigua (SIB).
The CLICO investigation, Jagdeo said, would also determine whether inside information was given that would have facilitated persons conducting certain transactions prior to the liquidity crisis that beset the institution.
He, however, said that the Judicial Manager has already instructed the auditor Nizam Ali & Company to determine if preferential treatment was accorded in relation to payment of claims prior to the crisis affecting the company.
Asked why he had guaranteed that all investors in CLICO will get their money back, Jagdeo said that “it is Important that you don’t generate a loss of confidence in the system.” He said that there were a lot of erroneous reports in the media which published irresponsible statements from some political figures where they said that the country was “in a deep financial crisis” without this ever being substantiated. He said that in light of such developments it was important to take measures to prevent a loss of confidence.
He said that another reason, why he has taken such a step, was because a significant amount of money invested in the company belonged to pension funds including those of the NIS, Bank of Guyana, GRA, Forestry Commission and UG. He said that apart from this there were small depositors or small policyholders who have deposits.
He said that the government had to take the decision to secure the hard-earned money of its citizens and said that it “could not walk away” from these investors.
Meanwhile, as it relates to the NIS investment in CLICO, he said that Cabinet doesn’t approve the investment on a “specific basis”.
Chairman of the NIS Board Dr Roger Luncheon said last week that when it came to their investment policies, they were guided by a Prudential Investment Progamme which was “baptized by cabinet” and which was subsequently fully implemented by the NIS Board.
During a press conference the President had on May 9, he said that it was a bad investment decision made by the NIS to invest in CLICO (Guyana) and said that once there were high returns the risk was greater.
But in explaining Cabinet’s policy in relation to the NIS, Jagdeo said that Cabinet may say to the NIS Board that “you should seek a maximum return on your investment,” or they may examine the actuarial review and see if there are gaps between the contributions and the benefits that are paid out. Where there is a gap the options may be to increase the contributions, or seek through returns to cover the gap or put a hold on the type of benefits you pay out, the President said.
Jagdeo also said that Guyana’s legal representatives in The Bahamas are seeking to challenge the classification that the Bahamian liquidator had assigned to CLICO (Guyana’s) $7B investment. Bahamian liquidator Craig Gomez had proposed that the amount dispatched from Georgetown be reclassified as unsecured intercompany advances. It is unclear what Guyana’s legal representatives would be able to do at this point as CLICO (Bahamas) is being wound up.
The President also emphasized that Guyana is still optimistic about regaining some of the money and that the $11.9 billion by which the company’s liabilities exceeds its assets is simply in a “worst case scenario.” In a best case scenario the company’s deficit is $8 billion dollars.
He said that the authorities have taken several steps to regain their money including steps taken against the parent-company CL Financial and said that they are also looking at the Caricom facility of the Petroleum Fund, where money has been set aside by Trinidad and Tobago to deal with the OECS countries. Guyana’s argument is that it is not only the OECS countries that have been exposed.
CLICO (Guyana) invested $ 6.9 billion (US$34) in CLICO (Bahamas) which represented 53 percent of the local companies’ assets. Although these investments were liquid on paper, investigations have revealed that this sum has been tied up in real estate investments that CLICO (Bahamas) had in Florida through subsidiaries. When CLICO (Bahamas) was ordered liquidated on February 24, the local company was subsequently placed under judicial management.
