In last Monday’s editorial entitled ‘Clico and the failure of leadership’ we dealt with the actions taken by the President, the Minister of Finance and the Commissioner of Insurance in relation to the crisis that has engulfed the local Clico subsidiary.
There are others whose action or lack thereof should also be examined. Foremost among them is the Chief Executive Officer of Clico (Guyana), Ms Geeta Singh-Knight. On January 30, amid the temblors that rippled through Port-of-Spain with the shock announcement that Trinidad was bailing out C L Financial, Ms Singh-Knight issued a brief statement which said that Clico (Guyana) “wishes to make it clear that developments in Port of Spain, Trinidad … involving CL Financial Limited have no financial impact on CLlCO Guyana. CLlCO Guyana is a separate entity within the CL Financial Group, and none of its assets are intertwined with CLlCO [TRINIDAD] or CLlCO lnvestment Bank.
“The facts are that CLlCO lnvestment Bank (CIB) has been sold to Trinidad and Tobago’s First Citizens Bank Limited, and the Government of Trinidad and Tobago will provide the liquidity to support any strain on the insurance company, CLlCO Trinidad backed by assets of CL Financial Limited.
“CLlCO Guyana remains solid with a statutory fund that is in good standing”. As we pointed out last week, Ms Singh-Knight made no mention of the 53% of its assets that Clico (Guyana) had placed with another C L Financial subsidiary Clico (Bahamas).
More than a month has now passed since that very economic statement was made by Ms Singh-Knight and in the interim Clico (Guyana) has been placed under judicial management and C L Financial is under the cosh. Yet neither Ms Singh-Knight nor any other senior official of Clico (Guyana) has made a public effort to explain to their policyholders, pension fund subscribers, investors and business partners what has transpired with the company and why alarm bells never pealed over the extent of the related party transaction with The Bahamas. Surely this could not be the corporate creed of C L Financial whose vision statement is “A boundaryless learning organization engaged in diverse businesses enhancing the quality of life in the communities we serve.” Surely this could not be the stance of a company that absorbed billions of dollars from the Guyanese public and became a fixture in the corporate firmament. There is, of course, nothing prohibiting the company from engaging with the public as the judicial management process is entirely separate. It must be pointed out that in Trinidad, the C L Financial Chairman himself, Mr Lawrence Duprey faced the public during the stunning bail-out press conference and other company officials have also been speaking.
In particular, Ms Singh-Knight must explain to the public the progression of the investment in Clico (Bahamas), the extent of inquiry into the financial affairs of the Bahamas company and whether there had been any questioning of the wisdom of the investment practices of the company in Nassau. Those questions are of great interest to thousands of Guyanese who have put money into Clico (Guyana). At the bottom of it all, did Clico (Guyana) exercise sufficient care in protecting the money of its customers and if not, who should be held liable?
The public must also hear from the National Insurance Scheme (NIS). Just prior to this crisis, Cabinet Secretary, Dr Roger Luncheon, who has been NIS Chairman for the last 16 years or so was on the verge of giving up that post. His mandate has since been renewed. Dr Luncheon and the management of the NIS need to provide an explanation to the public on the state of the NIS in light of the fact that it cannot immediately access its $6B investment in Clico (Guyana).
The government has already provided a comfort guarantee by stating that all those at risk in the Clico (Guyana) debacle will be covered. Whatever the final shape of the coverage, it will inevitably constitute a charge to the burdened taxpayers of this country and a diversion of scarce resources from other areas. It is nothing to feel comfortable about. Dr Luncheon needs to assure the public that the NIS’ investment portfolio is being prudently apportioned and there is will not likely be any major foreseeable risk to the remainder of its investment fund. For a long time prior to 1992, the NIS had been criticized for poor investment decisions that saw negligible returns. This is the flip side of the argument. Around 16% of the NIS’ portfolio has been jeopardized and might have to be covered by the government. The NIS must describe what efforts had been made to assess the risk of its various investments and to manage those risks. Based on its 2007 annual report, the NIS also has $2.4B in Hand-in-Hand Trust Corporation which it was recently disclosed has been exposed to the Stanford Group implosion to the tune of over $800M. The NIS also has an unsecured investment of $1.5B in the Berbice Bridge. In keeping with its Mission Statement which says in part “To ensure that monies collected which have to be used for future payments are invested in such a manner that the economy of the country would reap maximum benefit”, the NIS and its investment committee must be heard from.
Hundreds of Clico (Guyana) policyholders could be immediately out of pocket for health and other areas if they attempted to tap their policies. The judicial management process must be expedited to provide clear answers to Clico clients about how these claims will be handled.
As more and more C L subsidiaries come under pressure from what appeared to be systemic bad practices within the group that are only now being exposed, there is an urgent need for Caricom governments to expedite the regional financial services agreement which will better protect the ordinary investor from the jeopardy of cross-border capital movements.