A total of $3.6 billion has already been earmarked to fully repay 11,290 policyholders of Clico (Guyana), President Bharrat Jagdeo announced yesterday, saying the process should begin within three weeks.
Addressing policyholders at the security-swamped National Culture Centre, Jagdeo also announced that he will initiate an investigation into the affairs of both Clico and Globe Trust prior to their collapse. He said that action would be taken against culpable persons should irregularities be found. “I am prepared… at some point in time to investigate what took place in both institutions so if there are culpable people, we should take action against them. I am prepared to do that,” Jagdeo said. He added that while he agreed there needed to be an understanding of what took place in the collapse of the institutions, this should not come at the expense of settling claims, especially when the government is about to liquidate the both of them.
Jagdeo told Stabroek News that he would be setting up a team for the investigation. “We can move forward with this. So I’m going to set a team to look at both,” he said. Asked who would comprise this team, Jagdeo said that while he has not decided as yet, it would most likely consist of local people. “I think we have competent people,” he added.
The President told the gathering of a few hundred persons that Clico (Guyana) “currently has immediate access to just over $600 million of its cash resources.” He said $100 million is required to be set aside to meet the expenses of the company until wind-up and $500 million will be earmarked to ensure that the liabilities associated with the long-term insurance business are “adequately backed”.
“The long-term insurance portfolio would be separated and hopefully sold to another licensed insurance company in Guyana, thereby ensuring that policies of 6,924 active policyholders under this class of business exit Clico’s books intact and unimpaired,” Jagdeo stated. “While some insurance companies have already indicated an interest in acquiring this portfolio… expressions of interest will be invited from all licensed insurance services and discussions accelerated to conclude this sale,” he added. The President also explained that the $100 million set aside to meet the expenses of the company’s wind-up would also facilitate an actuarial review.
Jagdeo announced that the government will also make available a total of $3.6 billion, including $3 billion from the Petroleum Fund, which will be utilized to finance payout to policyholders under the company’s other classes of business. He explained that $2.7 billion will be used to pay out in full all holders of investment annuity policies and other insurance liabilities not in dispute, but added that it would be subject to a maximum limit of $30 million per policy holder. He said that this would mean that 4,366 holders of Executive Flexible Premium Annuities and other undisputed claims against the company would be paid under the arrangement. “This includes six Pension Funds,” he said. The Pension Funds include Grace Kennedy, Davis Memorial Hospital, New GMC, Go-Invest and GAWU. According to the President, this would leave only 39 policyholders with balances in excess of $30 million. He said the remaining $900 million will be used to pay these policyholders up a maximum of $30 million each, with priority being given to non-institutional policyholders. “The balances outstanding would be those as of the time that the judicial management commenced, that is, February 2009,” he explained, adding that at some time in the future the government and the liquidator would decide how to deal with policies by related party.
Jagdeo also said that the government hopes to realize a further $8.5 billion through the book value sale of assets, and legal action against Bosai, Caribbean Resources Limited (CRL) and Clico (Bahamas). He said the proceeds would deal with the remaining 39 policyholders as well as the other liabilities the company faces to government agencies such the National Insurance Scheme (NIS), GuyOil and Guyana Forestry Commission.
‘No apology’
Meanwhile, Jagdeo pointed out that his government was the only one in the region that moved to protect all of its citizens affected by the Clico fallout. He said too he had no apology to make for having the meeting with policyholders, despite the criticisms coming from some that it was a signal of the unnecessary intervention of the executive arm of the government. “I have no apology to make to anyone for [this] meeting… I have no apology” he said. “I did so because I thought that the government needs to work with the Central Bank,” he said adding that “there is a human face to this all. There are people whose lives have been put on hold because they don’t have access to their money.” He later added that he was simply doing his job as president.
He was critical of the legal action which held up the liquidation to the company and lashed out at director Winston Ramalho, who initiated the proceedings. There were very “frivolous obstacles mounted along the judicial management process,” he said, while noting that there were 42 sittings over the last year-and-a-half, as a result of the action.
Jagdeo said this was evidence that “the best efforts could be stymied because of frivolous legal action and because of some elements in our community, who are unwilling to make reasonable, rational decisions and to discharge matters affecting thousands of people—in this case over 10,000 people—in a timely manner.” He said that a similar situation had been experienced with Globe Trust and “this is why we fought tooth and nail to get this one resolved now…”
Addressing the regulation of Clico (Guyana), Jagdeo noted that in most of the Caribbean countries the growth of regulations has not matched pace with the evolution of the sector. He, however, said that this was a global problem that was exposed by the global financial crisis. However, he said steps are being taken to ensure that regulations are modernized to deal with the complex products that have been developed over the years.
Jagdeo said that as it relates to Clico and Globe Trust, the relevant regulating bodies had issued warnings to the two entities. He said that persons have asked why further actions were not taken, but he said that “the further action could possibly have led to the closure of these institutions.”
During his speech, Jagdeo criticized accountant Christopher Ram for his letter, printed in yesterday’s edition of the Stabroek News, questioning why he (Jagdeo) and not the court appointed liquidator was meeting the policyholders. Jagdeo also attacked Ram for his role as financial consultant to the directors of Globe Trust. Advice given by Ram, Jagdeo said, had led to an unsuccessful reorganisation plan and to investors of the institution suffering unnecessarily.
When the floor was opened for questions, Ram attempted to ask a question but was prevented by the President from doing so. “Not at my meeting,” he said, “you can go outside and write in all the papers…I’m just fed up with all of these sour people.” Ram then left the auditorium.
When asked by this newspaper after the meeting whether his reaction was excessive, Jagdeo maintained his position. “No, no, no, not my meeting. Let him go… Give him the pages. He has Stabroek News to distort everything,” he said.
Clico (Guyana) invested $6.9 billion (US$34 million) in Clico (Bahamas) which represented 53% of the local company’s assets. Although these investments were liquid on paper, subsequent investigations revealed that this sum was tied up in real estate investments that Clico (Bahamas) had in Florida through subsidiaries. When Clico (Bahamas) was ordered liquidated on February 24 last year, the local company was subsequently placed under judicial management. After a review of the company’s affairs, the judicial manager, Maria van Beek, recommended that the company be wound up but the move was subsequently challenged by directors.
Last Friday, acting Chief Justice Ian Chang ordered that Clico (Guyana) be liquidated, saying that available material points “unerringly” in the direction of its insolvency and it would be against the interests of policy holders to allow it to continue. Justice Chang ordered that the Bank of Guyana be appointed as liquidator to execute the wind-up order.
