(Trinidad Express) – A high court judge yesterday ordered the now defunct CLICO Investment Bank (CIB) to repay a $700 million deposit to the National Insurance Board.
The ruling centred around the definition of an Investment Note Certificate and whether such deposits were guaranteed under the January 2009 Government bailout of the cash-strapped CL Financial Group.
The ruling follows a separate decision in July, when another judge ordered insurance company CLICO to repay approximately $58.7 million to six Executive Flexible Premium Annuity policyholders.
In yesterday’s decision, High Court Judge Peter Rajkumar ruled that an Investment Note Certificate (INC) is in fact a deposit and not a security, as argued by attorneys representing CIB.
As a result of yesterday’s ruling delivered by Rajkumar, a total of 15 deposits—12 in United States currency and three in T&T dollars, with a value exceeding $700 million—will be returned to the National Insurance Board (NIB).
NIB’s total US deposits carry a value of US$102,506,128.64. Converted to TT dollars, this amounts to $659,114,407.15. NIB’s TT deposits are worth $46,490,993.49.
This brings the total of the deposits to more than $705.6 million to be returned to the NIB.
The judge further ordered that the money was subject to interest of six per cent per annum from the date of the maturity of each INC—some of which ranged between January and July 2009.
As of yesterday, until CIB pays NIB, it (NIB) will also get statutory interest at a rate of 12 per cent on what is due. Between January 2009 to January 2011, the interest on the deposits would be in the range of $84 million, bringing the total with interest up to January 2011 to around $789 million.
The National Gas Company (NGC) which was initially involved in the matter, withdrew its application in March.
The NIB and NGC had combined deposits of $1.8 billion.
Senior counsel Deborah Peake and attorneys Kerwyn Garcia and Marcelle Ferdinand represented the NIB, while senior counsel Reginald Armour and attorney Ian Benjamin appeared on behalf of CIB.
In addressing Rajkumar, Armour urged the judge to refrain from ruling on the issue of rates of interest, since Parliament amended the Central Bank Bill two weeks ago.
The amendment means that policyholders cannot engage in legal action against Government to access their money in CL Financial subsidiaries like CLICO and CIB.
“The question of applied rate of interest is something which needs to be argued. I do not think you should proceed further to rule on cost,” Armour said.
However, the judge said he was covered by the legislation and any further action (hearing of arguments of applied interest rates) to take the case forward will go against this.
“I do not accept there is any breach between the legislative and judiciary,” Rajkumar said. “The legislation does not say delivering of judgments shall be stayed.”
Following the decision, Peake said she agreed with the judge since, “if Parliament in their decision wanted to freeze proceedings they would have and we must constitute the words that are here”.
During her opening statements at the trial, Peake said following NIB’s deposits, it was given a CIB document outlining what an INC entailed.
The INC is a short-term deposit designed to give customers a safe haven for their investments above market rates.
Peake said: “An agreement was never honoured, it’s just words you put on a piece of paper hoping to give parties comfort. It has no reasonable meaning, just a bunch of words strung together.
You cannot dress up a deposit and change it in law. It cannot be done this way. No one said to us (by the way) it’s not a security but an investment.”
Peake said it was only in January 2009, when the Central Bank intervened in the CL Financial and CLICO collapse that “things changed to deprive us of our monies”.
“I cannot understand their defence, they took our monies in uncertain terms on a certain day with interest and it was not done. Now they come to court saying monies are not there to give us. If they want to characterise this as an investment, then does this mean the money has disappeared?”
In 2009, the then People’s National Movement government bailed out insurance giant CLICO—a subsidiary of CL Financial.
In a bid to prevent a financial crisis on other CL Financial institutions, the Government gave control of CIB to the Central Bank.
However, legal wrangling emerged after the Central Bank took a position that the INC is not an approved financial instrument and therefore is not eligible for payment of full principal amount of all third-party deposits guaranteed by the Government following CIB’s collapse.
