(Trinidad Guardian) The Central Bank did not want to be part of the Memorandum of Understanding (MOU) into the proposed bailout of the cash-strapped Lawrence Duprey group of companies. The bank’s comments on an agreement proposed by MG Daly & Partners, who were retained to act on behalf of CLF, suggested that it should only have a “monitoring” role of the agreement. “Our view is that the agreement should be between Government of Trinidad and Tobago and the CL companies and that Central Bank should not be a party to the agreement. “We feel there should be no fetter to the freedom of the Central Bank to exercise all of any of its powers against licencees and insurance companies as the agreement could compromise the regulatory role of the Central Bank. “The Central Bank had to continue its oversight of the companies and be in a position to act independently of the agreement,” read Peter Carter, QC, counsel to the Clico Commission yesterday.
Carter was reading yesterday from documents provided by Jo-Anne Julien, counsel for MG Daly & Partners’ client, Stone Street Capital, which was hired by CLF to negotiate a lifeline for Group. Julien was the second witness before this third session of Sir Anthony Colman’s commission of inquiry Into the CL Financial Group and the Hindu Credit Union at Winsure Building, Port-of-Spain. Carter continued to read the bank’s reservations on the MOU which said the Government should be provided with the necessary board’s resolutions of the respective companies authorising the entering of the Agreement and its execution. “There should be a provision that the agreement shall be null and void if the resolutions are not submitted within the week. “This is a necessary protection for the Government of Trinidad and Tobago as without the resolutions the boards could argue that there was no authority on the part of the signatory to enter into the agreement on their behalf,” read Carter.
The bank also was concerned that the proposed agreement gave no timelines for the disposal of the assets or other requirements, except for the listing of shares on the Stock Exchange, no requirement for disclosure of information, no reporting requirement on a regular basis, no sanction or consequence for failure to comply, he read. “The Government of Trinidad and Tobago may wish to take this opportunity to call on the companies to freeze new inter-company actions, increases in salaries of senior officials, payments of dividends, bonuses, share options and disposal of other assets without a schedule provide to Government of Trinidad and Tobago and Government of Trinidad and Tobago’s prior approval for disposal of these items,” read Carter. Despite the bank’s reservations, on January 30 governor Ewart Williams announced that the Central Bank and the Ministry of Finance would take control of Clico, Clico Investment Bank (CIB) and Caribbean Money Market Brokers (CMMB), stated Carter.
He stated Williams’ concern was the systemic risk the collapse of an institution, like the CL Financial Group, could have on the country’s financial system and the Caribbean. The bank took control of CIB, under Section 44D of the Central Bank Act, and all third party assets and liabilities on the books of CIB and CMMB were transferred to First Citizens, he stated. As a result of the bank’s intervention, he read, policy-holders subsequently argued they had received a guarantee on their EFPA policies. Julien’s testimony, which was basically read to her by Carter for her affirmation, revealed that CIB’s audited balance sheet of December 2007 consisted of $5.5 billion of customer deposits of which $4.1 billion were Clico deposits.
Further, e-mails provided by her to the commission reveal: 1. Corporate secretary Gita Sakal objected to the agreement and that she considered it “fraud” that CIB’s Republic Bank Limited (RBL) shares would be sold and the proceeds used to assist the insolvent Clico; and 2. Clico’s chief financial officer, Karen-Ann Gardier, objected to the Central Bank’s suggestion that RBL was a connected company because it would have reduced its $3.1 billion in the Stat Fund to $500 million or less.
“I mentioned to RBL that if we are now technically insolvent we have been for at least the past five years as we have held both RBL and MHTL for that much time. Is it legal/allowed for them to suddenly enforce regulations and not give us time to comply? “Between RBL and MHTL, enforcement of regulations has resulted in an immediate $3.5 billion reduction in the assets that we can hold in the Stat Fund,” Gardier wrote to Julien on January 28, 2009. Attorneys for the Central Bank, Lawrence Duprey and the Clico Policyholders Group reserved the right to cross-examine Julien at the next sitting.
Sakal’s Defence
Despite making allegations about former corporate secretary Gita Sakal, Carballo was challenged by her attorney, Justin Phelps, on why he did not attach documents to support his allegations to the commission. Carballo said the issue was well known and he did not see it fit to attach the documents but suggested that they were available at the High Court for public viewing. At the next hearing, Sakal will be cross-examined. Afra Raymond, who was scheduled to give evidence, will have his witness statement redrafted to “factual evidence” by Carter before it is posted on the Web site as there won’t be time for his testimony. The next hearing is scheduled for November 7 to 17. Among the witnesses expected to testify are former finance minister Karen Tesheira, Andre Monteil and Harry Harnarine. (All figures are in T&T dollars)
