JavaScript is disabled in your web browser or browser is too old to support JavaScript. Today almost all web pages contain JavaScript, a scripting programming language that runs on visitor's web browser. It makes web pages functional for specific purposes and if disabled for some reason, the content or the functionality of the web page can be limited or unavailable.

Sunday, July 27, 2025

Dookeran comes clean on Clico bailout

Tesheira feared run on Cli­co

by

20120815

For­mer Min­is­ter of Fi­nance, Win­ston Dook­er­an, has of­ten shied away from con­tro­ver­sy in his long po­lit­i­cal ca­reer.But in an ex­plo­sive af­fi­davit in re­sponse to a law­suit against the Gov­ern­ment's han­dling of the Cli­co af­fair, brought by his for­mer Cab­i­net col­league, Ramesh Lawrence Ma­haraj, Dook­er­an makes some as­ton­ish­ing rev­e­la­tions, in­clud­ing:

• It may take a fur­ther $21 bil­lion to re­solve the Cli­co is­sue;

• Why Cli­co's as­sets could not have been sold in 2009 and 2010

24. CL Fi­nan­cial is the par­ent com­pa­ny of the Group. The Group in­cludes com­pa­nies op­er­at­ing in bank­ing and fi­nan­cial ser­vices, man­u­fac­tur­ing, trad­ing, re­tail and dis­tri­b­u­tion, gen­er­al and life in­sur­ance, med­ical ser­vices, forestry and agri­cul­ture, re­al es­tate de­vel­op­ment, en­er­gy and petro­chem­i­cals, ma­rine ser­vices and al­so in the me­dia and com­mu­ni­ca­tions sec­tors. It was the largest pri­vate­ly held con­glom­er­ate in Trinidad and To­ba­go and one of the largest in the Caribbean. In ear­ly 2009, the group owned or con­trolled over 30 com­pa­nies and nu­mer­ous ad­di­tion­al sub­sidiaries un­der many of those com­pa­nies, lo­cat­ed in the Caribbean, the USA, Eu­rope and the Mid­dle East.

25. From the in­for­ma­tion which came to me on as­sump­tion of of­fice, it was ev­i­dent that the group pur­sued an ob­jec­tive of in­ter­na­tion­al ex­pan­sion. It ac­quired a num­ber of com­pa­nies in the al­co­hol in­dus­try and to this end ac­quired spir­its man­u­fac­tur­ing and dis­tri­b­u­tion com­pa­nies in the USA (in­clud­ing Tod­hunter In­ter­na­tion­al Inc., and Lawrence­burg Dis­tillers, In­di­ana) and Eu­rope. It al­so ac­quired Burn Stew­art Dis­tillers Lim­it­ed, Belvedere SA and Hine Co­gnac.

26. These ac­qui­si­tions were large­ly fund­ed by in­tra-Group lend­ing, a sig­nif­i­cant amount of which came from Cli­co.

27. Some key mem­bers of the Group's man­u­fac­tur­ing arm in­clud­ed An­gos­tu­ra Hold­ings Lim­it­ed (AHL) and Las­celles de Mer­ca­do {LdM) and, in the en­er­gy and petro­chem­i­cal sec­tor, Methanol Hold­ings Trinidad Lim­it­ed (MHTL). CLF re­lied on div­i­dend in­come from such prof­itable sub­sidiaries to fund its ex­pan­sion pro­gramme, al­though it ob­tained that in­come through its di­rect sub­sidiaries, par­tic­u­lar­ly Cli­co, which owned the shares in the rel­e­vant com­pa­nies.

28. Apart from those busi­ness­es, the oth­er sig­nif­i­cant sec­tor in which CLF was in­volved was fi­nan­cial ser­vices. Group com­pa­nies in­clud­ed:

(a) Cli­co In­vest­ment Bank (CIB). This was an­oth­er Group com­pa­ny which was fre­quent­ly used to pro­vide in­tra- Group fund­ing. Fol­low­ing a run on CIB in ear­ly 2009 (due in part to a large port­fo­lio of non-per­form­ing loans), CIB went in­to liq­ui­da­tion; and

(b) Caribbean Mon­ey Mar­ket Bro­kers Lim­it­ed (CMMB), which was sub­se­quent­ly trans­ferred to First Cit­i­zens Bank Lim­it­ed (FCB).

29. Cli­co to­geth­er with CIB al­so held a 55 per cent share­hold­ing in Re­pub­lic Bank Lim­it­ed (RBL), the largest bank in Trinidad and To­ba­go.

30. As of De­cem­ber 2007 (lat­est au­dit­ed fi­nan­cial state­ments), the Group's as­sets were de­clared to be in the re­gion of TT$IOO bil­lion, 43 per cent of which re­lat­ed to com­pa­nies op­er­at­ing in the fi­nan­cial ser­vices sec­tor. As TT$IOO bil­lion was broad­ly equiv­a­lent to 70 per cent of the 2009 GDP of Trinidad and To­ba­go, the size of the Group and its sig­nif­i­cance to the econ­o­my of Trinidad and To­ba­go can­not be over­stat­ed. Giv­en the mag­ni­tude and di­ver­si­ty of the Group's op­er­a­tions, any in­sol­ven­cy is­sues with­in the Group would have cre­at­ed a re­al po­ten­tial for sys­temic risk to the fi­nan­cial sys­tem of Trinidad and To­ba­go.

The Group bor­rowed over TT$6 bil­lion from fi­nan­cial in­sti­tu­tions in Trinidad and To­ba­go. A large por­tion of this debt was with two in­sti­tu­tions up­on whom the col­lapse of the Group would have im­pact­ed neg­a­tive­ly, and such a col­lapse would have af­fect­ed Trinidad and To­ba­go cit­i­zens di­rect­ly and in­di­rect­ly. This would have put at risk the sta­bil­i­ty and en­durance of the fi­nan­cial sys­tem of Trinidad and To­ba­go.

31. Due to an ap­par­ent lack of ef­fec­tive man­age­ment and cor­po­rate gov­er­nance struc­tures, the Group lost bil­lions of dol­lars on its ac­qui­si­tions, a num­ber of which were sub­se­quent­ly sold. A num­ber of sig­nif­i­cant group com­pa­nies across the Caribbean are cur­rent­ly in­sol­vent and un­der ju­di­cial man­age­ment or in liq­ui­da­tion in­clud­ing BAICO (Ba­hamas), Cli­co (Ba­hamas) and Cli­co (Bar­ba­dos).

32. One par­tic­u­lar­ly sig­nif­i­cant mem­ber of the Group is Cli­co, which is a

reg­u­lat­ed in­sur­ance com­pa­ny un­der the In­sur­ance Act, Chap­ter 84:01. Cli­co writes tra­di­tion­al poli­cies, which gen­er­al­ly in­volved the pay­ment of reg­u­lar pre­mi­ums, with the poli­cies pro­vid­ing ben­e­fits ei­ther at a par­tic­u­lar point in time or up­on the oc­cur­rence of a par­tic­u­lar event.

33. Cli­co al­so wrote a range of STIPs, in­clud­ing EF­PAs, which were sold to res­i­dent as well as non-res­i­dent in­di­vid­u­als and groups. Cli­co was al­so the spon­sor, man­ag­er, and dis­trib­u­tor of a se­ries of mu­tu­al funds.

34. Cli­co was one of the largest fi­nan­cial in­sti­tu­tions in Trinidad and To­ba­go, with a cus­tomer base of around 250,000 clients, rep­re­sent­ing ap­prox­i­mate­ly 20 per cent of the pop­u­la­tion of Trinidad and To­ba­go, and in­clud­ing more than 15,000 pen­sion­ers and around 100 cred­it and trade unions. Of those clients, 225,000 held tra­di­tion­al poli­cies and 24,800 held EF­PAs or mu­tu­al fund in­vest­ments.

35 .In ac­cor­dance with sec­tion 37 of the In­sur­ance Act, Cli­co and British Amer­i­can In­sur­ance Com­pa­ny (Trinidad) Lim­it­ed (BA) were re­quired to es­tab­lish statu­to­ry funds in re­spect of their li­a­bil­i­ties un­der all of their long-term in­sur­ance busi­ness, in­clud­ing the EF­PAs (these funds are here­in re­ferred to to­geth­er as the statu­to­ry funds, and the fund re­lat­ing to Cli­co is re­ferred to as (the statu­to­ry fund), though by 2009 the as­sets in the Statu­to­ry Funds were not suf­fi­cient to cov­er the li­a­bil­i­ties. The statu­to­ry funds were cre­at­ed in ac­cor­dance with sec­tion 37 of the In­sur­ance Act and no sep­a­rate trust deed gov­ern­ing the op­er­a­tion of the Statu­to­ry Funds ex­ists.

36. Al­though GORTT has in­ter­vened in both Cli­co and BA, I will con­fine my ev­i­dence large­ly to Cli­co as it is that in­ter­ven­tion which is in is­sue in these pro­ceed­ings.

38. As to para­graph 16 of the Ma­haraj Af­fi­davit, it is ad­mit­ted that there was a run on CIB and a rush of de­pos­i­tors seek­ing to with­draw their as­sets. I am un­able to say whether the fi­nan­cial cri­sis, of which Ms. Ma­haraj speaks, led to a loss of con­fi­dence and the run on CIB.

40. Para­graph 18 of the Ma­haraj Af­fi­davit is ad­mit­ted save and ex­cept that the MOU makes no ref­er­ence to GORTT pro­vid­ing col­lat­er­al­ized loan fi­nanc­ing to Cli­co and BA. The MOU in fact states that in the event that there is a short­fall in the sale of as­sets, CLF war­rants and un­der­takes to pro­vide col­lat­er­al which may in­clude a se­cure charge on the as­sets of CLF, Cli­co and BA, suf­fi­cient to se­cure any fi­nan­cial as­sis­tance to be pro­vid­ed by GORTT.

49. As to para­graph 30 of the Ma­haraj Af­fi­davit, Karen Tesheira's state­ment to the Par­lia­ment re­ferred to was not made on 16 June 2009. It was in fact made on 24 June 2009. In re­spect of the state­ment at­trib­uted to the KNT, I say that it must be tak­en in its prop­er con­text. Hansard records show that Tesheira stat­ed at page 340:

"How­ev­er, the Gov­ern­ment and you read the agree­ment - there is a re­struc­tur­ing agree­ment and that is car­ried out in the Mem­o­ran­dum of Un­der­stand­ing signed with CL Fi­nan­cial - is com­mit­ted to re­struc­tur­ing CL Fi­nan­cial as a go­ing con­cern to en­sure that if in­vest­ments are re­alised and all those per­sons in­clud­ing the cred­i­tors, share­hold­ers and all those per­sons are not left want­i­ng, they, at the end of the day will get back and re­coup all of their loss­es and po­ten­tial loss­es, but to guar­an­tee is not a guar­an­tee to them. We guar­an­tee the pol­i­cy­hold­ers and res­i­dents of this Coun­try that is our guar­an­tee, but we are com­mit­ted to see­ing that Cli­co be­comes a go­ing con­cern be­cause we want to en­sure that the mon­eys that the tax­pay­ers have in­vest­ed are re­couped and in so do­ing the per­sons to whom you spoke will there­fore ben­e­fit be­cause that will be part of the whole ex­er­cise of cre­at­ing sol­ven­cy for Cli­co and CL Fi­nan­cial. "

50. As to para­graph 31 of the Ma­haraj Af­fi­davit, I have read the state­ments at­trib­ut­able to KNT as con­tained in ex­hib­it "VM13" to the De­cem­ber 2011 Ma­haraj Af­fi­davit. I am un­aware that the state­ment re­ferred to in the said para­graph 31 is in re­sponse to pol­i­cy­hold­ers who had kept their funds in Cli­co be­yond ma­tu­ri­ty.

52. As to para­graph 33 of the Ma­haraj Af­fi­davit, I am un­aware as to the me­dia con­fer­ence re­ferred to there­in and to the Gov­er­nor's pur­port­ed state­ment that he planned to put a gen­er­al scheme to the Cab­i­net for its ap­proval.

53. In fur­ther re­sponse to para­graphs 15 to 33 of the Ma­haraj Af­fi­davit, I state what fol­lows here­un­der.

54. On 13 Jan­u­ary 2009, Mr Lawrence Duprey in­formed CBTT that:

(a) the glob­al fi­nan­cial cri­sis was af­fect­ing the avail­abil­i­ty of liq­uid­i­ty in Trinidad and To­ba­go;

(b) the Group had been se­ri­ous­ly af­fect­ed by this and many cus­tomers were with­draw­ing their funds;

(c) Group com­pa­nies had met their oblig­a­tions to cus­tomers to date, but a con­tin­gency plan was be­ing de­vel­oped in case the trend of with­drawals con­tin­ued; and

(d) Group as­sets could not be read­i­ly liq­ui­dat­ed with­out in­cur­ring sig­nif­i­cant loss, and liq­uid­i­ty sup­port may be re­quired.

55. Meet­ings be­tween CLF, GORTT and CBTT com­menced on 15 Jan­u­ary 2009. On 30 Jan­u­ary 2009, KNT, act­ing on be­half of the For­mer Ad­min­is­tra­tion, and CLF (act­ing for it­self and its af­fil­i­ates in­clud­ing Cli­co, CIB and BA en­tered in­to a Mem­o­ran­dum of Un­der­stand­ing (the MOU) in an at­tempt to cor­rect the fi­nan­cial con­di­tion of CIB, Cli­co and BA.

56. On 13 Feb­ru­ary 2009, CBTT ex­er­cised its emer­gency pow­ers pur­suant to sec­tion 44D of the Cen­tral Bank Act (the CBA), and as­sumed con­trol of Cli­co.

57. Pur­suant to the MOU and fol­low­ing fur­ther dis­cus­sions be­tween CLF and GORTT, on 12 June 2009, CLF and GORTT (amongst oth­ers) signed a share­hold­ers' agree­ment (the Share­hold­ers' Agree­ment). The main pur­pose of the Share­hold­ers' agree­ment was to reg­u­late and for­malise cer­tain as­pects of CLF's af­fairs and GORTT's deal­ings there­with.

58. Since the prob­lems with Cli­co came to light in 2009, GORTT has pro­vid­ed var­i­ous funds to mem­bers of the Group and to Cli­co in par­tic­u­lar. Ini­tial­ly some TT$5 bil­lion was pro­vid­ed to Cli­co. This com­prised:

(a) an ini­tial ad­vance of $1.9 bil­lion in cash to meet ini­tial liq­uid­i­ty de­mands af­ter the first stage of the in­ter­ven­tion; and

(b) a fur­ther sum of ap­prox­i­mate­ly $3.1 bil­lion in the form of long-term GORTT bonds with vary­ing ma­tu­ri­ties and coupon rates.

59. Since that ini­tial tranche of fund­ing, GORTT has fur­ther com­mit­ted sig­nif­i­cant sums, in­clud­ing, as at 9 Ju­ly 2012, ap­prox­i­mate­ly $9.542 bil­lion which has been paid to EF­PA pol­i­cy­hold­ers with poli­cies worth more than $75,000.

60. As­sum­ing that the re­struc­tur­ing of Cli­co pro­ceeds as de­tailed be­low, GORTT will ad­vance fur­ther funds to­talling ap­prox­i­mate­ly $12.097 bil­lion for pay­ments to EF­PA pol­i­cy­hold­ers with poli­cies worth more than $75,000.

61. I re­it­er­ate that the above num­bers are ap­prox­i­mate and rep­re­sent a sum­ma­ry of the funds GORTT has paid out to date and is like­ly to ad­vance, de­pend­ing on, in­ter alia, the num­ber of pol­i­cy­hold­ers who ac­cept the of­fer re­ferred to be­low.

62. In 2010, GORTT es­tab­lished a Com­mis­sion of En­quiry in­to the fail­ure of CLF. Karen Tesheira pro­vid­ed a state­ment to the Com­mis­sion of En­quiry. I have read that state­ment and ver­i­ly be­lieve that the for­mer ad­min­is­tra­tion took the po­si­tion that the fi­nan­cial con­di­tion of CIB, Cli­co and BA threat­ened the in­ter­ests of de­pos­i­tors, pol­i­cy­hold­ers and cred­i­tors of those in­sti­tu­tions and po

sed a dan­ger of dis­rup­tion or dam­age to the fi­nan­cial sys­tem of Trinidad and To­ba­go.

63. At para­graph 48 of W.D.4, Tesheira ex­pressed con­cern that there may be a run on Cli­co, which could cause its col­lapse and lead to con­ta­gion in the wider fi­nan­cial ser­vices sec­tor. Tesheira was par­tic­u­lar­ly con­cerned be­cause Bear Stems, a ma­jor US in­vest­ment bank, had re­cent­ly col­lapsed over the course of a sin­gle week­end.

64. The for­mer ad­min­is­tra­tion's ac­tions by en­ter­ing in­to the MOU, and the state­ments it made to re­as­sure de­pos­i­tors and pol­i­cy­hold­ers, was nec­es­sary to pre­vent a run on the Trinidad and To­ba­go fi­nan­cial sys­tem and to pre­serve the in­tegri­ty of and con­fi­dence in the fi­nan­cial sec­tor.

This point is well made in para­graph 38 of the state­ment an­nexed as W.D.4, which states that if news of the is­sues fac­ing the Group "leaked out and the rate of with­drawals con­tin­ued and oth­er de­vel­op­ments were made pub­lic this would un­doubt­ed­ly re­sult in a run on CIB and Cli­co with a very re­al risk to the sta­bil­i­ty of the fi­nan­cial sec­tor and ul­ti­mate­ly of Trinidad and To­ba­go."

65. In a state­ment to the House of Rep­re­sen­ta­tives on Mon­day 2 Feb­ru­ary 2009, KNT stat­ed that "the ac­tions [GORTT] has tak­en will per­mit an or­der­ly re­struc­tur­ing of the in­sti­tu­tions and safe­guard the in­ter­ests of our cit­i­zens who are de­pos­i­tors, in­sur­ance clients, and pen­sion fund mem­bers". She fur­ther stat­ed that the in­ter­ven­tion was "time­ly and nec­es­sary", and that it was "tak­en to pro­tect our fi­nan­cial sys­tem".

66. Be­tween Jan­u­ary and April 2010, as part of the on­go­ing dis­cus­sions aimed at for­mu­lat­ing a com­pre­hen­sive ap­proach to the prob­lems at Cli­co, GORTT again con­sid­ered the rea­sons for in­ter­ven­tion. It was clear that the ob­jec­tives of the in­ter­ven­tion were:

(a) to pro­tect the coun­try's eco­nom­ic and fi­nan­cial sys­tem from risk and to re­store con­fi­dence;

(b) to pro­tect res­i­dent pol­i­cy­hold­ers and de­pos­i­tors in the in­sur­ance and fi­nan­cial ser­vices com­pa­nies of the

CLF group;

(c) to con­tin­ue Cli­co and BA as go­ing con­cerns as the means of restor­ing con­fi­dence and main­tain­ing sys­tem

sta­bil­i­ty;

(d) to re­pay third par­ty­CIB de­pos­i­tors;

(e) to pro­tect oth­er sys­tem ex­po­sures that might be trans mit­ted through CMMB;

(f) to de­ter­mine and pur­sue ac­count­abil­i­ty with­in the group for the prob­lem; and

(g) to re­cov­er fund­ing from wher­ev­er pos­si­ble with­in CLF

67. In the pe­ri­od from GORTT's ini­tial in­ter­ven­tion un­til ear­ly in 2010, var­i­ous state­ments were made in re­la­tion to Cli­co, all of which are re­ferred to in the Ma­haraj Af­fi­davit and/or in the ex­hibits there­to.

68. In or­der to pro­tect the coun­try's eco­nom­ic and fi­nan­cial sys­tem from risk and to re­store con­fi­dence, and to con­tin­ue Cli­co as a go­ing con­cern as a means of restor­ing con­fi­dence and main­tain­ing sys­tem sta­bil­i­ty, it was es­sen­tial that pol­i­cy­hold­ers and in­vestors main­tained con­fi­dence that their in­vest­ments were pro­tect­ed. It was to this end that those state­ments were made.

69. Even at this ear­ly stage, GORTT was aware that cer­tain state­ments had been made cre­at­ing an ex­pec­ta­tion on the part of Cli­co pol­i­cy­hold­ers res­i­dent in Trinidad and To­ba­go aris­ing from the fol­low­ing words: "I wish to re­it­er­ate this Gov­ern­ment's com­mit­ment to en­sure that de­pos­i­tors' as­sets will not be at risk' as stat­ed by Tesheira in the State­ment for the CIB\Cli­co Me­dia Con­fer­ence of 30th Jan­u­ary 2009. In the me­dia re­lease of GORTT and CBTT dat­ed 30th Jan­u­ary 2009, it is fur­ther stat­ed: "The Gov­ern­ment will pro­vide fund­ing sup­port to ful­ly back Cli­co and BAICO to meet any Statu­to­ry Fund deficits that might emerge af­ter the com­pa­ny has made all pos­si­ble arrange­ments to place sat­is­fac­to­ry lev­els of cash and oth­er as­sets in­to the Statu­to­ry Fund in or­der to en­sure the short as well as medi­um and long term liq­uid­i­ty and sta­bil­i­ty of Cli­co".

70. It was clear from April 2009 that Cli­co and the wider Group need­ed to be re­struc­tured. Oth­er­wise, Cli­co would have been forced in­to liq­ui­da­tion, which could have had a dev­as­tat­ing ef­fect on the fi­nan­cial sys­tem and the wider econ­o­my.

71. Be­tween 30 April 2009 and March 2010, GORTT and CBTT worked to man­age the ini­tial pub­lic pan­ic and to be­gin to ring-fence risks with­in the CLF group. In re­la­tion to the in­sur­ance com­pa­nies, GORTT fo­cussed on the deficit in the Statu­to­ry Funds and pro­vid­ed an in­jec­tion of funds to Cli­co, which is ex­plained in greater de­tail be­low. Sim­i­lar ac­tion was al­so tak­en in re­la­tion to BA.

72. This in­jec­tion of funds had al­lowed GORTT sig­nif­i­cant breath­ing space, quelled pan­ic, and al­lowed Trinidad and To­ba­go to sat­is­fy the con­cerns of in­ter­na­tion­al rat­ing agen­cies (which had im­me­di­ate­ly put the coun­try on neg­a­tive watch when the cri­sis broke). How­ev­er, the funds made avail­able could not re­al­is­ti­cal­ly cov­er a de­mand for liq­uid­i­ty that could have re­alised all the short term poli­cies, in­clud­ing EF­PAs, is­sued by Cli­co. The li­a­bil­i­ties un­der those poli­cies amount­ed to ap­prox­i­mate­ly $13 bil­lion. It was there­fore im­per­a­tive that GORTT find a way to ad­dress the is­sue of Cli­co's li­a­bil­i­ties and re­struc­ture its busi­ness.

73. From the in­for­ma­tion that came to me it ap­peared that at the time that the MOU was signed the in­ten­tion had been that cer­tain valu­able group as­sets,such as shares in RBL and MHTL, could be sold or col­lat­er­alised. How­ev­er, it be­came ap­par­ent that this could not hap­pen, be­cause:

(a) the ma­jor­i­ty of Cli­co's RBL shares were held in its statu­to­ry fund (which was sig­nif­i­cant­ly in deficit);

(b) the re­main­der of Cli­co's RBL shares were sub­ject to se­cu­ri­ty in favour of CIB;

(c) most of the RBL shares owned by CIB were

hy­poth­e­cat­ed to se­cure that com­pa­ny's bor­row­ings;

(d) deal­ings in the MHTL shares owned by the Group were sub­ject to the terms of a share­hold­ers' agree­ment.

74. Giv­en the size and scope of the Group's busi­ness, and notwith­stand­ing GORTT's in­ter­ven­tion, there re­mained sub­stan­tial sys­temic risks in­her­ent in the fi­nan­cial sit­u­a­tion and con­di­tion of the Group. These in­clud­ed its third par­ty as well as its re­lat­ed par­ty debt, par­tic­u­lar­ly as they im­pact­ed on state-re­lat­ed in­sti­tu­tions and on Cli­co it­self.


Related articles

Sponsored

Weather

PORT OF SPAIN WEATHER

Sponsored