CLICO dealings and reperations
The regulators were constrained in dealing with the problems in Clico before 2009, as any drastic action could have had a negative ripple effect in the market and economy. That was how former Central Bank governor Ewart Williams defended the bank's role at yesterday's sitting of the Clico/HCU Commission Enquiry at Winsure Building, Richmond Street, Port-of-Spain.
He was cross-examined by Vincent Nelson, QC, counsel for the Ministry of Finance, during the morning session. "The Central Bank has taken about four cases, in the last ten years, of intervention," Williams said. "In at least three out of the four cases, there was a prelude to a wind-up, and the perception in people's mind is that intervention is the first stop to closing the company.
"You are dealing with a company that is dealing with 53 per cent of the market and a company with significant systemic risk. "Any responsible regulator has to make a judgment as to what the impact of putting Clico into intervention could mean...Because it is going to be perceived that Clico is going to be closed down.
And there is a real risk that exactly what you want to control, there is a risk that you, as the regulator, could precipitate this." According to his witness statement, Williams also withdrew money he had in Clico Investment Bank (CIB) on December 23, 2008. He had two deposits, one of US$50,000 and another of US$21,000.
Williams did this after Bhoe Tewarie, who was then on the CL Financial board, came to him to say he was "uncomfortable" with what was happening in the CL Financial Group. Williams denied that he withdrew his deposit because he knew the company was in serious problems at that time. Williams also said the bank did not allow Clico to do as it pleased.
"This does not mean that Clico was allowed to do what it wanted. Because the regulator was trying very hard along the way to find other means of getting the same. The bottom line is, the regulator always has to make the judgment," he said. Williams said the bank wrote to the office of the Director of Public Prosecutions (DPP).
"We even wrote to the DPP complaining about Clico Investment Bank (CIB). That is the ultimate one. We were taking steps to deal with CIB," he said. Under cross-examination, Williams said he did not recall getting a reply from the DPP's office.
"To the best of my knowledge, my deputy suggests that an answer was not forthcoming," he said.
Williams also defended his position that former CL Financial chairman Lawrence Duprey was largely responsible for the eventual collapse of the CL financial empire. Andrew Mitchell, QC, counsel for Duprey, said there were many other managers who should shoulder responsibility for what happened and it was not simply a "one-man show."
"It was a myth to say he was entirely dictatorial. There were people who were qualified and well paid. There were people not only with an obligation to their job, but to their professional office. There were actuaries, there were accountants and other people dealing with the day-to-day issues," Mitchell said.
Williams replied: "The Central Bank had taken civil action in some of these matters. In my view, some of the decisions that were taken by Mr Duprey led to some of the major problems, like some of the investment decisions and some of the organisational decisions."
Terrence Bharath, attorney for the Clico policyholders group, while cross-examining Williams, accused the Central Bank of doing nothing and jeopardising the savings and investment of 200,000 policyholders. "The Central Bank was charged with the duty of being the guardian in the interest of those 200,000 people who had their money in Clico.
"You were the man at the helm of the Central Bank. You had the obligation to police the industry. "Instead of using the heavy hand, the rod, you attempted to use moral suasion in dealing with the affairs of Clico," Bharath said.