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The path of good intentions?
The civil case brought by the Central Bank and Clico against former CL Financial chairman, Lawrence Duprey, former CL Financial executive, Andre Monteil, CL Financial and private companies owned by Duprey and Monteil is no doubt well-intentioned. The Central Bank issued a press release in April in which it foreshadowed the litigation and also responded to criticisms that it was not cooperating with the Commission of Enquiry into the collapse of Clico by failing to provide the commission with forensic audits by KPMG and Lindquist Forensic Accounting Investigations.
In that press release, the Central Bank referred to a statement by sole commissioner Sir Anthony Colman on the first day of the Enquiry that the COE “cannot order compensation even if it finds that financial loss has been due to the fault of particular individuals, companies, firms or government bodies.” The Central Bank then stated: “Financial recovery for the depositors and policyholders can therefore only come from civil proceedings, which the Bank and its legal team have been actively preparing. The Bank has a duty not to make any disclosures that would jeopardise those proceedings, and by extension possibly affect depositors and policyholders getting justice from the courts.”
So the intention of this litigation brought against Duprey, Monteil and associated companies, according to the Central Bank, is to seek “financial recovery for the depositors and policyholders,” which can “only come from civil proceedings.” It would seem, from this statement, that the Central Bank believes that these civil proceedings against Duprey, Monteil and their associated companies are the “only” means by which the long-suffering Clico and British American policyholders and owners of mutual funds can achieve “financial recovery” of the $12 billion owed to them.
If that was what the Central Bank was suggesting by this definitive statement—and one acknowledges that the Central Bank may simply have been a little loose in its use of language—then surely the Central Bank was mistaken. Civil proceedings again Duprey, Monteil and their associated companies are not the “only” means by which the policyholders and depositors can achieve “financial recovery.” The Insurance Act outlines, in some detail, the process by which an insurance company can be the subject of a winding up order. This requires the petition of ten or more policyholders owning policies of an aggregate sum assured of not less than $100,000 or on the petition of the Central Bank.
The Insurance Act requires that leave shall not be granted to present a winding up petition unless a “prima facie case has been established to the satisfaction of the Court.” The Act requires that “on making an order for the winding up of a company, the Court shall appoint a liquidator,” who acts under the control of the High Court and who may continue to carry on long-term insurance business “with a view to its being transferred as a going concern to another insurance company, whether in existence or being formed for that purpose.”
It is noteworthy that Section 79 (1) of the Act requires the liquidator to ascertain “the value of the liability of the company to every person who, according to the books of the company, is entitled to or is interested in a policy issued by the company and shall insuch manner as he thinks proper give notice to every such person of the value so ascertained.” In the event of a winding up order, the assets in the statutory fund should be valued and sold and the proceeds thereof distributed pari passu to all the policyholders, according to my understanding of this issue.
The Insurance Act even has a provision whereby directors, principal representatives or officers of an insurance company can be held liable and found guilty of misfeasance if the statutory fund has been diminished in contravention to the law. So, civil proceedings are not the “only” way to ensure “financial recovery” for the policyholders and depositors (not even to mention a Government-sponsored bailout like the one Finance Minister Winston Dookeran is about to unveil or the resolution strategy proposed in this space recently).
But is going after Duprey, Monteil and their associated companies the “best” way to ensure financial recovery for the policyholders and depositors? While it may provide the country with good theatre and satisfy those who feel that the “big boys” at CL Financial must be held to account, there is cogent evidence that civil proceedings, as envisaged by the Central Bank, are neither cheap nor quick—especially when the litigants are persons of means. The lengths to which Ishwar Falbaransingh and Steve Ferguson have gone in attempting to avoid being extradited to the US to face bid-rigging and money laundering charges should be instructive as to the issue of time and cost.
There is no doubt that Duprey and Monteil will be as vigorous in defending themselves with constitutional motions, judicial review applications, appeals followed by more motions and judicial review applications for years and years and years. The Central Bank is also, it seems to me, taking a calculated risk in going the way of civil proceedings. It is a fact that Clico, along with other insurance companies in this country, was placed under the regulatory ambit of the Central Bank in 2004. This means that for five years Clico was required to submit its accounts to the Central Bank and expose itself to possibility of onsite visits from the regulator.
Any civil proceedings brought against Duprey, who was chairman of Clico for years up to January 30, 2009, may serve to lay bear the extent of regulatory forebearance that Clico was allowed, negotiated or demanded. Duprey and Monteil may have in their possession letters, documents and reports that they would wish to make public in the event the civil proceedings go ahead. It would be interesting, therefore, to see whether these proceedings are held in open court or in chambers. The fact that the statement of case was not made available to the media on Tuesday when this matter was filed may be instructive in how this case will proceed.
I am fully aligned with those who feel that the executives responsible for the collapse of Clico, CL Financial, Clico Investment Bank and British American should be held to account. Given the other remedies available for “financial recovery,” if the Central Bank had real evidence of malfeasance, maybe the documentation in its possession should have been turned over the Director of Public Prosecutions, who is the person responsible for bringing criminal charges. There is a great deal of explanation that the Central Bank needs to do in this matter.
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