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How did $100 billion CL Financial become a $7 billion company?

Published: 
Thursday, June 7, 2012
BG View

In the past week, in private conversations, two business executives expressed great doubt to me about the likelihood or the willingness of the Government to recover enough assets from the CL Financial empire to ensure that taxpayers are not left out of pocket with regard to the bailout of the business empire that Lawrence Duprey built. This extreme cynicism at the ability of the Government to ensure that the taxpayers of T&T do not suffer as a result of the multi-billion dollar bailout of CL Financial came as a surprise to me because, as far as I am aware, the Government has taken steps to recover every cent that the State has spent on the bailout.

 
 
At the annual meeting of Angostura on April 27, CL Financial chairman Gerald Yetming, in answering questions from a shareholder, said that the Government will be making a claim on CL Financial to recover the billions of dollars that the conglomerate has received from the State since the signing of the Memorandum of Understanding on January 30, 2009.
According to Yetming, in order to facilitate the claim that the Government is going to make on CL Financial, there was an expectation that the shareholders of CL Financial would agree to the extension of the June 2009 Shareholders Agreement (which agreement expires at midnight on Tuesday coming).
 
 
At the special meeting of the CL Financial shareholders on May 14, it was agreed by a unanimous vote that a company with two shareholders as directors would be empowered, on behalf of the 360 or so shareholders of the conglomerate, to negotiate the terms of the Government’s claim on CL Financial.
 
 
According to my calculations, the gross claim would be $16.3 billion and counting, comprising:
• The $9 billion in cash and zero coupon bonds for 20 years that the owners of the short-term investment products issued by Clico and British American (Trinidad) have already received in lieu of giving up their rights to any further claims on either of the two insurance companies. My understanding of this is that the Government would stand in the shoes of the policyholders, according to Clico chief executive Carolyn John, which would mean that the Government would take the place of all the policyholders, who accepted the bailout, in relation to the Clico statutory fund; 
 
 
• The $5 billion in cash and bonds that the Government pumped into Clico in 2009 and 2010, most of which was converted into preference shares accumulating interest at four per cent a year and constituting the Government’s 49 per cent stake in Clico;
 
 
• The $2.3 billion that the Government made available to pay ensure that all of the individual, third-party depositors of Clico Investment Bank recovered all of their deposits in the failed financial institution.
As far as I am aware, from the $16.3 billion and counting, the following would need to be subtracted in order to calculate the Government’s claim on CL Financial:
 
 
• The value of the Government’s 49 per cent stake in Clico. While the insurance company’s 2010 accounts have not been published as of Wednesday morning, Clico has considerable assets, including its 56.4 per cent stake in Methanol Holdings (Trinidad) Ltd (MHTL), its 51.7 million shares in  Republic Bank worth $95.66 a share and its 67 million shares in Angostura worth $8.50 a share. Clico’s stake in MHTL, which is the subject of arbitration proceedings in London brought by minority shareholders, would be particularly valuable;
 
 
• The value of CMMB, which was acquired by First Citizens in 2009 for $1, would also need to be determined and netted off the $16.3 billion.
 
 
At the end of the day, the Government would have bought out the short-term investment product holders and would constitute the majority of liabilities held by the non-traditional policyholders (up to $12 billion) and the State would also have a 49 per cent stake in Clico. In the context of all of these facts, is the cynicism about the willingness and ability to go after the Clico assets justified? I think the readers would have to be the judge of that. I have formed my own opinion. But either way, the relationship that the former chairman of CL Financial, Lawrence Duprey, has with certain politicians in this country needs to be factored into the mix as well as the civil litigation case brought by the Central Bank against him and others. At some point, given the cynicism and lack of trust that abounds in this society, the Government is going to need to display a great deal more transparency and accountability than has hitherto been the case.
The Government’s main pointman on the CL Financial issue is Yetming, who also serves as chairman of CL Financial, Clico, Angostura and the Jamaican rum producer Lascelles deMercado.
 
 
In Yetming’s absence, other representatives of CL Financial attempted to restrict the public’s right to know what is going on with the billions of dollars that taxpayers have invested in Clico and CL Financial by threatening legal action against a journalist who attended the May 14 special meeting of CL Financial as the holder of a proxy from a shareholder. That journalist received a letter from Marjorie Nunez of Lex Caribbean on the night of May 14 claiming that general meetings of shareholders are private and confidential “and that the intended publication by your Anthony Wilson of the matters discussed at the meeting, resolutions passed and photographs will be a breach of company law practice and procedure which requires that members of the media be admitted to a meeting of shareholders only if the shareholders present approve.” The threat of legal action was ignored and a short, inoffensive story was written on the meeting. But the attempt to block the publication of information that the taxpaying public has a right to know is disturbing and does not bespeak an attitude of transparency and accountability.
 
 
As both of the businessmen who spoke to me on this issue pointed out, the cash and bonds that the policyholders have received is in effect taxpayers’ money that could be used to build roads, schools, bridges, hire more teachers, nurses and doctors or increase the salaries of public servants. The point needs to be made, though, that the Government has put itself in place to sequester the assets of Clico. If it does not follow through on taking ownership of enough of those assets to reasonably compensate the taxpayers of this country, there are likely to be political consequences. No doubt, all of the matters ventilated in this column will be given a proper airing at the annual general meeting of CL Financial, which takes place tomorrow at 5pm at the Clico Box at the Queen’s Park Oval.
 
 
At that meeting, the shareholders of the company will be asked to consider the following:
• To approve the extension of the GORTT/CL Financial agreement for a six-month period;
• To elect shareholder directors for the period ending December 31, 2012;
• To ratify the appointment of the GORTT directors for the period ending December 31, 2012.