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What of Mr Duprey’s rights?

Published: 
Thursday, April 27, 2017
BG View
Lawrence Duprey

On Sunday, I wrote an email to disclosure activist, commentator and property valuator Afra Raymond taking issue with some comments he made in Sunday Guardian and on CNC3 News on Saturday night that it would be “unacceptable” if CL Financial is returned to Lawrence Duprey.

Mr Raymond was quoted in the Sunday Guardian as follows: “I don’t think it should be returned to them. Those people are not fit and proper to have ownership, directorship or hold positions as officers or controlling shareholders of a financial institution in this country. There are fit and proper guidelines and that is one of the very issues we raised with the Governor of the Central Bank Dr Alvin Hilaire.”

The fit and proper guidelines, to which he referred, pertain to financial institutions only.

Section 33 (2) of the Financial Institutions Act (FIA) states: “A person who is not a fit and proper person in accordance with the criteria specified in the Second Schedule shall not act or continue to act as a director or officer of, or be concerned in any way in the management of a licensed institution or financial holding company.”

Section 71 (7) of the act also allows the Central Bank to apply the fit and proper test to controlling shareholders of licensees.

My reading of the act, especially the Second Schedule, is that it may prevent Mr Duprey from being director, controlling shareholder, significant shareholder or officer at Clico, Clico Investment Bank (CIB), Republic or any financial institution in T&T.

If the Central Bank were to take the view that Mr Duprey’s leadership of CL Financial and Clico was partly responsible for the collapse of insurance company and CIB , then the Central Bank may determine that Mr Duprey would not pass the fit and proper test.

The Central Bank may still be of the view—expressed by its former Governor Ewart Williams at the news conference on January 30, 2009—that the financial difficulties at Clico and CIB have more to do with “excessive related-party lending...an aggressive high interest rate mobilisation strategy to finance equally high-risk investments...and very high leveraging of the group’s assets.”

It is on that basis—plus the forensic audit of Clico in 2009 and 2010 and the civil proceedings filed by the Central Bank and Clico on June 7, 2011 against Lawrence Duprey and others—that the bank may conclude that Mr Duprey does not meet the fit and proper criteria outlined in the FIA.

The common sense position that flows from the above is that Mr Duprey cannot serve as a director, controlling shareholder, significant shareholder or officer at CL Financial if it continues to hold 51 per cent of Clico and lesser percentages of Republic Bank and CIB.

But the FIA does not pertain to non-financial companies such as Angostura, Home Construction, CL Marina etc.

If CL Financial is separated from its financial institutions, there can be no legal reason to deprive the shareholders of the group of their property rights in non-financial companies such as Angostura, Home Construction, CL Marina etc. That is because the Constitution of the Republic of T&T, at Section 4, affords CL Financial shareholders the fundamental right to “the enjoyment of property and the right not to be deprived thereof except by the due process of law.”

If the Central Bank/GORTT do not return CL Financial’s non-financial companies (or assets) to the group’s shareholders after GORTT and other creditors have been repaid, that would be a clear breach of the constitutional rights of those shareholders.

To deprive the CL Financial shareholders of their property rights in the group would tie the CL Financial resolution up in legal proceedings for decades and would deprive taxpayers of the benefit of the repayment of the monies advanced to the group at a time when T&T’s credit rating is being downgraded.

In other words, the Central Bank may prevent Mr Duprey from having anything to do with Clico if it remains as an insurance company, but cannot interfere with his property rights if Clico becomes a holding company for non-financial assets.

 

Negotiated settlement

 

If Clico’s traditional portfolio is separated from its non-financial assets, can that be the basis of a negotiated commercial resolution to the eight-year-old Clico nightmare? Such a scenario prevents the issue ending up in litigation, which would benefit neither the shareholders of CL Financial nor the taxpayers of T&T.

 

CL Financial’s proposal

 

Assuming the government is still owed $10 billion by Clico, it is my understanding that the CL Financial shareholders are offering to make a small payment to the government (for example $4 billion) which would allow them to regain control of the insurance company’s assets.

The shareholders would then run the company for a period of time (say ten years) and would repay the government an agreed sum every year until the $6 billion balance owed is extinguished.

 

Government’s proposal

 

My understanding of the government’s proposal is that it wants to be in a position to sell Clico’s assets until the insurance company’s debt to taxpayers is fully repaid and then return what is left of the company to shareholders of CL Financial.

That proposal was first outlined by the Central Bank in March 2015 and was endorsed as the current administration’s policy by Minister of Finance Colm Imbert in his July 7, 2016 statement on the Clico resolution in the Senate.

The March 2015 proposal was for the Government to be paid $4 billion in cash and for Clico to transfer its shares in Angostura Holdings Ltd, CL World Brands and Home Construction Ltd to the Government for $3 billion in value.

The sum of $7 billion would have satisfied 85 per cent of Clico’s debt to taxpayers, meaning the total liability was $8.3 billion) of which the Government received $4.2 billion in cash.

In his April 8, 2016 mid-year budget review, Mr Imbert said: “After this transfer, we will take appropriate decisions to dispose of these assets in a sensible and productive manner. With particular reference to lands owned by Angostura and/or Home Construction, it is the Government’s intention to acquire these assets for public purposes such as housing, tourism and infrastructure development.”

 

Differences between Clico and GORTT

 

It is clear Mr Duprey and other active CL Financial shareholders are prepared to go to court to block the transfer and/or sale of Angostura, CL World Brands and Home Construction.

That, in my view, is the reason the negotiations between the Government and Clico have broken down.

The bone of contention between the Government and Clico is that the Government insists that Clico’s shares in Angostura Holdings Ltd, CL World Brands and Home Construction Ltd should be transferred to it and “disposed of in a sensible and productive manner,” while the CL Financial shareholders maintain they should be allowed to take control of group assets as part of the resolution.

 

Bridging the gap

 

In a July 30, 2016 exclusive, Gail Alexander reported on an April 25, 2016 letter written by Roger Duprey—who is part of a group of CL Financial shareholders called United Shareholders Ltd that was set up to negotiate a settlement of this matter—to the Minister of Finance in which R Duprey outlined a plan for CL Financial shareholders to retain control of following six group companies.

The companies are Angostura Holdings Ltd; CL World Brands Ltd; Home Construction Ltd; CL Marine Ltd; Colfire Ltd and Caribbean Petrochemical Marketing Ltd.

It seems to me if the future of those six CL Financial assets is contentious, the Government and the CL Financial shareholders should at least agree on the assets that can be sold allowing for taxpayers to be repaid some of the Clico debt immediately:

• The Oman-based Methanol Holdings (International) Ltd;

• CL Financial’s 80 million shares in Republic Bank, representing just over 50 per cent of the bank, should be sold and the proceeds in excess of $8 billion shared among the Government, the unitholders of the Clico Investment Fund and the creditors of Clico Investment Bank;

• Clico’s traditional portfolio;

• If Clico is holding government bonds or treasury bills above the funding requirements of Clico’s traditional portfolio, that government paper can be extracted and retired...or sold.

• The Government can identify parcels of the group’s property holdings that it wants—including the property in Tobago that Prime Minister Keith Rowley insists should not be called No Man’s Land—and the valuation of that land be used to reduce the group’s debt to the government;

• CL Financial shareholders should be allowed to take control of some or all of the companies they requested with all of them having government-appointed directors and with strict, legally enforceable deadlines for the payment of the outstanding balances to the State.