I saw statutory fund deficit coming—Leid

 

 Leid, who was appointed as Clico’s corporate secretary in June 2007, and joined the board in October of that year, said he envisaged in June 2008 the insurance company might develop a statutory fund deficit by December 2008, based on its assets and liabilities. The Clico board came up with a three-pronged strategy in August 2008 to cure the looming deficit, Leid testified.  The strategy included the transfer of land, worth $1.5 billion, from the Home Construction Ltd’s land bank to Clico, the sale of a repo-type instrument and the transfer of shares in Methanol Holdings (Trinidad) Ltd from CL Financial to Clico.  But Clico’s plans to satisfy the Statutory Fund deficit were scuppered by the Central Bank’s change in valuation procedures, which had the effect of disqualifying  some of the related-party assets that would have gone into the fund.  He also said in October 2008, according to its books, Clico had a fixed CIB deposit of $4 billion but he agreed with Carter that the deposit was “almost worthless.”

 

 As a last-ditch effort to save Clico in the face of a liquidity crisis in December 2008, Leid said the board of the insurer decided in the Christmas week of 2008 to call in the $800 million debenture that Clico held over CL Financial. The calling of the debenture, which grew to $1.3 billion by January 30, 2009, would have required CL Financial to sell assets to repay Clico, which was chaired by Lawrence Duprey at the time.  But instead of calling in the debenture, according to Leid’s testimony, Duprey began to negotiate with the Government for a bailout three weeks later.  Under cross-examination by Carter, Leid said he did not consider he was in a conflict of interest when he served as Clico’s corporate secretary and as the legal adviser to Duprey, the CL Financial chairman. Although conceding later there was a “potential” conflict of interest, he said that once the Clico board agreed that the debenture should be called in, the potential conflict was no longer an issue. 

 

Leid also spoke about the fierce competition between Clico and its sister insurance company, British American, to attract funds during 2008, which led to Clico offering unsustainable interest rates on new money pumped into its Executive Flexible Premium Annuity.  He blamed Ian Garcia, Clico’s sales and marketing manager in 2008, for the decision to increase the interest rates offered on the insurer’s short-term annuity products, a decision, he said, that never received the sanction of the company’s board.  Asked by Carter how he accounted for Clico’s failure, Leid attributed the company’s plight to the interest rates it offered in 2008. Carter put to Leid that another contributory factor was the fact that some of the money that Clico received from its policyholders was used to pay other group companies. Carter then led Leid to a document which revealed that Clico funded $300 million of the CL Financial group expenses in 2008.