Enquiry into Clico/HCU: Former CIB head grilled on $173m in loans to Duprey, Monteil

Richard Trotman, former president of failed Clico Investment Bank (CIB), a subsidiary of CL Financial (CLF), admitted on Friday that he did not take steps as head of CIB to recover outstanding loans made to former CLF executives Lawrence Duprey and Andre Monteil totalling $173 million.

Under questioning by Gerald Ramdeen, junior counsel to the Clico/Hindu Credit Union commission of enquiry, at Friday’s sitting, Trotman was asked about three particular sums.

He asked Trotman if he knew who owned First Capital, to which Trotman said that matter is before the High Court. After some insistence by Ramdeen, Trotman said, “As I understand it, First Capital is owned by Mr Duprey. I cannot pronounce on that legal matter. As I understand it, Mr Duprey’s interests owns First Capital.”

Ramdeen asked Trotman if First Capital was initially owned by Monteil, former chairman of CIB, and whether he was aware Monteil sold First Capital to Duprey. “That is my understanding,” Trotman said. “And what was the consideration for that transaction?” Ramdeen asked. “I’m not sure, but I think it was sold...I can’t remember,” Trotman said.

Ramdeen offered the response: “It was sold for US$1.” Ramdeen asked Trotman what was the outstanding liability of First Capital? “Nine-five million dollars,” he told Trotman. “Did you take any steps as president to recover that? “Well, in 2008...” Trotman started to say. “At any time, no I didn’t take any steps,” Trotman said.

Ramdeen asked Trotman if he knew who owned Stone Street Capital. Trotman replied that it was Monteil. “What is the outstanding sum Mr Monteil owed CIB? $Thirty-five million dollars. Did you take any steps to recover that?” Ramdeen asked. Trotman asked instead: “Is that $35 million straight or does that include reassignment of his fixed deposits at CIB, because Mr Monteil at the same time had fixed deposits at CIB?

“Well, Mr Trotman, you were president. Can you help us?” Trotman testified at the enquiry on Friday at Winsure Building, Port-of-Spain, when he told lone commissioner Sir Anthony he was not prepared to give testimony since he had not submitted a witness statement, but perhaps he could do so at a later date.

It was decided that Trotman, now a chocolatier, teacher and a consultant, would be asked about issues based on issues he was alerted to previously.

Trotman’s CIB history
Trotman told the enquiry he became president of CIB in February 2007, a post he held until January 9, 2009. He said he was asked by then president Lennox Archer to join CIB as it was applying to the Central Bank for a commercial licence. Trotman said he initially joined CIB as its chief operating officer, prior to which he was group corporate finance executive at CLF.

He said while he was at CIB, the directors at varying times included Monteil as chairman, Archer as chief executive and director, Amjad Ali, Anthony Rahael, Claudius Dacon, Faris Al-Rawi and Michael Callender. He said after Monteil retired in 2008, Mervyn Assam took over as executive chairman.

Ramdeen said a witness statement submitted by Assam said Trotman borrowed US$600,000 ($3.8 million) to purchase a property in Grenada. In response, Trotman said he serviced the loan, which he  borrowed prior to joining the company, and it was fully repaid in December 2008.

Assam in his statement said Trotman was paid the sum of $5 million to join CIB, which was described as a “signing on bonus.” Assam said when he confronted Trotman about the payment, Trotman described it as a stock transaction. “When I went to CIB, I had benefits due to me from CL, and in joining, it was agreed between CL and CIB that they should pay those benefits which had already accrued.

“And those benefits which had accrued were in the sum of $5 million?” Ramdeen asked. “I believe they were,” Trotman said. He said when he was approached to be a director at Flavorite Ltd, Monteil then had no shareholding in Flavorite. “In fact, Mr Richard de Souza, now deceased, approached me to join the board of Flavorite, which was a publicly listed company,” Trotman said.

He said Peter Salvary, a former CLF executive, was then the chairman at Flavorite. He said there was a transaction involving Flavorite and he came on board as a director shortly thereafter. No details of the transaction were given at the enquiry. Asked if he came on after Monteil bought Flavorite shares, Trotman said his recollection was his directorship was later confirmed by de Souza and Salvary.

Ramdeen told Trotman that CIB’s personnel costs escalated from $18.2 million in 2006 to $23.9 million in 2007. Trotman said CIB paid a salary increase to its staff in 2006/2007 in the order of “low teens,” not having had an increase for about four years. Ramdeen said on a loan portfolio of $1.7 billion, interest income was a mere $139 million.

“I take it that those figures are correct?” Trotman asked. “I can’t remember offhand. Is that the performing loan portfolio of $1.7 billion?” “Yes,” Ramdeen said. “Were you aware of that as president?” “Yes, but my recollection was the yield was more than 8.2 per cent,” Trotman said.

Ramdeen read Assam’s witness statement that when he (Assam, a founding member) returned to the bank in 2008, CIB was experiencing certain difficulties, one of the most serious of which involved Clico agents being paid a commission for deposits brought to CIB. “I put an end to this policy in its entirety,” Ramdeen read of Assam’s statement.

Trotman said he was aware this initiative existed a few years before he joined CIB, to have CIB broaden its deposit base, for which Clico agents were used. “I don’t recall details of the arrangement. I know it was ceased and existing arrangements rolled forward, but no new arrangements came in,” Trotman said.

He said CIB liaised with Clico’s human resource department, and a payment was included in Clico agents’ remunerations based on funds generated. Trotman said there was a standard commission of one per cent, but he could not say on what quantum of deposits.

The commission was thought to be cheaper and more efficient way of generating funds than if the bank had to pay advertising and adminstration costs, Trotman said. He could not say if the one per cent commission was fixed by Clico or by CIB, but said they would have negotiated the details.

Trotman said the employment contracts of senior management - from vice-presidents upwards - included an incentive for generating business - deposits and lending - to CIB, but was stopped. “We did that since 2007/2008, prior to that, commissions were payable,” Trotman said.

Ramdeen said commissions were also paid for loans made through senior CIB managers, which Trotman said were provided for in pre-2007 contracts. He said as he understood it, those commissions were paid at the end of the financial year and not when loans were disbursed. “I was never the beneficiary of it, so I can’t say with any clarity, but I do know it was ceased in 2007.”

He said he can’t remember if commissions paid to senior management were staggered through the life of a loan. He said he did not investigate Assam’s claim that senior management paid themselves substantial commissions on disbursements. “I did not see that. Let’s put it that way.”