I know that many will instinctively disagree with me but Lawrence Duprey has done us all a favour. By bringing the Clico/CLF takeover back into mainstream focus he has reignited the debate about the best way to resolve the mess that we have found ourselves in. We even have, finally, an admission by a Minister of Finance that after seven long years of control and at least 20 billion dollars of taxpayer pain, they do not know what the real cost has been, will be, or where it all went.
The Minister now tells us that we can look forward to a forensic audit. This will presumably come at great cost and will report at some indeterminate time in the future. Yet this proposed forensic audit appears to have been greeted with universal acclaim.
I hate to spoil the party but a forensic audit is, in my judgment, an unfortunate and expensive distraction now. In particular, it fails to recognise the most important strategic imperative in the matter.
With every disclosure since the outset we have seen the reported cost rise. There is no reason to assume that the trend will not continue into the future. The greatest strategic goal therefore must be the removal of the controlled companies from state hands and the closure of the matter with an immovable final figure. In its wake must also come a viable plan for the compensation of the taxpayers and satisfactory resolution of claims by affected parties.
A forensic audit gets us no closer to any of that. It will, however, provide many opportunities for public titillation and gossip. It will most importantly deliver serial opportunities for further unproductive slanging matches about "who is more corrupt that whom." In the meantime the bill will continue to rise with the end disappearing into the sunset.
If we could only agree that the greatest imperative at this time is to eliminate risk of escalating costs, then the debate must be about how we achieve that. I hold the view that we must urgently move to return the company to private ownership along with all the financial risk. As long as we continue the irresponsible policy of burdening the taxpayer with commercial risk as started by the previous administration when they bought out policyholders' rights, the taxpayer will continue to suffer. Closure must be our principal goal.
Quite logically, that is what our Central Bank Act anticipated. While it gave the Central Bank draconian powers over distressed financial institutions, it also imposed certain responsibilities on them. It is the constant ignoring of these responsibilities that has brought us to this unfortunate place. I have written extensively on the failure to abide by those responsibilities, most notably the need for independent valuations in support of sales. For today however I wish to reflect only on one aspect of responsibilities under the Central Bank Act.
In Section 44G(2) the Act states in clear and simple terms:
"The Bank shall relinquish control and shall not
continue to carry on the business of an institution where–
(a) the circumstances on the basis of which the
Bank assumed control of the institution under Section 44D have ceased to exist;"
So not only is it in the best financial interest of the taxpayer to relinquish control, it is also the law. I know that other aspects of the Central Bank Act have given the past and possibly the present administration an appetite for acting outside of the laws of T&T but if we are to put the interests of the taxpayer first then we must return the company to the private sector.
To accomplish this, we need something very different from a forensic audit. We need urgently, a due diligence exercise. It is incredible that one was not done at the outset. No government or interested third party should contemplate taking control of and hence responsibility for a major enterprise without having one conducted as a precondition.
No private person or group can be expected to make an offer for the company without this. I want to hear an announcement in this regard in a manner that would satisfy an investment banker of the bona fides of the data presented to them in support of any prospective takeover or acquisition.
Having said that though, we have found ourselves in a frightful legal mess. The law is clear. Given that the original conditions clearly no longer exist, it is open to shareholders to force the return of the company. Even worse, given that the conditions are now known publicly to no longer prevail, it could be argued that Central Bank and its appointees no longer have the protection vested in them under Section 44 and might be personally legally liable for any actions, especially disposals that they now take.
The way forward is messy but simple in principle. There must be consent between the Central Bank, the Minister and the majority of shareholders to agree on a way forward that recognises the legal realities. There must be a collaborative due diligence process that informs all parties about the financial state of affairs, and all other affected parties must be persuaded via actions that their rights are to be protected.
Above all, the plan must be grounded in a respect for the law and a desire to put a lid on taxpayer commitment with a believable plan for full repayment. It can and must be done.
DAVID WALKER