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PS: They could not be trusted with bailout $$
Former CL Financial (CLF) chairman Lawrence Duprey wanted Government of T&T to put the initial $5 billion bailout money directly into CLF, the commission of enquiry into the collapse of CLF and the Hindu Credit Union heard yesterday. Going against what was agreed with the Government, CLF also tried to sell its Republic Bank Ltd shares and used a Swiss escrow agent to route proceeds from the unauthorised sale of its Clico Energy subsidiary to a Swiss bank account, the enquiry also was told.
Taking the stand yesterday at the Winsure Building, Richmond Street, Port-of-Spain, yesterday was the Ministry of Finance and the Economy’s permanent secretary Alison Lewis, who said: "I noted CLF was in breach of the memorandum." The Government had signed a memorandum of agreement with Duprey on January 30, 2009, through which taxpayers' dollars were used to bailout out the failing conglomerate because of the systemic risk it posed to the stability of the T&T economy.
Under the agreement, CLF was prohibited from selling any of its assets without the consent of Government. "There were attempts to sell a number of the assets within the group (CLF) and they were being done without the knowledge of the Minister of the Ministry of Finance," Lewis said.
For US$46.5 million, Clico Energy was sold to Proman Holdings of Barbados, the German partner with CLF in the Methanol Holdings company. The enquiry heard the proceeds from the sale were routed to an escrow account in Switzerland. Following the breaches, Lewis told the commission, she developed the view that CLF could not be trusted with any money given to it. Given that the Central Bank could not take over CLF, the enquiry heard the ministry had to rely on CLF being as good as its word.
When Peter Carter, QC, counsel for the commission, asked if the ministry's initial trust in CLF was sadly misplaced, she said: "I believe so, yes." As a result, the Government entered into a new agreement with CLF which gave the Government greater control over the board and management. "We didn't have confidence in the management and the board at the time," she said.
Lewis said CLF executives were giving inconsistent information. She added: "We had some concerns with respect to the veracity of the information they were giving us." Saying the group had a problem with compliance, Lewis said: "We did have some knowledge that the Central Bank basically was consistently asking the entities to provide the financial statements within the timeframe."
Lewis said the ministry intervened because of the "contagion effect" that the failure of CL Financial would have had in the economy. "That was our immediate concern," she said in response to Carter's question about the contagion effect. She responded affirmatively to Carter's question whether it was feared that other financial institutions would be dragged down by the Clico failure.
Asked about repayment for its bailout, Lewis said it was initially believed, when Government provided the $5 billion to rescue the company, that "over time," the taxpayers' dollars would be replaced. She said that, at the time, it cost taxpayers $7.3 billion to bail out Clico, $2.3 billion more than anticipated. "None of it has been repaid to date," she said in response to a question by commission chairman Sir Anthony Colman.
Lewis said she still believed that over time if the companies that form part of the CLF Group are restructured, there was hope that part of the bailout funds could still be repaid. She said floating some of the companies on the stock exchange was also an option. Prefacing his question with the fact that in other countries, a company like CLF would have been nationalised, Colman asked if that was ever an option on the table.
Lewis responded: "That was an option that was never discussed. It was never discussed as an option to nationalise." The Securities and Exchange Commission general manager Norton Jack is due to testify today.
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