Derek Achong

Se­nior re­porter

derek.achong@guardian.co.tt

The liq­uida­tor of Cli­co In­vest­ment Bank (CIB) has lost a law­suit seek­ing to hold three for­mer ex­ec­u­tives and board mem­bers ac­count­able for the fi­nan­cial in­sti­tu­tion’s col­lapse al­most two decades ago. 

De­liv­er­ing a judg­ment yes­ter­day morn­ing, High Court Judge Car­ol Gob­in dis­missed the case brought by the De­posit In­sur­ance Cor­po­ra­tion (DIC) against for­mer CIB chair­man An­dre Mon­teil, its for­mer pres­i­dent Lennox Archer and CEO Richard Trot­man. 

Jus­tice Gob­in found that the liq­uida­tors sought to hold the trio li­able, while ig­nor­ing the role of the Cen­tral Bank in fail­ing to pre­vent the col­lapse through its role as reg­u­la­tor. 

“There is suf­fi­cient to cause me to con­clude that this ac­tion may have been filed to shift blame from the reg­u­la­tor’s laps­es by at­tempt­ing to pin li­a­bil­i­ty on in­di­vid­u­als, the re­spon­dents,” she said.

In Jan­u­ary 2009, the Cen­tral Bank un­der its emer­gency pow­ers as­sumed con­trol of CIB and ap­point­ed its In­spec­tor of Fi­nan­cial In­sti­tu­tions to man­age it. 

Sev­er­al months lat­er, Ernst and Young (EY) was ap­point­ed to pro­duce a re­port on CIB’s fi­nan­cial sta­tus. It con­clud­ed that CIB was heav­i­ly in­sol­vent with its li­a­bil­i­ties ex­ceed­ing its as­sets by $4.7 bil­lion. 

In Oc­to­ber 2011, then High Court Judge and cur­rent Chief Jus­tice Ron­nie Boodoos­ingh grant­ed an ap­pli­ca­tion for CIB to be wound up and for its as­sets to be liq­ui­dat­ed to clear its li­a­bil­i­ties. 

The DIC was ap­point­ed liq­uida­tor and brought the law­suit against the trio al­leg­ing that they act­ed reck­less­ly and fraud­u­lent­ly in man­ag­ing the com­pa­ny be­fore its col­lapse. 

The law­suit re­lat­ed to the pro­vi­sions of Sec­tion 447 of the Com­pa­nies Act, which al­lows for find­ings of li­a­bil­i­ty against for­mer of­ficiers of a com­pa­ny be­ing wound up. Of­ficiers against whom find­ings are made may be banned from hold­ing a po­si­tion in any oth­er com­pa­ny for up to five years. 

In de­cid­ing the case, Jus­tice Gob­in crit­i­cised the DIC for fail­ing to dis­close the EY re­port in the wind­ing up pro­ceed­ings be­fore Jus­tice Boodoos­ingh. 

“In my opin­ion, the case could not be made with­out it,” she said. 

She al­so took is­sue with the fact that the DIC failed to bring key of­fi­cials of the Cen­tral Bank, in­clud­ing for­mer gov­er­nor Ewart Williams, to tes­ti­fy over the cir­cum­stances that led to the in­ter­ven­tion in CIB. 

The judge not­ed that while Williams’ health was cit­ed as the rea­son, he par­tic­i­pat­ed in a sep­a­rate law­suit pur­sued by the Cen­tral Bank against for­mer of­fi­cials of CIB’s par­ent com­pa­ny, CL Fi­nan­cial (CLF), which was re­cent­ly dis­con­tin­ued. 

“I have drawn ad­verse in­fer­ences from the fail­ure to pro­duce these crit­i­cal wit­ness­es,” Jus­tice Gob­in said. 

Jus­tice Gob­in al­so ques­tioned why the trio was sin­gled out while oth­er for­mer mem­bers were ex­clud­ed from the case. 

“I wish to state that hav­ing re­gard to the pru­den­tial cri­te­ria of the Cen­tral Bank and specif­i­cal­ly with re­gard to the re­spon­si­bil­i­ty of the board of di­rec­tors, I have not been per­suad­ed by the ar­gu­ments for pro­ceed­ings against these re­spon­dents to the ex­clu­sion of oth­er board mem­bers who were in of­fice at the rel­e­vant time,” she said.

Con­sid­er­ing com­pos­ite risk as­sess­ments done by the Cen­tral Bank for CIB be­tween 2003 and 2004, Jus­tice Gob­in not­ed that it (the Cen­tral Bank) al­lowed CIB to op­er­ate de­spite some con­cerns over reg­u­la­to­ry breach­es. 

“In my opin­ion, the reg­u­la­tor’s con­duct or ne­glect to take any ac­tion, en­abled the re­spon­dents and the board of CIB to car­ry on,” Jus­tice Gob­in said. 

“The reg­u­la­tor was less con­cerned with the cul­ture of non-com­pli­ance than it was with the over­all fi­nan­cial strength of the in­sti­tu­tion,” she added. 

She al­so found that there was no ev­i­dence of fraud and mis­rep­re­sen­ta­tion by the trio as al­leged. 

“If there was an in­ten­tion to de­ceive, which I do not ac­cept, there were no vic­tims,” she said. 

Jus­tice Gob­in al­so point­ed out that she found in­con­sis­tent ev­i­dence over the se­quence of events that led to the Cen­tral Bank as­sum­ing con­trol. 

She not­ed that there was ev­i­dence that CIB’s board was ex­clud­ed from dis­cus­sions be­tween for­mer CLF chair­man Lawrence Duprey and Williams. 

“It is hard not to feel some mea­sure of sym­pa­thy for the board of CIB who had been kept com­plete­ly out of the loop by the dis­cus­sions that had been go­ing on be­tween Mr Duprey and the Gov­er­nor of the Cen­tral Bank, while they did not agree with what was be­ing said about the fi­nan­cial state of CIB,” she said. 

As part of her judg­ment, Jus­tice Gob­in or­dered the DIC to pay the trio’s le­gal costs for de­fend­ing the case. 

DIC was rep­re­sent­ed by Ian Ben­jamin, SC, Dionne Springer and Ele­na Arau­jo. 

Trot­man was rep­re­sent­ed by Matthew Gayle, while Fred­er­ick Gilkes, Marc Camp­bell, and An­dre Rud­der rep­re­sent­ed Mon­teil. 

Archer, who worked at CIB be­tween 1998 and 2007, was rep­re­sent­ed by Nali­ni Shar­ma, and An­drea God­dard. 

More lit­i­ga­tion

The out­come of the case is the lat­est in a set of law­suits in­volv­ing Mon­teil.

In Jan­u­ary, the Cen­tral Bank with­drew a law­suit against Duprey, Mon­teil, their pri­vate com­pa­nies and for­mer CLF cor­po­rate sec­re­tary Gi­ta Sakal over Colo­nial Life In­sur­ance Com­pa­ny (Cli­co). 

Through the law­suit, filed in 2011, the Cen­tral Bank and Cli­co were seek­ing dam­ages and resti­tu­tion for the loss­es suf­fered by the com­pa­ny dur­ing the group’s tenure.

The de­ci­sion, which came while the tri­al of the case was on­go­ing, fol­lowed com­ments in Par­lia­ment from At­tor­ney Gen­er­al John Je­re­mie, SC, who an­nounced plans to end civ­il lit­i­ga­tion, fund­ed by the State, over col­lapse of the in­sur­ance com­pa­ny and CLF. 

Je­re­mie re­vealed that the State had in­curred be­tween $3 and $4 bil­lion in le­gal, ac­count­ing, and ad­min­is­tra­tive costs in ad­di­tion to the ap­prox­i­mate­ly $28 bil­lion that was ex­pend­ed to bailout CLF and Cli­co. 

He said that the State could no longer jus­ti­fy con­tin­u­ing ex­pen­sive lit­i­ga­tion that has not pro­duced mean­ing­ful re­sults. 

While Je­re­mie not­ed that crim­i­nal pro­ceed­ings are with­in the DPP’s purview and the Min­is­ter of Fi­nance has over­sight over the Cen­tral Bank, he not­ed that he had the pow­er to end civ­il pro­ceed­ings to en­sure that ad­di­tion­al tax­pay­ers’ funds are not spent. 

“I can, how­ev­er, end civ­il pro­ceed­ings. And I pro­pose to do so now, in a cost-ef­fec­tive man­ner, hav­ing re­gard to the fact that the State has com­menced some of these pro­ceed­ings and might be re­quired to meet some rea­son­able cost to ex­it the pro­ceed­ings,” Je­re­mie said. 

Last month, the Court of Ap­peal re­versed a de­ci­sion of a High Court Judge to up­hold a $100 mil­lion case against Mon­teil and Trot­man over a con­tro­ver­sial, un­se­cured CIB loan to Mon­teil be­fore the bank’s col­lapse.

CIB claimed that Trot­man and Mon­teil breached their fidu­cia­ry du­ties through the deal which left the bank un­paid and with­out suf­fi­cient se­cu­ri­ty to cov­er the loan. 

The deal con­sist­ed of a se­ries of com­plex fi­nan­cial trans­ac­tions done be­tween 2007 and 2008. 

Mon­teil  sought and ob­tained the loan through his com­pa­ny Stone Street Cap­i­tal in Feb­ru­ary 2007 to help pur­chase shares in Home Mort­gage Bank (HMB) held by CIB’s par­ent com­pa­ny CL Fi­nan­cial (CLF).

Short­ly af­ter, the debt was trans­ferred to Mon­teil’s oth­er com­pa­ny First Cap­i­tal (St Lu­cia) Ltd (FCL), which held over 300,000 CLF shares, which at the time, were val­ued at al­most $444 mil­lion. 

CIB was ini­tial­ly to hold Mon­teil’s new share­hold­ing in HMB as se­cu­ri­ty but when the debt was trans­ferred to First Cap­i­tal, it was sub­sti­tut­ed to that com­pa­ny’s CLF shares.

Mon­teil struck a deal with  Duprey for him (Duprey) and his com­pa­ny Dal­co to take con­trol of First Cap­i­tal’s debt and as­sets in ex­change for the op­tion to pur­chase CLF’s 43 per cent share­hold­ing in HMB. 

Mon­teil pur­chased the HMB shares us­ing the loan and oth­er fi­nances for $110 mil­lion and then sold them to the Na­tion­al In­sur­ance Board (NIB) for al­most the ex­act pur­chase price. 

CIB filed the law­suit against the par­ties af­ter the Cen­tral Bank took over con­trol of the in­vest­ment bank and CLF fol­low­ing the Gov­ern­ment’s bailout of both or­gan­i­sa­tions in 2009.

It did so as it could not seek to re­coup the debt by liq­ui­dat­ing FCL’s CLF shares, which were worth sig­nif­i­cant­ly less at the time. 

In de­ter­min­ing the ap­peal, the ap­peal pan­el found that CIB’s liq­uida­tor rat­i­fied the no­va­tion process by ac­knowl­edg­ing that FCL owed the debt in cor­re­spon­dence sent in 2015. 

It al­so found that Mon­teil’s fail­ure to dis­close his deal with Duprey had no im­pact on the loan.