Last Friday, Attorney General John Jeremie, SC, laid the Colman Commission of Enquiry report into the failure of Clico and other companies of the CL Financial group in Parliament, effectively making that voluminous document public for the first time.
In making the document public, Mr Jeremie told Parliament, and the nation, that he proposed to end civil proceedings in litigation involving the demise of the CL Financial “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 costs to exit proceedings.”
On Sunday, this columnist reached out to a senior Government official to find out whether the litigation brought by the State to overturn the sale of what was known as Clico Energy to the Switzerland company, Proman, was one of the matters that Mr Jeremie proposed to end.
That Government official told me that it was his understanding that the matter “had been compromised on terms beneficial to the State.” Compromise, in this context, is a fancy word used by lawyers to mean “settle a dispute by mutual concession.” The resulting story was published in the Monday T&T Guardian, under the headline “Govt reaches settlement with Proman over Clico Energy.”
On Monday afternoon, the Office of the Attorney General sent out a news release with the headline ‘CL Financial agrees to sale of disputed shares to Proman Holdings Barbados.’ That news release was not reported on in the Tuesday Guardian because it was my opinion that it did not add any important information to the article the previous day.
For those who may not have been following this story as closely as I have, before the collapse of the CL Financial empire, Clico Energy was a company that was 51 per cent owned by CL Financial and 49 per cent owned by Proman.
Clico Energy owned shares in two ammonia companies on the Point Lisas Industrial Estate, Caribbean Nitrogen Company and Nitrogen 2000, as well as a 48.75 per cent stake in Southern Corporation Company, a methanol marketer and a 67.50 per cent shareholding in Industrial Plant Services Ltd.
On January 30, 2009, then minister of finance, Karen Nunez-Tesheira, accompanied by then Central Bank Governor Ewart Williams, held a news conference to announce that the Government and the Central Bank were stepping in to bailout the group. The then CL Financial chairman, the late Lawrence Duprey, and Andre Monteil, who were both at the news conference, accepted the terms of a Memorandum of Understanding that outlined the bailout process.
On February 3, 2009, just days after the signing of the MoU, Mr Duprey sold the 51 per cent shareholding to Proman for US$46.5 million.
It is useful to quote extracts of the Office of the Attorney General’s news release now, as it places the issues in context:
“Upon entering into office, this government met various legal matters that threatened the economic well-being of this country. One of those matters was the Privy Council Appeal of Proman Holdings Barbados against CL Financial (CLF) and its related companies.
“These proceedings concerned the validity and effect of a Purchase and Sale Agreement dated 3 February 2009 through which CLF, purportedly acting through Mr Duprey, who was then a director and chairman of both CLF and Clico, sought to transfer a 51 per cent shareholding in Clico Energy Co. Ltd (now Process Energy Trinidad Ltd) to Proman for the sum of US$46,500,001.
“The transaction was challenged in the High Court with Justice Devindra Rampersad, in September 2021, ordering Proman to return the 51 per cent of Clico Energy to CLF, and to provide an account of dividends and/or distributions owed, which were ultimately valued at US$185,916,295.05 plus interest at the time.
“This decision was challenged and upheld in the Court of Appeal, where the proceedings were described as “high stakes, full-blown, adversarial litigation involving well-renowned Titans of Trade and Industry”. Proman went on to pursue an appeal before the Privy Council.
“Immediately upon entering into office, the Government, being the majority shareholder and largest creditor of CL Financial, sought the advice of eminent Kings Counsel in London with respect to the prospects of success and the likelihood of the JCPC upholding the decision of the Court of Appeal.
“The Government, having received advice, decided to continue negotiations which commenced but were never successfully concluded under the last administration.
“After giving careful thought to all the interests involved, the prospects of success and the very real possibility of certain of the findings of the Court of Appeal being overturned, CL Financial, with the express agreement of the Liquidator and the sanction of the Court, agreed to the sale of the disputed shares to Proman Holdings Barbados to compromise the proceedings before the Privy Council. The completion of this transaction allowed the Government to recover significant funds while avoiding the litigation risk which would have resulted from the further pursuit of this matter before the Apex Court.”
Justice Rampersad voided the February 3, 2009, purchase and sale agreement (PSA) and ordered:
• The restoration of 51 per cent shareholding in Clico Energy (which was renamed Process Energy Trinidad Ltd) to CL Financial;
• An account and payment to CL Financial of all dividends and distributions made after the PSA. According to a 2022 judgment in the Court of Appeal by Justice Malcolm Holdip, the distributions and dividends generated by Clico Energy between February 2009 and September 2021, amounted to US$185,916,295.05 plus interest at 2.5 per cent per annum;
• The return of the US$46.5 million consideration for the sale of Clico Energy to Proman; and
• The payment of the costs of the action by Proman and Duprey to CL Financial.
Justice Rampersad suggested that the money that Proman owed CL Financial (US$185.91 million) could be set off against the money CL Financial owed Proman (US$46.5 million). The result of the setting off, or netting off of those two numbers is US$139.41 million. The Court of Appeal did not interfere with Justice Rampersad’s order in that regard
Justice Rampersad also directed, and the Court of Appeal concurred, that an interest rate of 2.5 per cent per annum should be added to the set-off figure of US$139.41 million. If that is done, and the length of time of the interest is extended from September 2021 to December 2025 (the presumed date of the settlement agreement), then the compounded interest over 16 years would be US$90.074 million.
So if the set-off amount of US$139.41 million is added to the compounded interest of US$90.07 million, then the amount of money Proman owes CL Financial grows to US$229.48 million.
The news release from Office of the Attorney General stated that CL Financial, which is under liquidation, AGREED TO THE SALE OF THE DISPUTED SHARES TO PROMAN HOLDINGS BARBADOS.
That means that in addition to the US$229.48 million, which is the set-off amount plus the compounded interest of 2.5 per cent over 16 years, the value of the 51 per cent stake in Proman Holdings Barbados has to be added.
I asked Google’s AI the following question on Wednesday: If a company generates $185.91 million in dividends over 12 years, and pays out 40 per cent of its profits in dividends, what would be a reasonable sale price for the company.
Assuming an average annual dividend of US$15.49 million, a 5.0 per cent perpetual growth rate and a 10 per cent required return, the AI determined a price of US$309.85 million.
Did the Government receive a total of US$539.33 million from Proman and, if not, why not? What was the value placed on the shares, and what was the total consideration?
