Call it a minus or a Midas touch. That's the effect CL Financial chairman Lawrence Duprey had on his empire. When it came to investments, former Group Finance head Michael Carballo affirmed that Duprey's "insatiable risk appetite" had cost policyholders hundreds of millions of dollars. "They placed a lot of faith in Lawrence and hoped he'd have a Midas touch," Carballo told the commission of enquiry on his third day on the witness stand.
When it came to his remuneration though, millions of policyholders deposits were forked out to pay his invoices, Carballo acknowledged. Duprey earned $5 million a month for his efforts. In 2007, he was paid $90 million by the CLF board. That sum included a base salary, dividend payments and bonuses. Former Group Finance head Michael Carballo said while Duprey's salary was "substantial" it was being paid by Clico.
Among payments received:
• In January 2008, Duprey though his company Dalco, billed Clico $5 million for consultancy services.
• Clico was also billed US$5 million by Dalco for Duprey's "services rendered" after three meetings in Las Vegas.
• At another date, Clico was billed $6 million by Duprey's consultancy in South Africa with regard to expanding the "spirits" business for CL Ventures.
Clico's attorney Neil Bisnath challenged Carballo on the sums being earned by Duprey. "I knew it was a significant sum on an annual basis...This was a situation I met," he said. Bisnath questioned how Duprey could be allowed to use Clico's money, which was raised from EFPA policyholders with interest rates from 7-15 per cent, to invest in "risky" ventures. For the first time since he took the stand at this hearing of the inquiry, Carballo's explanations, which were mostly defensive, were cut short by three attorneys-Bisnath, CPG's Terrence Bharath and Ministry of Finance's Fyard Hosein-who cross-examined him yesterday. Bisnath pointed out that Clico was forced to buy assets-such as Burn Stewart and Golden Grove Estate in Tobago-that were unprofitable and could not be held in the company's Statutory Fund, at the behest of Duprey.
Further, Bisnath argued, Clico was saddled with several bad investments made by other subsidiaries with no hope of regaining its money. It was pointed out that Clico had loaned CIB$100 million to facilitate a loan to Andre Monteil to purchase shares at Home Mortgage Bank. Upon his departure of CLF, Monteil's $78 million outstanding CIB loan was given as a gift, claimed Bisnath. The loan was taken over by Duprey. Bisnath observed that Clico had no way of ever receiving monies owed to them. Earlier, Bharath had highlighted a series of bad investments made on the Florida Real Estate Market which were percipitated by Duprey.
Questioned as to who Duprey was accountable to, Carballo said Duprey only accounted to those in his trust. He admitted that while there was "a lot of discussion and debate" in the board over several decisions being proposed by the chairman, "at the end of the day there was a underlying strategy and ultimate goal." "There was from my time on the board, many debates about investments and justification for investments." Commissioner Colman asked: "Essentially, he always prevailed?" Carballo answered: "Always."
• The Capri Project-a major hotel and condominium on Fort Lauderdale beach...under the "W hotel" brand. Clico incurred a US$300 million loss.
• The Wellington Park Project-intended to be an equestrian and residential project in West Palm beach...a US$60 million loss.
• The Merrick Park Project-intended to be a commercial complex in South Miami.
• The Las Olas Projects-a mixed use residential and commercial project in Fort Lauderdale.
Carballo argued that far from taking risks "with other people's money," Duprey believed the projects would bring in company to satisfy the interest rate demands of the EFPA policyholders. Duprey, he said, did not anticipate the crash of 2008 and the devastating impact on the real estate market in the US. Carballo admitted that CLF has not benefited from a number of investments.
Other investments which incurred heavy losses include:
• the sale of Cruz Ann-lost US$10 million;
• Burn Stewart-lost US$75 million;
• Belvedere-lost hundreds of millions. Estimated US$200-300 million:
• Angostura India.
• Lascelles de Mercado.
Despite spending US$676 million, Carballo admitted that the "benefits are not yet tangible." "No, it has not been a success, Carballo told the commission. Carballo said the vision for Lascelles was never achieved as the investment led to Angostura being delisted from the TTSE because it did not provide accounts in time. Further, the company carried a debt on its books from the Belvedere transaction and it was unclear after the MOU whether it would have revived the monies owed to it by the CLF group. And while the company's liquidity problems were recognised in 2008, Carballo was questioned on his signatures on certain documents in which Duprey's dividend and bonus payments due from CLF were used to cover loans at Clico Investment Bank.
1. May 1, 2008-CL Financial confirmed that a $78 million dividend and bonus payment to be assigned to Duprey would offset a $78 million dollar loan and capitalised interest at the bank.
2. September 8, 2008-CLF again wrote to CIB stating that a $16 million loan would be repaid with dividend and bonus payments and settled within a year.
3. November 5, 2008-CLF wrote once more to CIB stating that dividend and bonus payments would offset a $12 million loan by Duprey from CIB.
4. November 11, 2008-CLF again wrote to president of CIB Richard Trotman stating that dividend and bonus payments due to Duprey would be sufficient to cover a $15 million loan to be settled within one year.
Duprey's dividend and bonus payments due from Clico were also used to cover loans at Clico Investment Bank.
1. August 4, 2008-Clico wrote to CIB stating that dividend and bonus payments due to Duprey should cover a US$3.8 million loan with interest in one year.