Ignorance was detrimental. That's the lesson former Clico directors learnt after the company collapsed in January 2009. Well-cushioned after a global recession in 2008, some former directors claim they were kept in the dark about the company's challenges. The revelations during last week's commission of enquiry by former CL Financial Group head of finance, Michael Carballo, have left them questioning their directorship tenures as they comprised a board which existed on paper and clearly, there was another board was engaged in the "functioning" of the organisation.
Further, they are "disgusted" with the obscene bonuses paid to management of the failed Lawrence Duprey empire and that Clico was a cash cow milked dry by its parent company, CL Financial. "A lot of things we are hearing now is news to us...We were left in the dark," one former director told the T&T Guardian yesterday. The last board in place before the collapse comprised chairman Lawrence Duprey, corporate secretary Geoffrey Leid, Ian Garcia, Karen Ann Gardier, Shama Deonarine, Nigel Salina and Hayden Charles. The board, which met once a quarter, was paid $5,000 a session. To qualify the point, the director produced board minutes of the last three meetings of the Clico board.
In the meetings, save the last on January 26, there is no indication of the impending "tsunami" (as Duprey described it) that would cripple the company. Minutes from the meetings show:
1. The board meeting of September 23, 2008, started at 2.15 pm and ended at 2:25 pm. The only item for discussion was the inter-company balance. "It was unanimously agreed that the inter-company balance be significantly reduced. Further, it was agreed that outstanding balances, dividends owed to the company be pursued such as with MHTL."
2. The board meeting on December 8 at 11.35 am dealt with other issues such as code of conduct, ethics and compliance, a marketing report from October 31, 2008, was presented, the accounts as at October 2008 were presented and that a review of interest rates be conducted. Director Hayden Charles suggested that leveraging cash flow should be looked at. The marketing report stated, on the draft balance sheet as at October 2008, that total liabilities were $18, 301,110,000 with total equity at $25,097,883,000.
To address the financial crisis, the report suggested a freeze on hiring, increase productivity and re-evaluate departmental budgets. Their objectives were:
• to allay fears that clients and the general public might have with respect to the EFPA guarantee ad mandated by the Securities and Exchange Commission;
• to strengthen trust in Clico as a financial institution;
• to generate end of year sales; and
• to position Clico as a booming company in these times against the global financial landscape.
Other imaging strategy proposals included a promotion of One Woodbrook Place, media interviews with Duprey and a press campaign to focus on Clico Investments. "When you look at these meetings, which were in December, there was no sign of forthcoming collapse, there was no sign the company was going to implode," the director told the T&T Guardian. "There was nothing in those meetings to suggest there was a cash crunch or a liquidity issue. The board was never informed of any of this," the director explained. Questioned on whether they were aware of the statutory fund deficit at the time, the director said there were clearly people in "the know," but that information was not presented at the board.
To emphasize the point, the director produced the board minutes of an emergency meeting.
3. An emergency board meeting held on January 26, 2009, at 6 pm. According to Carballo, a CLF team had met with the Ministry of Finance on January 23 and 24 and Duprey had flown in on January 25 to discuss the company's bailout. Clico's assets-its RBL shares and MHTL shares-were being considered for negotiations before board approval. The first item on the board's agenda was the statutory fund. Gardier appraised the board that "change in the economy altered the company's plan to support the statutory fund. Though there was an increase in premiums, the net outflow was deficient." Director Charles raised the question of whether people were aware of the large withdrawals from Clico.
Gardier said withdrawals were higher than deposits, as a result of people feeling the effects of the economic crisis and payouts are delayed by a few days. Charles added that he found this to be a dangerous situation and noted that cheques were usually given in the interest of service within a shorter time frame than required. The public's confidence was questioned. Deonarine inquired about the exact position of the statutory fund. Gardier did not give a figure but advised that Central Bank had a different actuarial approach and stricter adherence to regulations. At the commission of enquiry, Ministry of Finance attorney Fyard Hosein, SC, revealed that the projected deficit of the statutory fund as at December 31, 2008, was $10.3 billion.
Charles asked what is expected of the company and Gardier indicated that a meeting was held with Central Bank to discuss the course of action and the proposal to use surplus value of Methanol shares was under consideration. Gardier told the board that the strategic map to restructure was already planned out and advised that TT debt could be swapped for Methanol shares and give an opportunity to repurchase. "Anyone's who's ever been associated with Clico of CL Financial has been tainted by the actions of a few. There were agents working hard, even if it was working hard for their commission, but there were agents working hard to put money into the company. The story is of corporate greed but no one's looking at the agents who lost their homes. It is very devastating," the director said.
Questioned on the interest rates offered to EFPA policyholders, the director explained that it needs to be put into perspective. "If you have money to invest and you put it into good investment and get a good return, the customer benefits," the director said. "In this regard, there was a slim margin for the company. Now if the company is doing well, you pay off handsome bonuses and its okay. But if the company is doing bad, which we didn't know, it would be unfair to take those bonuses. "We were aware of some of the investments. Some were good. Some were bad. A lot of deals we were not privy to."
The director was unaware that Clico paid Duprey's salary. "A lot is coming out in the news. It has cost me personally." The director explained that while Clico policyholders were able to get back some of their money from the Government for their investments, their policies had been put on hold. "Directors can be held liable. But how can directors be held liable for something which you did not know." Despite the hardship, the director admitted to having a "soft" spot for Duprey. "The agents loved Duprey. He had that charm over everyone."