$128M Suits: Policyholders taking CLICO, BAICO directors to court


THIRTEEN DIRECTORS of the insolvent CLICO and British American Insurance Company (BAICO), including former CLICO executive chairman Leroy Parris and president of CLICO Holdings Barbados Limited, Terrence Thornhill, are facing $128 million in negligence lawsuits.

The action has been initiated by the Barbados Investors and Policyholders Alliance (BIPA), whose lawyers have served the directors with pre-action protocol letters, giving them two weeks to respond with either “plausible reasons” why the action should not be maintained or a convincing settlement offer.

Failing that, the court action to recover $76 million from the CLICO players and $52 million from those accused of negligence in the BAICO matter will  be triggered.

The SUNDAY SUN was told that attorneys at law Alair Shepherd, QC, and Esther Arthur sent off the January 17 correspondence along with a draft statement of claim to CLICO directors Parris, Thornhill, Anthony Ellis, Woodbine Davis, QC, Leslie Haynes, QC, Elridge Thompson, Adrian Lorde, Basil Springer, Edrick Griffith and Vishnu Ramlogan.

The BAICO claim named former CL Financial chairman Lawrence Duprey and  directors Brian Branker  and Robert Fullerton.

The other defendants named in both claims were accounting firm PriceWaterhouseCoopers, the auditors of BAICO and CLICO; the Supervisor of Insurance; and the Attorney General, as the representative of the Crown.

BIPA has contended that the loss suffered by its members was a direct and/or indirect result  of the negligence and breach  of duties by the defendants.

President June Fowler said their actions “individually and collectively contributed to the unnecessary demise of the two companies and the consequent massive losses to policyholders”.

“It is with a heavy heart that BIPA has instructed its  attorneys at law to proceed with these actions,” she said.

“Having pursued various other more conciliatory avenues over the past two years without success, BIPA has been left with no alternative but to represent the best interests of its members by taking this action,”  Fowler added.

She said that many Government promises had gone unfulfilled and neither of the judicial managers had taken  the route of legal action to recover the funds.

In the case of BAICO, the alliance said its members had lost out on $52 million, while the higher amount of $76 million was lost by the CLICO investors.

The statements of claim detailed where BIPA believed each defendant fell short.

Among dozens of accusations made against the directors were that they did not properly manage the affairs of the companies; rubber-stamped management decisions; recklessly funded acquisitions of investments regardless of whether they could yield any dividends, thereby exposing the company to insolvency; blindly relied on the reputation of Duprey and the  CL Financial group of companies; and failed to recognize that the course of conduct embarked on by the companies could only result in their insolvency.

The Supervisor of Insurance was accused of failing to perform his statutory duties by ensuring that BAICO was only able to carry on as an insurance company if it both maintained the required Statutory Fund and complied with restrictions on the use  of assets representing that fund.

As for the auditors, the claim further contended  that they failed to carry out their work to uncover the companies’ risk of not maintaining the liquidity needed to meet their obligations; plan and carry out their work to uncover potential deficits in future cash flows of the companies; and to carry out their work so as to show that the returns on investment for high interest rate products were substantially lower than the returns guaranteed to the policyholders.

PricewaterhouseCoopers has already responded  to the correspondence from BIPA’s lawyers. In  a January 23 letter, territory leader Marcus Hatch  said the company was in the process of seeking  to appoint attorneys who would respond after an investigation of the matter. It promised a full, written response within a month.

Fowler said that while BIPA campaigned for the rights and restitutions of funds to all 35 000 CLICO and BIPA policyholders in Barbados, only the  424 members of the alliance had been named  in the court action.

BIPA’s action comes ahead of the four-year anniversary of the collapse of CL Financial, the parent company of BAICO and CLICO, and amid efforts by judicial managers – Deloitte Consulting represented  by Oliver Jordan and Patrick Toppin in the case  of CLICO, and KPMG’s Lisa Taylor and Michael Edghill for BAICO – to find a resolution.

Both have indicated that policyholders would not get back all the money they invested.