Welcome to BIPA
Barbados: Tuesday February 21, 2012 – Deloitte Consulting Ltd. (represented by Oliver Jordan and Patrick Toppin) the Judicial Manager of CLICO International Life Insurance Limited (“CIL“ or “the Company”) yesterday reported to the High Court of Barbados (“the Court”) on the status of its efforts to identify an investor with the depth of management and financial capacity to acquire the operations of CIL, with the aim of completion by mid-2012 of the possible sale of the assets and policyholder liabilities of the Company.
The Judicial Manager also presented the Court with its recommendations arising from the Forensic Audit that was commissioned on the Company.
A key objective of the Forensic Audit was to investigate the “Amounts due from related companies” which totalled Bds$370million at the date of appointment of the Judicial Manager. The forensic team was able to identify substantially all of the intercompany balances during the course of the audit. It was however noted that access to documentation, held by related entities which are not subject to judicial management, would be necessary to establish the validity of certain transactions.
In light of its primary mandate to identify a course of action that is most advantageous to CIL’s policyholders, a recommendation was made by the Judicial Manager, and accepted by the Court, for the Financial Services Commission of Barbados (“the FSC”) to initiate, with the assistance of the appropriate government agencies, further investigations into the significant transactions identified in the Forensic Report and pursue any required criminal and/or civil legal actions.
The Judicial Manager undertook to cooperate with the FSC and any other agencies to provide such information that the Judicial Manager possesses, if required, during the conduct of these investigations.
The Judicial Manager wishes to assure policyholders that all efforts are being made to expedite the process of transferring of CIL’s business to a qualified investor and that it will continue to provide updates as key milestones in this process are achieved.
Any and all queries concerning policies can be directed to the company via established lines of communication. Additionally, the Judicial Manager has established a dedicated email address of firstname.lastname@example.org for direct communication concerning the Judicial Management process.
About Deloitte: Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte’s approximately 182,000 professionals are committed to becoming the standard of excellence. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte Touche Tohmatsu Limited is a private company limited by guarantee incorporated in England & Wales under company number 07271800, and its registered office is Hill House, 1 Little New Street, London, EC4A 3TR, United Kingdom.
SUNDAY EXPRESS – CLICO
Ex-State counsel: Unforgivably gross and reckless dereliction of duty
By Camini Marajh Head Investigative Desk
Story Created: Dec 17, 2011 at 11:44 PM ECT
Story Updated: Dec 17, 2011 at 11:44 PM ECT
For close to two decades, State regulators kept rogue insurance giant CLICO in their gunsight, but never fired the proverbial warning shot that could have saved the day.
Now, nearly three years past intervention and $7.3 billion taxpayers’ dollars later, new evidence obtained by the Sunday Express shows that State and Government officials knew the country’s number one insurer was not only routinely breaking the rules, but was operating well outside the law.
Official correspondence, sent under cover of strict confidentiality, shows that for close to two decades, State regulators registered quiet displeasure, issued stern warnings, raised myriad red flags and watched disapproving from the sidelines as the country’s largest insurer hurtled toward near-collapse, with not a word to the investing public.
State officials, tasked with the responsibility of protecting policyholders and the financial system from accounting ingenuity and breaches of the law by maverick financial firms like CLICO, did nothing to police the renegade insurance company and avert the financial disaster that, from all the evidence on hand, was long in coming. No alarm bells were rung or threat of intervention made. Instead, regulators continued to quietly list the same litany of repeated acts of law-breaking to a defiant CLICO, which continued to take high-risk acquisition gambles with policyholders’ money. And even as senior executives and the parent company, CL Financial Ltd, continued to use CLICO as their personal piggy bank, the message to the investing public was that all was well.
Central Bank, Government officials and State regulators all stood by and allowed CLICO to conduct business as usual and to continue to use policyholders’ funds to provide guarantees to affiliate CL Financial companies, knowing that the insurer had liquidity issues and had breached its Statutory Fund obligations, as required by the insurance act. In December 2008, exactly one month before State intervention, CLICO was running a Statutory Fund deficit of $2.5 billion. The fund is designed to hold assets in trust for the protection of policyholders.
Sudeesh Shivarattan, a former senior State counsel at the Board of Inland Revenue, former lecturer in tax law at the Hugh Wooding Law School and editor of Dominion tax cases, Canada, said the Central Bank was “grossly negligent and, indeed, breached its fiduciary obligations to policyholders”, who, he contended, relied on the bank’s supervisory authority to ensure compliance with the law and maintenance of the Statutory Fund.
“Unquestionably, the Central Bank was the absolute custodian of the Statutory Fund and, therefore, was in absolute control,” he told the Sunday Express, pointing to Section 37 (4) of the Insurance Act, which states, in part: “Every company carrying on a long-term insurance business in Trinidad and Tobago shall place in trust in Trinidad and Tobago assets equal to its liability contingency reserves with respect to its Trinidad and Tobago policyholders as established by the balance sheet of the company as at the end of its last financial year.”
Shivarattan said the Statutory Fund was, by law, in the nature of collateral security for policyholders and that “the Central Bank knowingly and recklessly failed to discharge its mandatory statutory duties”. He said: “For this unforgivably gross and reckless dereliction of duty, the Governor of the Central Bank and his entire board of directors should resign and be made personally liable for the losses suffered by policyholders.”
Financial analyst Ved Seereeram said Central Bank, by its complicit silence, aided and abetted CL Financial executives in repeated acts of corporate misconduct and law-breaking. A former Citi banker, Seereeram contended that Central Bank was guilty of a dereliction of duty. He said if the regulators and external auditors had acted sooner on the concerns raised 16 years ago by former permanent secretary in the Ministry of Finance and former Republic Bank chairman Frank Barsotti, now deceased, “the problems could have been rectified, if not confined. Certainly, the financial hole would have been a lot smaller”.
Both experts agree there were other culpable players who contributed to the making of the CL Financial debacle, namely, the external auditors PriceWaterhouseCoopers (PwC), which signed off on the annual financial accounts, and the directors and officers who were entrusted to manage the affairs of CLICO, CL Financial Ltd, CLICO Investment Bank (CIB) and British American Insurance Co Ltd.
Recent disclosures at the public commission of enquiry into the collapse of CL Financial Ltd portray a conglomerate run amok with directors and executives who were unusually adept at exploiting the weaknesses in the corporate governance structure, engaged in acts of self-dealing and asset buys to the financial detriment of the group and routinely breached and evaded regulation, including the Board of Inland Revenue. The group’s top brass traded accusations as to who benefitted from which deal and who was to blame for taking the country’s largest conglomerate down a precipitous slope. Lawrence Duprey’s CL Financial group controlled assets in excess of $100 billion in 32 countries before it crashed in January 2009.
Its investment bank, which was the first casualty of the 2009 collapse, engaged in sloppy lending practices, failed to keep proper accounts, showed more capital than it had on its books, financed private deals for directors and senior executives, practically gave away depositors’ money to executives and favoured customers and paid fat commissions to bank executives for loans brought in (including non-performing loans), according to documents seen by this newspaper.
As detailed in previous Sunday Express reports, millions of dollars were advanced, often without documentation and sometimes in violation of CIB’s own lending limits. A post-mortem analysis of the accounts by Ernst & Young found glaring evidence of loose management and board oversight, vague paper-trails on many inter-group and related-party transactions, material inaccuracies in the management accounts, non-compliance of monthly financial statements with generally accepted accounting principles and a loan portfolio that comprised a significant percentage of high-risk real estate projects, among other things.
But the rogue conduct and systemic deterioration of prudential banking standards at CIB was well known to the Inspector of Financial Institutions, Carl Hiralal, who, in making the case for Central Bank’s intervention under Section 44D on January 29, 2009, detailed the bank’s poor financial condition and compliance track record. In his eight-page report to the Governor of the Central Bank, Hiralal noted: “CIB has failed to supply timely and accurate returns. Despite receiving several letters on the matter, CIB failed to institute effective measures to correct the situation.”
He cited the bank’s penchant for fudging numbers (overstating of balance sheet figures and profit margins) and violations committed under the Financial Institutions Act, specifically, the granting of unsecured credit facilities to a single client. He said unsecured lending to DCG Properties (over US$73 million) was 29.8 per cent of CIB’s capital base at December 31, 2007.
The Ernst & Young analysis found that CIB did not pay corporate taxes for the years 2007 to 2009 and, in fact, had serious liquidity problems since 2007. The CL Financial-run investment bank was given a clean 2007 audit by PwC. In keeping with the CL Financial tradition of tardy filings, the 2007 accounts were signed off late, November 2008 to be exact.
The Inspector did not disclose how CIB got so totally over-leveraged and under-regulated or why his office allowed the precarious situation to develop to the point of liquidation. Perhaps the answer lies in the complex connections between State regulators who take their cue from Government officials and the close relationships between prominent political figures and wealthy and influential business leaders.
View/download the Judicial Managers’ presentation to Barbados CLICO policyholders – October 01 2011
Click the play button below (>) to begin playing the audio clip:
Click to download in MP3 format (1.81MB)
Once again there is a buzz about a possible solution to the Clico issue, which as far as I see it, has weighed down the economy since September 8, 2010—that is two weeks short of a year. Last Friday, Guardian associate editor, Asha Javeed, got word that the Government’s exit strategy for the holders of the Executive Flexible Premium Annuity with investments of over $75,000 included offering them shares in an investment holding company which would be structured in a manner similar to National Enterprises Ltd. Read full article…
BARP Press Statement
30th Aug 2011
Following a recent meeting between The Barbados Association of Retired Persons (BARP) and The Barbados Investors and Policy Holders Alliance (BIPA), the Board of BARP has decided the association will be joining BIPA.
President of BARP, Edward Bushell, stated that a significant number of BARP members have policies with both Clico and British American Insurance Company (BAICO), and indeed the Association itself has investments with both companies. Bushell feels it therefore makes sense for BARP to ally itself with BIPA, which is currently planning structured legal approaches in an effort to retrieve funds on behalf of its policyholding members.
Chairperson of BIPA, June Fowler, expressed that BIPA is very happy to have BARP on Board as it strengthens the Alliance’s position and profile. The two organisations are looking forward to working together in the interests of their respective members.
BARP is encouraging those of its members who are Clico and BAICO policyholders, some of whom have invested their life savings in the two troubled companies, to join BIPA as individual members as soon as possible so that their interests and rights can be more effectively represented. More information on membership of BIPA can be found atwww.thebipa.net or by calling 230-1026.
In Attached Photograph BARP BIPA meeting; from left to right; Stanley MacDonald Vice Chairman BIPA, Alphea Rock Wiggings Executive Manager BARP, Edward Bushell President BARP, June Fowler Chair Person BARP, Peter Marshall Secretary Treasurer BIPA.
Please be reminded that you can call the Financial Services Commission to make an appointment for viewing the CLICO Interim Report:
Tel: (246) 437-3924
Tel: (246) 437-3930
Click the link below to download the Group Allocation Form in Excel format: