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CLICO and BAICO financial information prepared by chartered accountant Peter Douglas, showing a solution for Barbados policyholders.
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.
Chris Sinckler told us it was all going to be resolved in June 2012, then it would be December 2012 and now Mr. Stuart tells us it will be March 2013. BIPA takes the GOB to task in The Weeekend Nation of 4th January to mark the 4th Anniversary of this debacle, which started with us all being told by the same GOB to ‘Stay Calm’ and that our money was safe. And do we need to remind Mr Stuart of his repeated public promise that we will all get our ‘principal’ back?
Chosen as one of Barbados’ “Personalities of 2012”, watch June Fowler, Chairperson of the Barbados Investors & Policyholders Alliance (BIPA) in an excellent interview with Carol Roberts on Starcom Network’s “VOB Country” broadcast on 92.9FM Voice of Barbados during Christmas 2012.
Has the Barbados Government all but totally dismissed as a “minor inconvenience” tens of thousands of CLICO and BAICO policyholders who trusted Government agencies and regulatory bodies to do their job properly?
Are they once again admitting that had they acted as they should, they could have prevented the disastrous collapse of these two companies and the devastating consequences throughout the region?
Having already heard Chris Sinckler declare they must “humble themselves and admit they dropped the ball”, we now have Minister of Trade and Commerce, Senator Haynesley Benn confirming the widespread lack of enforcement of the requirement of statutory corporations to submit their annual audited financial statements on time, noting that some are up to seven years overdue!
He too bows his head and accepts some blame. Is he even aware it was that same negligence and dereliction of duty which allowed CLICO to continue without publishing accounts while its affairs deteriorated towards complete collapse?
Adding further insult to injury, we hear Minister of Health, Donville Inniss, stating that “elderly care is not cheap … and Barbadians must prepare for their own circumstances when they get old”.
Excuse me Minister, but would you be including in that statement the 35,000 people who, in the last ten years, responsibly did exactly what you suggest, only for your Government and its agencies to fail so miserably to protect their financial “preparation for their own circumstances”, that they are now left destitute and having to rely on the State for help?
With the officially confirmed record of apathy, lethargy and disinterest in corporate governance, legislation, regulation and enforcement, how much lower can the level of confidence of potential savers and investors sink?
You can debate a Prevention of Corruption Act as much as you like, but while you continue to sit back and allow companies to act with a level of disregard for the law and a lack of supervision and enforcement akin to that of “ZR” drivers, you prove to us all that a Prevention of Corruption Act, or any other legislation or regulation designed to protect the people, is nothing more than pointless “long talk”.
– Michael Goodman
Barbados Investors and Policyholders Alliance Inc commends the recent reported sourcing of US$100 million by Eastern Caribbean Currency Union governments from Trinidad and Tobago to cushion the devastating loss which would otherwise have been borne by BAICO and CLICO policyholders who trusted their governments to regulate the insurance industry and enforce the appropriate laws.
The EC governments have demonstrated responsibility, leadership and empathy for those who elected them, qualities sadly lacking in many government officials. Their actions acknowledge that tens of thousands of people are victims of greed, recklessness and irresponsibility of businessmen and their board members, and negligence of key government officials.
Presumably the EC governments, committed to properly representing their constituents, convinced the government of Trinidad of the domino effect of their failure to properly regulate CL Financial Ltd., the ultimate parent company of BAICO and CLICO businesses throughout the region.
Given the size of CL Financial Ltd. and the resources available to it, confidence would have been placed in its ability to support and meet all financial commitments to its various subsidiaries. It could have been argued that failure to properly regulate C L Financial would contribute to the collapse of the company and its subsidiaries which, no longer able to allay concerns about their balance sheets and statutory funds, would inevitably meet the same fate.
BIPA notes that the Trinidad government has consequently allocated a large sum to compensate policyholders, and cooperated with a number of EC governments, clearly showing its recognition of the failure of its regulatory authorities to act effectively, despite being aware for some time of the company’s risky financial practices.
The Government of Barbados has already acknowledged its own failures in this regard and must act, as have Trinidad and the EC governments, to fully compensate the victims of such failures.
If, after four years of procrastination, the Government of Barbados does not act without further delay, the financial industry in Barbados will suffer a major crisis of investor confidence, bringing it to its knees. BIPA expects the key figures in the Government of Barbados to understand the weightiness of their responsibilities in this fiasco, and act now. If they lack the necessary skill and expertise, they might consider consulting the EC governments on how to achieve success in this matter.
– June Fowler,