Clico... A victim of corrupt actions.. by connected parties [Part 5]

FINANCE BY DAVID WALKER ACCOUNTANT & DATABASE EXPERT

Central Bank Of Trinidad And Tobago

I briefly touched on the issue of connected parties in a previous issue.

The identities and roles of these connected parties were and are crucial in creating the enabling environment for the financial tragedy that has befallen taxpayers, policyholders and shareholders. I will now share some more information, all publicly sourced, about the inappropriate connections at play. I leave you to contemplate the reasons for these connections and what results flowed from them. Let’s start with a little more about those I have already mentioned then move on to some new ones. This list is far from exhaustive.

I will remind you that during a rescue or liquidation, connected parties should be identified and kept well away from any participation. Their transactions with the distressed company in the months leading to the collapse should be routinely examined for any possible improprieties. This is all just plain common sense in addition to being the best practice for professionals and taken as a basic requirement. Judge what follows in that light.

Here is a list of the connected parties that we will briefly explore today:

• The Central Bank

• Central Bank Governor Ewart Williams

• Central Bank Governor Jwala Rambarran

• The Ministry of Finance

• Minister of Finance Karen Nunez-Tesheira

• Deposit Insurance Corporation

• CMMB/KSBM

• Independent Senator Subash Ramkelawan

• CLICO Chairman Gerald Yetming

The Central Bank

The connection of the Central Bank to CLICO is that it was the regulator and it failed spectacularly in that capacity. It was as connected as a party could be. Their protestations that they lacked the necessary legal or regulatory clout to prevent the collapse are beneath contempt. Yet that connection was not sufficient in this case to rule out its effective control of the CLICO rescue, encompass-ing all CLICO’s associated assets and every dollar that the government injected. It has continued as both the regulator and manager of CLICO for the past ten years with catastrophic consequences.

Central Bank Governor Ewart Williams

At the time of the decision to rescue CLICO, Ewart Williams was the Governor of the Central Bank. In fact, the rescue via a takeover by the Central Bank was of not only CLICO but also all the financial institutions in the CL Financial (CLF) group. One of these was the CLICO Investment Bank (CIB). It emerged that Governor Williams had a milliondollar deposit at CIB. What’s more, he had withdrawn his deposit prior to the maturity date, a couple of months before the collapse was announced. This same man would then be in charge of the rescue as the head of the Central Bank.

Central Bank Governor Jwala Rambarran

Jwala Rambarran replaced Ewart Williams as Central Bank Governor. Jwala then took control of the rescue of the institutions under his regulatory oversight. It later emerged via a Freedom of Information request that prior to his appointment as Governor he was used as a consultant on the very rescue and was paid millions of dollars for his services. Central Bank Of Trinidad And Tobago

The Ministry of Finance

The Ministry of Finance through its Minister gives general and specific directions to the Central Bank. Since the Central Bank was in control of CLICO then the Ministry of Finance also exercised control over CLICO. As it also disbursed funds for the rescue and traded in the assets of CLICO, it became both buyer and seller, investor and investee, making all the decisions for both parties. The sale of CLICO assets thereby came under Ministerial control even when the buyer was the Ministry. Caesar unto Caesar. It was also discovered that many of the larger policyholders were government agencies, using public funds. These included Unit Trust Corporation and First Citizens among many. As Corporation Sole, the Minister was also responsible for the well-being of these depositors/policyholders leading to another clear conflict of interest.

Minister of Finance Karen Nunez-Tesheira

Like Governor Williams, Minister Nunez-Tesheira was a depositor at CIB. Like the Governor, she also withdrew her money a few months prior to maturity of the term. Like the Governor, she claimed that it was a coincidence. She nevertheless played a major role in the rescue.

The Deposit Insurance Corporation (DIC)

A decision made early on to liquidate CIB, one of the financial institutions taken under Central Bank control as previously indicated. DIC was appointed as the liquidator. Remarkably, DIC is birthed from the Central Bank and is totally controlled by it. The Governor of the Central Bank is also its Chairman. Therefore, Governor Williams was in de facto charge of the liquidation of CIB from which he prematurely removed his funds just months before.

CMMB/KSBM

Another of the institutions being saved was CMMB. The method chosen was to sell it to First Citizens Bank, a state-owned entity for $1. The state and First Citizens Bank then guaranteed all the investments in CMMB at a cost that has not been disclosed. In the subsequent execution of the Resolution Plan, the four directors of CMMB formed a new company, KSBM that was among those selected to participate in the redemption of bonds as described in an earlier episode. Robert Mayers was Chairman of CMMB and is now Chairman of KSBM. In addition, Carolyn John who was MD at CLICO during the rescue is now a director of KSBM. You think it easy! We have not been told how much was earned by each such intermediary but we can be certain that the total earned runs to hundreds of millions of dollars. Requests under the Freedom of Information Act for details of the firms used and the amounts earned by each have been met with silence.

Subhas Ramkhelawan

The passage of the Central Bank Amendment Act was critical to the ability of the authorities to engage in the serially unlawful acts that made up this rescue. It was not expected to gain the necessary support of independent senators but did so under bizarre and troubling circumstances. The abuse of the public purse and the pauperisation of affected parties could not have happened without it. One must understand that independent senators are just that - independent. They are supposed to display independence of thought and act independently of each other. They are barred from caucusing together i.e. engaging in collective discussions and decision-making. In open and callous contempt for such rules and accepted norms, the Minister of Finance along with undisclosed individuals made a late-night presentation to the body of independent senators, which resulted in them voting for the legislation in the aftermath. It is said that no notes were given and no records were kept of the meeting. A legal fight has ensued in an attempt to obtain any notes that were presented. Among the independent senators was Subhas Ramkhelawan, the only finance professional among their number. It is reasonable to assume that given the reality of the meeting that he would have been looked upon by his peers for guidance and explanations. They supported the bill after that meeting, having previously indicated a lack of willingness to do so. On top of the impropriety of the meeting and the lack of any records for the public, it is noteworthy that Bourse Securities, the firm owned and run by Subhas Ramkhelawan was prominent among those who profited from the Resolution Plan, which could not have been implemented without the decision by those independent senators. Were the other independent senators aware of this when they voted or sought his guidance?

CLICO Chairman Gerald Yetming

Gerald Yetming was appointed Chairman of CLICO by the authorities. He therefore drove and participated in all major transactions and decisions in the rescue. We should be alarmed at what he described as a coincidence. What follows is an unedited extract from a report in a regional publication - “Chairman of Colonial Life Insurance Company (CLICO) Gerald Yetming did not disclose that his son, Gerard Yetming, was employed at commercial real estate firm CBRE, which was hired to sell the W Fort Lauderdale hotel in the United States. Three months before the sale was concluded, after the allegation was made that the son of a CLICO director would “get a large commission”, Yetming told the board that his son was employed at the firm, which was chosen to conduct the sale. The issue was brought before the CLICO board, in the form of a note, and was dealt with at a board meeting.” There has been a subsequent denial that his son received a commission. However, the coincidence of his son’s employment and the fact that it was not disclosed to the board until after the matter had gone public raises more questions than answers. By any stretch of the imagination, the son is a connected party to the father and that information should have at a minimum been advised to the board in advance of any decision. The connections and probable collusion described above would fail any test of the independence of those undertaking the rescue. What we have is a playing field seemingly designed and built for the execution of corrupt actions by connected parties to the massive detriment of policyholders, shareholders, and taxpayers. The cost has been huge and will be the subject of the next episode.