By Sandra Chouthi
Special to Indo Caribbean World
Port-of-Spain - The extent of the bailout of three subsidiaries of the Lawrence Duprey-created CL Financial Group is likely to be (Can) $2 billion, Central Bank Governor Ewart Williams said last week.
Both Williams and Prime Minister Patrick Manning had originally put the bailout figure at between (Can) $1.2 billion and (Can) $1.6 billion.
Cabinet has approved more than (Can) $.2 billion as a first tranche to begin easing the liquidity pressures of Colonial Life Insurance Company (Trinidad) Ltd and British American Insurance Company (Trinidad) Ltd.
Duprey and other executives of CL Financial approached the Central Bank in January seeking assistance for three of the Group’s cash-strapped companies — Clico, Clico Investment Bank (CIB) and Baico.
Duprey’s appeal developed from some unexpectedly large withdrawals of funds totaling millions.
Williams announced at a news conference on January 23 that the Central Bank and the government had agreed to a bailout plan, based on a Memorandum of Understanding signed with Duprey.
That’s when Williams announced the Central Bank was taking control of the assets of aforementioned companies with immediate effect.
The news sent a ripple effect throughout the country.
The CL Financial empire was widely considered to be one of the fastest growing around, with Duprey at the helm. He took his uncle’s Cyril Lucius Duprey’s insurance company and added to its asset base real estate, energy and petrochemicals, manufacturing, retail and distribution, marine services, media and communications and forestry and agriculture. It heavily advertised CIB and Clico branches as “the house on the corner,” the group having purchased old properties and converted them.
Following Williams’ major announcement, many banks and insurance companies placed full-page newspaper ads assuring the public their institutions were financially solid. Governor Williams and chief executive officers willingly gave media interviews for an entire week to assure the investing public their banks were solidly and responsibly managed, that as institutions they were safe, and investors’ funds were secure.
David Dulal-Whiteway, managing director of Republic Bank Ltd., of which CL Financial had a 55 percent share, saw some (Can) $32 million being withdrawn from its bank in the space of a week. Dulal-Whiteway said those withdrawals amounted to just 0.1 percent of its assets. He has since said much of those funds have been redeposited.
Significant developments have taken place since January 23.
In a subsequent press conference held on February 13, Williams said there was an accelerated decline of deposits in Clico’s statutory fund.
“Based on the audited accounts, Clico had surpluses in the statutory fund in 2004, 2005 and 2006. These surpluses shifted to a deficit of around (TT) $600 million (Can) $120 million) in 2007. Based on the unaudited accounts for 2008, the statutory fund deficit, measured on the same basis as in the previous years, had ballooned to (TT) $5.1 billion (Can $1 billion),” Williams said.
The Governor said if this was true, it could be that some of the premium income collected in 2008 that could have gone into the statutory fund, went elsewhere. He said that over the last few years, assets in the statutory fund included several inter-group assets which appeared to be of little value.
“If we exclude these instruments from the statutory fund calculation for 2008, the notional deficit rises to (TT) $10 billion (Can $2 billion) on a policy holder liability base of (TT) $16.7 billion (Can $3.34 billion),” Williams said.
He said given CL Financial’s business model, Clico was a major source of cash, much of which was used to finance investments in other subsidiaries. As a result, Clico ended up as a guarantor for many of the Group’s assets, most of which were heavily pledged.
Given the state of Clico’s financial position, it’s now clear Clico is in desperate need of funds to meet more immediate liabilities.
Those financials showed that as of January 31, 2009, policy surrender requests and maturing obligations amount to (TT) $650 million (Can) $130 million, monthly payment of pensions and annuities (TT) $40 million (Can $8 million), and Clico’s bank account a mere (TT) $15 million (Can $3 million), with a sizeable bank overdraft.
Williams said there’s a need to know what caused such a massive deficit in the statutory fund.
Although the Central Bank knew of the huge deficit in the statutory fund since 2007, Williams said no sanctions were implemented.
He said the Central Bank spent most of its supervisory time at Clico than at any other financial institution.
In the week following January 23, the government took to Parliament amendments to the Central Bank and Insurance Acts, which would now allow it to dig deeper into CL Financial’s books.
Carl Hiralal, inspector of financial institutions, said on February 13: “What we are seeing is that the products were sold, the premiums came in, and what we are trying to determine is what happened to the funds and what kind of assets were used and whether or not those assets were appropriate for purposes of the statutory fund.”
Hiralal added: “I think, logically, if there is a hole in the statutory fund, then the assets were inappropriate or we need to find out what happened to the funds.”
While Williams and key players in the financial sector were working at reassuring the public that the economy was strong, and politicians were trying to score points in Parliament during debate over the amendments to the Central Bank and Insurance Acts, another issue was brought up.
The government was criticized for bailing out CL Financial, but not the Harry Harnarine-led Hindu Credit Union, which went into liquidation in 2008. Government said little about that criticism until February 13.
Finance Minister Karen Nunez-Tesheira made a statement in Parliament on the issue. She said the HCU misled the State on its true financial position.
Nunez-Tesheira said when the HCU approached the State, it said it needed a line of credit of TT $71 million (Can $14.2 million) because it was experiencing a temporary liquidity problem. She said the property the HCU offered to the State were The Towers in central Trinidad.
The controversial Towers has been under construction for more than five years and is far from finished. She said HCU claimed the property was unencumbered, but its investigation proved otherwise. She said checks by an independent auditor showed the company was insolvent.
The Finance Minister said the question was the HCU not facing a liquidity problem, but a solvency one.
“And all of the HCU’s assets were overestimated in value and encumbered. The HCU had failed to comply with its own internal controls and policies and procedures. Loans receivables for HCU subsidiaries, totally (TT) $133.7 million (Can $26.74 million) were all loss-making entities, and/or did not have sufficient realisable assets which could liquidate the loans or any part of loans made to them by the HCU. Three, other receivables were, from the HCU subsidiaries, amounting to (TT) $53.5 million (Can $10.7 million), were not likely to be recovered.”
“In the case of Clico, there was tangible co-operation by the Clico authorities, as evidenced of the signing of the memorandum of understanding, the reconstitution of the board of directors and the restructuring of the company senior management, all of this accomplished without resistance to date,” Nunez-Tesheira said.

Port-of-Spain - Disgruntled Opposition MPs, Jack Warner and Ramesh Lawrence Maharaj, are calling on members and supporters of the United National Congress to stand up against “dictatorial rule” within the party. This is the latest development as the party’s deputy political leader and chief whip, respectively, insist that there is need to make the party more attractive to the electorate.
“We believe that MPs, members of the national executive and the parliamentary caucus must have the courage to stand up for the rights of members and supporters of the party when they are threatened with dictatorial rule,” a joint statement issued over the weekend by the two said. Warner and Maharaj have been pressing for change in the UNC leadership, and calling unsuccessfully for internal party elections. UNC leader Basdeo Panday, who is also Leader of the Opposition, said the elections would be held after the upcoming local government elections.
In previous comments on the campaign by the two men, Panday said he was “very frustrated” by the existing situation. “Why, Jack, why?” Panday asked rhetorically.
Warner and Maharaj said they remained committed to the party: “We do not intend to leave the UNC-A. We are more determined now, than ever before, to stand up and fight, to ensure that the UNC-A forms the next government,” the statement said.
It added: “If (Prime Minister) Manning calls a general election, the question is whether the UNC-A, as presently constituted with its existing policy and strategy, can win. The majority of UNC-A members and supporters believe that we would not win.
“This is not a battle against Mr Panday, the parliamentary caucus or the national executive (of the UNC-A); it is a battle in support of the UNC-A and the national community as a whole.”
They said the majority of members of the UNC-A’s national executive and parliamentary caucus “would not support our position, for obvious reasons. “That is a matter for them and their consciences. We are not backing down in our battles to get the party ready to win a general election.
“Our first duty is to members and supporters, and not to the upper levels of the party. Our first duty is to protect the membership at the lower level of the party against dictatorship from Patrick Manning and his government.”
They said public calls for other Opposition MPs to burn the Draft Constitution of Trinidad and Tobago went unheeded. “Our public calls for change in the UNC-A were not causing declining numbers (attendance) at the Monday Night Forum, as claimed by the leader and some of our colleagues,” Warner and Maharaj said.
They said they were considering calling meetings of the party to advance the need for change within the UNC-A.
Panday said Warner “seems to be playing completely into the hands of Manning and the PNM: “Why is he doing that, I would like to know. Can somebody tell me why he is doing this?”

Port-of-Spain - Attorney Timothy Hamel-Smith, of the Congress of the People, has called on Prime Minister Patrick Manning to publish the 2007 report from consultations that were held to get the public’s response to the 2006 Draft Constitution.
Speaking at a press conference held by the COP at its Barataria constituency office over the weekend, Hamel-Smith said if the PM failed to produce this report, then the consultations would be considered as a “democratic hoax perpetrated on the people of Trinidad and Tobago.
“If this report is not published, why should we expect that the views of the public, which are expressed in the consultations, which are proposed over the next two years, will not be discarded as being of no consequence?” he asked.
He said the structure of the Working Draft, proposed by Manning, was flawed and because of this the COP viewed it as a dagger aimed at the heart of democracy. “We are fearful that Mr Manning’s approach will lead to further divisiveness in our society,” he added.
COP Political Leader Winston Dookeran said he was opposed to the way in which the entire constitution reform process was being conducted.
Deputy Political Leader Prakash Ramadar said the party was not in support of the Draft Constitution, as it did not give voice to the people of Trinidad and Tobago. After Carnival, the party will meet with the public, as well as other groups, including the Opposition and trade unions, to get a general consensus on the Draft Constitution. He noted that an Anti-constitution Draft done by the COP will also be presented at these meetings.