Guyana
(Final of 2 parts on the financial sector fallout)
As the CLICO fiasco unfolded, Guyana’s financial sector was hit by another disaster - the Stanford crisis - increasing the total potential loss faced by the country’s financial institutions.
In this case, the Hand-in-Hand Trust Company (HIHT), which holds depositors’ funds and manages some of the country’s largest pension schemes, invested G$1.124 billion in certificates of deposit (CD) offered by the failed Stanford Group of Companies. The Stanford Group includes Antiguan-based Stanford International Bank (SIB), Houston-based broker-dealer and investment adviser Stanford Group Company (SGC), and investment adviser Stanford Capital Management.
In March, the U.S. Securities and Exchange Commission (SEC) charged Robert Stanford and three of his company officials for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion CD program. Evidently, SIB sold approximately US$8 billion of so-called "certificates of deposit" to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB's unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years. Unfortunately, HIHT was hoodwinked into participating in this so-called Ponzi scheme.
Whether the financial problems of CLICO Guyana and HIHT will eventually be resolved is still unknown. For now, the final outcome appears bleak. In the meanwhile, the fate of the investments of thousands of Guyanese in these institutions remains in limbo.
According to the General Secretary of the Guyana Trades Union Congress (GTUC), over 60,000 unionized employees have their pension schemes with either CLICO or HIHT, including companies such as Guyana Sugar Corporation, Guyana Shipping Corporation, the Guyana Geology and Mines Commission, Guyana Printers Limited, Demerara Sugar Terminal and many other workers who comprise the former Cooperative Financial Administration (COFA) and also belong to “the STEPS pension scheme”. He said the “STEPS scheme alone is responsible for over 30,000 workers”. The GTUC President said that some workers also hold various policies with the affected insurance company CLICO), claiming that “hundreds of thousands” of workers are exposed.
In addition, information on the Office of the Commissioner of Insurance website states that pension plans with CLICO Guyana include those of the Guyana Bank for Trade and Industry, Banks DIH Limited, the Continental Group of Companies, the Demerara Power Company, Guyana Agricultural and General Workers Union, Guyana Fertilizers Limited, the Guyana National Cooperative Bank, the Guyana Office for Investment, the Guyana Revenue Authority, Kayman Sankar and Company, the Linden Power Company, the Linden Town Council, the New Guyana Marketing Corporation, Shell Antilles and Guianas Limited and the Singer Sewing Machine Company.
And it gets worse. The National Insurance Scheme (NIS) also has a G$6 billion investment in CLICO. According to local press reports, this amount is equivalent to more than 20% of the earnings accumulated by the NIS over forty years and about one year’s benefits payment. Should the NIS be unable to recover its investment, hundreds of thousands of Guyanese workers and taxpayers could be affected. As well, the NIS stands to lose up to $1 million or more per day in returns on its investment if CLICO is unable to fulfill its obligations. If CLICO Guyana fails, then the future viability of the NIS is questionable.
Incidentally, the New Building Society (NBS) was also unwittingly drawn into the CLICO mess. As the financial troubles of CLICO Guyana worsened, it sold its G$1.8 billion bond investment in the Berbice Bridge Company Inc. to NBS. While this investment is typically prudent for an insurance company which usually has a long-term mandate, it is a single, sizeable and risky investment for NBS, which does not adhere to the rules of diversification for a financial institution. This is especially so given that it represents about 40% of the reserves of NBS.
Evidently, although NBS is a deposit-taking institution it is not supervised by the Bank of Guyana, allowing it to act without adhering to prudent benchmarks and raising the risk of the investment in an untested entity.
As well, the government appears to have had a hand in the NBS decision since its approval of the investment was necessary, raising the question: Was the government aware of CLICO’s financial problems ahead of time? That’s quite probable because – as stated in Part 1 of this article – the news of the imminent failure of the CLICO Empire was no secret in Canadian circles for several days prior to the formal announcement. Plus a Trinidadian Minister reportedly withdrew her investments in CL Financial in December, indicating prior knowledge of CLICO going under.
Arguably, in spite of the problems of CLICO Guyana and HIHT, Guyana’s financial system appears sound. However, numerous red flags have been raised. In the case of CLICO, the lack of regulatory supervision, poor risk management controls and corporate negligence are very much evident.
In addition to its investment in CLICO Bahamas, CLICO Guyana has a G$1.537 billion investment in Caribbean Resources Limited (CRL), a subsidiary of the troubled Trinidadian company, CL Financial Limited. The question that arises is: how could Guyana’s Commissioner of Insurance as well as CLICO officials allow two-thirds of the company’s assets to be invested in related entities, that is, CLICO Bahamas and CRL? Apparently, the Commissioner was aware of this shortcoming but did not seek to take any affirmative action to correct the situation until it was too late.
Also, according to Christopher Ram of Ram & McRae (Chartered Accountants), CLICO was in breach of the Insurance Act which requires 85% of its statutory fund be held in Guyana. What action, if any, did the insurance regulator take to address this situation?
To date, the investment in the CLICO Bahamas remains in question. Evidently, CLICO Guyana has proof of investing in CLICO Bahamas in an investment which is classified as Fixed Deposits. However, there is no trace of Guyana’s investment in the financial statements of CLICO Bahamas, unless it’s lumped in a block amount under Annuities. One would imagine that such a large sum would have been referenced separately.
Two questions come to mind. How much due diligence was done by CLICO Guyana prior to making the investment? Evidently, many questions were not asked because CLICO Bahamas is a related company.
Secondly, what was the role of the auditors, if any – both entities used the same firm, Deloitte & Touche - in identifying potential risks, including asset impairment or related party risks.
More importantly, were the Board of Directors, CEO and CFO asleep – or did it simply turn a blind eye to the potential risks because CLICO Bahamas is a related company?
Worst case: Is there fraud or intent to defraud at CLICO Bahamas?
The HIHT investment in SIB is quite another story. For years, it has been widely acknowledged in the financial community that Stanford’s rates of return were suspect. Personal due diligence experience about two years ago clearly indicated that Stanford could not justify its returns, leading me conclude that they were probably fraudulent. It is unfortunate that the SEC, which was also aware of Stanford’s operations, waited until it was embarrassed by the $50 billion Bernard Madoff fraudulent scheme to take action against Stanford.
However, this should be no excuse for HIHT to justify its investment in Stanford. It is evident that barring inadequate due diligence on Stanford’s CDs that there was significant concentration risk in placing such a large investment in a single product. Most idiots with a basic knowledge of the dynamics of interest rates would have recognized that Stanford’s program was a fraud – or he might have been unquestionable because he appeared to many West Indians as “larger than life.”
It is possible to ask many more questions but the truth may eventually be known. For now, the CEO of CLICO Guyana should be on the hook for misleading the public; the Commissioner of Insurance for failing to do her job; the Bank of Guyana for poor oversight and regulatory controls; the Board of Directors and company officials of the various companies for fiscal irresponsibility; the auditors for not exercising diligent standards of due care; and probably officials at NIS and HIHT for poor risk management. The President of Guyana and the Minister of Finance have also apparently underestimated the gravity of the CLICO crisis, which could still end up being a disaster.
Perhaps there should have taken a cue from the Prime Minister of Bahamas who told his country’s Parliament: “It is still too early to determine whether or not policy holders will lose any money” rather than declaring that all policy holders will be protected. They just don’t know, that is, unless the government plans to finance a bailout, if necessary.
According to Stabroek News (SN) a recent study conducted in the area which is on the border between Region Seven (Cuyuni-Mazaruni) and Region Eight (Potaro-Siparuni) indicated that there is evidence of the presence of gold deposits in the area encompassing approximately 70,000 square km.
American Professor Lawrie Minter made this disclosure on March 19 at a presentation entitled ‘Geological Information on Prospective Areas for Auction-Ex-Goldstone Reconnaissance Permission’, held at the Zoom Inn on Croal Street. SN said that Professor Minter and his team began working in the Roraima Basin ten years ago.
In his presentation Professor Minter said that he and his team encountered fossil streams ranging in dimensions from 100 to 600 sq km. The professor said that this underground discovery along with other pieces of evidence was a clear indication of the presence of gold deposits. He noted that the appearance of the soil to the naked eye could give an indication of the presence of gold and added that the deposits may have been in the basin for over 2,000 years.
Professor Minter disclosed that the areas where the prospects of gold being present are at Arawai, Chi-Chi and Kurupung in Region Seven as well as an area known as the ‘Mahaica Locality’, located in the vicinity of Kurupung. In addition, prospects are also possible at Eping and Karanang in Region Eight. He said research conducted at Parish Hill in the Berbice River also gave an indication of the presence of gold.
SN said that Kampta Persaud, Manager, Geological Services, GGMC, noted that there are already persons with mining claims working in the area, but the GGMC will hold an auction in the last week of October this year for claims in the area. Prime Minister Samuel Hinds was present at the forum and in his remarks noted that Prof Minter had approached the government to conduct reconnaissance work in the ‘90s and was given permission to do so.
Newell Dennison, an official of the Guyana Geology and Mines Commission (GGMC) told the Kaieteur News (KN) that initial tests on samples of the gas had indicated high levels of methane. Methane is a colorless, odorless, non- toxic gas which is highly flammable and may form explosive mixtures with air.
Dennison said that if the gas is thermogenic, having its origin in petroleum, it would be of significant interest to the GGMC, which is looking for petroleum. If, on the other hand, it is biogenic it would be of less interest.
Dennison went on to say that while the gas may have commercial value, its volume would also have to be determined and that would be another expensive undertaking.
Dennison said that over the year a number of vigorous vents of methane gas have been found at Bath Settlement in Berbice, Corentyne Coast, Charity, Leguan, Wakenaam, Pomeroon, and in the North West District. But with the exception of one or two areas, he said, most of the samples tested showed that the methane gas was biogenic.
However, tests of samples taken from the Pomeroon indicated that the gas was thermogenic in character but also masked by biogenic features.
In the meantime, he said that the GGMC would continue to monitor the area in Grove to see whether there are changes to the immediate environment.
When the well erupted the vent spewed mud and water over 40 feet in the air and because of the amount of earth - about 30 to 40 truckloads that were spewed on account of the gas - the foundation of the nearby edifice could be compromised. Dennison advised the owner of a nearby house to consult a structural engineer.
Georgetown — President Bharrat Jagdeo at his first meeting with King Abdullah II of Jordan on March 25 took the opportunity to explore the possibility of developing agricultural trade between the two nations. He also held talks on boosting cultural and diplomatic relations between the countries when he met the Jordanian monarchy.
At the end of his visit both leaders had agreed that small countries must cooperate to protect their interests particularly in the light of the current financial crisis.
A Government Information Agency (GINA) press release stated that President Jagdeo was in Jordan as part of his Middle Eastern tour to bolster bilateral relations and attract investment to Guyana.
The president commenced his Middle Eastern tour with a visit to Syria where he met with President Bashar al-Assad and discussed possible areas of cooperation and investment with regards to culture, tourism, transport and the interventions that can be made to the benefit of the peoples of both countries.
He also met with Cyprus President Demetris Christofias where similar discussions were held.
The GINA release also stated that on this tour Jagdeo also met with leaders in Greece and Libya which were among the first countries outside of Europe that he visited on his Middle Eastern tour. Jagdeo was reported as saying that Guyana had much to gain from moving its economic diplomacy from Europe to Brazil, China and the Middle East.
At his meeting with King Abdulla II, Jagdeo told the Jordanian leader that his government is willing to work with foreign investors. Jagdeo highlighted the investment opportunities in the agricultural sector and the two leaders explored the possibility of Guyana exporting agricultural and other products to Jordan. They also discussed collaboration in technology, education, health, tourism and energy and climate change.
King Abdullah II noted that the global financial crisis has raised concerns about his country’s future relations with the international financial markets and emphasized that such a relationship must be based on countries changing their response to the challenges of the crisis.
Jagdeo then reiterated the need for small countries to coordinate their efforts to ensure that the developed world makes decisions that would benefit all stakeholders. He also said businessmen from the two countries need to work towards finding a better mechanism for trade and economic cooperation.
According to GINA, Jagdeo had also planned to meet with Jordan’s Prime Minister, members of the Amman Chambers of Commerce and businessmen.
On his arrival in Amman, Jagdeo was welcomed by Minister of State for Legal Affairs Salem Khazaleh and Guyana’s Honorary Consul Rudyn Gewaar.
President Jagdeo cut short his visit to return to Guyana on learning of the death of former President, Janet Jagan.
It is unclear whether he would return to the Middle East after the funeral to resume his discussions with other leaders whom he did not have a chance to meet as yet.
Georgetown — Two men who were involved in a Wild West style shooting in Main Street, Georgetown on March 22 are now in police custody.
Erasto Roberts, 35, who was shot in the chest when he and another man fired at each other, was charged with unlawful possession of a firearm and ammunition and was refused bail when he appeared in court last Thursday.
Meanwhile the other suspect, 22-year-old Abdool Imran Khan who was wanted by the police over his alleged role in the shooting incident turned himself in on March 24, accompanied by his lawyer. He is currently held in the Brickdam lock-ups.
According to Stabroek News (SN) gunfire erupted when two men, who were involved in an argument in the New Courtyard Restaurant and Bar drew their weapons at the corner of Main and Hope streets and fired at each other hitting other persons in the process. Others injured in the shooting were 45-year-old Joseph Nedford, a vendor outside the nightspot who was shot in the knee and Jamal Douglas, 22, of Turkeyen, East Coast Demerara who was shot in the foot.
Georgetown — A 72-year-old male remigrant wounded three persons, including a physically challenged girl on March 27, when he went on a chopping spree in an apparent domestic dispute.
Wounded in the attack were Natasha Cusbert, the man’s 33-year-old lover, who suffered lacerations to her neck and back, 17-year-old Mishana Cusbert, who was chopped on her right hand and 13-year old Tiffany Cusbert, who was wounded on her nose and back. A release from the Georgetown Public Hospital Corporation stated that Natasha and Mishana were treated and sent away while Tiffany Cusbert was admitted to the ward.
According to Kaieteur News (KN) the man, who shared a house at Bachelor’s Adventure, with Natasha, went berserk at about 3:00 am forcing at least two of the victims to flee by scaling a 10-foot high fence to seek refuge at a neighbour.
Meanwhile in another domestic dispute on March 23, a man attacked his reputed wife, 21-year-old Kaloutie Kumar, her six-month-old baby, Seema Rabarat, her grandmother Lapatie, 56, and aunt Hemwantie Jadunauth, 20, all of First Street, Handenveldt, Mahaica, East Coast Demerara. The baby was transferred to the Intensive Care Unit of the Georgetown Hospital on March 27 after her condition took a turn for the worse and is on life support machine. The infant had sustained a broken arm and head injuries during the attack. The suspect, Fazul Ousman, is still on the run.
Georgetown — A Corentyne family and their friends were robbed of cash and jewellery on March 29 by two bandits who left them traumatized.
According to Stabroek News (SN) the bandits struck at around 12:30 am last Sunday while the group was celebrating after a cricket match. One of the victims, Jasmatie Ramotar, told SN that the two bandits entered their yard and as they reached their house, one of them whipped out a gun and ordered the persons outside to lie on the floor. Ramotaur said that she was sitting on a bench and slipped away to the road to raise an alarm.
In the meantime, the bandits relieved the victims of $62,000 in cash, two cell phones and jewellery. One of the victims, who attempted to get up, was hit with a bottle. The bandit with the gun stood guard over his victims while his accomplice forced one of the persons present to go upstairs at knifepoint. The bandit ransacked the rooms and took US$350 and jewellery worth $300,000, among other items. The bandits left after about 15 minutes.
According to the police, Pooran was checking his truck, which was parked along the road, at approximately 3:30 am when he was attacked. The police said the three masked men held him up and led him into his house where they demanded that he hand over cash and jewellery. The bandits escaped with $2 million cash and a quantity of jewellery, the police said.
Meanwhile the police have questioned a 25-year-old man in connection with the murders of Romeo De Agrella, 41 and his son, Clint De Agrella, 20, whose bullet-riddled bodies were found on March 23 in the Atlantic Ocean near Iron Punt, North West District. The man questioned is reportedly the nephew of Romeo De Agrella, and the police are reportedly pursing a drug link to the killings. The nephew is the person who had found the victims’ vessel after a search was launched for the missing men.
Clint had sustained bullet wounds to the head, while his father was shot in the back. An autopsy conducted on their bodies confirmed that both men succumbed to multiple gunshot injuries.
According to Kaieteur News (KN) both victims appeared to have been shot at close range and a warhead police retrieved indicated that the killer(s) used an assault rifle. However, police appear to have no clear motive for the brutal double murder.
Georgetown — The City Wide Internet café located obliquely opposite the GuyOil Service Station on Sheriff Street at the City Holiday Inn, was raided by two gunmen on March 24.
According to Stabroek News (SN) the “part-manager” of the business along with two other employees and a few customers were in the café at around 8:40 pm when the men struck. SN said that two unmasked men walked in and one of them approached the “part-manager” and pulled a gun. The customers were ordered to lie on the floor and were stripped of cash and cellular phones. The “part-manager” was robbed of his cell phone which was valued at over $30,000, while his wallet with $11,000 in cash was also taken from him. The men also stole cash from the cash register as well as watches and cellular phones that were on sale on the premises. The men spent ten minutes at most in the café before they escaped in a waiting white car, SN said.
This shooting follows one on March 6, when internet café attendant Bobby Hemraj was shot in the abdomen by two men, at the Sheriff Street Plaza Computers Services. Terrence Plummer, 30, who was shot in his head during a robbery attempt in front of the Imperial Chinese Restaurant on Sheriff Street on February 15, subsequently died from his injuries.
Georgetown — In the early hours of March 22, homes and businesses alike located in Bush Lot, West Coast Berbice were ransacked by bandits who went on a rampage. It seems that the robberies took place at around three o’clock in the morning. C & S Computer Repairs (“C&S”) suffered nearly $6 million in losses and damages. Flat screen monitors, speakers, and ink were all stolen and damages caused by the recklessness of the bandits amounted to $3 million. Khemraj Persaud also had his house and shop raided, losing more than $1 million worth of jewelry and $100, 000 worth of merchandise. Across the street from C&S, numerous sections of the building were robbed. Stores including Cheddie and Sankar Fashions and Salim’s Jewelry were turned upside down. The home of a Canadian-based resident was also scoured. Three persons have been placed in custody at the Fort Wellington Police Station assisting the police in their investigations.
Georgetown — Canada’s High Commissioner to Guyana, Charles Court, reassured Guyanese that Canada is in no way trying or attempting to distance itself from support to Guyana.
He said so on March 25, during his opening remarks at a seminar on ‘Corporate Governance’ hosted by the Canadian International Development Agency (CIDA) for preferred businesses both in the public and private sectors. The High Commissioner said rumours of Canada’s departure is ‘grossly exaggerated’ and pointed out that Canada will continue to be active in Guyana, exploring ways to promote the country’s economy, its social sector and add to the benefit of the local population.
The seminar was hosted to discuss the importance of corporate governance in private and public enterprises and was held under the theme, ‘Towards Transparency and Accountability.’
Among the topics discussed by the participants were issues relating to the Evolution of Corporate Governance, Irresistible Case for Corporate Governance and Legal Framework and Institution Governing listed Companies in Guyana.
Also speaking at the opening session of the discussion group was Minister within the Ministry of Finance, Jennifer Webster. She said that the seminar can be considered most opportune, since it allows both the Private and Public sectors to come together to examine Guyana’s positions, in the face of the global economic downturn. She added that more importantly, the seminar provides the opportunity for the business community to identify ways and means to improve and promote corporate best practices, locally, and regionally as part of CARICOM.
She also said that much work has begun in the area of corporate governance in the region.
Georgetown — The Government of Guyana has strongly rejected the findings of the United Nations Independent Expert on Minorities, Gay McDougall, calling them baseless, flawed and fundamentally contradictory. But the main opposition PNCR has endorsed the findings calling it a clear reflection of the views of the people of Guyana in general and the Afro-Guyanese community in particular.
McDougall visited Guyana between July 28 and August 1 last year, to promote among other things, the implementation of the Declaration on Rights of Persons belonging to National or Ethnic, Religious and Linguistic Minorities. She conducted consultations with senior government representatives, including President Bharrat Jagdeo, ministers and other public officials. She also consulted with civil society organisations, political parties, religious leaders, academics and media representatives.
In her report she stated that there is a widely held belief on the part of Afro-Guyanese, that they are discriminated against by an Indian-dominated and supported government that puts Indian interests to the fore, particularly in resource allocation, government contracts and employment. McDougall also said that at the same time, the Indo-Guyanese believe that an Afro-centric political opposition, if in power, would settle political scores and work solely in the interests of Afro-Guyanese.
Referring to the Lusignan and Bartica massacres, McDougall said that “On the basis of recent atrocities and ongoing killings, both ethnic groups currently perceive a heightened threat of violence from the other.” She added that many believe this threat to be sanctioned or supported to some extent by the opposite political party. She added that rumours and conspiracy theories are rife and are being exploited by those who might seek to fuel ethnic tensions for their own ends.
According to Stabroek News (SN) the government, in a strongly-worded official response, has rejected the description of the country as “ethnically polarized,” stating that it flies in the face of documented occasions like Guyana’s hosting of ICC Cricket World Cup matches in 2007 as well as the hosting of CARIFESTA last year. The government has accused McDougall of failing to incorporate its views adequately into her reports, misleading it about her mission and being susceptible to the wiles of extremists.
The government, through its Permanent Mission to the UN, has submitted an official response to the Human Rights Council, registering its “profound concern” about the scant regard with which it was treated, SN said. The government has also questioned the report’s focus on one ethnic group to the exclusion of others that constitute real minorities. “The State Party has difficulties comprehending on what basis the mandate of minorities was switched to examining exclusively the concerns of Afro-Guyanese − an ethnic group comprising 30.2% of the population − who are a sizeable, significant and influential component of the body politic and cultural fabric of society,” the government said. It added “It is incomprehensible to this State Party that the Amerindian population, the largest defined minority appears to have been reclassified, ignored and shunted to another Special Rapporteur!”
In her report on Guyana, McDougall has urged the Guyana government to take urgent steps towards national reconciliation, including the establishment of an open dialogue on inclusive governance.
She warned that ethnic divisions entrenched in society could escalate into violence adding that there is need for a new era of political will and strong, visionary leadership to change and reverse the economic and social stagnation evident in the divided country.
Georgetown — The RUSAL Bauxite Company of Guyana (BCGI) will reduce its export and consequently production for the remainder of 2009 as a result of losing one of its main party buyers of bauxite for the year 2009.
This loss of market along with the declining price of aluminium has led to decreased revenues and cash flows in the company to the extent that it cannot satisfy its debts payable at the end. The company has been reported as having problems meeting operating costs whilst implementing critical capital projects to sustain its product capacity.
The Guyana Government and the Russian Aluminum Company, RUSAL had announced a major agreement on privatising the bauxite industry in Berbice in January 2006. At that time it was announced that there were sales agreements for contracts for more than two million tonnes of bauxite per annum from the Berbice operations for the next 10 years.
RUSAL is the third largest aluminium company in the world with revenues of more than US$5B. The American Reynolds Metals company, up to 2001, had owned 50 per cent of Aroaima.
RUSAL was expected to provide about US$20M in total equity investment into BCGI while Oldendorf was expected to provide an estimated US$60M in facilities for shipping and barging the bauxite.
Oldendorf Carriers is one of the largest private shipping companies in the world, having control of more than 200 large ocean-going ships and shipping more than 80 million tons of cargo per annum.
Oldendorf and BCGI had entered into contracts that guarantee shipment of more than two million tons of bauxite per annum over the next 10 years, starting in 2006