The Clico fallout – Duprey, Monteil and Geeta Singh-Knight

The Duprey name is legendary in Trinidad and Tobago. Cecil Duprey, a member of an ordinary local family in a matter of decades rose from practically nothing to become a household name in his country. He founded a successful conglomerate, established a business that would probably have been considered too bid to fail and his grandson Lawrence Duprey had visions of taking the company global. He was street smart and while living his vision – first in the Caribbean and then further afield – played the political field as a major supporter of the corrupt Basdeo Panday government. Duprey seems to have won President Jagdeo’s confidence here in Guyana which seems to have made available to him and his company CLICO endless opportunities to invest in Guyana. For example, CLICO’s forestry subsidiary Caribbean Resources Limited was allowed to retain concessions over huge swathes of Guyana’s forests even though it had for years defaulted on its obligations to the Guyana Forestry Commission. Duprey was preferred to DDL for GuySuCo’s molasses and was negotiating for an investment in an ethanol plant.

Mr Lawrence Duprey surrounded himself with some bright accountants, including Andre Monteil, a classmate of mine at South West London College from 1970 to 1973. Monteil is credited with being a key architect of CLICO’s expansion and some of its more aggressive and possibly illegal activities. While Monteil’s role in some transactions made him quite unpopular in Trinidad and Tobago, for the better part of two years, it was felt the Mr Duprey was untouchable. That belief was shattered this past week in Trinidad and both gentlemen are now in some real problems.

Double whammy
Reports emanating from Trinidad and Tobago suggest that the government of that country is moving against Lawrence Duprey and Andre Monteil for civil and or criminal conduct in the collapse of the insurance giant CLICO and its parent CL Financial. A civil lawsuit was filed last Tuesday by Trinidad’s Central Bank and CLICO against Duprey and Monteil for alleged mismanagement and misappropriation of CLICO assets which led to the fall of CLICO in January 2009. Then one day later Attorney General Anand Ramlogan directed that all files coming out of the probe into the collapse of insurance giant CLICO should be forwarded to Director of Public Prosecutions (DPP) Roger Gaspard to determine if criminal charges should be laid against Duprey and Monteil. The two hundred page suit should make interesting reading indeed.

Under normal circumstances the authorities in Guyana and the former key officers in CLICO Guyana should be taking great interest in the developments taking place in Trinidad. While the architects of the financial misadventure that has placed our National Insurance Scheme at risk were those in Trinidad, they found compliant Guyanese to carry out the Guyanese leg of transactions, even willing to ignore the country’s laws and defy its regulator. This column had previously called on the Bank of Guyana which has taken over responsibility for regulatory control of the insurance sector to work closely with its counterparts in Trinidad in the investigations and prosecutions of the region’s most expensive financial failure.

Deafening silence
So far we have heard nothing but a deafening silence from the Bank of Guyana whose Governor has, probably dangerously, been appointed the company’s liquidator. I say dangerously because it is not unusual for legal actions to be brought against a liquidator and the person most likely to do so would be the regulator. That is not going to happen even as the liquidation has in essence been contracted out! Indeed my understanding is that CLICO’s former CEO Ms Geeta Singh-Knight is still playing a paid role in the liquidation. We are truly an incredible country.

The CLICO debacle in Guyana has been addressed to some considerable degree in these columns before. I do not intend to do so again. Suffice it to say that the company had breached the provisions of the Insurance Act which require companies carrying on long-term insurance business to invest a base of 85% of its statutory fund in Guyana. In clear contravention of that legal requirement CLICO took the billions of dollars in the Fund and placed it in a related party in The Bahamas, incorrectly claiming that it was invested in Fixed Deposits, a matter that appeared to have escaped the diligent notice of CLICO’s auditors. The directors and officers of CLICO did not comply with a demand/request by the regulator to repatriate the Statutory Fund.

Enter the law. Section 19 of the Insurance Act provides that any person who contravenes any provision of the Act, or any of its regulations or any direction or requirement made by the Commissioner of Insurance, is guilty of an offence. Unlike the normal presumption in law where the prosecution has the burden of proving beyond reasonable doubt the guilt of the accused, the Insurance Act shifts the burden to the “person” to prove that s/he did not knowingly commit the offence of omission or commission.

Sub-section (2) of the section provides that where an offence is committed by a company – in this case CLICO – and the offence is proved to have been committed with the consent or connivance of, or to have been facilitated by any neglect on the part of, any director, principal officer, or other officer or an actuary or auditor of the company, he, as well as the company, shall be deemed to be guilty of the offence. Ms Singh-Knight was both a director and principal officer of the local company and most certainly it would have been to Ms Singh-Knight that the Commissioner of Insurance would have been addressing correspondence and directions.

There is no doubt in my mind that as the new regulator the Bank of Guyana should have long initiated action against the officers and directors of CLICO Guyana, and that the failure by the BoG amounts in my view to a serious dereliction of duty. Now when the regulator fails, for whatever reason, to protect the public interest, there is trouble indeed. That is the situation we face.

Duprey and Monteil
The question has been posed to me whether Guyana can take similar action here against Duprey and Monteil. That is a question for really seasoned attorneys to answer. The Insurance Act recognizes that insurance may be offered in Guyana by persons who are not in Guyana. In fact the Act defines a person as including “a natural person and any corporation or other entity which is given, or is recognized as having legal personality by the laws of any country or territory.”

The challenge is that the laws of Guyana are generally only enforceable in the country’s courts and the question is under what law can the courts of Guyana compel Mr Duprey to submit to its jurisdiction. Article 38 of the revised Treaty of Chagauramas imposes an obligation on member states of Caricom, within defined limitations, “to remove discriminatory restrictions on banking, insurance and other financial services.”

Oddly, the treaty created a single economic space but left territorial jurisdictions intact, impervious to each territory’s domestic laws. The Caribbean Court of Justice only has original jurisdiction in relation to the treaty and the CSME and appellate jurisdiction from national courts. It may seem commonsensical that crimes or contraventions of provisions of the treaty committed in any territory should be dealt with in that territory. It is certainly worth further consideration and one only has to look at how the US used the long arm of its laws to bring to justice ‘Sir’ Alan Stanford for financial crimes committed in Antigua which defrauded Americans back home.

Local directors
But back to the directors of the local company and in particular Ms Gita Singh, its CEO who was at the centre of the questionable and disastrous transactions. In addition to the infractions of the Insurance Act there were clear breaches of the Companies Act (CA) which governs all companies incorporated or registered in Guyana. S 96 of the Act imposes on every director and officer of a company a duty to (a) act honestly and in good faith with a view to the best interest of the company; and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

In the discharge of their particular duties which they have assumed, directors are bound to take reasonable care. Failure to exercise such care constitutes negligence. While the normal legal principle is that directors owe their duty to the company and to no one else, directors may be liable to outsiders for their own wrongs. This means that directors who are parties to a fraud or the commission of any other wrong are personally liable on the general principle that a servant or agent who commits a wrong is liable for damages resulting therefrom as well as the company.
Time to act

We should long ago have started an enquiry into CLICO for possible criminal conduct and the Bank of Guyana should, like their counterparts in Trinidad and Tobago, have begun civil action against them and their Trinidadian masters. This would have been an excellent opportunity to expand on our jurisprudence while penalizing those who break our laws and cause our people and country huge losses.

It may be that the Bank of Guyana is afraid to take action because President Jagdeo has stood by Ms Singh-Knight while he throws red herrings about investigating Globe Trust and CLICO. There must be some good reason for him to want to do so but his failure sends the wrong signal that some people can do no wrong and if they do, there will be no consequences.

Clico and the related crisis: Confusion continues

It has been an incredibly hot week in Guyana. In fact so hot that the President who was directly or indirectly involved with every single financial decision made in the public sector for the past sixteen years decided it was just too hot and took off for a change of climate engagement. He asked his Finance Minister Dr Ashni Singh who has carried statutory responsibility for the operation of the Insurance Act and therefore supervision of Clico for more than two years as well as of the National Insurance Scheme, the biggest single potential loser in the Clico debacle, to make a statement to the National Assembly.

Clearly stung by the revelations of what may prove to be a major loss to the country there has been heightened activity by the government. Even as lower-level letter writers were at work, the government called into their corner big guns like Messrs Yesu Persaud and Clifford Reis for a panel discussion with the Minister of Finance. We heard again from the Bank of Guyana not on whether it has continued to track and assess “every bit of information being provided on the issue as it develops” but to “dispel the misrepresentations” by persons whom the Bank did not name. We heard as well from Ms Maria Van Beek, the Commissioner of Insurance/Judicial Manager of Clico, witnessed a press conference by the directors and management of Hand-in-Hand Trust, TV interviews with economist Ramon Gaskin and TUC President Gillian Burton and disturbing but not surprising fears expressed by insurance broker Mr Bishwa Panday and leaders of the teachers’ union. By the end of the week it was clear that there was little confidence in everything said by the government and the regulator in relation to Clico. Having done next to little so far, the Minister of Finance rather than the Judicial Manager is impressively rushing papers to The Bahamas to prove our debt. We all hope it is not too late.

Red herring
The Bank of Guyana and the big guns were called out mainly to speak about the strength of the banking system, as if that was the issue. There are currently many questions about the banking system but not about its strength. Yes, different persons in varying degrees and sometimes with varying justification question many things, such as the role of the non-bank cambios in the underground economy, the absence of any meaningful interest or effective efforts to stamp out money laundering, the interest rate policies and the conservative approach inherent in banking, and the increasingly troubling failure of the Bank of Guyana and the government to bring the New Building Society under the Financial Institutions Act. But the strength of the banking system has not been an issue to academics or depositors who place increasing sums with the sector, which must surely be a big test. Raising it was a pure red herring.

Experience has taught that the public is more sensible than it is given credit for. It knows that failures do not arise only in weak systems, with Globe Trust being a good case in point. It knows how toxic assets can contaminate good ones akin to Gresham’s law and money. It is concerned that the NBS has just invested some $1.5 B in the Berbice Bridge, hardly on the grounds of an investment but more as a bail-out using poor people’s money. It would still be sceptical about the optimism of the Board of HIHT to withstand a near billion dollar loss in Stanford and wonder whether the Bank of Guyana was too soft in allowing such a concentration of assets. None of these issues was raised by the moderator of the panel or by the Bank of Guyana. It is wrong to believe that because the public does not have access and opportunities it is voiceless or does not understand.

Much of what was said by our men of learning had little impact. What really had the country and the Minister of Finance going was a statement by the Prime Minister of The Bahamas that “there appears to be no record available at this time” of Clico (Guyana)’s investment in Clico (Bahamas). That is contrary to everything accepted by all including the company’s auditors Deloitte and Touche and the Commissioner of Insurance. In fact the Minister of Finance confidently told the press that there was “a plethora of correspondence, including wire transfers of substantial amounts, dating as far back as 2004” supporting the investment.

I have looked at the 2006 and 2007 financial statements of Clico (Bahamas) and these seem to support the qualified statement by the PM. In the books of the Bahamian company, note 12 (2007) and note 10 (2006) show the following (in Bahamian dollars which is equivalent to US dollars):


And note 22 (2007) shows that the figure of $212,723 at December 31, 2007 is made up of amounts owing to Barbados, Suriname and CL Financial Limited which is the parent company. Nothing is shown as owing to Guyana. Over the three years 2005-2007 the only year shown with a balance with Guyana is 2006 where the amount was stated at $275,317.

Transactions with Guyana over the same years are shown as follows:


The Guyana books showed investments at 31 December 2007 in Clico Bahamas of $5.95B and accrued investment income of $329M. Can it be that the balance owed by the Bahamas company to the Guyana company is shown somewhere else in the accounts? That is possible, but given that the accounts are both audited and in both cases by the same auditing firm − but by different offices − it is hard to understand why the Minister chose the route of the plethora of documentation rather than having the Judicial Manager call in the auditors for an explanation, to be followed by the paperwork. After all, the auditors would respond quickly, bringing their audit working papers files, anxious to avoid the implications of what seems on the face of the financial statements to be a major discrepancy which routine audit procedures should have revealed. Yes the paperwork is necessary, but surely the persons who have given their stamp of approval on the accounts would be a good place to start.

Different strokes…
One of the very striking features of the still far-from-over saga is how the two countries have treated the matter at the regulatory and more so at the political level. The Prime Minister of The Bahamas made an early and clear statement to their Parliament on the whole issue including offering advice to affected persons. Our President has chosen to make several statements including one before he departed these shores repeating his assurances about meeting all valid claims against Clico. From reports of a meeting Mr Panday had with Ms Van Beek and the information conveyed to the teachers, it does not appear that Clico is relying on those assurances.

There is also some discrepancy about the timing of Mr Jagdeo’s contacts with his counterpart in The Bahamas with the latter saying that it was after the announcement of the move to liquidate the Bahamas company that President Jagdeo called him. But what is more significant is Mr Jagdeo’s revelation that he had proposed as (part) settlement of the debt by Clico (Bahamas) to Clico (Guyana) to take over the Florida real estate in which the Bahamian funds were invested through one of its subsidiaries. It is not clear whether his intention is that our politically-controlled Privatisation Unit would then sell the asset, but surely our President, who is never hesitant to pronounce on matters legal, ought to have realised that that was not possible as a potentially fraudulent preference. The suggestion by a columnist in another newspaper that our President say nothing further in this matter has a lot of merit and was reflected in the call by the Finance Minister to “ensure that the court appointed process is allowed time to exhaust all avenues to protect the assets of CLICO Guyana.” Regrettably there is too much at stake for the public to wait on the necessarily cautious and deliberate court process.

Huge costs
Liquidation costs are enormous and are a first call on the proceeds of any sale of company assets. Many of the assets of the Bahamas company are pledged to secure debts other than deposits, and we therefore need to prepare ourselves for a substantial loss by Clico (Guyana) of its investment in the Bahamian company, assuming that there is such an investment. This then raises the question about Mr Jagdeo’s assurances which the Commissioner of Insurance through GINA initially reaffirmed, ie that all polices held in CLICO (Guyana) will be protected. This of course, whatever form it takes, will have to come from the taxpayers.

The Commissioner as Judicial Manager has to act independently and professionally. She has been instructed by the court to return promptly to them with a plan and no court will accept such vague assurances as those given by President Jagdeo and later repeated by her. She should not be unmindful that medical service providers have refused to extend further credit to the company while holders of short-term policies are already looking elsewhere for their coverage. In repeating the President’s assurance about guarantee, Ms Van Beek will recognise that this cannot be open-ended. If we care about our constitution and the Fiscal Management and Accountability Act, any such guarantee has to be given by Parliament.

In this regard, it seems a fair assessment that the President has not been sufficiently informed of the liabilities which his assurances that “all claims” will be met are interpreted to guarantee. The motion submitted by the PNCR calls on the government to take all necessary steps “to guarantee the savings, pensions and investments of all CLICO (Guyana) investors including the National Insurance Scheme (NIS), depositors, policyholders and contributors.” That would cost the government billions of dollars even if Clico’s actual and contingent assets are taken over. In Trinidad and Tobago Mr Lawrence Duprey had to give up huge chunks of assets in exchange for the government’s assumption of liabilities. Assuming we take over the liabilities, what do we get in return and how? It seems that Clico (Guyana)’s main assets – other than the Bahamas investment, are the loan to Caribbean Resources Limited ($1B), shares in the Berbice Bridge Company with a book value of less than $80M and any remaining bonds in the Berbice Bridge Company.

The President in his typical style has threatened prosecution against the directors and management of Clico if fraud were found. The President may not be aware, as disclosed by Business Page of February 8, that there is only one Guyanese director who is also the CEO who less than ten weeks ago he lavishly praised and made a director of his revamped GuySuCo Board. We are now paying the price for our failure to take governance seriously, not only in what I have referred to as public interest companies but in all public and state-owned companies.

Next week I will continue looking at the implications of this debacle but for now, please if we are thinking of selling off any of the policies to other companies, remember that there will have to be actuarial valuations done. From what I have seen we have not even begun to deal with this problem.

Insurance Commissioner should be addressing the public on Clico

Ms. Maria van Beek expressed surprise (SN letter of February 14, 2009) at what she describes as Business Page’s unspecified “assertions and suppositions” (February 8, 2009) on the role of her Office in the Clico issue. She claims that I did not seek her comments on it. She is wrong on both counts.

What did Business Page say about her Office? That it has been silent on the Clico issue (fact then and now); that it is very important for her Office to ask the right questions and to get hard information from the company (vital then, more so now); that the responsibility for supervising Clico’s operations falls entirely under the Commissioner of Insurance (is she disputing that?); that her Office should have been far more proactive than it has been in this matter (is that not a given?) and that the Office of the Commissioner of Insurance simply does not have the resources to properly regulate the sector (fact, just visit her room at the Privatisation Unit in Barrack Street).

But let us set the records straight. When I returned to Guyana on Friday, February 6th, to begin our firm’s preparation for the Budget 2009, I drove straight to Ms. van Beek’s office hoping to meet her in connection with Clico. She was not in office but her secretary spoke to her in my presence. She did not however call me until days later, after the column on Clico had appeared. To say therefore that I did not seek her comments is misleading for someone who regulates an industry subject to the principle of “utmost good faith”. I even had to do some special arm-twisting to get a copy of the 2007 annual report of Clico for which I had to pay her Office $5,400, at the prohibitive charge of $100 per photocopied page.

Almost as if there is nothing unusual about the Clico issue, Ms. van Beek expressed satisfaction that insurance companies have been addressed in BP, adding that she hoped that “this examination of an insurance company’s financials is one of many more to come.” There is no room for banality when $7.5 billion of people’s money in Clico is invested in related parties owned by the CL Financial Group, Clico’s parent which is facing serious liquidity and other difficulties. But yes, Ms. van Beek, just send me the financials and I will review them. Her office should be doing the same and providing informed periodic reports for the benefit of the public.

Too many public bodies are more concerned with protecting their image than in carrying out their mandate. Now that the Governor of the Central Bank of Trinidad and Tobago is claiming that the situation with the Trinidad group is more serious than first thought, Ms. van Beek should be addressing the public on the substantive issue instead of making small and wrong points about Business Page.

I appreciate Ms. van Beek’s offer of assistance and will be writing her for information to do a follow-up to the February 8 article.