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Introduction
Today completes a series on the liquidation process of the insurance giant that collapsed spectacularly in early 2009 after news came out of Trinidad and Tobago that the company’s parent had been taken over by that country’s central bank following a dramatic run on the company mainly by policyholders. As we looked with amazement at the manoeuverings of those involved including President Jagdeo, Drs Ashni Singh and Roger Luncheon and Ms Maria Van Beek and Ms Geeta Singh-Knight we learnt that the Guyana subsidiary was resting on a foundation of sand, that the company had been managed recklessly, and that the regulator had failed to do its job. Then we saw what the Insurance Act and the Companies Act had intended, namely, to regulate the orderly liquidation of a failed business, turn into a series of legal and professional infractions.

This series of three parts began following the lodging of a Liquidator’s Statement of Receipts and Payments more than one year beyond the statutory deadline. If readers thought the elementary errors in the preparation of the statement by the liquidator and his team were bad, they must now confront worse. If the high priced professionals knew what they were doing, it is not reflected in their work. Their carelessness, shoddiness and poor standard of work have done nothing to minimise, let alone reverse the massive losses to Clico’s creditors, the NIS and the country.

Today’s Business Page concludes its short series with the regret that when the government prefers loyalty to competence, all we end up with are avoidable losses and lessons from which we do not learn.

Source: Statement lodged with the Registrar of Companies

Earlier, I had reproduced the Liquidator’s Statement of Account in which Mr Williams misleadingly described total receipts as ‘Realisations‘ and separately, disclosed those payments in relation to Insurance transactions and those he described as Liquidation Expenses. For the purpose of this instalment, I think readers might find the information in the table set out above of some assistance in understanding how the liquidator has conducted the financial transactions for the period for which he has made a report.

Insurance payments
But before turning to those payments, a general comment on the $4,584.2 million in insurance payments. The information lodged with the Registrar shows only the classes of the payees. There are no supporting schedules or particulars. As a result there can be little commentary on those payments and whether for example the NIS, by far the company’s major annuitant, has so far received any cash from the liquidator. But the NIS is not the only creditor which has been made to sweat, despite the key role being played in the liquidation by their long-serving director Mr Maurice Solomon, a member of Williams’s triumvirate.

NIS massive losses
Whatever duty Mr Solomon may consider he owes the NIS, he appears to have done very little to protect or speak up for the tens of thousands of pensioners and other beneficiaries who are staring at the loss of billions of dollars of NIS investments in Clico. Worse, the famous assurances by Drs Jagdeo and Luncheon that the NIS would get back all its money have so far proved to be no more than the idle words of insincere politicians. On his part, Mr Solomon has annually approved financial statements of the NIS which make no provision for the losses which the NIS is already incurring, as it looks helplessly at its financial statements and sees over $5,000 million of investments in Clico producing no income and on a balance of likelihood, having to be written off sooner rather than later.

This is not scaremongering. The information provided in the June 2012 statement, the first filed by the liquidator since his appointment nearly two years ago, is hopelessly deficient to allow for proper analysis; well outside of the statutory deadline; uninformative about the current financial status of the company; and useless when it comes to assessing the prospects for the remaining creditors. What I know based on professionally prepared information collected in 2009 is that the total liabilities of Clico at the date of the appointment of the liquidator amounted to close to $15 billion. At June 30, 2012, just under $5 billion had been paid towards those liabilities leaving around $10 billion to be paid towards the capital sums outstanding, since interest is out of the question.

Already it seems that some $600 million will be paid to the NIS by way of an effective exchange of property in part settlement for its debt. That will leave little else for them or for the other creditors. In other words, as things stand the NIS is likely to lose over $5 billion, and other creditors, whose names are known by the liquidator but who have not been listed, will lose around $4 billion.

Liquidator’s expenses
Now let us turn to an amount of $301 million referred to by Mr Williams and his team as ‘Liquidator’s expenses.’ Because of the amateurishness in the preparation of the statements, a review or comment has to make certain assumptions or consider certain possibilities. For example, it is hard to believe that the payment to RK’s Security of $67.0 million could possibly be for the period since the liquidation, and one wonders what it would have taken for the liquidator to state the period to which the payment applied.

This is not simply amateur accounting. It has legal implications. When an entity goes into liquidation, the law provides a scheme for the payment of debts, starting with preferential creditors. Charges by RK’s Security prior to the liquidation are not priority debts and it must be assumed therefore that the $67 million was paid for services received after Williams’ appointment. Surely these must be justified by way of proper disclosure.

Another interesting item is that relating to taxation. The sale of properties gives rise to potential capital gains tax while payments made to non-residents may be subject to withholding tax. My experience is that a number of accountants, in carrying out receiverships and liquidations, routinely overlook their obligations under the tax laws. So before Mr Williams undertakes another transaction with tax implications, he should invite the GRA to examine his stewardship’s compliance with the tax laws.

The unnamed professional firms
Returning to the statement, the most startling item is the sum of $76.8 million paid to “professional firms,” a term, which obviously rules out both Mr Williams, and Ms Gibson, a member of his supporting cast. So how does Mr Williams explain the $76.8 million paid to “professional firms,” which perhaps not surprisingly, he does not identify? He gives not a least hint. What we do know is that this sum cannot include any payment to the actuary since that is separately itemised with its own amount ($2,123,815). It cannot be audit since that too is separately itemised with its own amount ($1,740,000). It cannot be for valuation services since that is also separately identified with its own amount ($3,110,215). Mr Williams the liquidator, Ms Gibson, the actuary, the valuer and the auditor having been eliminated, one is left only with the providers of legal and accounting services.

The accountants and the lawyers
Based on the public records, legal services, including conveyancing and litigation work, were provided mainly by the law firm of Mr Ashton Chase SC. In accounting, Nizam Ali and Co prepared for then Commissioner of Insurance Maria van Beek, a statement of net assets at February 28, 2009 and Mr Maurice Solomon provides to the liquidator, services such as cheque-signing. Since Clico retained the services of CEO and Chartered Accountant Geeta Singh-Knight as well as key accounting personnel of the failed company, all of whose emoluments are accounted as staff cost, the $76.8 million paid to “professional firms” seems hardly justifiable.

Adding insult to injury, the liquidator, possibly on the advice of Ms Geeta Singh-Knight paid some $23.2 million to a company that is part of the group which cheated Guyana of some $7 billion.

Conclusion
Ever since the matter of Clico surfaced in Guyana following the collapse of its parent in Trinidad and Tobago, Guyanese have been subject to misinformation, distortions and silence. Guyanese reacted favourably to the false assurances and actually praised President Jagdeo for helping out with money he negotiated from the Petroleum Fund and from raiding the Forestry Commission of moneys that should have been paid into the Consolidated Fund.

Informed opinion thought otherwise. That group wanted an investigation and prosecution of the directors of Clico as contemplated by the Insurance Act and the criminal laws. The Commissioner of Insurance had the power to appoint a Special Prosecutor to pursue any wrongdoing. But her failure to do so, her rush to liquidation and her appointment of Ms Geeta Singh-Knight to continue in the management of the company were as mysterious as her subsequent shooting in downtown Georgetown.

Some of us felt that the move to have a liquidator appointed premature; they were convinced that certain of Clico’s business not only could, but also should have been saved in the public interest. They were not only ignored but also ridiculed.
We are the only country that made no attempt to save the salvageable parts of the company. Indeed Trinidad, which was the worst hit, is now being rewarded with a Clico that is reporting improved performance and a significant rise in its assets value. As the financial press in that country reports earlier this month, Clico’s portfolio of listed investments is now worth T&T$6.3 billion. We ought to have been in a position to make a case against the Trinidad and Tobago parent. Jagdeo’s rushed deal to extract money from the Caricom Petroleum Fund probably ruled that out.

While the company may have some time to go before it is finally dissolved, the chances of any inquiry are not high since neither the government nor the opposition seems to have any interest in the fate of the company. Given the consequences for the NIS – a potential loss of more than $5,000 million – their lack of interest is a shame. They must insist on a full inquiry. Compare our situation with Trinidad where their central bank Governor on Thursday September 6 admitted to public perceptions that the Bank faltered in relation to its supervision of Clico; that there is likely to be psychological damage from the Clico failures; that the Bank would be subject to the first Commission of Inquiry in its 48 year history; and that the Bank would be transparent in accounting for its regulatory and supervisory actions in respect of the Clico companies.

The bunglers who are administering the Guyana Clico have allowed Caribbean Resources Limited to be dissolved without pursuing the $1.5 billion which CRL owed to Clico. Mr Lawrence Williams has double the obligation of his Trinidad counterpart. The Guyana central bank messed up big time when it failed to challenge Clico’s marketing of deposits masquerading as insurance. Now as liquidator, its Governor and its head of the Insurance Supervision Department are botching the company’s liquidation.

Introduction

Here is a cheque drawn on the account of Clico – in Liquidation.

The court-appointed liquidator of Clico is Mr Lawrence Williams whose substantive office is Governor of the Bank of Guyana. If you were familiar with Mr Williams’ signature you will notice that he is not a signatory on this cheque. The reason is that Mr Williams has single-handedly converted a personal appointment as liquidator with strict fiduciary responsibilities and obligations into what I referred to last week as a triumvirate operating it seems in the most outside-of-the-law process.

On that occasion I named as one of the triumvirate Ms Geeta Singh-Knight who played a lead and illegal role in the collapse of Clico. But you will note that Ms Singh-Knight is not a signatory either. She has carefully stayed out of the limelight while the other two members of the triumvirate, Ms Tracy Gibson who had taken over from Ms Maria Van Beek as Commissioner of Insurance, and Mr Maurice Solomon, Chartered Accountant and a favourite of the government, are in the forefront. They are the ones who signed the cheque, the identity of the payee being redacted.

A diversion into legislative confusion
Let me divert a bit and look at the law establishing the Commissioner of Insurance. After Ms Van Beek migrated, the Insurance Act was amended to transfer to the Bank of Guyana the responsibility for the general administration of the Insurance Act subject to directions by the Minister of Finance. Unfortunately the amendment did not indicate what functions, if any, the Commissioner of Insurance now exercises. Surely the insurance industry is too important to be left in such a messy state of uncertainty.

Jagdeo’s legacy
Now I return to Clico. Clico was racked by illegalities before it went into liquidation. Just prior to its avoidable demise, former President Bharrat Jagdeo showed that he, and not the court, the Commissioner of Insurance or the Liquidator was really in charge. The stamp of Mr Jagdeo has been worse than the albatross around the neck of the Ancient Mariner for those with any interest in the law, in corporate governance or who believe that crime should not pay. Unfortunately none of the professionals who followed the politician seems to have made any effort to repair the damage or restore any respect for legality, sense of competence or interest in professional discipline.

From day one into the liquidation, I questioned the decision by Mr Jagdeo to ignore the principle of pari passu under which returns to creditors and contributories in a liquidation are made proportionately. And when disposal of assets began, I had cause to question the sale of properties and the granting of (fraudulent) preference to one of the creditors of the company.

The triumvirate
Nothing has changed, as evidence of the roles being played by Ms Singh-Knight, Ms Gibson and Mr Solomon challenge all the norms of decency or professional ethics imaginable. Ms Singh-Knight breached the Insurance Act and ignored the request of the then Commissioner of Insurance to comply with the law. Incredibly, after being appointed Judicial Manager under the very Insurance Act, the then Commissioner of Insurance turned around and rewarded her with an appointment as Assistant Manager of Clico, with even less oversight!

And what about Ms Gibson and Mr Solomon? It may be argued that the former is now acting not in her regulatory capacity but as an agent of the liquidator. She signs as Assistant Director, Insurance Supervision Department, Bank of Guyana. Her substantive responsibilities must surely be to oversee compliance with the Insurance Act in which capacity she should be overseeing the Insurance Act and overseeing the liquidation of the insurance company. By accepting an executive function in the liquidation, she has effectively abdicated her regulatory responsibilities.

Mr Maurice Solomon is a director of the National Insurance Scheme, by far Clico’s largest creditor. As a director of the NIS, Mr Solomon has a first obligation to the Scheme and should owe no loyalty to any other entity which would place him in a conflict of interest position. The liquidation process has brought all of those into question.

Fees, fees and more fees
As will be seen in the concluding instalment next week, the Liquidator’s Receipt and Payments Statement reveals payments for professional services amounting to $76 million between October 2010 and June 2012. By a process of elimination, this huge sum could only have been paid mainly to any or all of Mr Williams, Ms Gibson and Mr Solomon and Mr Ashton Chase, SC. Except for a block figure, the statement is amateurishly unhelpful. This is the first Liquidator’s Receipt and Payments Statement I have seen where such vital information is not disclosed.

The public and policy-holders have a legitimate interest in knowing whether all professionals engaged in this liquidation were paid, and if so, how much.

The statement has been lodged with the Registrar of Companies who as this column noted last week must cause an audit to be carried out. She has had the statement more than a fortnight and should have taken steps to comply with the law.

Misleading description
Let us return to the Receipts and Payments Statement of the Liquidator at June 30, 2012 (sic) which appeared last week. That statement discloses what is described as Realisation and Disbursements. The statement would have us believe that some $3,650.9 million of the $4,595.9 million was in fact Realisation. It is not. In fact, that sum is made up of approximately $3,000 million which came from the Caricom Petroleum Fund in exchange for the $7,000 million which the T&T owned Clico cost this country. Under the unexplained, lop-sided deal negotiated with Trinidad and Tobago by President Jagdeo our country effectively lost any right to bring legal action against Clico or the Central Bank of Trinidad and Tobago which took over the assets of Clico’s T&T parent company, the parent company of the Bahamas Clico. That is the company in which Geeta Singh-Knight and Lawrence Duprey had “invested” over $7.1 billion of Guyana policyholders’ funds. The other major receipt was $650 million hijacked from the Guyana Forestry Commission which the Commission received from the Indian Coffee maker Vaitarna. This sum should have been paid into the GFC from which, subject to the Act, surpluses could be paid into the Consolidated Fund.

Lucky bridge company
The next highest receipt is some $464.1 million being repayment of a loan made by Gita Singh-Knight’s Clico to Geeta Singh-Knight’s Berbice Bridge Company Inc (BBCI). Interest received from the Berbice Bridge Company amounted to $22.4 million, bringing the total received from that company to $486.5 million. The indebtedness of the Berbice Bridge Company to Clico at the last report date was $605.9 million, and how the difference of close to $125 million will be accounted for is a matter for speculation, since neither the de jure liquidator nor the de facto triumvirate (Geeta Singh-Knight, Maurice Solomon or Tracy Gibson) have shown themselves duty bound to offer any explanation. I am sure we did not even notice and by now have forgotten that NICIL unlawfully waived almost half a billion dollars to the Berbice Bridge Company Limited; now it seems that a company in liquidation – Clico – may be unlawfully waiving close to $125 million.

The only other receipt over $50 million was the sum of $390.3 million being proceeds from sale of assets. This is how this sum was made up:

Next week I will turn to the payments.

Introduction
This column is about Clico Life and General Insurance Company (South American) Limited (Clico), a regional insurance giant whose Guyana subsidiary collapsed spectacularly when Mr. Ian Chang, Chief Justice appointed Mr. Lawrence Williams, Governor of the Bank of Guyana to liquidate the company. Since 2010 when Clico began to implode I have written forty-nine pages on the company – all of which are posted on my website chrisram.net. In those many pages I questioned the role of then President Jagdeo’s compulsive, misguided and irresponsible direction of the judicial management and subsequent liquidation of Clico.

I noted that his action exacerbated the colossal and unlawful serial acts of Clico’s CEO Ms. Gita Singh-Knight who shifted billions of dollars belonging to Guyanese policy holders in breach of the Insurance Act 1998 and in defiance of the then Commissioner of Insurance Ms. Maria van Beek. Unfortunately for Guyana, Ms. van Beek hardly distinguished herself with her indecision and failure to act against Ms. Singh-Knight whose immunity from prosecution under Jagdeo appears to have continued under his successor.

Brief recap
But let us go back a bit to what might seem to be the genesis of the collapse of the Guyana company. On January 30, 2009 the authorities in Trinidad and Tobago announced that they were taking over certain assets of CL Financial Limited including Colonial Life Insurance Company Limited, the parent company of the Guyana company Clico Life and General Insurance Company (S.A.) Limited. Further references to Clico and the company are to the Guyana company unless otherwise stated.

Prior to February 25, 2009 the company was unable to raise additional funds or liquidity from its parent or recoup US$34 million invested by its management in its Bahamian fellow-subsidiary which itself had been placed in judicial management. The company was facing a run and needed help. On an application by Ms. Maria van Beek she was appointed Judicial Manager by an order entered on February 26, 2009. Surprisingly, rather than insisting on an enquiry into Ms. Singh-Knight’s conduct, Ms. Van Beek appointed her as Assistant Manager challenging the old adage that wrong does not pay.

After technical arguments between Senior Counsel Mr. Ashton Chase for the Judicial Manager and Attorney-at-Law Mr. Roysdale Forde the Chief Justice appointed Mr. Lawrence Williams, the Governor of the Bank of Guyana as liquidator. In one earlier column I argued that had Mr. Williams in his capacity as the banking regulator moved against the company for taking deposits packaged as insurance, Guyana might have been saved billions.

The Liquidator
I have enjoyed a cordial relationship with Mr. Lawrence Williams who I sincerely believe is doing a very good job at the Bank of Guyana. But no matter how charitable one wishes to be, it is hard not to rate his stewardship as liquidator of Clico with almost the same grades as one rates Jagdeo in relation to the company. He has acted unlawfully, delegated his powers and duties without any logic or justification, and overseen spending on a scale that may bear comparison with Ms. Singh-Knight’s reckless management of the company.

Incredibly Mr. Williams who as court appointed Liquidator has enormous but not unlimited powers has had Ms. Singh-Knight as one of his top lieutenants in the liquidation process. Ms. Singh-Knight may not be prominent in front of the camera but her influence has none the less been crucial. The word is that she has been paid a seven figure salary as part of a triumvirate to do the work that the Court empowered and ordered Mr. Williams to do. That is not only recklessness; it is madness; it is lawlessness.

And while all of that was going on the Chairman of the National Insurance Scheme who is also the Head of the Presidential Secretariat has misled the public into believing that the investments of NIS in CLICO would be recovered. I said then that had the Board not included long-serving and experienced directors like Maurice Solomon FCCA and Paul Cheong, a top director of the Beharry Group, I would have said that it was a case of Luncheon taking the workers of Guyana for a $5.8 billion dollar ride. That he managed to take others along with him is a feat that only a Luncheon would contrive and succeed with.

Liquidator’s failure
Last Friday, after months of checking for the financial statement every liquidator is required to file with the Registrar of Companies, I finally came up with one such report which I am not suggesting that the report was prompted by my persistent enquiries. But before I go into the contents let us look at some of the statutory requirements and how the liquidator dealt with these.

The report itself states the Statement of Receipts and Payments was being submitted under section 379 (1) of the Companies Act. But let me quote that same section 379 (1). It says: “Every liquidator of a company which is being wound up by the court shall, at such times as may be prescribed but not less than twice in each year (emphasis mine) during this tenure of office, send to the Registrar an account of his receipts and payments as liquidator.”

The liquidator was appointed on September 10, 2010 and twice yearly reports should have been submitted for six months to March 2011, September 2011 and March 2012 with the next due at the end of this month. Let us assume that Mr. Williams does not know or is too busy to be informed about the requirements of the sections of the Act that affect his role as liquidator. Is it reasonable to believe that none of the triumvirate and their high-priced legal advisor was aware that the liquidator had been guilty of a continuing offence under the Act for more than five hundred days?

Registrar’s audit
The triumvirate could not have missed that section 379 (2) requires the statement to be in duplicate and verified by an affidavit or a statutory declaration. Nothing in the records at the Registrar of Companies suggests that these requirements have been met. Nor does it end there. The Registrar must now cause the accounts to be audited, for which purpose the liquidator is required to furnish the Registrar with such vouchers and other information which the Registrar requires. When the accounts have been audited, the Registrar is required to keep one copy and to deliver one to the court for filing. Both copies are available for inspection by any creditor or interested person. We wait to see whether the Registrar, who was recently installed by the Attorney General and whose own appointment has not passed without raising some eyebrows, will do what the law and the public interest require.

The Registrar is also confronted with section 380 of the Companies Act which requires her to take such action she may think expedient if a liquidator does not faithfully perform his duties and duly observe all the requirements imposed on him by statute, rules, or otherwise with respect to the performance of his duties. A failure of more than five hundred days can hardly be considered faithful and is probably the first public test whether the Registrar will act as she is required to under the Companies Act.

The Statement
Now let us turn to the contents of the statement which I saw for the first time two days ago. One would have expected that with Mr. Maurice Solomon as the financial and accounting agent to the liquidator, a highly professional prepared statement with such elementary omissions as proper heading, cross-referencing and some notes.

Source: Office of the Registrar of Companies: August 31, 2012

Next week I will undertake a detailed commentary on this statement and introduce an interesting document.