Home' Trinidad and Tobago Guardian : January 26th 2017 Contents JANUARY 26 • 2017 guardian.co.tt BUSINESS GUARDIAN
VIEW | BG3
BG VIEW ANTHONY WILSON
Chief editor business
Editing and design
NATASHA SAIDWAN OFFICES:
4-10 Rodney Road,
PO Box 122.
Telephone: 225-4465, ext 2035, 2025
Fax: (868) 225-3147 (Editorial)
Fax: (868) 623-2050 (Advertising)
Have we learnt anything
from the collapse of Clico?
Next Monday, January 30, marks the eighth
anniversary of the news conference at the
Central Bank, at which then Governor of
the CBTT, Ewart Williams, announced the
bailout of the insurance company Clico and
its affiliated companies Clico Investment
Bank (CIB), CMMB and British American Insurance.
At the news conference, the former Governor said both Clico
and CIB faced liquidity problems with the latter being subjected
to unusually high level of withdrawal requests and "given the
close integration of these two financial institutions within the
CL Financial group, it is just a matter of time before Clico also
began to come under severe liquidity pressures."
At the news conference on January 30, 2009, Mr Williams
said the liquidity challenges faced by Clico and CIB were the
result of depositors' concerns about the impact of the sharp
decline in methanol and real estate prices on CL Financial's
overall financial situation.
But, he added, their financial difficulties had more to do with:
• Excessive related-party transactions, which carry signifi-
cant contagion risks. He noted that the high level of concentra-
tion was not specifically prohibited by the present legislation;
• An aggressive high interest rate resource mobilisation
strategy to finance equally high risk investments, much of
which are in illiquid assets, including real estate both in T&T
• Very high leveraging of the group’s assets, which constrain
the potential amount of cash that can be raised from asset sales.
In justifying the intervention by the CBTT and the gov-
ernment, Mr Williams underscored the fact that the T&T
authorities were "very conscious of the contagion risks that
the financial difficulties in an institution as vast as the CL
Financial group could have on the entire financial system of
T&T and indeed in the entire Caribbean region."
In reflecting on the events of the past eight years, it is im-
portant to note the length of time that a final resolution of
this issue has taken and the failure of the current Minister of
Finance to update the country on the discussions towards a
But, I believe T&T would have failed to progress as a nation
if its regulators, legislators and investors do not learn the right
lessons from the collapse of the CL Financial empire:
1.Was Lawrence Duprey's model appropriate for
If the CL Financial model can be distilled down to its core
element, it would be this: how does T&T mobilise the savings
of local individuals and institutions to invest in companies and
projects that use local resources to produce internationally
competitive and demanded goods and services?
In effect, what Mr Duprey did was channel the premiums
and deposits from investors in Clico, CIB and CMMB into
world-class investments in methanol, banking, alcohol and
real estate development.
In doing so, Mr Duprey developed world-class assets on the
Point Lisas Industrial Estate, at Angostura and in the group's
other holdings in the alcohol sector, in a majority ownership
stake in T&T's largest indigenous financial institution, Republic
Bank, and in real estate developments such as Trincity Mall,
One Woodbrook Place and the Buccoo estate in Tobago that
is now coveted by Butch Stewart's Sandals group.
I believe that Mr Duprey's vision of mobilising local capital
to invest in the commanding heights of the T&T economy was
first rate and absolutely necessary for the private sector led
development of the country.
For T&T to advance out of its current economic downturn,
it needs entrepreneurs who are able to spot opportunities for
investments that are net generators of foreign exchange.
The CL Financial vision, it seems to me, was not about buy-
ing an American franchise for fast-food or coffee, or building
one more cineplex to show mostly American movies for the
entertainment of the masses or even constructing yet another
shopping complex to sell clothes, wide-screen televisions and
trinkets made in China.
It should be obvious that investments in Starbucks and TGI
Friday (by Prestige Holdings) or MovieTowne (by Derek Chin)
or the C3 shopping plaza (the Allum family) are net users of
the foreign exchange generated by T&T's depleting oil and
natural gas resources.
What T&T needs is a new paradigm that is able to mobilise
local savings to extract value out of the country's tourism assets,
its high-quality cocoa, Scorpion pepper and in the trading,
financing, insuring, transporting and marketing of the products
from T&T's natural gas sector.
2.While the Duprey-led CL Financial empire had an
appropriate vision for the development of T&T,
clearly there were serious issues in the execution of the
• There was a lack of transparency in the products of Clico,
CIB and CMMB. In other words, a local institution or indi-
vidual investing in a CIB Certificate of Investment or a Clico
Executive Flexible Premium Annuity in 2008 may not have
been aware that their money would have contributed to the
purchase of Lascelle deMercado for significantly more than
the Jamaican producer of rum was worth;
• There was a mismatch in the terms of the investment prod-
ucts sold to customers and the nature of those investments.
By this is meant that it is never a good idea to sell a two-year,
fixed-rate investment that is going to be used to purchase a
company in which the return on investment will be in five
years or more;
• There were serious issues in consistent, up-to-date, accu -
rate financial reporting of the performance of the investments
• Lawrence Duprey’s developmental vision does not seem to
have extended to allowing investors to have a direct ownership
stake in his empire. He started CL Financial with equity that
included people who worked at Clico or had investments in the
insurance company. The group never expanded its capital base.
In my view, the Duprey vision would have been more sus-
tainable if he had offered shares in CL Financial to individual
and institutional investors in an Initial Public Offering, creating
a publicly listed company with strong independent directors,
proper oversight from board committees and an obligation
to submit quarterly accounts to its shareholders and to the
A public company would have ensured that there was a more
appropriate mix between the group's debt and its equity.
3.While I am a strong believer in the Duprey vision,
there is the issue of accountability for the collapse
of the CL Financial empire.
In that regard, reference is made to a press release issued on
June 7, 2011, in which the Central Bank and Clico announced
that they had "filed civil proceedings against Lawrence Duprey,
Andre Monteil, CL Financial, Dalco Capital Management Ltd
and Stone Street Capital Ltd arising from the failure of Clico,
following the CBTT's exercise of emergency powers under sec-
tion 44D of the Central Bank Act in respect of Clico."
The press release continued: "The claims include allegations
of mismanagement of Clico and misapplication and misap-
propriation of its income and assets to the detriment of its
policyholders and mutual fund investors.
"CBTT and Clico are seeking damages, equitable compen-
sation and declarations related to certain agreements and
property of Clico.
"The statement of case alleges breach of statutory and com-
mon law duties and related accessory liabilities on the part of
the defendants and highlights egregious transactions involving
the use of Clico's assets and income to its detriment, such as:
---transactions related to shares in Republic Bank;
---drinks transactions including LascellesDeMercado;
---energy transactions including the sale of Clico's stake in
Clico Energy Ltd
---Florida property transactions; and
---the sale of seven million HMB shares"
The press release added that the pleadings highlight the
subordination of the interests of Clico, its policyholders and
mutual fund investors to the private interests of Mr Duprey
and Mr Monteil and their companies.
The pleadings also highlight the lack of proper governance
and serial mismanagement and improper dealing with Cli-
co's assets and the funds of policyholders and mutual fund
unitholders. The release concluded by noting that the action
was based on the forensic investigations commissioned by the
CBTT into the affairs of Clico and that the "forensic work is
continuing and may result in the expansion of this claim and/
or further action."
I draw no conclusion from the above, but ask: what has be-
come of this civil action initiated in 2011?
The author is a shareholder of Angostura Holdings Ltd.
In this January 30, 2009 photograph, then Governor of the
CBTT, Ewart Williams, left, is seen with former chairman of CL
Financial Lawrence Duprey following the announcement of a
bailout of the insurance company Clico and its affiliated
companies: Clico Investment Bank (CIB), CMMB and British
Links Archive January 25th 2017 January 27th 2017 Navigation Previous Page Next Page