The CL Financial bailout Submission by Afra Raymond B.Sc., FRICS to the Colman Commission of Enquiry into the failure of CL Financial et al and Hindu Credit Union www.afraraymond.com Wednesday 9th November 2011 Republic Bank Ltd's 15th July 1996 Letter to Shareholder's explaining why they should REJECT CLICO's ATTEMPT TO TAKE CONTROL OF YOUR BANK THE NATURE OF BANKS AND WHY THEY MUST BE REGULATED The Bailout Timeline What did they know and when did they know it? • When did the CL Financial group actually collapse? • Who withdrew their investments and when? • What are the reasonable conclusions we can form from the actions and statements of the responsible Officials involved? Michael Carballo’s statement published in the Business Guardian on 7th November 2008 Carballo said CL Financial, with $100 billion in assets, could weather any storm. “We are not exposed in any one particular industry. That is our business model,” Carballo said. http://legacy.guardian.co.tt/archives/2008-11-07/bussguardian1.html NGC’s Management of its Financial Investments NGC’s Press Release of 4th February 2009 “…in accordance with the Company’s policy for short-term investments, which has maximum placement limits for any financial institution or group of financial institutions, computed as a percentage of total investment. This policy is approved by the Board of Directors; it seeks to diversify the Company’s investment portfolio…” “…At the end of 2008, NGC’s investment with the CL Financial group – Clico Investment Bank (CIB), CMMB and Republic Bank was 37%, compared with 40% at the beginning of 2008…” “…In November 2008 CIB failed to return the principal and interest due upon the maturity of an NGC deposit (US $10 million). This deposit, plus interest, was paid in two amounts during the first week of December 2008, An additional two deposits, which matured in December 2008, were similarly affected, notwithstanding promises made at a meeting held in December to repay by year end...” http://www.ngc.co.tt/Media/pdfs/Publications/NGC%20press%20release-%20Feb%205.pdf The Minister of Finance 'Everybody knew CIB was in trouble' Sunday Express 15th March 2009 – "In an interview with the Express on February 4, Nunez-Tesheira also confirmed that her sister made an application on December 30 to break the $2.1 million deposit held in her late mother's name, Una Nunez. In that interview Nunez-Tesheira said: "Everybody knew CIB was in trouble.“ But she stressed that she only received the formal brief on the issue of CL Financial troubles on January 14. In an interview on the same day with this newspaper, she stated: "The information about CIB and the concerns about CIB, were out there in the public domain for a long time, and my sister being a banker, would have been one of the persons who would have heard the concerns about CIB." Asked if in hindsight she should have declared her investments in CIB and CMMB before making any statements in the Parliament on the issue, Nunez Tesheira said she had no need to do so. "In answering that question, it would imply that there was something that somehow was untoward," she said, adding that there was not(hing untoward).“ http://www.trinidadexpress.com/news/_Everybody_knew_CIB_was_in_trouble_-115443989.html The Inspector of Financial Institutions – 1 In his affidavit of 16th April 2010 in the winding-up action for CIB, the very Inspector of Financial Institutions states – At para 5 he states “…On January 15th 2009 as part of its normal regulatory process, the Central Bank held a meeting with officials from the Petitioner, namely Messrs (sic) Devati Mooledhar, Senior Vice President etc.…” At para 6 he states “…At the said meeting Ms Mooledhar stated that the petitioner was experiencing a liquidity problem…” The Inspector of Financial Institutions – 2 At paras 9 c. and 10 g. he states “…the Petitioner (CIB) was not maintaining high standards of financial probity and sound business practices…” At para 23 he states “…With respect to the Creditors of the Petitioner, the Petitioner has met the statutory obligations for the Board of Inland Revenue (except for Corporation Tax Returns for 2007, 2008 and 2009 which are being prepared and remain outstanding)…” The Inspector of Financial Institutions - 3 In Hansard of 5th February 2009, Senator Conrad Enill, quotes (at page 62) from the statements of the Governor of the Central Bank on the crisis at CIB and CLICO “…Given the close integration of the two institutions within the group it is just a matter of time before one starts to come under severe liquidity pressure. Therefore in those circumstances, the Inspector of Financial Institutions and the Governor of the Central Bank met with the chairman and chief financial officer of the group on January 07, 2009...” 'Fit & Proper' Regulations “...3.1 In accordance with governing legislation a person is considered to be fit and proper if the person essentially is of good character, competent, honest, financially sound, reputable, reliable and discharges and is likely to discharge his/her responsibilities fairly...” LAWRENCE DUPREY CL Financial letter of 13th January 2009 “…CL Financial being a significant part of the financial sector has been disproportionately impacted by these adverse conditions…” That letter specifies the ‘Assets available for Restructuring’ as being in the sum of $23,913,993.014. ++++++++++++++++++++++++++++++++++++++++++++++++++++++ CL Financial Annual Report ‘The Next Wave of Growth’ of 23rd January 2009, from the preamble “…We have confidence in our ability to not only navigate this financial storm but to find fresh and profitable opportunities within it…” CL Financial 2007 Annual Report ‘The Next Wave of Growth’ of 23rd January 2009 From the Chairman’s Letter to Shareholders “…As the global economy and financial markets enter a new and uncertain phase, the C L Financial Group stands at the cusp of the next wave of growth and is preparing to shape itself as a formidable global player in four main sectors: • Financial Services • Energy • Drinks Manufacturing and Distribution • Real Estate Development…” _______________ The Consolidated Balance Sheet to that Report disclosed Total Assets at $100,666,256. The Governor of the Central Bank ‘Govt left empty handed in CL Financial bailout’ Trinidad & Tobago Guardian 8th April 2009 - http://test.guardian.co.tt/?q=business/business/2009/04/08/govt-left-empty-handed-clfinancial-bailout “…Williams said yesterday that CL Financial’s $100 billion assets are otherwise committed…Williams said much of Clico’s assets are pledged in one way or Another...“ “…I have two small deposits with CIB…” cited from the Governor’s statement at page 622 of Hansard for the Monday 2nd February 2009 sitting of the House of Representatives – see http://www.ttparliament.org/hansards/hh20090202.pdf - 30th January, in describing the causes of the CLF problems – “excessive related-party transactions which carry significant contagion risks. I should note that the high level of concentration is not specifically prohibited by the present legislation. An aggressive high interest rate resource mobilization strategy to finance equally high risk investments, much of which are in illiquid assets (including real estate both in Trinidad and Tobago and abroad).” 13th February – “Clico/CIB were isolated cases of an overly-aggressive and Risky business model.” From the Governor’s ‘Remarks for the CIB/CLICO Media Conference of 30th January 2009.