The facts surrounding the debacle of CLICO are fascinating; but equally fascinating are the characters involved.
When the news first broke, the impression was conveyed that CLICO Holdings Barbados Limited (CHBL) was a well run company. Mr Leroy Parris is the former chairman of CHBL and CLICO International Life Insurance Company (CIL).
Immediately following the developments in Trinidad and Tobago, the Central Bank of Barbados issued a Press statement in early February 2009 assuring the public that CLICO Mortgage & Finance is a well run organization with assets to support its liabilities. It further stated that the uncertainty in the Trinidad market should not be translated into uncertainty in the Barbados market.
Exactly a month later, on March 2, 2009, another Press release was issued, stating that the Minister of Finance and Economic Affairs, the Governor of the Central Bank of Barbados, the Supervisor of Insurance and the management of CLICO Holdings Barbados Limited all emphasized that “CLICO Holdings is a well run company and that the domestic financial system is well regulated and capitalized”.
Sometime later, the Government suggested that “the assets of CIL, supplemented by the assets of CLICO Holdings Barbados Limited (CHBL), which are left after the transfer to and sale of the traditional life insurance business should be assigned to the Government of Barbados as collateral for the Government guarantee” of the cost of a rescue plan without the benefit of a forensic audit.
Subsequently, wisdom prevailed and there was the appointment of a judicial manager. This appointment led to the execution of a forensic audit that has revealed an awful lot about inter-company transactions and some of the characters involved.
According to the findings in the audit, “the balance owed to CIL by CHBL amounted to $155 [million] at March 31, 2011, and is the single largest inter-company receivable on CIL’s balance sheet. The balance receivable in the account has grown from approximately $8.5 [million] as of January 1, 2003 …, most of which related to funding for acquisitions or investments made by CHBL.”
If, as we were led to believe, CHBL was a “well run company”, why did it borrow so heavily from CIL between 2003 and 2008?
It is clear that CIL was a cash cow being milked by CHBL. Significant investments of CHBL were funded by CIL, which also provided funding to CHBL, often on a monthly basis, to meet the latter’s operating expenses and in some cases capital costs. The details are available.
The audit report noted too that there were also a number of payments funded by CIL, which related to CLICO group executives: “On January 16, 2009, a payment of $3.33mm was made to the law firm Thompson & Associates by CIL.
We examined the invoice from Thompson & Associates dated December 30, 2008, which described four different legal matters in detail and the ‘fees’ or ‘retainers’ for each. The invoice was approved by Mr Leroy Parris, as chairman. The invoice was paid by CIL cheque on January 16, 2009, and deposited ‘to the credit of the payee’ that day.
“CIL recorded three of the four matters as an inter-company receivable from CHBL. We were advised that the fourth for $237K [$237 000] was believed by CIL to be its expense at the time the invoice was received and therefore this item was not charged back to CHBL. In CHBL’s accounting records, three of the four matters were recorded as separate transactions as ‘Professional Fees’, totaling $3.096 [million].”
The payment above was related to partial payment of a gratuity to Mr Leroy Parris. The total gratuity was identified in Part 4 of a contract which also referred to a letter dated December 5, 2002 between Leroy Parris and Lawrence Duprey. However, the auditors never saw a copy of the letter. Reference to the payment was not found in the minutes of CIL or CHBL at or around the time it was made.
Apart from transactions involving CHBL, CIL also provided the funds to clear $4.3 [million] in property taxes and $2 [million] in legal fees to Thompson & Associates, both associated with the sale of Caribbean Commercial Bank.
The latter was a healthy “four per cent of the sale price of US$25 400 000.”
Given just the few detailed findings above associated with inter-company transactions at CIL and CHBL, it is reasonable for affected policyholders to agitate for every cent.
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy. Email clydemascoll@gmail.com
