Barbara Gayle, Staff Reporter
ICWI Investments Ltd. of which former Life of Jamaica boss, Dennis Lalor is chairman, has obtained a Supreme Court order barring any move by the Government to sell Life of Jamaica within the next 30 days or until further order.
The Government had announced in Parliament on Tuesday that FINSAC had invited and had recently received bids for the sale of its shareholdings in LoJ. "Based on the timetable which has been developed, it should be possible to determine the winner of the bid by early May with the sale completed by mid year," Dr. Omar Davies, Minister of Finance, announced.
Justice Donald McIntosh, after hearing submissions last week Friday from attorney Priya Levers, granted ICWI an ex parte order, halting the sale.
The court order states that the state-owned Financial Sector Adjustment Company Ltd. (FINSAC) and its servants or agents are restrained from selling and or transferring 140,816,330 ordinary shares in LoJ to defendants Colonial Life Insurance Company Ltd., Barbados Mutual Life Assurance Company, First Life Insurance Company Ltd. or any other third party without first complying with the option granted to ICWI Investments Ltd. by an agreement between defendants FINSAC Ltd. and LoJ on May 21, 1997.
Ex parte
ICWI Investments was also granted leave by the court to serve the ex parte order and the writ of summons and statement of claim on Colonial Life and Barbados Mutual out of the jurisdiction on their registered offices.
Mr. Lalor, in his affidavit in support of the application for the interim injunction, has accused FINSAC of breaching the Securities (Take Over and Merger) Regulations because in receiving and considering the offers (for sale of LoJ) it had failed to consult with ICWI Investments and other shareholders. FINSAC is also accused of failing to exercise its right of control in good faith and with due regard to the minority rights.
He stated that FINSAC which was formed to assist in the rehabilitation of the financial sector, entered into a refinancing agreement dated May 21, 1997, with LoJ and ICWI Investments whereby FINSAC invested $1.2 billion into LoJ. The investment was in the form of an equity injection in exchange for which FINSAC was issued:
" A. 143,316,330 new ordinary shares representing 26.5 per cent of the issued ordinary share capital of the fifth defendant (LoJ)
"B. 1,056,683,670 (12 1/2 per cent) cumulative redeemable $1 preference shares.
FINSAC entered into a second refinancing agreement dated November 6, last year with FINSAC and LoJ pursuant to which it invested an additional sum of $2,051,360,000 for LoJ and was in exchange issued an additional 1,115,432,625 ordinary shares in LoJ. With the result FINSAC was at all material times the majority shareholder in LoJ, holding in excess of 70 per cent of the said ordinary shares in LoJ, he contends.
He is contending among other things that by virtue of the agreement in writing dated May 21, 1997, entered into by ICWI Investments, FINSAC and LoJ, FINSAC covenanted with ICWI Investments inter alia that ICWI Investments and the other shareholders in LoJ would have the option, up to the year 2004, to purchase from FINSAC 140,816,330 of its ordinary shares in LoJ.
Breach
He contends that in breach of the said agreement FINSAC had agreed to accept offers for its total shareholding in LoJ without reference to the said option. He said he feared that unless restrained by the court, the defendant companies would sell the shares in breach of the said regulations.
Mr. Lalor sued FINSAC last month to recover $31 million in compensation for his services as executive chairman of the LoJ. He has also sued for pension benefits and seeking damages for breach of trust. He is seeking a declaration that LoJ is liable to pay ICWI Holdings $31,062, 288 arising from an agreement dated February 4. 1998.
FINSAC, in response to the suit, is contending that Mr. Lalor is entitled to any compensation or benefits. In response, FINSAC has filed a counter-claim accusing Mr. Lalor and his wife of inducing LoJ to pay a service provider agreement of $8.5 million annually to Mr. Lalor.
Mr. Lalor and his wife Diane Elean, otherwise know as Diane Schwartz, have been named as defendants in the counter-claim filed by attorney Valerie Alexander, in the Supreme Court on April 6. FINSAC is blaming Mr. Lalor and his wife for causing and inducing Life of Jamaica (LoJ) to enter into a service provider agreement for Mr. Lalor to be compensated for his services on a "base consideration of $8.5 million per annum. The sum would be indexed annually at the average rate of increase of executive compensation in addition to a bonus to a maximum of 30.45 per cent of the total remuneration package which would be payable on certain conditions. The service provider agreement was payable over a five-year period.
FINSAC is further contending that the service provider agreement also purported to confer certain substantial and unfunded pension benefits on Mr. and Mrs. Lalor. On or about May 13, 1998, Mrs. Lalor, in her capacity as Chairman of the Compensation Committee, issued a written directive to Milverton Reynolds, the president of LoJ to the following effect:
"The Executive Compensation Committee has agreed that as executive chairman, Mr. Lalor will receive an annual compensation of $8.5 million. It is to be paid to ICWI Holdings and classified as directorship fees."
"In accordance with and as a result of that directive, LoJ paid significantly more than $15 million to ICWI Holdings on behalf of Mr. Lalor," FINSAC contends. It also contends that it was not aware of the service provider agreement.
Poor performance
FINSAC states that for the financial year ending December 1997, LoJ's financial performance was significantly worse than budgeted. The negative variance was due primarily to overruns in administrative expenditure amounting to over $60 million. "Despite the financial problems with LoJ "on January 28, 1998, at the same meeting at which they appointed nominees as directors of LoJ, LoJ's Board of Directors approved" the increases in the fees payable to non-executive directors. Directors fees were increased from $18,000 to $300,000 per year. Chairman fees from $72,000 to $900,000 per year, attendance at meetings from $1,800 per meeting to $20,000 per meeting; chairman, finance and investment committee from $36,000 to $200,000 per year; chairman, audit committee from $36,000 to $150,000 per year and chairman, compensation committee from $0 to $50,000 per year.
It is FINSAC's claim that at the time of the meeting on January 28, 1998, Mr. Lalor was chairman of the finance and investment committee and Mrs. Lalor was chairman of the compensation committee.
