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Rowley: CLICO Commission report alleges ‘criminal misconduct’

Published:Monday | July 4, 2016 | 12:00 AM
Prime Minister of Trinidad & Tobago, Dr Keith Rowley.

Prime Minister Dr Keith Rowley said on Friday that the report of a commission of enquiry into the failed regional insurance giant, CLICO, has made "very serious allegations of criminal misconduct" and is urging Director of Public Prosecutions (DPP), Roger Gaspard to review them.

Rowley told Parliament that he would not disclose details of the report pending legal advice from Gaspard, to whom a copy had been sent.

Rowley said it would be "wholly irresponsible" to publish or release the report of the one-man commission that probed the circumstances that led to the collapse of the CL Financial Group and its insurance subsidiary CLICO in 2009.

"A number of adverse findings of criminal misconduct ... were found and recommendations made which would be for the DPP to consider. I make no further comment with respect to these areas in the report," Rowley told legislators, adding that the sole commissioner Sir Anthony Coleman, had submitted a number of recommendations which were now being dealt with by the government.

Rowley said the commission found several factors had contributed to the collapse of CLICO, resulting in the Trinidad and Tobago government having to pump "many billions of dollars" into a bailout plan.

He said Minister of Finance Colm Imbert was doing an audit of the bailout programme to determine its cost, including payments to lawyers.




Rowley said that having perused the report himself, "I can advise the population that it contains very serious allegations of criminal misconduct on the part of a handful of privileged individuals who were associated with the CLICO/CLF group of companies.

"Accordingly, these findings of the report must, of necessity, require the attention of law enforcement through the office of the DPP ...".

But Rowley he also said there were some aspects of the report he could relate, saying there was overleveraging and unacceptable, intercompany transactions that seriously, negatively affected CLICO, CLICO Investment Bank (CIB) and the British American Insurance Company.

"CLF paid high premium prices in acquiring various assets - thereby resulting in overall prices being more than originally anticipated," said the PM. "CLF's auditors expressed disquiet in the course of 2008 at the rapidity with which the group was acquiring new companies ... at the growth of intercompany balances, particularly the indebtedness of CLF to CLICO and CIB, as well as the limited ability of CLF management to operate a much enlarged group".

Rowley said that the auditors had also recommended "that there be no further acquisitions until the group had consolidated its new holdings and paid down the unsecured part of its indebtedness to CLICO", but that "recommendation was ignored in as much as CLF management proceeded to go ahead with what can be described as a reckless manner".




He said the underlying causes of the collapse of all of the companies were the defective business model of the CLF Group, poor corporate governance, and ignoring the recommendations of their external auditors.

Rowley told legislators that the business model which ultimately crippled the entire CLF Group involved as its central feature "the deployment by CLF, either directly or through subsidiaries, of funds originating in monies deposited by external depositors as well as by CLICO and BAT in CIB", as well as the use of funds "originating in policy premium income and investment dividends belonging to CLICO and BAT for the purpose of making investments in equities and real estate and, latterly, for the payment of the operating expenses of CLF itself and other group companies".

"In essence, therefore, the insurance companies were treated as the means of funding the investments made by or directed by CLF," Rowley said. "The fundamental defects in this business model were first, that once funds had been transferred out of CLICO, CIB and BAT, and invested by CLF and/ or other group component companies in real estate and equities, those assets lost the key attribute of liquidity which was essential to the safe conduct of the business of both CIB and the insurance companies, CLICO and BAT.

"Consequently, those companies lost the ability to respond to the requirements of external policyholders and depositors for money payments as and when they fell due," he said.