PM’s statement on Clico

Prime Minister Kamla Persad-BissessarPRIME MINISTER Kamla Persad-Bisssessar announced that Government will establish a commission of inquiry to find who and what were responsible for the fiasco at CL Financial subsidiaries Clico, British American and Clico Investment Bank. Below is the Prime Minister’s full statement in the House of Representatives on Friday:

The CL Financial crisis is, perhaps, one of the largest failures in our country’s history; financial failures. We believe that it is important to reiterate and re-emphasise the magnitude and systemic exposures that may arise from this crisis, as well as some of the factors which contributed to this fiasco, based on our understanding to date. May I say, we continue to gain more and more information as time unfolds daily.

In January 2009, the Central Bank of Trinidad and Tobago intervened and placed the distressed financial institutions of the CL group under section 44D control. These institutions included Clico, CIB and British American. The decision to intervene was taken due to requests by the CL group for substantial Government and Central Bank support for what was then described as a temporary liquidity problem.

In this current economic environment, given the extent of the significant debts owed by the CL group, the problem was obviously not a temporary one. There was a much deeper and wider problem of solvency in the group’s financial institutions, where debts exceeded available assets and where inter-company borrowing left the financial institutions with significant receivable balances due from CL, but for which there was and is insufficient freely available assets available within the group to repay Clico, BAT and CIB.

It is our view that the former administration grossly and completely mismanaged the Clico matter making it into the crisis it is today. By their misguided misinformed actions, they clearly had no solution to the matter.

We now know that the then government was blinded by personal interest in Clico and they lacked the capacity to properly diagnose the crux of the problem facing Clico. More than that, recent disclosures in a private matter before a domestic court in the High Court, reported in the newspapers locally, revealed evidence of concern raised six years ago about the stability of CIB. It is alleged that one of the directors of CIB at the time was a gentleman who subsequently became a Minister in the Ministry of Finance under the previous government. By their incompetency, they added to the tragedy of what Clico now means to this country.

More than that, they pumped billions of dollars in what appears to be in a blind manner, into a situation in which they had not the slightest clue of how to handle it. What the results show is that they were acting out of their league. They wasted $7 billion in Clico which passed through Clico in the proverbial “dose of salts” manner. Their actions signified nothing and, clearly, did not accomplish anything for our citizens in spite of that seven billion of taxpayers’ dollars being wasted there.

If we focus on insurance entities of Clico and BAT, it was clear that these companies shifted their marketing focus away from the traditional long term insurance business, and they began to sell Executive Flexible Premium Annuities (EFPAs) which you are reading about. So they moved away from their core business and went into their non-traditional insurance business—went into the EFPAs. In Clico’s case, they also marketed and guaranteed the principal and interest on the mutual fund. The maturities on the EFPAs and mutual fund were typically three to five years, but some were short as one year.

The interest rates offered and paid on these products ranged from eight percent to nine percent on average and for very large sums which were invested, the rates went as high as 13 percent. By comparison, information published by the Central Bank revealed that the weighted average interest rate on deposits invested with commercial banks range from 2.88 percent to 3.14 percent, between 2006—2008. So, here it is, a very high interest rate—one would say an unreasonable interest rate—was being offered to persons to induce them to come in to invest in these programmes that they had, whilst the going rates were 2.88 per cent to 3.14 percent weighted average interest rate as compared to eight percent, nine percent and 13 percent.

These companies raised enormous amounts of cash from the sale of these products because Clico’s rates were obviously significantly higher than what was prevailing on the market rate for investment of similar duration. So much money was raised from the sale of these products that EFPA and mutual fund liability owed to 25,000 Clico and BAT customers equal $12 billion as of June, 2010 which was twice the size of the $6 billion owed to the 225 traditional long-term life insurance policyholders.

Another important element of the crisis that has not been sufficiently highlighted is that approximately $10 billion of the $12 billion EFPA and mutual fund liability is due over the next 18 months, that is to say in the short term. The $12 billion liability includes approximately $10 billion owed to individuals; $600 million owed to credit unions and trade unions; and $1.1 billion owed to corporations.

Additionally, when one considers the taxpayers’ exposure to Clico and other distressed CL Financial entities, it is also important to know that Government owned corporations have also invested approximately $300 million in Clico and in BAT EFPAs.

Separately, state-owned companies NIB and NGS also invested approximately $1.7 billion in CIB. As such, the State and therefore the taxpayers are directly exposed to CL Financial Group institutions by way of impaired investments that amount to approximately $2 billion.

http://www.newsday.co.tt/politics/0,128530.html

8 Responses to “PM’s statement on Clico”


  • Why did it take this long on the part of the PP government to establish this? Why after so much agitation, and even failed attempt to bring in legislation?

    The timing and the manner of establishing this commission suggests that it is reluctantly done and done only because of the anger of too many distressed people who Dooks attempted unsuccessfully to pay off in his budget, that no one of significance will be charged and tried and if found guilty be sent to jail.

    The established practice in the places where politics meet power in T&T is not one of justice for all, regardless, but it is a type of “justice” in which, based on your power and contacts and the corruption of these contacts (eg., Ish and Steve) is, “we doh fin’ yuh guilty, buh doh leh we ketch yuh doin’ it again, ok?”

    “Ok!”

    • There we go again making everdirty suggestions about Ish and Steve, with no knowledge of the facts of this case.

  • Since 1996 and probably further back, Clico has had huge deficits.Those who were wise investors took the time to investigate before attempting to invest and placed their monies in balanced portfiolos.There were numerous opportunities to do exactly that in T&T, a place with a vibrant stock market.The promise of high, unrealistic interest rates was too good for some investors; greed controlled their brains. As far back as 1998, I warned many about investing in Clico.Warnings fell on deaf ears.There are other financial institutions in T&T which are declaring profits,but based on the size of these institutions, the profit margins seem minimal.Unit Trust and the Republic Bank are two examples.Fortunately, the new government is making long awaited changes to banking and investing laws to protect consumers and investors.

  • Thanks for nothing T-Man,but how come you could not warn us that chose to invest in the HFCU ,about the crooks and bandits that were lurking ,to prey on the innocent? We admire the fact that your government were able to do the right things for the folks that followed Sat , and placed all there saving in it, as opposed to the Unit Trust and similar state controlled financial apparatus.
    However we look on with some apprehension as your pp GOVERNMENT seem intent to wait until Dookie become President before pressing charges on the CEO’S . Let me get it outrage over CLICO, but in typical fashion ,you a high chieftain , and criminal apologist, behaves as if cat cut their tongues on anti pensioners fraud. We are taking notes my friend , Transparency international might be called into action.

  • The HCU is in the same boat as Clico.Indian people trusted the administration using tribal logic and not realizing that greed has no ethnicity. They got burned in spite of the warning signs and like Clico were lured by high returns and ethnic pride in their “own” institution.Hopefully those responsible will be jailed.

  • Therefore T-Man what you a tribal apologist should be outraged about is not the government per say, but the penchant for the quick rich, easy financial rewards that a particular segment of your gullible population, seems to always be very eager to indulge in- even if it entails selling their souls, and or engaging in criminally ,unwholesome ,activities at the risk destroying their entire families -from the highest elites , at the top of their profession, to the greedy ,scrunting ,low end bloke, from within that said camp.
    Of course you forgot that it was Sat ,and company who used their influence and told hard working folks chiefly from Caroni, to ignore places like Unit Thrust ,Rand, PSA , Eastern Credit Union,and similarly well run , noble financial institutions, so as to opt instead for the Gillman Hussain like Ponzi schemes , “dat we , highly intelligent boy with the $500 million property from Florida, possess , no?
    Let’s just say in ending, 1- 1 = 0 , for not only did Africans , but also Indian people who trusted Basdeo Panday ,and his administration when they gave them power some years ago, and look how that bandit , and his gangs repay them , by raiding, and nearly emptying the treasury in 4 years , while also giving our country a bad stain internationally, when they engaged in all sorts of shenanigans during the construction of the now infamous Airport.
    Tell you what T-Man, I will admit, of being scared at times when I frequently return to my country outside of election time- like you do for a lil R and D, not of the so call criminals that run around the country like headless chickens, but at the possibility that the plane would swerve off course, and land either in Jagdeo’s Guyana , or Raul Castro’s Cuba,instead, for as you know the money that were to be used to install sophisticated radar technology like you enjoy in Toronto Canada, most likely went instead, to certain unmentionable accounts , under the pretense of completing the British finishing school for then prospective Queen Mick, the Oropouche nepotistic beneficiary.
    Fortunately, karma exist, and the more seasoned and experienced Siparia Queen’s , prayed more diligently for freedom of her party’s leadership patriarchal subjugations, and so we were save from future Trini ill fates.
    I see cousin Rammy, aka de COP Pitbull, is busy running around London these days, getting his Christian, Xmas winter shopping done, under the pretext that he is looking for evidence on an Insurance company with 90% of it’s assets ,base in Lloyds of London – go figure.
    We will wish him luck on that, as we also did in trying to track down the stolen loot of Johnny O,one of Dada Eric William’s pal.
    Tell the politically naive, and overexcited ,PP boys, and gals, to pay attention to global historical trends my friend,for it is claimed that “whosoever digit a pit ,shall fall in it,” agreed?

  • basket doh hold water.

  • Ummm hummm! Now while we are awaiting the death penalty on these Clico characters, let us stand by for the real deal when it comes to Trini well established criminals , and the Politicians that cuddled them.
    We know that in typical fashion,these paper powerful , cowards, would soon be screaming like excited canneries in plea deals in big brother America , so as to get a few years taken off likely long prison sentences.
    Hopefully, that would ensure that our wonderful ,law oriented government ,along with our Edmonton Commissioner Gibbs,can snag a few more local big wigs ,that successfully eluded custody for too long.
    http://www.newsday.co.tt/news/0,128876.html

Comments are currently closed.