By ANDRE BAGOO Sunday, October 28 2012

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FORMER CL Financial (CLF) executive chairman Lawrence Duprey failed to disclose to the Clico board a power of attorney he reportedly used to divert Clico dividend income – potentially worth hundreds of millions – away from Clico, according to the findings of a Sunday Newsday investigation.

The power of attorney, dated April 23, 2005, gave Duprey – as well as former Clico director Andre Monteil – power to receive “all money owing to the company and to receive dividends or other distribution to the company” and to invest “any of the company’s money in such investments as they consider appropriate”.

Sources with knowledge of the arrangement said the power of attorney was used by Duprey to divert dividend income away from Clico to companies all over the CLF group, in the absence of full Clico board oversight.

The issue of the treatment of millions worth of dividends which were due to Clico has been a central one for the Commission of Inquiry into the collapse of Clico, which closed a ninth evidence hearing last week.

In a letter dated February 17, 2012, the inquiry asked former Clico and CLF board member Michael Anthony Fifi to clarify the functioning of these boards and in particular to articulate their policy with regard to the handling of Clico dividends.

Fifi was asked:

* What policy, if any, was used in determining the distribution of dividends due to Clico?

* What steps were taken by the board when dividends due to Clico were declared but not received by Clico?

In a 60-page witness statement tendered into evidence at the Colman Inquiry last week, Fifi says he was not aware that Clico – the insurance arm – was not receiving dividends.

“I was never aware that dividends due to Clico were declared but not received by Clico. As far as I recall, there was no stated policy with respect to determining the distribution of dividends due to Clico,” Fifi says in his statement, which has been obtained by Sunday Newsday.

Fifi noted that he only discovered the dividends were being diverted in 2009, after the State intervened via an initial Memorandum of Understanding (MoU) in January of that year.The dividends were crucial, he said, because the whole point of the dividends was to ensure Clico had enough cash to meet demands from policyholders.

“It was only subsequent to the MoU that I became aware that Clico did not always receive dividends due to it,” Fifi says.

“In my opinion, Clico had its value secured. However, its cash flow problems seemed to be the source of the challenges that surfaced in January 2009. Clico was to receive a shareholding in the investment for any value borrowed and any dividends paid. I always assumed that any dividends paid were paid directly to the companies according to the shareholding ratio.”

On April 23, 2005, a power of attorney was signed-off on, giving Duprey and Monteil, as well as former CL Financial corporate secretary Gita Sakal, powers in relation to Clico’s “ownership and/or investment” in a fixed list of companies “or any of their subsidiaries and/or affiliated companies”.

The companies the shares related to included Republic Bank, Home Construction Limited, Methanol Holdings (Trinidad) Limited and Methanol Holdings (International) Limited and Home Mortgage Bank. Clico held 51.8 million shares in Republic Bank alone, a potential dividend earning of about $142 million, assuming a dividend of about $2.75.

The power of attorney was marked signed at 29 St Vincent Street, Port-of-Spain, on May 5, 2005, by then Clico directors Roger Duprey (a cousin of Lawrence) and Peter Salvary. Salvary later denied ever seeing the document.

Days after the document’s date, the then Clico board (Lawrence Duprey, Fifi, Roger Duprey, Kerston Coombs, Monteil, Salvary, Neil Jones and John Martin) was replaced with a new board on May 2, 2005, as part of a purported restructuring exercise. Duprey, however, was later returned to the Clico board. Fifi stayed on at CLF until 2009. Key officials at CLF and Clico, however, remained unaware of the power of attorney right up to 2009.

Fifi admits that one transaction, the nearly $2 billion Lascelles de Mercado Jamaica drinks deal, placed incredible stresses on the group.

“I think that CL would have been liquid enough to meet the demands of depositors if it had not entered into the Lascelles de Mercado transaction,” Fifi says.

“It was a double jeopardy situation because in entering that transaction, CL was adding to what it was borrowing and taking away from its assets and ability to repay in light of the liquidity situation compounded by the global financial crisis.” While lawyers for Duprey have sought to build the argument that Duprey largely delegated responsibility for day to day management, and left things like Lascelles in the hands of others, such as former CLF finance director Michael Carballo, Fifi makes clear the driving role Duprey had in the matter.

“On the surface, it looked like a good match and a healthy deal. Lascelles de Mercado was operating in sectors very similar to CLF,” Fifi says.

“The decision still seems rational, but I am not aware of the full details of structuring the financing and so forth. Mr Duprey would say that in a race you have to be in the first two or you are not in the race. Mr Duprey would also say that in sectors such as the drinks sector, you have to deal with the larger players in order to get into global markets.” The handling of dividends was not the only thing the board was in the dark about. Fifi confirmed the MoU itself was never brought to the board.

“The MoU was presented as a fait accompli,” he says.

“I am of the opinion that if the board was presented with timely and adequate information, certain steps could have been taken in an effort to avert the crisis. These steps could have included the liquidation of certain assets to meet the cash shortfall.” Meanwhile, while Fifi’s Barbados-registered company, Premium Management International (PMI) Limited, got millions in payments from 2004 to 2008 from Home Construction Limited, the company was not registered in this country as an external company.

That registration would come in 2008, according to documents seen by Sunday Newsday, the same year Fifi sold the two-employee company — which held property — to HCL for $30 million, and had its debt taken on by HCK for $22 million.

PMI was at the centre of revelations last week around a rich basket of payments totalling $200 million which, according to evidence heard at the Colman Inquiry, were made to firms tied to Fifi.