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ADB’s $16.2M stash at Clico

By Andre Bagoo Sunday, June 1 2014

JUST before it made a huge loss, the Agricultural Development Bank (ADB) recorded holding $16.2 million in short-term holdings at failed insurance company Clico, according to accounts tabled in Parliament last month.

The ADB Financial Statements for the year 2011, tabled for the consideration of the House of Representa­tives, disclose that for the year ended September 30, 2010, the ADB recorded a loss of $20.4 million.

Yet, according to notes in the statements, for the same year, the ADB recorded short-term investments at Clico, including one Christmas Eve deposit dating back to 2007.

“The investments held with Colonial Life Insurance Company Limited comprised instruments representing two deposits of $7.5m and $8.5 million, which were issued on December 24, 2007, and October 7, 2007, respectively,” one note, under “Short-term investments” reads in the document. “The company is now in Government control due to its inability to meet current liabilities and liquidity issues. The Government has proposed to settle these debts with an initial payment of $75,000 and balance of payment over 20 years.”

The nature of these short-term holdings, including their duration terms, is not specified in the notes.

The Agricultural Development Bank was set up in 1968 with a mandate to, “encourage and foster the development of agriculture, commercial fishing and industries connected therewith and to mobilise funds for the purpose of such development”.

In the year in which it made its $20.4 million loss, the ADB was kept afloat by taxpayers’ funds. The same financial statements note that in 2010, the ADB received “proceeds from Government” to the tune of $71.3 million.

The ADB had a history of pumping money into Clico, on the basis of further documents obtained by Sunday Newsday.

This history, at one stage, reportedly drew criticisms from the office of the Auditor General, yet it seems the ADB, prior to Clico’s 2009 meltdown, insisted on pumping money into the insurance giant.

For instance, a court judgment in 2004 detailed how an impasse reportedly occurred between a former ADB CEO and the Board over the CEO’s termination.

The judgment details two previous “investments” in Clico, one in 2002 for $4.5 million and one in 1998 for $1.3 million. The litigation revealed the ostensible basis of the CEO’s termination was over the $4.5 million investment in a Clico product, a board-sanctioned moved which saw allegations of conflict of interest relating to one board member who approved the transaction.

The court laid bare correspondence between the office of the Auditor General and the ADB raising concerns about the nature of these transactions.

The judgment of Justice Amrika Tiwary-Reddy states, “By letter dated 12.7.01 the Auditor General expressed reservations about several long-term investments with Clico. In particular the Auditor General noted that proper documentary evidence of certain long-term investments including the 1998 Group Contract ADBL-0033 was not produced to enable the Auditor General to verify whether the Bank would be the beneficiary of a financial asset in the future.”

In April 2006, the judge found that, “The Auditor General’s reservations about the (ADB) placing large sums of money in Clico’s Group Advanced Protection Contract were never adequately addressed by the Respondent.”

The extent of the exposure of the loss-making ADB was not an issue that emerged during the public hearings of the two-year Commission of Inquiry into the collapse of Clico and the Hindu Credit Union, chaired by sole commissioner Sir Anthony Colman.

Finance and Economy Minister Larry Howai, addressing the Senate last Tuesday, stated Sir Anthony’s report is due to be published “shortly” but did not specify a time frame.

The ADB, in 2011, recorded a profit of $2.5 million.

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