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Duprey loses bid to ‘gag’ media

By Jada Loutoo Sunday, June 22 2014

click on pic to zoom in
Andre Monteil...
Andre Monteil...

The Central Bank’s multi-billion dollar claim against businessman Lawrence Duprey and his former executives will continue in the High court on July 30 as the lawsuit progresses to a case management conference set for that date by Justice Robin Mohammed.

Mohammed on Wednesday last ruled against an application by Duprey to have the case heard in private. The former CL Financial boss sought, among other things, to prevent the media from reporting on the case or gaining access to documents filed by either Central Bank or Clico — a subsidiary of CL Financial — or his defence.

A cost hearing has been adjourned to next month as Duprey has been ordered to pay the costs of defending the failed “gag order” application.

Central Bank and Clico initiated legal proceedings against Duprey and Andre Monteil, a former group financial director of CL Financial, as well as former CLF corporate secretary Gita Sakal seeking what could amount to billions in damages.

The three are being made to answer as to why the conglomerate failed, taking with it millions of dollars of investments of policyholders and investors and threatening the stability of the country’s economy. They have been accused of mismanagement of Clico, mis-application and mis-appropriation of the insurance giant’s income and assets to the detriment of its policyholders and mutual fund investors.

In the lawsuit, which was amended by Central Bank and Clico, last year, both parties are claiming several billion dollars in losses suffered as well as damages and restitution. The 200-plus pages statement of case outlines all the transactions which led to the insurance giant’s collapse and the participation of each of the defendants in the failed transactions.

According to the particulars of loss outlined in the amended claim against Duprey, Monteil, the total loss on the Republic Bank Limited “swap” share arrangement amounted to TT$1.18 billion while total losses on the 2004 Clico Investment Bank (CIB) ten percent shareholding purchase amounted to TT$805.9 million or a grand total $2 billion, suffered by Clico.

As it related to the drinks transactions, the insurance company’s loss on the Burn Stewart distilleries transaction amounted to $138 million and losses on the Lascelles de Mercado transaction amounted to US$185 million. The losses incurred due to the energy transactions, which included the diversion of Methanol Holdings dividends to CL Financial amounted to US$136.9 million.

Losses incurred as a result of its Florida property transactions amounted to US$154.4 million while the sale of Home Mortgage Bank’s shares TT$135 million. According the 200-plus amended statement of case, Clico and Central Bank are seeking damages, sums due from CL Financial to Clico, equitable compensation as well as declarations that the agreements and arrangements entered into by the defendants are void, that the six defendants were liable to account for all assets now or previously in their possession acquired or derived directly or indirectly from Clico; among others.

Clico and Central Bank are also seeking orders to enable it to trace, follow and recover its assets as well as restitution.

According to the lawsuit, Duprey received, over a seven-year period, “consultancy fees, salary and bonuses,” as direct payments from Colonial Life Insurance Company Limited (Clico), amounting to over $96.8 million to support his personal needs and lifestyle and that of members of his family.

The shocking claim forms part of the Central Bank and Clico’s civil lawsuit against the businessman who has been in control of the insurance behemoth and its parent company for over 20 years, until recently.

Civil proceedings were filed against Duprey, Monteil, CL Financial, Dalco Capital Management and Stone Street Capital Limited — companies both men were affiliated with — as well as Sakal arising from the failure of Clico which resulted in the Central Bank having to exercise its emergency powers under Section 44D of the Central Bank Act, in respect of the insurance giant.

The lawsuit alleges that Clico’s operation was “grossly deficient,” claiming that interests of policyholders and mutual fund investors were used for funding of Duprey’s personal needs and lifestyle, as well as those of other members of his family and private companies.

Additional information obtained by Sunday Newsday indicates that Clico’s monies were used to fund “unsuitable and high risk” projects in pursuit of Duprey’s personal global ambitions, including real estate projects in Florida. These transactions are said to be the Capri Project, Palazzo Las Olas, the Merrick Park Project and The Wellington preserve Project and Clico was reported to have provided primary financing between 2001 to 2009.

Additionally, it has been alleged that Clico’s monies were used to invest in other unsuccessful Florida property ventures at Palazzo Las Olas, Wellington Preserve and Merrick Park, resulting in losses to the company.

The Central Bank and Clico’s lawsuit spoke of the operation of two types of Ponzi schemes by using Clico’s “today’s premiums to pay yesterday’s obligations.”

CL Financial was described as having increasingly become “a behemoth built on debt” while another subsidiary Clico Investment Bank (CIB) was “rumoured to be a basket case, but has been for years.” The insurance giant — which has over 100,000 individual clients, 450 group health and life clients, 180 group pension plan clients and 14,000 pensioners — was said to be periodically unable to pay its debts, including being unable to meet its obligations to policyholders in full.

The Central Bank and the Government were forced to take control of the conglomerate and its banking and insurance subsidiaries in January 2009, after Duprey sought a bailout when Clico and CIB’s liquidity problems were made public.

It almost immediately faced a slew of policyholder lawsuits stemming from its inability to pay claims as they fell due. The prized Clico was said to be weighed down with policyholders’ liabilities of more than $12 billion.

At that time CL Financial controlled over $100 billion of assets in at least 72 companies in 32 countries throughout the region and the world and its financial interests covered several industry sectors including banking and financial services, energy, real estate, manufacturing and distribution.

In the months following its bailout, the financially-stricken Clico reportedly sucked up more than $5 billion in taxpayers’ money. According to the statement of case, in 2008, the Central Bank determined that Clico’s statutory fund (at December 31, 2007) was in deficit by $616,729,110.

Towards the end of 2008, having determined that there was a significant deficit in Clico’s statutory fund in 2007, the Central Bank was said to have become concerned about the state of the fund and made contact with the company’s officials.

The Central Bank’s deputy director of financial institutions was informed that Clico’s statutory fund was deficient by some $2 billion and investigations of the fund’s deterioration points to it being in deficit from as far back as 2001.

Eighty-three percent of Clico’s assets were said to be invested in other companies of the CL Financial group, including over $4.2 billion in fixed deposits with CIB, raising red flags with the Central Bank.

CIB was said, at the time of Central Bank’s intervention, to be suffering from low liquidity ratios and being unable to convert the fixed deposits held by Clico into cash within a reasonable time frame, while the returns on Clico’s investments in other CL Financial group companies had declined in value due to falling market prices for real estate and methanol.

Clico was described as a “cash cow” and the “cash engine” for CL Financial. The lawsuit also alleges that there was no proper governance of Clico, CL Financial or CIB.

The civil proceedings has highlighted that the actual position in relation to the CL Financial group, Clico and CIB was very different from the self-portrayed position and the general public impression.

“Indeed, increasingly over time their actual position became the inverse of the self-portrayed position,” the lawsuit noted.

It was also said that auditors and actuaries expressed concerns that, from as early as 1995, the financial state of Clico was of great concern and the company’s financial state was also of constant and increasing concern to regulators.

“Over the years, Clico’s assets and liabilities were misrepresented, misreported and manipulated, including by related party transactions in order to conceal the deficit and increasing chasm in the statutory fund.” Investigations into CIB, to date, have also revealed that the bank has failed to perform its duties as trustee of the mutual funds and at January 20, 2009 was estimated to have net liabilities of about $4.7 billion.

An Ernst and Young report — which also forms part of winding-up proceedings filed by CIB and its State appointed manager — noted that CIB “would have probably been deemed insolvent in 2007.”

“Investigations into the affairs of the CL Financial group, Clico and CIB have been and continue to be complex and difficult, especially in relation to earlier years,” the lawsuit notes. Attorney General Anand Ramlogan has in the past said the claim revealed that a large and fast expanding insurance company led people to believe that it was safe for policyholders to invest in it and they will get a very high and attractive rate of return and in the end, there was an artificial layer within the management of the company which led it to implode as it were.

“The divergence of funds into several subsidiaries, the acquisition of substantial real estate holdings utilising funds from the depositors, we have the interest in Fort Lauderdale and elsewhere, the divergence of dividends which were owed to Clico, we have certain transactions within the energy sector which need to be looked at. Of course we have the sale by Clico to Stone Street of seven million HMB shares which was not in the interest of Clico, and at a price which was not authorised by Clico,” he said.

DPP Roger Gaspard has also in the past admitted he had been in receipt of documents from the Central Bank and was in the process of seeking advice from Queen’s Counsel on the issue. There are currently several lawsuits before the courts filed by investors and policyholders seeking to get back their investments from the failed companies (Clico and CIB). A commission of inquiry - led by sole commissioner Sir Anthony Colman - was also launched to investigate the failure of CL Financial and several of its subsidiaries.

The Central Bank’s legal proceedings were based on the forensic investigations commissioned by the bank into the affairs of Clico. The case carries the case number CV 2011 02140.

The lawsuit also identifies a series of specific transactions which show further breaches of duty by each of the defendants, which include numerous actions in relation to Republic Bank Limited, which were contrary to Clico’s interests, including the diversion of dividends, the diversion of “consultancy fees” and various other transactions designed to benefit other individuals and entities to the detriment of Clico, its policyholders and investors. Clico held the majority stake in Republic Bank.

The Central Bank and the then PNM government were forced to take control of the conglomerate and its banking and insurance subsidaries, in January 2009, after Duprey sought a bailout when Clico and CIB’s liquidity problems were made public.

CIB’s banking licence was revoked and then Finance Minister Karen Nunez-Tesheira committed the PNM government to provide additional funding needed by Clico to meet its sizable statutory fund deficit. Legislation was quickly passed to amend the Central Bank Act and the Insurance Act to give the bank the additional powers to deal with Clico’s problems.

Nunez-Tesheira, on behalf of the government, signed with CL Financial a Memorandum of Understanding (MOU) to restructure the failed insurance company. Duprey was a signatory and Monteil, who was PNM treasurer at the time, was present for the signing at the Financial Complex in Port-of-Spain on January 30, 2009.

Immediately following the announcement, thousands of Clico policyholders sought to cash in and surrender their policies and other investments with the failed CL Financial companies, however they were unsuccessful and later the then Minister of Finance Winston Dookeran would announce in his first budget presentation as part of the People’s Partnership Government, in 2010, structured plans for the repayment of monies owed to depositors and policyholders.

In the months following its bailout, the financially-stricken Clico reportedly sucked up more than $5 billion in taxpayers’ money.

Nunez-Tesheira, it was alleged, however, used insider information to withdraw investments she had in CL Financial subsidiaries before the 2009 MOU was signed. This allegation was made by Siparia MP, now Prime Minister Kamla Persad-Bissessar. Nunez-Tesheira denied the charge, saying she withdrew her money from CIB because the funds had matured. Others were not as fortuitous.

Leading the team for Central Bank and CLICO is Queens counsel St Michael Hylton and also includes local attorneys Ian Benjamin, Jagdeo Singh , Roger Kawalsingh and Elena Araujo.

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