By: Tony Best
“A massive fraud on the public.”
That’s how Ewart Williams, the highly respected Governor of Trinidad and Tobago’s Central Bank, has described the operations of one of the eastern Caribbean largest financial services companies which imploded in 2009, sending shivers up and down the spines of government leaders, their finance minister and tens of thousands of individual investors in Trinidad and Tobago, Barbados, Antigua, Guyana, Grenada, St. Kitts-Nevis and their neighbors in the region.
And Williams’ characterization of CLICO is bound to heighten the fears of insurance policy holders and annuity investors across the Caribbean who stand to lose billions of dollars in what is turning out to be biggest failure of a financial institution in Caricom in the last 50 years.
“We are taking the position that CLICO was a massive fraud on the public and that is our position,” was the way Williams put it in his last news conference in Port of Spain before stepping down as Central Bank Governor after serving in that top position for a decade.
It’s an unnerving assessment of the implications of CLICO failure for governments and private investors, all of whom are trying to determine the future of government’s pension and national insurance funds invested with the company and the savings of individuals who are facing the grim prospect of being unable to recoup much, if any, of their life savings which they used to purchase annuities and other financial instruments during the past dozen plus year. Many of them had been promised annual returns of between seven and eight per cent.
As if to underscore his complaint about possible criminal behavior by some people connected with CLICO, the Central Bank Governor put some of them on notice that “certain players” could end up facing fraud charges.
A Commission of Inquiry led by Sir Anthony Colman is now investigating what happened at CLICO in Trinidad and Tobago while judicial managers in Barbados are probing the company’s operations and its management there under Leroy Parris, the firm’s chief executive officer. In addition, policy holders in Trinidad and Tobago and Barbados have gone to court in a determined effort to get back their money.
“We are now in the process of addressing the various stages” of CLICO’s operations before its collapse, said Williams who insisted that the saga underscored the need to tighten the regulatory infrastructure, including the legislative framework and practices.
“We have done some work on the legislation and we have done considerable work on improving the supervisory practices,” he explained.
Williams’ statement about the need to tighten regulations to prevent a re-occurrence of the financial calamity had a familiar ring to it. Baldwin Spencer, Antigua’s Prime Minister, told the Carib News late last year that members of the Organization of Eastern Caribbean States, OECS, had contributed to the significant financial fall-out from CLICO’s demise by failing to regulate insurance companies operating in the sub-region.
“We have failed over the years to properly regulate the insurance sector in the OECS,” he said back then.
Antigua could end up with losses of as much as (EC) $ 1 billion ’s alone, including government National Insurance funds.
Although the amount of losses in Grenada are yet to be fully quantified, the financial damage to policy holders may run into more than $100 million.
Like Spencer, Grenada’s leader Tillman Thomas has blamed lax regulations for some of the hefty losses in the OECS.
“This is a regional problem,” Thomas said during an interview in New York. “Some of the companies that were set up in different territories were not full-fledged companies but were like branches of the main company. Of course, in recent times we didn’t put proper legislation in place to deal with matters like this should such a situation arise. So, to a certain extent, yes, lack of proper legislation could be a factor.”
In Barbados, where CLICO had invested heavily in real estate and other businesses, the losses can exceed $400 million, according to some estimates. In Trinidad and Tobago where the company’s headquarters were located the financial damage can exceed $1 billion.
Asked in Port of Spain about a future bailout of any financial company which collapsed, Williams said that if the company’s failure would have systemic consequences, then the government should step in and save it.
“It is an easy decision to allow shareholders of the financial institution to take the bounce if they alone lose their stake,” he said. “It is not so easy if the failure of the bank systemic consequences.”
The Governor was quick to admit that the collapse and the impact were so great that he had lost considerable sleep over CLICO’s failure.
“I am sure that all of the members of my regulatory staff (at the Central Bank) have lost a lot of sleep on this,” asserted the Governor.