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Will CLICO Policyholders Soon Have Reason To Smile?

There is one characteristic about which Barbadians have boasted through the years, our stable financial environment. Even in the midst of the prevailing economic turbulence Barbados’ financial space has been recognized for its resilience and good management. CLICO’s catastrophic fall as a premier pan-Caribbean company now threatens to besmirch that reputation. BU has blogged voluminously…

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Former Supervisor of Insurance Carlos Belgrave (l) former Governor of the Central Bank Marion Williams (c) Late Prime Minister David Thompson (r)

There is one characteristic about which Barbadians have boasted through the years, our stable financial environment. Even in the midst of the prevailing economic turbulence Barbados’ financial space has been recognized for its resilience and good management. CLICO’s catastrophic fall as a premier pan-Caribbean company now threatens to besmirch that reputation.

BU has blogged voluminously about the CLICO Affair; the summary of which: CLICO’s problem was facilitated by deficient oversight, porakey regulation, greedy politicians and the collapse of Wall Street in the last quarter of 2007. It does not mean that Duprey and cohorts did not make bad decisions as managers of the company but the last couple years has exposed that the regulatory approved EFPA was the financial product which pushed the company over the edge. There is no doubt in the BU household that regional regulators fell into a deep coma at the wheel. Why this occurred is now the subject of speculation and investigation. BU would hazard a guess regulators and politicians alike were wooed by the smooth talking deep pocket Duprey. It is note worthy that in almost all the countries in the region where CLICO operated there is a similar story to be told.

Both BLP and DLP can share blame in the CLICO mess. The controversial EFPA was approved to be sold under a BLP government and the failure to efficiently manage the collapse was obfuscated by a DLP government whose loyalty to its biggest corporate contributor created an obvious conflict. The matter was compounded by the Thompson led government whose friendship and close family ties was widely known. The revelation that the late Prime Minister Thompson signed of on Parris’ terms and conditions of employment document in his capacity as legal advisor, along with the revelation  that the wives of Parris and the late Prime Minister partnered in a deal to buy property in St. John  does not paint a comfortable picture.

Affected CLICO policyholder placed in limbo as a result of the company being placed under judicial management would have been heartened by the statement delivered by Minister of Finance Chris Sinckler during his wrap-up to budget 2011.  He indicated there is a meeting scheduled with the judicial managers this Friday (26 August 2011) to discuss a workable deal for policyholders.  Given some of the horror stories circulating about some policyholders going crazy at the thought of losing their life’s savings, BU is pleased that a solution seems to be around the corner even if it means policyholders accessing principal investments only. Forfeiting interest is a price some would say deserves to be paid for being greedy.

BU suspects that the late Prime Minister died and took with him sensitive information related to CLICO which may never now become public knowledge. If for no other reason it might explain why this DLP government is committed to fixing the CLICO problem and promised from the start of the CLICO mess the government would protect the investments of policyholders. The legacy of the dearly departed David Thompson and a positive outcome to CLICO remain inextricably linked in the government delivering on that promise.

  1. Caswell Franklyn Avatar
    Caswell Franklyn

    The story behind the purchase of CLICO Mortgage Finance Company by Public Workers’ Credit Union should also be investigated. That company was purchased using a loan from the NIS Fund. My information is that the NIS Board initially rejected the application but was overruled.

    Government could not be seen as putting any more public money into CLICO so they had to find a way to channel NIS funds via the credit union. When will the Government come clean about this misuse of public money to benefit CLICO.

  2. BAFBFP Avatar
    BAFBFP

    Wait, all ah dem gone …!

  3. David Avatar
    David

    @BAFBFP

    As if by a stroke of fate they are all gone.

    You really need to stop being so cynical 🙂

    @Caswell

    One would have thought the issue you raised was one ripe for the Opposition to take advantage of.

  4. John Avatar
    John

    David

    It is note worthy that in almost all the countries in the region where CLICO operated there is a similar story to be told.

    +++++++++++++++++++++++++++++++++++++++++

    No coincidence.

    Part of the strategic plan.

    Politicians in the region all have the same agenda.

    Get a $ from any source, screw the cost to the country.

    Public Private sector partnership, or is it Private Public sector partnership.

    You say …. almost all … can you name the countries (if any) where the result was dissimilar?

  5. BAFBFP Avatar
    BAFBFP

    David

    You got me confused for the wrong person .. I does listen to you know 🙂

  6. David Avatar
    David

    @BAFBFP

    Today the conversation was interesting the problem must be that your respected the person in the chair more?

    The vigil until Friday begins, let us keep our fingers crossed for the policyholders.

  7. G Avatar
    G

    Any update?

  8. David Avatar
    David

    @G

    If we go by what the Minister stated in his wrap up to the budget the meeting is scheduled for today.

  9. David Avatar
    David

    The Business Authority will be featuring a piece in its edition tomorrow which addresses the concern of the CLICO judicial managers that ASSETS cannot be found!

  10. Truthman Burton Avatar
    Truthman Burton

    @David | August 28, 2011 at 11:09 AM |
    “The Business Authority will be featuring a piece in its edition tomorrow which addresses the concern of the CLICO judicial managers that ASSETS cannot be found!”
    ***************************************
    David, We cannot ask David Thompson …. He’s gone, God rest his soul. that is, unless you have a chat with Education Minister RONALD JONES. I am not telling untruths on Jones; he claimed on the political platform IN St, John that he speaks regularly to the departed Thompson at night when “he travels.”

    You will have to ask JONES to explain that mystical, occultic, stuff of which I know nothing.

    But LEROY PARRIS got to know where those assets are! He might be a bufffoon, but he got a nose for money and assets! So I don’t buy this rubbish about they can’t locate. Incidentally, have the courts or CLICO’S lawyers been able yet to locate that document allegedly prepared and signed by the Parris and the late Prime Minister, detailing that TEN MILLION DOLLAR BONUS arrangement?

  11. David Avatar
    David

    @Truthman Burton

    There must be no doubt that the late PM took some secrets to his grave.

    It will be up to Leroy Parris or Terrence Thornhill to deliver.

    You shouldn’t hold your breath however.

  12. Truthman Burton Avatar
    Truthman Burton

    I have just read a Business Authority article headlined “Missing CLICO Assets” as per the Judicial Managers’ Interim Report of May 27, 2011. I am eager to see more details from this interim report and even more so, the final report submitted July 28th, 2011..

    The Interim Report alleges that a stated amount of approximately $356 Million in assets cannot presently be properly supported by documentary evidence. Furthermore, the Report states, (according to the Business Authority,) that the Company’s total assets of $802 Millions as at April 13, 2011, consisted PRIMARILY of amounts due from related companies and investments in subsidiaries and associated companies ……

    The worrying aspect here is that, [quote] “The Judicial Manager noted that the ultimate solvency of the company is dependent on the realization of its assets, PARTICULARLY amounts due from related companies WHICH THEMSELVES ARE IN FINANCIAL DISTRESS!” (emphases mine)

    The Judicial Managers reportedly added: “Many of the underlying assets of the related companies have already been pledged towards statutory trusts that the company is required to set up in various jurisdictions in which it operates and which appear to be currently underfunded.”

    There are also issues related to differences of assumptions and approaches between the subsequently employed independent Actuary and the company’s previous Actuary.

    Public knowledge of the J.M’s final report is keenly awaited, but I think the predominant layman’s view would be that the foundations of this company have been severely compromised. In the absence of massive taxpayer support, in which case, full public disclosure would be mandatory, the annuity and policy holders will be required to sustain great losses.

    Makes me wonder what were the thought processes when certain guarantees were given by (1) The Central Bank, (2) by Gov’t Leaders, and (3) by PIMPS (Pals In Machiavellean Places) who saw no prohibitory leprosy. (I using language that Freundel would love). Did they really have an indepth look at what they were guaranteeing, or were their commitments made on the basis of political patronage, and excessive favours granted during general election campaigning. Were those commitments made on the basis of Families First, and TaxPayers afterwards?

  13. Christopher Halsall Avatar
    Christopher Halsall

    @Truthman Burton et al…

    Have you ever heard of the term “crash and burn”?

  14. Truthman Burton Avatar
    Truthman Burton

    Yes Christopher. I have heard it. I think it generally means to experience unanticipated and utter failure, but if that is the meaning you have in mind (because I understand there are a few other meanings mostly used in big-city language) what or who are you applying it to?

    CLICO?
    The Policy and Annuity Holders?
    The PIMP?
    Leroy Parris?
    The Central Bank?
    The DLP “Guhment” (Pornville’s pronounciation)?
    The Judicial Managerial Study?
    Or ALL of the above?
    Explain wuh yuh mean.

  15. Christopher Halsall Avatar
    Christopher Halsall

    @Truthman Burton…

    Crash and Burn is an old term used by test pilots to refer to those who were not able to bring their aircraft back onto the ground successfully.

    In the “old days”, the test pilots didn’t have escape routes, so they crashed and burned….

    Now a-days, this term is used to describe many situations. In the financial industry, the “pilots” somehow have “golden parachutes”, and while the company crashes and burns and the investors take massive damage, the pilots escape without harm…

  16. Truthman Burton Avatar
    Truthman Burton

    @Christopher
    You appear irresolute to say it plainly; stop the shilly-shallying CHRIS! From your explanation of “crash and burn” you are clearly referring principally, to (1) LEROY PARRIS, who definitely unfurled his “golden parachute”, (ability to cash in policies etc. ahead of anybody else) as his mis-managed, mishmash of companies crashed around him!

    He will really fly away to Utopia (I didn’t say anything about Dodds) if and when the Courts award that further TEN MILLION DOLLAR BONUS PAYMENT, strategised by himself and his late buddy.(may his soul rest in peace). I wonder what are the Judicial Manager’s recommendation about that SHADY-LOOKING BONUS PAYMENT.

    From my list above, Christopher, you are also referring to (2) The PIMP, (Pals In Machiavellean Places,) no leprosy abounding, together with (3) The DLP “Guhment”, All massive beneficiaries of CLICO largesse, distributed via a clever FAMILIES FIRST arrangement, in order to deceptively acquire the reigns of power.

  17. David Avatar
    David

    Can anyone advise on ALICO?

  18. checkit-out Avatar
    checkit-out

    I noticedin today’s Nation newspaper that a plan has been developed and is in the final stage of approval to solve the CLICO problem. It reportedly involves recapitalization of more than 150 M dollars for CLICO which now has JM reported assets of over $802M and liabilities of $768.4 M as determined by the Judicial managers. (Now, if that is true, why was there a problem in the first place?) There was no mention of the 100’s of Millions of assets which the Judicial manager had earlier said could not be found. It also involves the establishment of a new legal entity. There are no immediate plans for the sale of any of the assets, so where is the $150 M coming from? NIS again? Gonsalves, the StV PM was interviewed and took the opportunity to play some mind games with Sinckler and Stuart reminding them that Barbados, through the late and current PMs had committed to bailing out the policy holders both here and in the OECS and that he expected that the majority of the investors would get back 92% of their investments.

    I am happy that it looks like the people who suffered from the depredations of Parris, Thompson, et. al. will get back most of their money and if the CLICO asset/liability ratio is as the Judicial manager now says it is, there should not be much of a difficulty in them being repaid. But please don’t use any NIS pension funds as guarantees, or use NIS funds in any other way to bail out CLICO. Why not ask Parris and the other CLICO operatives and big-ups who got most of their moneys while Thompson was sick and Sinckler and Freundel were otherwise engaged, to please give CLICO back some of the millions that he got from it or find some other way to get it back.

    The fallout from the Judicial managers’ reports and the Sinckler approved rescue plan should be very interesting. I wonder if the NIS pension cheques story and how NIS management is now backing-back now that they realise how a significant part of the political constituency will be affected by poorly thought out innovations, will be repeated for the CLICO rescue plan when the general public have their say.

  19. Like it is Avatar
    Like it is

    Tell bastard Ralph Gonzalves use thousands of US$ he pay the policewoman who claim he rape her to pay Vincentians owed CLICO it cant be that much.
    We know he love to kiss Trinidadians ass he can go to them and beg as he’s been doing for years. CLICO is a Trinidad company put the blame on them not Bdos.. Gonzalves begs across the planet Gadaffi, Iran, Chavez, name it.

  20. David Avatar
    David

    Gonzales too love to pressure Barbados, remember how he sided with Jagdeo against Barbados during the immigration debate.

    Why doesn’t he attack St. Lucia and the other countries who have left Barbados to majority fund LIAT?

  21. anthony Avatar
    anthony

    @checkit out

    I don’t think they have addressed if the assets have been found or not that is part of the final judicial report which still hasn’t been made public. what the recapitalization does mean is at least another 50-80 million in either lost /over valued assets have to be replaced while giving the company space to have the rest as operating capital. Also given the nature that sam lord is being compulsory acquired mean another 10-20 million in cash is coming to clico. which may or may not been included in the plan. For barbados portion of the 150 million it will be most likely be thru nis as the cmf was done thru. Left to be seen is how much of hit investor are going to take. As gonzales state he hope it in the region of 90% RTI any less and policy holder might just take the company under with a class action lawsuit with the intent they never let it happen to anyone else thru clico.

  22. know your enemy Avatar
    know your enemy

    David | September 18, 2011 at 11:30 PM |
    Bang on David he attacks Bdos incessantly..
    Gonzalves is an ungrateful fat slob, not to mention a repeated rape accused, in dictator like fashion he runs an island which inundates Barbados with illegal drugs wrecking our communities and causing our security forces to use up enormous amounts of scarce resources trying to interdict ST. Vincent drug runners.

  23. checkit-out Avatar
    checkit-out

    Anthony; Thanks for your very clear post above. If you are correct, and I think you are, It means that the Barbados taxpayer would have sunk several millions into CLICO, including the first 10 million that Thompson gave them, the 10-20 million for Sam Lords and heaven knows what else, add to that the Barbados portion of the $150 M which could approach over 50% and the taxpayers will be paying through the teeth for CLICO’s under the table support to Owen Arthur and Thompson over the years and the regal living of Parris and the other CLICO high flyers.

    I say, liquidate CLICO and pay out its debtors. Let CLICO be consigned to the dustbin of history and let it sink. Let some other business entity carry on with a different name and take up any vacuum left by its demise. No more monies from NIS! Expose Thompson, Stuart and Arthur fully and their role over the years in the CLICO mess and let us move on. The people of Barbados, per se, owe nothing to the CLICO policyholders

  24. Hocus Pocus Avatar
    Hocus Pocus

    @ Checkit-out – September 19, 2011 at 7:07 AM

    I empathise with what you have written. However, in the essence of fair play, the Government of Barbados must share in the repayment of CLICO/BAICO policyholders as the government body, or bodies, responsible for supervising insurance companies was/were seemingly negligent in enforcing instructions and mandated regulatory controls. It is a given that the major source of income for any government comes from the population it governs. Therefore, when a government and has to produce money to repay and most its money comes from the pockets of the people, then it is ultimately the citizens that pay and if the citizens don’t approve, then there are elections which should be able to address the issue.

    What I want to know is how come certain individuals are still free, as opposed to incarcerated, and still in apparent possession of all their property and wealth? Should not the assets of certain persons have been frozen, certainly until a forensic audit of CLICO/BAICO has been completed and an all clear given?

  25. checkit-out Avatar
    checkit-out

    I note in todays Barbados today that the CLICO / CIL enquiry in Trinidad is unearthing a number of facts that should be of great relevance to the CLICO Barbados story.

    Here is the BT story;

    http://news.barbadostoday.bb/barticlenew.php?ptitle=Duprey%20paid%20$90M%20a%20year&article=10626

    Anyone thinks that Parris, aided and abetted by his preeminent and paid for contacts in Government was doing any differently over the years?

    It was all over the news last night as well as the “good” news of the proposals by the JM for resuscitating CLICO here. There was nary a comment from the BU family.

    Anyone thought about why the Judicial Managers would call for a forensic audit only NOW when a large part of their remit was to identify the assets and liabilities of the CLICO companies. That determination must have been of innate relevance to determinig what should be done with the company. Bet you that a significant part of the the monies Duprey got and squandered (oops I should have said invested) came from Barbados and that Parris got his fair share.

    Nothing less than a full fledged commision of enquiry into CLICO and its Barbados operations over the past 10 years or so is likely to be seen as necessary by reasonable people. But of course that will not happen. Like the integrity legislation both parties will conspire to damp down any serious enquires into CLICO and leave the public (through NIS) holding the bag.

  26. anthony Avatar
    anthony

    actually forensic audit was request since the interim report. why wasn’t it approve is a mystery. As for the rescue plan i can see a mass people request for shares to be sold quickly. They want nothing to do anymore with the company or is successor..

  27. Alien Avatar
    Alien

    anthony | September 24, 2011 at 12:05 PM |
    Unfortunately, I did not read the report, only heard the radio news. Will the equity/shares be supported by an injection of capital by the governments, as the policyholder benefits will be adjusted to equal the verifiable assets? Also, is there a plan to list the shares of the new company?

  28. anthony Avatar
    anthony

    For haven’t read the actual report myself. from barbados today sep 22 2011

    The options outlined were: (1) Transfer of the traditional business at full value into a new company; transfer of the individual EFPAs and quasi-Government EFPAs at full value into annuities in the new company; and conversion of the corporate EFPAs principal and interest converted into shares in the new company. This option will require investment of $152 million.

    Option two involves transfer of the traditional business at full value into the new company; transfer of the individual EFPAs at full value into annuities in the new company; and conversion of the corporate and quasi-government EFPAs into shares in the new company. This option will require an investment of $103 million.

    The third option again includes transfer of traditional business at full value into a new company; transfer of the principal balance of the individual EFPAs and quasi-Government EFPAs into annuities and the interest of the EFPA policies into shares in the new company; and conversion of the corporate EFPAs into shares. A $94 million investment is required with this option.

    The fourth option involves transfer of the principal on individual EFPAs into annuities and the interest into shares; conversion of corporate and quasi-government EFPAs into shares and transfer of traditional business at full value. The investment required for this approach is $56 million.

    Jordan said judicial management had spent considerable time after being appointed ascertaining the current financial position of CLICO in terms of both assets and liabilities in all its jurisdictions.

    He said that as at May 31 this year CLICO’s assets, which also included those of the parent company CLICO Holdings Limited, stood at $512 million, with policyholder liabilities at $835 million.

  29. anthony Avatar
    anthony

    From the article list of share onto the bse isn’t a current plan. most of the 322 million shortfall in assets would be likely to be from the clico life. A break down of liabilities here would give us a much clearer picture of how equity is need for the rescue plan to work. I will assume these plan are only for clico barbados.

    With the first option the the original maturing balance for personal and quasi government efps will be paid out, with corporate efpa reviving the original matured balance in share of the company. This will call for 152 million in capital for government/other business to invest for the clico mean 170 million worth of clico share would most likely got to corporate ffpas. For the investment in clico i would assume government will receive part of the company shares. How the share ratio will go along with corporate efpa would be interesting question. Assuming equality for investment dollar/debt exchange we get a ratio of 47% government to 53% private if there are no other shareholder.

    With the second option all the maturing balance are still paid out but only individual cash out with corporate and quasi government . This call for 103 million in capital. Giving the quasi government liability a 49 million stake in the liabilities shortfall. ratio we get 32% government and 68% corporate and quasi government.

    option 3 gives principal balance into cash for quasi and individual while the interest is given in shares. corporate goes into shares. This call for 94 million in capital. This given the interest in individual and quasi as 58 million in the liability shortfall.ratio we get 29% government and 71% corporate, quasi and individual.

    option 4 gives principal balance into cash for individual while interest in share. with corporate and quasi getting shares. this calls for 56 million in capital. This give individual interest a value of 45million of the liability shortfall. ratio we get 17% government and 83% individual , quasi and corporate.

    now when the share are created they will bring finical balance to company. the issue normally with shares for debt swap is the value of share can change quite easily. As i forsee quick sell the value share will plument the ROI for those with share will be minimum. Before any share debt swap is done, the government show show recent audit report of clico actually yearly operation to show policy holder if the business can continue as a profitable going concern where person would want the shares.

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