Recent Financial Failures In The Caribbean–What Were The Causes And What Lessons Can Be Learnt?

By William Layne, retired Permanent Secretary - Ministry of Finance (Barbados)

The 1980s witnessed the collapse of the investment firm DREXELL BURNHAM LAMBERT and the imprisonment of Michael Milken and Ivan Boeskey for insider trading. This was an era of leveraged buyouts financed by junk bonds, which demonstrated the greed and arrogance of wall-street personnel. The 1990s saw the dot com boom and bust. The stock market fell after 911 and then recovered before the decline occasioned by the 2008 financial meltdown. However, before the 2008 crisis we witnessed the collapse of MCIWORLDCOM and ENRON the imprisonment of Bernie Ebbers and some of the Enron executives for fraud. Ebbers is serving 25 years.

These international events were caused by a number of factors, such as, the greed and arrogance of wall-street actors; the greed and ignorance on the part of some investors and in some cases, an absence of effective regulation and the political belief in the virtues of the market to be self-regulating. ALAN GREENSPAN now admits that he made an error in assuming that the market would effectively regulate itself to prevent excesses.

The Caribbean over a similar period of time has witnessed financial crises. In Barbados the year 1986 saw the collapse of Trade Confirmers, a finance company offering interest rates on deposits that were in excess of what the other regulated entities were offering. The depositors lost their money. However, prior to that event, Barbadian depositors had lost money when two icons on the Barbadian business landscape the COTTON FACTORY and THE BARBADOS FOUNDRY collapsed. Here again there was no bailout of depositors. Trade Confirmers though a deposit taking institution was not regulated by the Central Bank and this brought about a change of legislation subsequent to the event to regulate these Finance Companies. However, there are still companies in Barbados accepting deposits from the public which are not licensed as banks or other deposit taking institutions. This has come to my knowledge recently.

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0 thoughts on “Recent Financial Failures In The Caribbean–What Were The Causes And What Lessons Can Be Learnt?


  1. The following extract from William Layne’s paper is instructive and has been made several times on BU:

    However, it is noteworthy that even though the Statutory Fund was in deficit, there is no mention of this in any of the audited statements. The estimated deficit of BAICO Barbados is some Bds$48.


  2. I note that Sanford is facing 20 years or more. Can we conclude that some one some where else could look to face some number of years as well? i say let justice be done though the heaven may fall. We need to get to the wrong doers and show them the way forward. We have all continued to lose in this debacle and many of us have lost much. I am pained by the treatment of every one . who must suffer in silience.. Vengence is mine.


  3. It is obvious that the patient had been suffering from a terminal disease for some time but the surgeons were unwilling or reluctant to perform the radical surgery to ensure that there was the possibility of survival. Now the patient is dead they are trying to preserve it cryogenically to fool some of the people that it will be resurrected some time in the future. After all this who would put money in any Corporation with the name of CLICO or any entity arising from its ashes?

    Layne touched on the point about donations from CLICO and its subsidiaries to political parties in the OECS, Barbados and Trinidad; therein lies the rub the politicians were bought and silenced and looked the other way given the time line of the events transpiring at CLICO Trinidad. CLICO Trinidad was playing both sides of the political fence and I suspect the same was true for CLICO Barbados.

    So much blame to go around, the Politicians; The Auditors; The Directors which brings me to the Sarbanes/Oxley Act which was enacted in the USA to provide new Accounting Standards for Auditors and additional Corporate responsibilities for members of the Boards of public Companies. Pity there is no such act in the Caribbean otherwise the Auditors and The Directors would be shaking in their boots.

    BTW if a Company is prohibited from performing some function by a Gov’t Agency, isn’t it the responsibility of the Agency to inform the public? How else would the public know? This is done on a routine basis by small operating companies in Barbados and the Gov’t can’t get its act together?

    @ David

    1)The article ended rather abruptly I was expecting more. 2) What period of time did the investigation by the JM cover?


  4. I trust that in light of the Clico scandal and the BLP quest for Integrity legislation and their members lining up to declare their assets, the BLP will also declare all political donations before the next election.

    This would be real Integrity.


    • William Skinner hits the mail on the head. Here is the last paragraph:

      “Finally citizens must demand that where corporate executives are by their fraudulent actions responsible for the demise of corporations, then the full weight of the law is brought to bear on such persons. Madoff is in jail, Stanford is in jail, David Smith is in jail, but no one in the Eastern Caribbean has been brought before the courts for the pain and suffering caused by the collapse of CL. Financial and BAICO. We have the ridiculous situation of the Executive Chairman of CLICO International Life Barbados bringing an action against the Company for nonpayment of bonus payments, while policy-holders cannot receive what is due to them.”


    • Here is what the author says on the issue of campaign financing:

      We need also to rethink the way political parties are financed. In Jamaica, the Gleaner newspaper of April 19, 2011, stated that the political parties who received money from Olint should repay it to the depositors who have lost their money in the entity. The editorial stated only the politicians would have benefitted. The same can be said about the political parties in Barbados, Trinidad and the OECS who received donations from CLICO and its subsidiaries. This practice can constitute a dangerous assault on democracy in small societies. Maybe the time is ripe for the states in these small countries to provide financing to the political parties and ban other contributions.


  5. The Right Honourable Owen Seymour Arthur is a member of the Privy Council of the United Kingdom. The Queen, Elizabeth 11 is the head of that body.
    Here we have a country called Barbados pretending to practice the Westminster form of government under a Constitution Monarchical system in which the Head of State is her Royal Highness represented locally by a viceroy in the form of a Governor General (GG). It is not a Dictatorship or at least not yet a “banana Republic.
    The only way citizens can have faith and confidence in this system of government is through respect for the LAW earned by the State by way of its upholding and enforcing the said LAW. When this principle is set aside and the law flouted with impunity then a recipe for chaos and social dislocation would be concocted.
    The ordinary still law abiding citizens of this Land that boasts of one of the highest rates of literacy and almost 61 years of adult suffrage are calling on you the Rt. Hon. Owen Arthur to use your privileged position in the Privy Council to raise this matter in that esteemed Court. The CCJ is not empowered to “rule” since the matter has not yet been referred by one of its signatory members. Neither do we expect any of these puppet or “Mickey Mouse” administrations to adhere to their constitutional responsibilities.

    Please Sir, the Rt. Hon. Owen S. Arthur, a long standing member of Her Majesty’s Most Honourable Privy Council, make a plea on the behalf of us common citizens who are only asking the Barbados Government under the leadership of the Honourable Freundel Stuart, QC to follow through on his oath to adhere, uphold and enforce the laws of the Land without fear or favour.

    By making this plea on behalf of the subjects maybe Her Royal Highness, in recognition of our 60 years of unswerving loyalty to her and her dominion, would prepare an appropriately worded dispatch to her “in situ” representative for onward transmission to her locally appointed Prime Minister with the obvious instruction to “follow the Law of the Island” as bequeathed and created by “Independence” status in a way that would bring justice to the commoner and harmony in the realm. Your Rt. Hon. Owen S. Arthur please let Your Highness know that the natives are getting restless!


  6. miller

    O$A better approach the monarch before her son takes over.

    He has let it be known that he doesn’t approve of adulterers so we could hardly expect him to stray from his principled position!!


  7. Thank you William Layne for an excellent, well researched article.

    Let us hope that our law makers are listening and that our fellow Bajans will take the wider point that state funded elections will minimize a lot of the corruption and undue influence ’bout here.

    Off topic – my condolences to Keith Rayside’s widow and his family.


  8. @ John | March 7, 2012 at 12:35 AM |

    But isn’t this a perfect example of the ‘kettle calling the pot black” or is it the other way around?
    What a laugh, these politicians are! But to top it all off some become ministers only to confirm the ordinary man’s suspicions of the genuineness of the instruction: “Do as I say and not as I do” coming from the men of the cloth who display similar characteristics as those temporal ministers with only the votes in sight.


  9. 12 Lessons to be learnt

    1. If it sounds too good to be true , then it isn’t true!
    2. Do some DETECTIVE WUK, and I mean look and see how the executives and directors living and ask pertinent questions. PLEASE DO NOT CALL MY NAME EFF DEM KETCH YUH PEEPING TRU DEM WINDOWS. BE DISCREET! IF DEM LIVING HIGH, IT ENT DEM MONEY DEM SPENDING! PLEASE RUN AS FAST AS YOU CAN.
    3. If any LAWYERS ARE INVOLVED, RUN AS FAST AS YUH FEET WOULD CARRY YUH!
    4. Check out how DE WIVES AN WIMMEN of the executives living and where dem does shop. IF DEM LIVING HIGH IT ENT DEM MONEY DEM SPENDING!
    5. If yuh GOVERNMENT SAY IT IS A GOOD TING TEK YUH MONEY AN PUT IT IN AN UTM*
    6. EFF TOO many BLACK PEOPLE involved RUN FUH YUH LIFE!
    7. EFF TOO MANY WHITE PEOPLE involved RUN FUH YUH LIFE!
    8. EFF TOO MANY INDIANS involved RUN FUH YUH LIFE
    9. EFF YUH WANT YUH MONEY TO GROW, PLANT IT ON SOME PIECE OF LAND.
    10. WHEN MONEY IS SITTING IN ANY INSTITUTION, IT IS VERY TEMPTING FOR DEM PEOPLE DAT DOES WUK DERE. DEM DOES BE TEMPTED TO USE YUH MONEY FUH DEM USES.
    11. DO NOT PUT ALL WUNNA CHERRIES IN ONE TOT, EFF ONE BAD DE WHOLE LOT GINE SPOIL.
    12. EFF YUH IS A WOMAN AN YUH MAN TELL YUH IT IS A GOOD INVESTMENT TELL HE TO PUT HE OWN IN FUH YOU! EFF IT IS A GOOD ONE WUNNA CUD SHARE DE PROFITS —70 SHE-30 HE.

    * UTM—Under the mattress.


  10. miller thanks for your information of the duties and responsibilities Directors of Boards under the Companies Act. Seems to me from my limited knowledge that Section 96- 4(a) (b) still absolves the Directors of blame under certain circumstances cand offers them some way out. would like to hear from Mr Franklyn in this regard.


  11. The CLICO PROS paid for their Gigolos political campaigns in return for a blind eye to squandering of Policy holder”s monies. How can these Gigolos refuse a well endowed Mistress? Prostitution is illegal in many countries for the man on the street BUT NOT for many who occupy our highest office. THEY CALL IT FUNDING WE CALL IT FU–ING


  12. and the worst part is that with all that is being brought to the public attention in the article bajans are stilling looking for leadership from some of the very politicians who looked the other way in theClico debacle.


    • Note that the CLICO mess is an issue for the Caribbean. It is the point which Layne makes repeatedly. In Barbados we had different actors playing the scrip but the Executive Produce remained the Regulator.

      What changes/amendments have been ,ade to the regulatory system post CLICO debacle?


  13. And because it is a caribbean issue DT’s and LP’s estates will not escape.

    The OECS legal wolves will soon come a calling and will scrape every remaining piece of flesh from the CLICO entities in Barbados.


  14. The BLP meeting was on Sunday- No new astounding revelations, the same political gamesmanship but the BLP PR paper – The Nation has run EIGHT (8) STORIES from the same political meeting over the last 3 days. That’s right EIGHT.
    You see why they are called the BLP’s PR firm.

    The meeting was carried on CBC tv on Monday and on VOB up to yesterday in Sagicor business section.
    The Nation is on full BLP spin- Sanka today, Mascoll on Thursday, I would not be surprised if they call each other and coordinate their stories.
    Sanka is truly a S.ad A.nd N.aughty K.nown A.ssociate of the BLP.
    Mascoll is cordinating his talking points for Thursday and we can all predict what Brandford and Hoyos will say before we see it. Remember Mascoll’s weekly meetings with Branford.
    The Nation should just report and let us decide but NO WAY-8 stories from one political meeting. They would never extend such a courtesy to this government.
    The Nation has taken balanced journalism to a new low.


  15. CORRUPTION, evil, wicked INTENT, is ROOTED deeply in the heart of ALL mankind, just varying from person to person, manifested in different degrees, under different circumstances, and it HAS NO COLOUR, it IS* our SIN NATURE, that can only be cleansed by the Atoning Blood of Jesus Christ!

    “For from within, out of the hearts of men, proceed evil thoughts, adulteries, sexual sins, murders, THEFTS,”

    Young’s Literal Translation
    “For from within, out of the heart of men, the evil REASONINGS do come forth, adulteries, whoredoms, murders,”

    Gill’s Exposition of the Entire Bible

    “For from within, out of the heart of man,…. The inside of man is very bad, his inward part is not only wicked, but wickedness itself, yea, very wickedness, Psalm 5:9, in him dwells no good thing naturally, his heart is wicked, and desperately so; it is full of evil; and out of the abundance of it, proceed the evil things hereafter mentioned; all its powers and faculties are vitiated, there is no place clean; the understanding and judgment are DREADFULLY CORUPTED; the mind and conscience are DEFILED; the affections are inordinate; not only the thought, but every imagination of the thought of the heart is evil, and that continually: what good thing therefore, can come out of such a Nazareth as this? Nothing, but what follows: for from hence proceed evil thoughts, adulteries, fornications, murders; which several things are related in Mat_. 15:19 see the note on Matthew 15:19; only the order here is a little different; “murders”, which are here mentioned last, are there put after “evil thoughts”.

    ——————————————————————————–

    ——————————————————————————–
    Geneva Study Bible

    For from within, out of the heart of men, proceed evil thoughts, adulteries, fornications, murders,

    ——————————————————————————–
    Matthew Henry’s Concise Commentary

    7:14-23 Our wicked thoughts and affections, words and actions, defile us, and these only. As a corrupt fountain sends forth corrupt streams, so does a corrupt heart send forth corrupt reasonings, corrupt appetites and passions, and all the wicked words and actions that come from them. A spiritual understanding of the law of God, and a sense of the evil of sin, will cause a man to seek for the grace of the Holy Spirit, to keep down the evil thoughts and affections that work within.

    Psalm 119:36 Turn my heart toward your statutes and not toward selfish gain.
    ——————————————————————————–
    Proverbs 4:23 Above all else, guard your heart, for it is the wellspring of life.
    ——————————————————————————–
    Isaiah 59:7 Their feet rush into sin; they are swift to shed innocent blood. Their thoughts are evil thoughts; ruin and destruction mark their ways.
    ——————————————————————————–
    Isaiah 59:13 rebellion and treachery against the LORD, turning our backs on our God, fomenting oppression and revolt, uttering lies our hearts have conceived.
    ——————————————————————————–
    Jeremiah 16:12 But you have behaved more wickedly than your fathers. See how each of you is following the stubbornness of his evil heart instead of obeying me.
    ——————————————————————————–
    Jeremiah 17:9 The heart is deceitful above all things and beyond cure. Who can understand it?
    ——————————————————————————–
    Matthew 15:19 For out of the heart come evil thoughts, murder, adultery, sexual immorality, theft, false testimony, slander.
    ——————————————————————————–
    Mark 7:20 He went on: “What comes out of a man is what makes him ‘unclean.’
    ——————————————————————————–
    Mark 7:22 GREED, malice, deceit, lewdness, envy, slander, arrogance and folly.
    ——————————————————————————–
    Colossians 3:5 Put to death, therefore, whatever belongs to your earthly nature: sexual immorality, impurity, lust, evil desires and GREED, which is idolatry.
    New International Version ©1984 by Biblica

    Adulteries Adultery Evil Fornication Fornications Forth Heart Hearts Immorality Inside Men’s Murder Murders Pleasures Proceed Purposes Reasonings Sexual Sins THEFT, THEFTS, Thoughts Unclean Whoredoms Within


  16. As an academic who specializes in Finance one of the things that has stood out for me is the number of investors who seem unaware of, or choose to ignore the relationship between risk and return. Almost all investors I have spoken to say that they were attracted to various products because of the relatively higher returns. What does not seen to factor into their investment choices is that relatively higher returns typically comes with relatively higher risk, however, credible the institution offering the product is.

    If an entity offers you a 9% annual return, then if that entity is to cover its costs and earn a profit margin, the funds would have to be invested in assets (if they are legitimately invested) generating an average annual return of at least say 14%. In our markets (almost any market) such returns typically comes with relatively high levels of risk. Investors would have to carefully decide how much of say their pension money they would want to invest in such products, which by the very high returns they offer should be telling you that they carry relatively higher levels of risk. I hope this aspect of thestory does not get lost among the more juicy aspects.


  17. @Dr Robinson

    Your posit is correct and it is one which BU has advanced.

    However we have to present a 360 view of the CLICO issue. There was catastrophic regulatory failure, there was an incestuous network of relationships which conspire to mask the problems from the public, these relations straddle political boundaries and private interest.

    The fact is the CLICO matter cannot be view through the lens of an investor.


  18. Three years hence are we happy that the Financial Services Commission (FSC) is empowered to prevent another CLICO?

    We need to move pass the political cackle and get proactive. We are told we are an educated people. Is there another version of the CLICO Mess out there?

    As a people and as a society we need to step up to the challenge of doing better!


  19. @ David | March 7, 2012 at 11:39 AM |
    “Is there another version of the CLICO Mess out there?”

    Seems so! Another teetering giant whose honchos along with a bloated executive class have been living large off the hog for sometime now. But as the long suffering draught donkey told the fatted pig in the farmer’s cart on the way to market: “Sweet life ain’t long life”.
    The days are fast approaching when the insurance and annuity contracts sold to the “baby boomers generation (born in the 50’s, educated and started working and saving in the 60’s & 70’s) would be due for settlement within a “spiked” timeline and within a financial framework in which exist a depressed real estate market and growing lack of interest in the trade of government’s securities and other Treasury paper.


  20. @ Observer:

    Heard that you got a special reference today on the popular ‘Brass-tacks’ show. Your legal illumination has really caught the eyes of the mainstream media. Perhaps it’s the intellectual goading of the miller that has awaken the sleeping giant within you. You even managed to get the miller to agree with you in the matter of the role and responsibilities of the former office of the SoI in relation to the Minster of Finance and by extension the Cabinet under our form of “collective executive” responsibility governance system.

    Seems as if this blogging place is becoming a very serious interest group and lobby force to reckon with.
    Well done, Observer. The BU family members are very proud of you!


  21. @nationnewspaper”
    The Nation is on full BLP spin- Sanka today, Mascoll on Thursday, I would not be surprised if they call each other and coordinate their stories.
    Sanka is truly a S.ad A.nd N.aughty K.nown A.ssociate of the BLP.
    Mascoll is cordinating his talking points for Thursday and we can all predict what Brandford and Hoyos will say before we see it. Remember Mascoll’s weekly meetings with Branford.
    The Nation should just report and let us decide but NO WAY-8 stories from one political meeting. They would never extend such a courtesy to this government.
    The Nation has taken balanced journalism to a new low”…………………….

    Must every man jack support the DLP? You have DLPTV to yourself, the Advocate supports the DLP to the hilt. Put some more of your henchmen in there to write columns for the DLP and stop complaining. Your are very boring!


  22. @Jeff Cumberbatch

    BU regrets that after being elevated to Commissioner at the Financial Services Commission the BU family has been robbed of your erudite interventions. Suspect you still find time to follow the commentary and urge you to galvanize you colleagues to agree to speak to the state of the insurance industry in Barbados.

    Are there insurance companies which are operating below legal and performance requirements? What about those whose financials have been tardy to publish? What about those companies which have Holding Companies? Have we leveraged against any learning from the CLICO MESS?


  23. @Justin Robinson | March 7, 2012 at 11:08 AM |

    As an academic who specializes in Finance one of the things that has stood out for me is the number of investors who seem unaware of, or choose to ignore the relationship between risk and return. Almost all investors I have spoken to say that they were attracted to various products because of the relatively higher returns. What does not seen to factor into their investment choices is that relatively higher returns typically comes with relatively higher risk, however, credible the institution offering the product is…………………

    Bearing this in mind, can you tell the public how high risk is the MILLIONS of our NIS funds that you as Deputy Chairman of the NIS sat down and agreed to invest in the Four Seasons Project against the advice of the Investment Committee and which the majority of Barbadians object to strongly? Even though the majority have said that Four Seasons is a black hole into which you are pouring millions, CAN YOU TELL THE PUBLIC if quoting your own words ” the number of investors who seem unaware of, or choose to ignore the relationship between risk and return”…… Did you take this advice to Chris Sinckler when you decided to bend under his pressure?

    We the investors in the NIS would like to know.


  24. But considering that not too many of the liitle guys who these policies are being sold to don.t understand how the financial markets operate most of the time the buyer buys the police only based on the return which sounds good absent of the fact that they can also lose.most policyholders never give that a second thought until it is too late


  25. There is a lot of blame to go around, I am simply trying to highlight the investment aspect which I think has been lost so far in the debate.


  26. @ Justin Robinson | March 7, 2012 at 11:08 AM |

    What you described is called ‘financial prudence’; an axiom mentioned early on in any training module of basic Finance. For the layman it’s called ‘common sense’. The bigger the expected profit from any venture or more attractive the product the higher the concomitant risks or cost.

    Life insurance products and invested pension contributions are not meant to be highly speculative in nature. Hence the long-term horizon and generally low but consistent rates of returns. It is not right therefore for those entrusted with the management of these funds to play “casino royale” and totally usurp their fiduciary responsibilities . If such gambling moves- buttressed by lavish lifestyles incapable of being financially supported on the agreed fund managers’ fees- are undertaken then one can conclude that they were not “risky” ventures but bordering on downright fraud and misappropriation of policyholder’s money.

    The EFPA’s could indeed meet the speculative criteria you mentioned and as a result could be subject to the vagaries and risky outcomes of the financial markets. But the question to be asked is this: Were these financial products marketed as insurance-type investment instruments subject to regulatory constraint and thereby ensuring a measure of security of return?
    If these EFPA products did not receive the ‘blessings’ of the Regulators why were they not marketed as “medium-term’ certificates of deposits (CD’s) with their attendant risks of speculative high rewards or irrecoverable losses?

    PS: Since your first man the marshal(l) has gone underground could you tell us what is the status of the financial statements for the various NIS funds as promised via a Press Release issued last year?


  27. @Dr Robinson

    Agree but such a discussion many regard as moot because of the obvious culpability of relevant bodies including governments.


  28. Whatever the failures of the regulators, investors should be encouraged to take a careful look at the risk profile of the investments they are undertaking and what portion of their portfolio to allocate to various investments.

    Whatever the quality of the institution or the level of regulation all investments carry risks and Investments will go bad from time to time. Diversification is one of the best means of protecting yourself. A number of folks seems to have put all their money in one place for example. As a general rule you should avoid this.

    Don’t think I am downplaying the other issues, but this is also a pertinent side to the whole affair.


  29. Is there an explanation why pension funds invested in CIL are said to be at risk when best in class insurance companies are known to utilize a segregated funds policy?


  30. @ Prodigal Son | March 7, 2012 at 1:37 PM |
    “CAN YOU TELL THE PUBLIC if quoting your own words ” the number of investors who seem unaware of, or choose to ignore the relationship between risk and return”…… Did you take this advice to Chris Sinckler when you decided to bend under his pressure?”

    Prodigal, don’t expect a specific response from jr. He is certainly misled into thinking that by presenting himself as some guru of theoretical Finance & Business he can be accepted as the paragon of objective analysis, informed judgment and only here to educate the layperson and enlightened those keen to imbibe his esoteric knowledge and wisdom. People like yourself rely on good old commonsense and the ability to sniff out a rat from afar. Not bullshit from the hill.

    We would rather listen to Gearbox than to entertain one line of hypocritical advice from a sycophant indiscriminately prepared to compromise the principle of Integrity rather than vacate a position no objective intellectual with a modicum of competence would wish to retain.
    Show us the money (NIS financials) and we would listen to any investment proposal or option for any four seasons of the business cycle.


  31. Segregating funds does not remove the risk from the underlying assets, that the funds are invested in.


  32. Give us an Investment 101.

    CIL receives pension contributions which it invests.

    We are not discussing the EFAP.

    Why can’t those investments be segregated?


  33. The two products clearly carry different risks from the viewpoint of an investor. The funds can be segregated within the organization, however, it is not clear to me, why if there is a bankruptcy and a liquidation of assets that pension investments would be senior to EFPAS.


  34. Segregated funds are just funds that may be put SEPERATE from other funds…(.like another bank ac )..but still attract same WACCrisk.. as other monies being kept by firm.
    Term segregated funds is uaually associated with Govt accounting and NGO’s.
    For a profit oriented firm like CLICO….just jaga.


  35. @Dr. Robinson

    Assumed that you followed that a segregated pension fund would have to be housed under a unit trust to defend the fund from the balance sheet of the company.


  36. I see your point, but its not clear that in the context of a consolidation of the financials for the entire firm that pension liabilities would necessarily rank above EFPAs in a liquidation.


  37. @Justin Robinson | March 7, 2012 at 3:39 PM |
    “I see your point, but its not clear that in the context of a consolidation of the financials for the entire firm that pension liabilities would necessarily rank above EFPAs in a liquidation

    Yes, pension funds would have priority over unregistered or approved EFPAs in a liquidation. Pension funds if registered would take priority over a non-regulated investment instrument. The question you must address is: Were these EFPAs approved by the SoI and other regulatory agencies as fit and proper annuities that would be subject to the Statutory Fund requirements? If approved then they would have the same status as the pension funds but below life insurance contracts.


  38. @Miller

    Agree with you because the idea of setting up a unit trust and benefit from tax exemption is to shield the fund from the balance sheet of the company in the event it heads south.

    This begs the question to Dr Robinson’s point why companies and individuals would invest in pension plans owned by companies which don’t bother to shield the fund.


  39. I hope the financial savvy aspect of the debate does not get lost among the other bigger issues.

    Diversification is key to managing the inevitable risks of investments.

    I think the aversion to investing in stocks makes persons especially vulnerable to products offering fixed rates of returns.


  40. @Dr. Robinson

    Don’t mean to put you on the spot but how do you support the focus on a investment strategy which matches risk and return with the decision taken to invest in the Four Season? Is it true to say that the decision to invest in the Four Seasons has more to do with its shovel readiness to create stimulus rather than ROI?


  41. @ David:

    Dr. Robinson made the following statement:
    “Segregating funds does not remove the risk from the underlying assets, that the funds are invested in.”

    There is validity in what is said. Let us assume that say 25% of the various funds is placed in very low risk (low returns) instruments, e.g. government bonds, Treasury notes, shares in utility companies (BL&P). Then the other 75% (if not spent on executive high living and funding political campaigns) would be invested in much more risky ventures such as real estate, agri-business, manufacturing, wholesale & retailing ventures, financial services (banking and commercial insurance).
    Now let us accept that the other 75% that is subject to the vagaries of the market and economic boom and bust cycle. The question is:
    Did CLICO suffer the ravages of market forces to such an extent that at least 75% of its investment portfolio was seriously compromised resulting in losses (negative returns) to these various funds? If so, why only CLICO? What about the other major player? If market forces are to be blamed instead of management excesses and tainted deals leading to alleged corruption and fraudulent activity can we expect a similar virus from the market to affect the other major player’s investment portfolio? Or is this other major player so well inoculated as to withstand any attack of its investment firewall and possible infiltration to spread the malware to the its overvalued asset portfolio?


  42. Well the bloggers kinda have me on the spot.

    I think along with the risk/return profile of a particular investment, risk should be viewed in a portfolio context, in terms of the share of the portfolio allocated to various asset classes so as to spread risk, and the size of an investment relative to the size of the fund. In such a context I find the risk/return profile of Four seasons acceptable. But I have the greatest respect for the sincerity of those who do not share that view and respect their right to state their view in the strongest manner possible. After all, its their pension money.


  43. The board expects to be able to make a very positive statement to the public on that score shortly. I can say that a lot has been achieved in terms of getting the financials up to date.


  44. The disdain for our local financial competency and accountabilty is reinforced by the former head of Barbados Central Bank, signing off as a chief officer for Stanford International’s accounts as a true and fair reflection of its financial position

    Courtney Blackman you have misled and thus defrauded and robbed thousands of investors, through believing your academically approved opinion.
    I, for one will not recognise your knighthood, you bring shame upon Barbados.


  45. @Justin Robinson,

    We the public are still waiting on your response re questions posed earlier.

    @Straight Talk,
    I dismiss everything Sir Courtney says since he said in Barbados at the outset of the economic crisis in the US that the recession would not have any long term dire effects on Barbados. My spouse and I looked at each other and said did we just heard him say that. Low and behold three years on and the world is still feeling the effects of the meltdown.

    Finally, my advice to Barbadians who have a few dollars to invest, invest in Treasury bonds, they are safe, even if the government broke like this one we have, they have to pay up when the bonds mature. I have a feeling that this whole CLICO scam will turn Barbadians away from purchasing insurance policies.


  46. @Justin Robinson | March 7, 2012 at 5:26 PM |
    “The board expects to be able to make a very positive statement to the public on that score shortly. I can say that a lot has been achieved in terms of getting the financials up to date.”

    Thanks for your “promising words of comfort”.
    But given what has transpired we will not hold our breath in case we expire.
    Maybe if you take control and effectively push aside the stumbling marsha(l)l out of the way we might get some real action instead of a lot of long talk suitable to the call-in programme for which he is supremely suitable.
    Despite the harsh criticism targeted at you because of your boldness to raise your head above the parapet and to stand up to represent the Board we are prepared to rely on your word about the financials ; a courtesy we will not be extending to the “talky-talky”, arrogant, pompous misfit wearing the badge of incompetence. Next time you meet with him whisper in his ear that the school children have passed by and they want to give him a message: “He has overstayed his welcome and it’s time he returns the badge, pistol and holster and hang up his boots for good.”


  47. @miller,
    “Did CLICO suffer the ravages of market forces to such an extent that at least 75% of its investment portfolio was seriously compromised resulting in losses (negative returns) to these various funds? If so, why only CLICO? What about the other major player? If market forces are to be blamed instead of management excesses and tainted deals leading to alleged corruption and fraudulent activity can we expect a similar virus from the market to affect the other major player’s investment portfolio? Or is this other major player so well inoculated as to withstand any attack of its investment firewall and possible infiltration to spread the malware to the its overvalued asset portfolio?”
    ………………………..

    miller,
    It is my belief that CLICO did not suffer any ravages of market forces to cause this disaster. It was caused by pure greed, naked greed. By Lawrence Duprey and Leroy Parris. Duprey did as he like and Parris was allowed to do as he like too. It seems as if everybody did as they like if you follow the information coming out of the inquiry in Trinidad. The policy holders monies were lavished out as if there was no tomorrow.


  48. @ Straight talk | March 7, 2012 at 5:33 PM |

    So you think the SEC should issue a warrant for his arrest for aiding and abetting in a fraud (ponzi) scheme? One wonders how the local con (glomerate) of corporate and political incestuous behaviour would react to such an extradition request?


    • Barbadians should thank William Layne for publishing in his retirement whether one agrees or not.

      Often times retired civil servants are happy to pot about in the garden and guard their wealth of experience/knowledge in public life.


  49. interesting and thought provoking thread. I appreciate the education gained. Thanks to all.


  50. Mr robinson is discredited in my book as a man willing to sacrifice principle for a position of prominence.


  51. would the minutes of the meetings before you changed your view reflect that you always found investment of NIS funds in Four seasons acceptable?


  52. The cause: DISHONESTY.

    What have we learned: Maybe nothing.

    Or maybe we have learned there is no point having laws and regulations unless we are willing to be law abiding, and willing to obey regulations.

    We have learned that lawyers, politicians, and executives are quite happy to fool us, and to live large offa us to pseudo “big shots” are willing to (to put it crudely) rub shit in our mouths and expect us to say “yum-yum chocolate”

    We have learned (I hope) not to be fooled by sweet talk.

    Not to be fooled by an elegant suit.

    Not to be fooled by a Caw’mere boy, or Lodge or lodge boy, or by any of the old school tie boys.

    We have learned I hope not to be fooled by sweet talking Trickydadians.

    We have learned I hope that light (skinned) is not always right.

    We have learned that politicians can be bought at ten for the bit.

    We have learned that politicians are just as amoral as “the boys on the block” that politicians are willing to betray their constituents for a fancy car or a ride in a Lear jet.

    We have learned that if youare the Prime Miniters friend that you will never be regarded as a [financial] leper.

    We have learned the meaning of the word IMPUNITY.


  53. Above all else we have lerned the meaning of the word “IMPUNITY”

    And if we haven’t we should look up the word in a dictionary and we should post the definitian on our mirrors and we should learn and re-learn the word every time we look in a mirror.

    IMPUNITY.


  54. Trade Confirmers though a deposit taking institution was not regulated by the Central Bank and this brought about a change of legislation subsequent to the event to regulate these Finance Companies. However, there are still companies in Barbados accepting deposits from the public which are not licensed as banks or other deposit taking institutions. This has come to my knowledge recently
    ******************

    The above is an excerpt from the article penned by William Layne and I am surprised that not one person has commented on that statement. I n essence the whole scenario a la Trade Confirmers could be repeated and some more Bajans could feel the pain of their “irrational exuberance” to quote Greenspan.

    Does anyone know the names of these companies?


  55. @Produgal Son

    To be fair to Dr Justin Robinson he addressed why he believes the decision to invest in Four Seasons by NIS has merit and also he confirmed plans by the board to address the issue of the financials shortly.

    He has always been willing to interact with the BU family and he deserves the benefit of the doubt in this regard as miller mentioned.


  56. I now move to Trinidad. In August 1998, a report prepared in the Office of the
    Supervisor of Insurance of Trinidad & Tobago indicated that a review of the files of
    Colonial Life Insurance Company Limited (CLICO) of Trinidad & Tobago, over a 5
    year period ended 1996, indicated that the Company had since 1992 found it
    difficult to satisfy its Statutory Fund Requirement. Nevertheless, the Company had
    declared and paid dividends in 1993, 1994 and 1995 and had proposed the
    payment of dividends in 1996, in violation of the Insurance Act.
    ***********************************************

    Clico Life TnT was not meeting it’s statuary fund requirements for almost 20 years. Did the same thing happen in Barbados and if so, how did our SOI rationalize this?


    • @Snipes

      Clico Life TnT was not meeting it’s statuary fund requirements for almost 20 years. Did the same thing happen in Barbados and if so, how did our SOI rationalize this?

      You seem to want to open a whole can of worms.


  57. What I think should be highlighted is the question of a Statute of limitations to prospective class action suits. Can the Judicial Managers be accused of dragging their feet, with a hidden agenda?


  58. @ BAFBFP | March 8, 2012 at 11:07 AM |

    So what do you think is their ultimate intention?
    To create more questions than answers to obfuscate the process. Look and see who is still at the helm of the sinking ship? A blatant slap in the face of the policyholders!
    But what better profession to engage in other than the World’s oldest profession where you are paid to have sex– (to bf or to f)? That’s what the saying “having your cake and eating it also ” really means but with a massive cost to your reputation and possible health.


  59. I would like very much to see a lot of these people (including the directors who claim ignorance, the senior officials who have since acted as tax payed consultants and board chairmen to the present Government and indeed the Ministers of Finance who have interfered in the proper functioning of the Supervisor of Insurance and are part of private institutions that have received funding from the financial institution to further political campaign agendas) face the law courts. Is there a statute of limitation that will effect the possibility of this happening?


  60. @David
    The can needs to be opened to reveal what is the true state of affairs with Clico et al. I am not a Clico policy holder, however I have funds invested with another major insurance company in this country and systems have to be put place to protect my pension plan, endowment and life insurance policies. To rebuild the financial sector, it may have to be stripped bare to get rid of all the toxicity. There is too much secrecy surrounding insurance and other deposit taking financial entities and this cannot go on. We have to demand more from the regulators and the state. I am one wary of commissions of enquiry because at the end of the process the public is none the wiser as to what has transpired. Reports are never published. The entire financial services industry has to be investigated and the findings published for all to see. Let the chips fall where they may.

    Does our system allow for special/impartial investigators to be appointed with powers to subpoena, investigate and prosecute persons if prima facie
    evidence warrants such.? Forget the DPP……………


    • Snipes

      There is agreement.

      BU will be playing our part to expose the cancer.

      Let us hope traditional media sees the need to do so also free of the agenda and politics.

      What we need are a few whistleblowers in Barbados come forward.


  61. @ Miller.
    I thank you most sincerely; I am now getting an opportunity to catch up on the contributions. Note I will not take a second look at the proverbial Trojan horse ( lol ) I consider this a genuine compliment. I have been encouraged to contribute to this blog after initially trying to navigate around the rabid, naked political contributions which only give rise to invective and personal abuse from which we cannot benefit. I Firmly believe that we can use our best efforts to try to educate ourselves , first of all , and the readers more generally. I shall therefore continue to add my effort to the efforts of those who have an obvious capacity to contribute to national development. Thank you my friend . Peace.


  62. It is evident the strategy which is emerging from the BLP camp if one follows Mascoll’s weekly submissions to the Nation newspaper as well as the supports. By throwing the kitchen sink at the questionable transactions highlighted by the Judicial Managers and dumbing down the insignificance of the statutory fund deficit, it is an obvious ploy to insulate Arthur from any collateral damage to come. Smart!


    • @miller
      Don’t see that specifically addressed but the FSC Act is empowers the Commission to act, there is no excuse, the question is whether it has the resources to do so.
      Here is is the link to the Act:


  63. @ David:

    Do you know if there are provisions in the current Financial Services Commissions regulatory framework for “interested” policyholders to find out if their life insurance and pension providers are meeting their statutory obligations? That is, filing reports and financial statements on time and fulfilling the Statutory Fund obligations.


  64. @ David | March 10, 2012 at 6:48 PM |

    Thanks! I will peruse when time permits.
    On the face of it, the Act does give the regulators some legal teeth. But as Caswell pointed out the enforcement by the Authorities is the acid test to its relevance. Another piece of watertight paper but with limited or no pen and ink to write with.


  65. I mentioned this in another contribution and have done some checking. It relates to Prof Frank Alleyne’ s refusal to divulge pertinent information. It is not clear if he refused to provide information to the judicial manager but his statement in the Sunday Sun is quite shocking.
    He is quoted as saying that he garnered this information under privileged circumstances and therefore will not divulge it.
    This is clearly an insult to us policy holders who are seeking justice. Further more Section 18 of the Financial Services Commission legislation provides protection for anyone who provides information to an investigator.
    However Section 19 goes on to state penalties for not providing such information to the investigator. This includes a prison term and over $50,00.00 in fines.
    I am of the view that the good professor is not on solid ground and should provide what information he has to the investigators in an effort to further the cause of justice. Failing this he should be removed from the chairmanship of the Financial Services Commission a body that should always be held high in relation to integrity.
    Can any one including Caswell respond to this??


  66. Dear David:

    Cay you, the Nation or any of the thousands of people you have copies of the CLICO Forensic Report please drop a “brown envelope” with the Report in it in the Prime Minister’s mail boxes at home and at work, and while you are at it email him a copy or post it on Facebook, so that he can see it like all the rest ‘o we.

    And maybe than he can tell us wha’ happening.

    Before we have to tell him wha’ happening via the VOTING BOOTH.


  67. @Carlos Bourne | March 10, 2012 at 11:41 PM |
    “Failing this he should be removed from the chairmanship of the Financial Services Commission a body that should always be held high in relation to integrity.”

    If a person (say a senior police officer) is prepared to break the very law they are entrusted to uphold how then can we the public have trust and confidence in their competence and integrity. A person holding such a ‘sensitive’ position will be expected to perform that role with the utmost of integrity by upholding and following the requirements of the Act both in its execution and spirit.


  68. @ Random Thoughts | March 11, 2012 at 11:25 AM |

    If you believe that you can believe that Zoe is an atheist.
    Only goes to show that if a man can make a statement like that he is not functioning.
    Caswell, is this the same decent and honest man you want Bajans to vote for?


  69. One should easily expect that a government that is expected to bail the greedy EFAfers would have been the first to receive the report.


  70. @ David.
    Your observation that ” one should easily expect that a government that is expected to bail out the greedy EFAFers would have been the first to receive the report ” is worthy of very serious consideration and the expose’ carried in today’s Sunday Sun might very well be the key that has has opened a very frightening pandora’s box. The report confirms that , up to the time of publication , none of the Prime Ministers from : Antigua and Barbuda , Dominica , St Kitts and Nevis , St Lucia , and St Vincent and the Grenadines had received copies of the report .These territories all have direct interest and involvement on what is happening in the CLICO saga . Our own Prime Minister was even more expansive : ” I am not in a position to comment on any revelation made….there are people talking about a report that i have never seen …I am hearing about those people who had access to the report , but the Prime Minister has had no access ….The Nation has had access to the report and the opposition…” The Prime Minister’s comments come on the heels of the statement recently made by the Minister of Finance Mr Sinckler that the report was being widely circulated and analysed when neither he nor the Prime Minister had as yet received a copy.
    This observation by the Prime Minister is of the highest import ; the official laying of a report coming out of an inquiry such as the judicial management inquiry into the CLICO affair is a very formal exercise . Therefore when the process of confidentiality can be compromised to the extent that the Nation Newspaper and /or the opposition could be quoting from that document BEFORE THE REPORT HAS BEEN HANDED OVER TO OFFICIALS , then the total integrity of the inquiry may be held up to scrutiny and serious ridicule . w What has become very clear is that persons with interest have been more than eager to strike the first blow in what has become a highly motivated political escapade . But unfortunately , they have not been sufficiently astute in protecting the sources that have obviously leaked the report to them ; they have been in their eagerness to get a head start , guilty of jumping the gun . An inquiry into the fortunes of the CLICO regional corporate – giant is not an inquiry into the demise of a local sporting club and the leaking of the report in the manner that gave rise to the newspaper coverage and wide public comment is most unfortunate and may have even wider legal implications. The Prime Minister of Barbados , whatever criticism his detractors may seek to level at him is a SHREWD LAWYER ; his observations are not only those of the politician , but those of the LAWYER.
    There have been contributions on this blog that have called the appropriateness of the personnel appointed as the judicial managers of CLICO into question ; this latest revelation will definately place the WHOLE INQUIRY FURTHER UNDER THE MICROSCOPE. We are in for interesting times ahead .


  71. @David and Observer
    Is there anything in the JDM’s mandate that says their preliminary findings should be forwarded to the PM or MoF? If I remember correct the FSC should have a copy of the report for further “data gathering” and investigation so that better judgements and recommendations can be made. The PM and MoF theoretically only come into play when “alternative solutions” have been devised and are put forward for government’s or cabinet’s choice. Their not having an officially copy (submitted to them) then is a red herring. Of course, given their sensitivities and concerns they both can request a copy of it…..if they wanted to.

    Also, Observer referenced the process as an “inquiry.” Is this indeed the case or are we still using the JDM process to “search” for a solution while now apparently discovering “spatters or fiduciary and financial concerns” along the way? As far as I am concerned no inquiry has started…yet.


  72. @ David
    First , the report had to be formally presented in the forum ( in this case the Court ) which ordered the judicial management and appointed the judicial managers ; in addition , because a number of regional governments have been called upon to take such measures as may be necessary to bring relief to their nationals who might have been made to suffer loss because of the demise of CLICO , officials of the respective governments must be presented with reports for the purpose of laying those reports in Parliament in order to initiate debate in their Parliament. Of course one would expect that the CLICO officials would also have been presented with their copy of the document . In general , any person who found himself with a copy of the report ” PREMATURELY “should , as an act of absolute propriety , have realised that he could not embark on the process of publication which the Nation has done . I hope I have been helpful.


  73. @ OBSERVING …..
    Any matter that comes before a FORMAL TRIBUNAL , and the court is the highest form of a tribunal . Must be given very formal procedural treatment, regulated by very formal RULES. you are obviously not well informed given your admission ” as far as I am concerned “….


    • @An Observer

      Your posit reconciles with BU’s own view.

      The publishing of the Forensic Report has muddied the matter, one which was already a difficult one.


  74. @ OBSERVING.
    You may wish to consider how else the judicial managers COULD HAVE MADE FINDINGS other than BY INQUIRY..


    • Surely the Judicial Managers (Deloitte’s) should know their findings would form the basis of possible litigation given the import of the CLICO matter?

      Surely the Nation as a responsible newspaper should know it as well?


  75. @observer
    agree totally with you on the process and though I didn’t say so the possible “muddying of the waters” (@David)

    given your legal mind I hope you forgive my distinction between inquiry, and an inquiry. If you don’t no hard feelings.

    Everyone is not very well informed at some point on some matter. I accept that human curse as I hope you do too, all semantics and linguistics aside. Nonetheless the forensic report was called for in an effort to better guide the JDM’s decisions, recommendations and final report. It is but a corollary to the formal tribunal matter of resolving the CLICO issue. If the powers that be treat to it’s circumstantial findings as a separate issue during or after the process, so be it. Objective #1 and a final report still remains to be completed.


    • We should not move away from the point that the report prepared would have been fact-based and does not recuse malfeasance on the part of any one.

      However when prepping fro court process is paramount.


  76. @David

    “responsible newspaper”
    Thanks for the Sunday humour

    Everyone has an agenda and some may be contented with the court of public opinion in order to advance theirs. Facts are facts, just a matter of who decides to use them, when and how. Policyholders will be the losers in this one. Time will tell who else “sinks with the ship.”


  77. @ OBSERVER
    All opinions and suggestions are well intended . We are all educating each other. What I can be most emphatic about is that from the time the matter engages the attention of the court , it becomes a very formal exercise . As a matter of fact , even as we confer. there is an application before the court that might influence the future conduct of the judicial management process . Whatever we disagree on we must agree that the leaking of the report TO and BY the Nation was a dark day in the administrative process of the country. THAT CANNOT BE GAINSAID . And the politicians will be well advised to take note.


  78. In Barbados people create a desired result without conspiring.

    There is a game being played based on the understanding of unwritten rules.

    Who will be the fall guy?

    Leroy Parris is being vilified and maybe rightfully so. But a whole lot uh wunna BLPs and DLPs benefitted when CLICO was flying high.

    The verbs were green but the caviar was black for the last 10 years.


  79. @Observer
    – touche and we have seen many dark days in other processes of the country recently, not only administrative.

    “And the politicians will be well advised to take note.”

    Our current crop of politicians? take advice? or follow common sense?
    Good luck!


  80. Quoting An Observer at 1:53 p.m. “This observation by the Prime Minister is of the highest import ; the official laying of a report coming out of an inquiry such as the judicial management inquiry into the CLICO affair is a very formal exercise… then the total integrity of the inquiry may be held up to scrutiny and serious ridicule…The Prime Minister of Barbados , whatever criticism his detractors may seek to level at him is a SHREWD LAWYER”

    Interesting.

    Dear Observer:

    is the Prime Minister also a very shrewd servant of the people?

    We know now that when David Thompson had to choose between being a very shrewd lawyer and being a very shrewd servant of the people, the shrewd lawyer won.

    Since you seem to understand these things so well if the current PM has to choose between being a shrewd lawyer and being a faithful servant of the people which should he choose?

    If the Prime Minister still can’t of won’t talk to us you may want to remind him that we will talk to him and to the DLP via the ballot box.

    So whether he talks or not is of the lowest import. We will make up our minds with or without him.


  81. I’ll remind you Observer and perhaps you can remind he Prime Minister, that it is we the people you pay him every month, and we pay him well so that there can be no conflict and so that he can be our faithful servant (not so that he can be a shrewd lawyer)

    And if our Prime Ministerial servant does not provide good service we will fire him and hire another servant just the same as if he was a domestic or a gardener.

    Just saying ya know.


  82. There may well have been very strategic leaking here.

    I’ve always thought that the premature leaking of the eager 11 letter to the Nation newspaper was of no benefit to Chris Sinckler. It could only have benefitted the faction supporting FS.

    Similarly, the leaking of the Forensic Audit to the Nation might have also been a strategic move that was ultimately designed to muddy the waters and even throw out the report and the JM (Note that there was over 2 months between the date of the report and the leakage in the Nation). But the Forensic report appears to have recognized that there was a possibility of leakage and used preemptive words in a preamble which suggest, it would seem, that leakage cannot be used as a rationale for negating the report or not paying the consultants.

    Similarly, I suspect that whatever happens, the data is there and the current government cannot expect the revelations in the report to go away, even if they succeed in shutting down or otherwise damping the revelations made in the Audit.


    • @checkit-out

      Even if what you say is true it does not negate the political fall out for the government.


  83. Hants | March 11, 2012 at 3:49 PM |
    “Leroy Parris is being vilified and maybe rightfully so. But a whole lot uh wunna BLPs and DLPs benefitted when CLICO was flying high.

    The verbs were green but the caviar was black for the last 10 years.”
    You are quite right there!

    Can’t imagine how “Kollig” boys and those arrogant sods from the older secondary schools with their pompous qualifications could have been so closely associated and mingled socially. Money not only makes the mare fly but can also make knights and knaves sip from the same poison chalice.

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