Kaieteur News news item, Sunday 29 March 2009
http://www.kaieteurnews.com/2009/03/29/law-dictates-penalties-for-misuse-of-
public-funds/
Law dictates penalties for misuse of public funds
A Minister or
official shall not in any manner misuse, misapply, or improperly dispose of
public moneys, according to the Fiscal Management and Accountability Act of
2003.
As it relates to the penalty for the Minister who misuses, misapplies, or
improperly disposes of public monies the FMA specifically spells out the
penalties that should be incurred.
According to the FMA, if a loss of public monies should occur and, at the
time of that loss, a Minister or official has caused or contributed to that
loss through misconduct or through deliberate or serious disregard of
reasonable standards of care, that Minister or official shall be personally
liable to the Government for the amount of the loss; where the misconduct or
disregard of the person is not the sole cause of the loss referred to in
subsection, the person shall be liable to pay only so much of the loss as is
just and equitable having regard to the person's share of the responsibility
for the loss, if a loss of public monies should occur and, at the time of
that loss, a Minister or official had nominal custody of such moneys.
Over the past few weeks there has been significant debate as to the
decisions taken by some officials such as Chairman of the Board of Directors
Dr Roger Luncheon as it relates to the investment of some $6B in Colonial
Life Insurance Company (CLICO) Guyana.
The issue was more recently raised at the People's National Congress
Reform's first general council meeting for this year. It was pointed out
that the People's Progressive Party had mismanaged the economy and had
failed to take prudent measures to prevent the collapse of CLICO and ensure
the long-term viability of the National Insurance Scheme (NIS).
The primary factor of the current economic circumstances in Guyana was
deemed to be high unemployment and the rising cost of living.
As a result of the $6.9B investment in Colonial Life Insurance Company
(CLICO) Guyana, the National Insurance Scheme is losing close to $1M per
day, according to financial analyst and economist, Christopher Ram, who in
an invited comment told this newspaper that this was the case given that the
income stream relevant to the principal investment is no longer operational.
Mr. Ram said that the crisis in which the company has found itself in, is
having a ripple effect on the financial sector and as such the President
should refrain from reserving the CLICO Guyana issue to a mere three per
cent of the financial sector.
The economists drew reference to the fact that relevant directors, including
the Commissioner of Insurance and the Minister of Finance, violated their
fiduciary responsibilities and were in breach of the Fiscal Management and
Accountability Act.
They should be dealt with according to the provisions of the law, he said.
The economist also questioned the failure of NIS to retain the services of
an actuary to determine the true status of the entity given that a
significant amount of its status is impaired.
This is in light of the fact that as of December 31, 2007 the expenditure of
NIS far outweighed its contributions.
According to the 2007 Annual Report for the National Insurance Scheme, the
viability of the scheme is dependent on its investment returns given that
its expenditure is greater than its income from contributions.
The audited report states that for 2007 its total contributions were some
$8.06 billion whilst the total expenditure was some $8.57 billion, a
difference of $516.4 million.
The figures indicate that without the returns on investment of some $1.5
billion the company would be operating at a huge deficit.
Sunday, March 29, 2009
Tuesday, March 17, 2009
Roger Khan pleads guilty …may serve 15 years for 3 charges
Roger Khan pleads guilty …may serve 15 years for 3 charges
Posted By Stabroek staff On March 17, 2009 @ 5:19 am In Local News | 37 Comments
http://www.stabroeknews.com/2009/news/local/03/17/roger-khan-pleads-guilty/
In a shocking twist, Guyanese businessman Shaheed Roger Khan yesterday pleaded guilty to all pending charges against him in the US, including drug trafficking and witness tampering and is likely to serve 15 years behind bars.
Stabroek News understands that Khan appeared in the New York Eastern District Court before Justice Dora L Irizarry at 5 pm yesterday and pleaded guilty to indictments in three criminal matters: narcotics trafficking, obstruction of justice and a separate gun running charge. It is unclear if the plea was accepted.
Shaheed Roger Khan [1]
Shaheed Roger Khan
In a letter to the presiding judges in the New York courts, US State Attorney Benton Campbell indicated that the prosecution and the defence had come to an agreement for Khan to receive a 15-year sentence when he pleads guilty to all charges.
Benton indicated the agreement in the event that the judges considered consolidating all three matters for Khan to plead guilty in one court. To this end, the US attorney for the District of Vermont agreed to transfer the weapons charge to the New York district, where the narcotics trafficking and obstruction of justice matters are being heard. “While the defendant consents to consolidation, and the parties believe that it may facilitate the resolution of these matters, the government takes no position on the issue and we leave it to the discretion of Your Honours,” Benton said in the letter. He added that under the Federal Rules of Criminal Procedure “…the government has agreed to a sentence of principally 15 years imprisonment in order to resolve all three matters.” Under the Federal Rules, the court would be bound by the sentence request once it accepts the plea agreement.
Robert Simels
Robert Simels
The latest twist in the saga comes less than two weeks before the scheduled start of Khan’s trial on the drug charges, for which he could have been sentenced to life in prison.
Khan was captured in 2006 when he fled to neighbouring Suriname after local police went after him. He was nabbed during a cocaine bust along with his bodyguards and thrown into jail in that country. He was later arrested in Trinidad while en route to Guyana, and taken to the US where he has been in jail since.
Prior to fleeing to Suriname and in response to police searches of his various properties and a wanted bulletin being issued for him, Khan had placed newspaper advertisements in the Guyana Chronicle and the Kaieteur News stating that he was involved in crime fighting in Guyana and had worked closely with local and US law enforcement officials.
Since being imprisoned, Khan and the prosecution have made some explosive statements about the inner workings of his criminal enterprise and other matters in Guyana. Khan’s former lawyer, Robert Simels, who, along with his assistant, Arianne Irving, is now his co-defendant in the witness-tampering charge, had stated that US government investigators had learnt that Khan received permission from the Guyana government to purchase surveillance equipment capable of intercepting and tracing telephone calls made from landline or cellular phones. The software is reportedly only sold to governments.
Only last week, US officials had indicated that the same equipment, which was originally seized from Khan at Good Hope in 2003, was recovered from Simels’s New York law offices. Guyana’s President Bharrat Jagdeo, however, has since said that Commissioner of Police Henry Greene has assured him that the equipment is in the possession of the local police.
David Clarke
Meanwhile, one of the witnesses Khan, Simels and Irving had been charged with attempting to “eliminate and neutralize,” retired Guyana Defence Force (GDF) major David Clarke, who is himself sitting in a US jail on drug charges, was to have testified on how he conspired with Khan to traffic in narcotics. Clarke was said to be the main witness in the drug trial, as he was the only witness who could have testified that he spoke to and met Khan during the period he trafficked in narcotics.
Khan for his part had long since attempted to distance himself from Clarke, against whom he made “assorted accusations” at a meeting in March 2006 with US officials at the Ocean View International Hotel. He had sought to provide “evidence” that Clarke and others had worked in concert with February 2002 prison escapee Shawn Brown, who was later wanted for a series of high-profile murders, kidnappings and robberies.
Khan had alleged that during Clarke’s tenure at the head of ‘Operation Tourniquet’–a joint army/police operation to arrest the wave of criminal activity emanating from Buxton after the jail break–was in league with Brown, who was responsible for kidnapping former US embassy officer Stephen Lesniak in April 2003.
In a transcript of a conversation between Simels and a confidential US government source, who was responsible for Simels and the others being charged with witness tampering, it was revealed that Khan had at least one meeting with a government minister in the presence of the source.
Guilt was strong
Khan is charged with conspiring to import cocaine into the US over a five-year period from January 2001 to March 2006. The US government said that he was the leader of a cocaine trafficking organisation based in Georgetown. It also asserted that he was able to import huge amounts of cocaine into Guyana, and then oversee exportation to the US and elsewhere. The US government had charged that a significant amount of the cocaine distributed by Khan went to the Eastern District of New York for further distribution. As an example, it cited a Guyanese drug trafficking organisation based in Queens, New York, which it said was supplied by Khan. The Queens organisation was said to have distributed hundreds of kilos of cocaine in a two-month period during the spring of 2003.
Initially, after he was arrested in 2006, Khan through his then lawyer Simels, had applied for bail but US State Attorney Roslynn Mauskopf in submissions had maintained that evidence of Khan’s guilt was strong and that his history in the United States suggested that he could easily flee to Guyana. In response, Khan’s lawyers had submitted that they could have obtained a statement from the Guyana government that it would bar Khan from returning to the country.
According to Mauskopf, Khan had resided in the US and committed crimes in both Maryland and Vermont. On January 6, 1992 he was convicted in Montgomery County of breaking and entering and theft. While he was on probation for that offence, he was arrested in Burlington, Vermont for receiving and possessing three firearms while being a convicted felon. He was subsequently indicted and was released on bail in November 1993. He promised to obey all conditions of his release but fled to Guyana in 1994 in order to avoid prosecution and as a result there is an outstanding warrant for him, for violating the conditions of his partial release and an outstanding warrant in Rockville, Maryland for violating the conditions of his probation.
Witness tampering
Khan’s troubles deepened last year when he, Simels and Irving were hauled before the courts and charged with conspiracy to tamper with witnesses relating to the drug trial. Simels was accused of making an alleged US$1,000 payout and having discussions about “eliminating and neutralizing” witnesses. He and his assistant allegedly had numerous discussions with a US government informant, to locate certain individuals close to the case and to get them to rescind statements, not testify against Khan, and or even to be eliminated.
In her affidavit to support the charges against Khan, Simels and Irving, Special Agent of the Drug Enforcement Administration (DEA) Cassandra Jackson said that during Khan’s drug trial the government would seek to establish that he was the leader of a “violent drug trafficking organisation [the Khan organisation] that was based in Georgetown, Guyana, from at least 2001 until his arrest in 2006.” She had said that Khan and his co-conspirators obtained large quantities of cocaine, and then imported the cocaine into the Eastern District of New York and other places for further distribution. “Khan was ultimately able to control the cocaine industry in Guyana, in large part, because he was backed by a paramilitary squad that would murder, threaten, and intimidate others at Khan’s directive. Khan’s enforcers committed violent acts and murders on Khan’s orders that were directly in furtherance of Khan’s drug trafficking conspiracy,” Jackson had said. She said the paramilitary squad was referred to as the ‘Phantom Squad’.
These same accusations had last year led Justice Irizarry to rule in favour of an anonymous jury for the drug trial. The judge was of the opinion that the dangerousness of Khan, as alleged by the prosecution, was a fact worth considering since according to one of the government’s confidential sources the ‘Phantom Squad’ Khan was associated with was responsible for “at least 200 extra-judicial killings” in Guyana from 2002 to 2006.
While Khan was not charged with crimes considered violent in nature, his involvement with and leadership of a criminal organisation indicated his propensity for violence, the judge had pointed out. In making her ruling, the judge said there was evidence of Khan’s willingness to tamper with the judicial process since he admitted that in 1993 he successfully evaded federal prosecution in Vermont for possession of a firearm by a convicted felon by absconding to Guyana while on bail. That action, the judge said, indicated his ability to tamper with the judicial process in the US.
Execution-style killings down
The US Government had also accused Khan of murdering boxing coach Donald Alison, who was gunned down outside his Agricola home and Dave Persaud who was shot and killed outside the then Palm Court Restaurant and Bar on Main Street. Khan denied the charges, stating Alison had been supplying the Buxton criminals with guns and that national cyclist, Tyrone Hamilton, knew who had killed Persaud.
In Guyana, the police appeared to have accepted that Khan was responsible for the execution-style killings. In November 2007, Crime Chief Seelall Persaud claimed that since Khan’s capture, execution-style killings in Guyana dropped considerably from 43 in 2006 to 12 in 2007.
Persaud said Khan had a group of men who worked with him while he was here, but since he had been locked up the men had all gone in different directions. “We believe that Mr Khan was involved in narcotics trafficking and since his arrest we have seen a fragmentation of his gang instead of them being one place they are all over the place,” Persaud had declared. When asked why–since the police knew Khan operated a gang and had men–the force had not gone after them, Persaud said charges were laid against individuals based on evidence. He had said the police were still conducting investigations on Khan’s men.
Prior to being arrested, one of Khan’s associates had told this newspaper that the businessman never got involved in actual operations. The associate, who had asked not to be named, said the drug accused used his own bodyguards and a network of armed informants–the ‘Phantom Squad’–made up of mainly ex-convicts and ex-policemen.
Khan had boasted that when Lesniak was kidnapped and taken to Buxton he had met operatives from the American Embassy here on a daily basis and provided them with information and hard evidence that led to the issuance of an arrest warrant for escapee Brown, who was thought to have masterminded the abduction. Brown was later cornered in a house a few days after and shot dead by the police.
Stabroek News was told that Khan employed ex-convicts and policemen, paid them and had them gather intelligence on the whereabouts of the five escapees Browne, Troy Dick, Andrew Douglas, Dale Moore and Mark Fraser. The quintet had made a bloody escape from the Camp Street Prison on February 23, 2002. Their escape was the catalyst for a wave of crime that the country had never before experienced. During this period some 21 policemen were shot dead and numerous civilians murdered. This period also saw scores of policemen leaving the job, while confidence in the force was at an all-time low.
Posted By Stabroek staff On March 17, 2009 @ 5:19 am In Local News | 37 Comments
http://www.stabroeknews.com/2009/news/local/03/17/roger-khan-pleads-guilty/
In a shocking twist, Guyanese businessman Shaheed Roger Khan yesterday pleaded guilty to all pending charges against him in the US, including drug trafficking and witness tampering and is likely to serve 15 years behind bars.
Stabroek News understands that Khan appeared in the New York Eastern District Court before Justice Dora L Irizarry at 5 pm yesterday and pleaded guilty to indictments in three criminal matters: narcotics trafficking, obstruction of justice and a separate gun running charge. It is unclear if the plea was accepted.
Shaheed Roger Khan [1]
Shaheed Roger Khan
In a letter to the presiding judges in the New York courts, US State Attorney Benton Campbell indicated that the prosecution and the defence had come to an agreement for Khan to receive a 15-year sentence when he pleads guilty to all charges.
Benton indicated the agreement in the event that the judges considered consolidating all three matters for Khan to plead guilty in one court. To this end, the US attorney for the District of Vermont agreed to transfer the weapons charge to the New York district, where the narcotics trafficking and obstruction of justice matters are being heard. “While the defendant consents to consolidation, and the parties believe that it may facilitate the resolution of these matters, the government takes no position on the issue and we leave it to the discretion of Your Honours,” Benton said in the letter. He added that under the Federal Rules of Criminal Procedure “…the government has agreed to a sentence of principally 15 years imprisonment in order to resolve all three matters.” Under the Federal Rules, the court would be bound by the sentence request once it accepts the plea agreement.
Robert Simels
Robert Simels
The latest twist in the saga comes less than two weeks before the scheduled start of Khan’s trial on the drug charges, for which he could have been sentenced to life in prison.
Khan was captured in 2006 when he fled to neighbouring Suriname after local police went after him. He was nabbed during a cocaine bust along with his bodyguards and thrown into jail in that country. He was later arrested in Trinidad while en route to Guyana, and taken to the US where he has been in jail since.
Prior to fleeing to Suriname and in response to police searches of his various properties and a wanted bulletin being issued for him, Khan had placed newspaper advertisements in the Guyana Chronicle and the Kaieteur News stating that he was involved in crime fighting in Guyana and had worked closely with local and US law enforcement officials.
Since being imprisoned, Khan and the prosecution have made some explosive statements about the inner workings of his criminal enterprise and other matters in Guyana. Khan’s former lawyer, Robert Simels, who, along with his assistant, Arianne Irving, is now his co-defendant in the witness-tampering charge, had stated that US government investigators had learnt that Khan received permission from the Guyana government to purchase surveillance equipment capable of intercepting and tracing telephone calls made from landline or cellular phones. The software is reportedly only sold to governments.
Only last week, US officials had indicated that the same equipment, which was originally seized from Khan at Good Hope in 2003, was recovered from Simels’s New York law offices. Guyana’s President Bharrat Jagdeo, however, has since said that Commissioner of Police Henry Greene has assured him that the equipment is in the possession of the local police.
David Clarke
Meanwhile, one of the witnesses Khan, Simels and Irving had been charged with attempting to “eliminate and neutralize,” retired Guyana Defence Force (GDF) major David Clarke, who is himself sitting in a US jail on drug charges, was to have testified on how he conspired with Khan to traffic in narcotics. Clarke was said to be the main witness in the drug trial, as he was the only witness who could have testified that he spoke to and met Khan during the period he trafficked in narcotics.
Khan for his part had long since attempted to distance himself from Clarke, against whom he made “assorted accusations” at a meeting in March 2006 with US officials at the Ocean View International Hotel. He had sought to provide “evidence” that Clarke and others had worked in concert with February 2002 prison escapee Shawn Brown, who was later wanted for a series of high-profile murders, kidnappings and robberies.
Khan had alleged that during Clarke’s tenure at the head of ‘Operation Tourniquet’–a joint army/police operation to arrest the wave of criminal activity emanating from Buxton after the jail break–was in league with Brown, who was responsible for kidnapping former US embassy officer Stephen Lesniak in April 2003.
In a transcript of a conversation between Simels and a confidential US government source, who was responsible for Simels and the others being charged with witness tampering, it was revealed that Khan had at least one meeting with a government minister in the presence of the source.
Guilt was strong
Khan is charged with conspiring to import cocaine into the US over a five-year period from January 2001 to March 2006. The US government said that he was the leader of a cocaine trafficking organisation based in Georgetown. It also asserted that he was able to import huge amounts of cocaine into Guyana, and then oversee exportation to the US and elsewhere. The US government had charged that a significant amount of the cocaine distributed by Khan went to the Eastern District of New York for further distribution. As an example, it cited a Guyanese drug trafficking organisation based in Queens, New York, which it said was supplied by Khan. The Queens organisation was said to have distributed hundreds of kilos of cocaine in a two-month period during the spring of 2003.
Initially, after he was arrested in 2006, Khan through his then lawyer Simels, had applied for bail but US State Attorney Roslynn Mauskopf in submissions had maintained that evidence of Khan’s guilt was strong and that his history in the United States suggested that he could easily flee to Guyana. In response, Khan’s lawyers had submitted that they could have obtained a statement from the Guyana government that it would bar Khan from returning to the country.
According to Mauskopf, Khan had resided in the US and committed crimes in both Maryland and Vermont. On January 6, 1992 he was convicted in Montgomery County of breaking and entering and theft. While he was on probation for that offence, he was arrested in Burlington, Vermont for receiving and possessing three firearms while being a convicted felon. He was subsequently indicted and was released on bail in November 1993. He promised to obey all conditions of his release but fled to Guyana in 1994 in order to avoid prosecution and as a result there is an outstanding warrant for him, for violating the conditions of his partial release and an outstanding warrant in Rockville, Maryland for violating the conditions of his probation.
Witness tampering
Khan’s troubles deepened last year when he, Simels and Irving were hauled before the courts and charged with conspiracy to tamper with witnesses relating to the drug trial. Simels was accused of making an alleged US$1,000 payout and having discussions about “eliminating and neutralizing” witnesses. He and his assistant allegedly had numerous discussions with a US government informant, to locate certain individuals close to the case and to get them to rescind statements, not testify against Khan, and or even to be eliminated.
In her affidavit to support the charges against Khan, Simels and Irving, Special Agent of the Drug Enforcement Administration (DEA) Cassandra Jackson said that during Khan’s drug trial the government would seek to establish that he was the leader of a “violent drug trafficking organisation [the Khan organisation] that was based in Georgetown, Guyana, from at least 2001 until his arrest in 2006.” She had said that Khan and his co-conspirators obtained large quantities of cocaine, and then imported the cocaine into the Eastern District of New York and other places for further distribution. “Khan was ultimately able to control the cocaine industry in Guyana, in large part, because he was backed by a paramilitary squad that would murder, threaten, and intimidate others at Khan’s directive. Khan’s enforcers committed violent acts and murders on Khan’s orders that were directly in furtherance of Khan’s drug trafficking conspiracy,” Jackson had said. She said the paramilitary squad was referred to as the ‘Phantom Squad’.
These same accusations had last year led Justice Irizarry to rule in favour of an anonymous jury for the drug trial. The judge was of the opinion that the dangerousness of Khan, as alleged by the prosecution, was a fact worth considering since according to one of the government’s confidential sources the ‘Phantom Squad’ Khan was associated with was responsible for “at least 200 extra-judicial killings” in Guyana from 2002 to 2006.
While Khan was not charged with crimes considered violent in nature, his involvement with and leadership of a criminal organisation indicated his propensity for violence, the judge had pointed out. In making her ruling, the judge said there was evidence of Khan’s willingness to tamper with the judicial process since he admitted that in 1993 he successfully evaded federal prosecution in Vermont for possession of a firearm by a convicted felon by absconding to Guyana while on bail. That action, the judge said, indicated his ability to tamper with the judicial process in the US.
Execution-style killings down
The US Government had also accused Khan of murdering boxing coach Donald Alison, who was gunned down outside his Agricola home and Dave Persaud who was shot and killed outside the then Palm Court Restaurant and Bar on Main Street. Khan denied the charges, stating Alison had been supplying the Buxton criminals with guns and that national cyclist, Tyrone Hamilton, knew who had killed Persaud.
In Guyana, the police appeared to have accepted that Khan was responsible for the execution-style killings. In November 2007, Crime Chief Seelall Persaud claimed that since Khan’s capture, execution-style killings in Guyana dropped considerably from 43 in 2006 to 12 in 2007.
Persaud said Khan had a group of men who worked with him while he was here, but since he had been locked up the men had all gone in different directions. “We believe that Mr Khan was involved in narcotics trafficking and since his arrest we have seen a fragmentation of his gang instead of them being one place they are all over the place,” Persaud had declared. When asked why–since the police knew Khan operated a gang and had men–the force had not gone after them, Persaud said charges were laid against individuals based on evidence. He had said the police were still conducting investigations on Khan’s men.
Prior to being arrested, one of Khan’s associates had told this newspaper that the businessman never got involved in actual operations. The associate, who had asked not to be named, said the drug accused used his own bodyguards and a network of armed informants–the ‘Phantom Squad’–made up of mainly ex-convicts and ex-policemen.
Khan had boasted that when Lesniak was kidnapped and taken to Buxton he had met operatives from the American Embassy here on a daily basis and provided them with information and hard evidence that led to the issuance of an arrest warrant for escapee Brown, who was thought to have masterminded the abduction. Brown was later cornered in a house a few days after and shot dead by the police.
Stabroek News was told that Khan employed ex-convicts and policemen, paid them and had them gather intelligence on the whereabouts of the five escapees Browne, Troy Dick, Andrew Douglas, Dale Moore and Mark Fraser. The quintet had made a bloody escape from the Camp Street Prison on February 23, 2002. Their escape was the catalyst for a wave of crime that the country had never before experienced. During this period some 21 policemen were shot dead and numerous civilians murdered. This period also saw scores of policemen leaving the job, while confidence in the force was at an all-time low.
Monday, March 16, 2009
Information which was challenged in column came from Insurance Commissioner’s office
Information which was challenged in column came from Insurance Commissioner’s office
Posted By Stabroek staff On March 15, 2009 @ 5:01 am In Letters | 7 Comments
Dear Editor,
The tone of the March 3 letter of Commissioner of Insurance Maria Van Beek seems to suggest that she is reacting to the pressure from several quarters over her supervision of Clico. To accuse sections of the victims of the worst insurance failure in the country under her watch of making “reckless, uninformed and irresponsible pronouncements” (GINA release published March 1) might seem to indicate that Ms Van Beek is reluctant to acknowledge the scale of the problem or the extent of public concerns about potential personal and national losses of billions of dollars. Even if the government gives a complete bailout of Clico it is we the taxpayers who will pay it, while those who contributed to the crisis lecture us on how much they have done to protect us.
A number of persons have suggested to me that I should respond to the three issues she challenged me on: 1) the statutory fund/assets; 2) her reason for the approach to the court for a winding up of Clico; and 3) the name of the company, Clico.
1. I never claim to be an expert on insurance, accounting or indeed on any subject. However Ms Van Beek can rest assured that the provisions of the Insurance Act, including the difference between statutory assets and the statutory fund, would not escape any practising accountant. It is Ms Van Beek who has some explaining to do for apparently missing the assertion in Clico’s 2007 financial statements that the company had a “statutory fund” of $46 million and not the $9B she says it should be! As the expert and regulator of the sector, Ms Van Beek should tell the public what steps she took to have such an error in the audited financial statements rectified in a timely manner.
2. Ms Van Beek claims that I accused her of saying that it was Clico’s business model and investment strategy from which its problem stemmed. I did not invent that. Ms Van Beek said so in paragraph 10 of her affidavit. Ms Van Beek has insisted that it was the decision by The Bahamas authority to liquidate their Clico that triggered her move to the courts. It is not that decision which imperilled Clico Guyana’s investments.
Those unlawful and injudicious investments were impaired long before the move by The Bahamas authorities and required action, not excuse. But no, she waited until the property market in the US had collapsed taking with it huge amounts of Clico’s funds and then waited even further and longer on the Bahamian authorities.
3. Ms Van Beek writes that I wrote from an uninformed position concerning the name of the company. In her very affidavit she also refers to the company as SA!
In other words, everything Ms Van Beek accuses me of came out of her office.
Finally let me say that I welcome the press statement made by Ms Van Beek on the state of the company and note that she has taken several of the steps I advocated some weeks ago, including calling in the debts and guarantees of the related parties and giving specific advice to policyholders about the state of their insurance coverage. However she continues to repeat the vague promise she “attributes” to President Jagdeo that “no policyholder in Clico (Guyana) will lose their money.”
By now she should have sought written confirmation from the Minister of Finance to whom she reports, and not the President, of the precise nature and scope of the guarantee which in my view has to have parliamentary approval. Perhaps Stabroek News can clarify their report that Ms Van Beek “re-emphasised the assurances given by President Bharrat Jagdeo and Finance Minister Dr Ashni Singh, that no one with investments in the company will lose their money.” That goes well beyond policyholders and was not contained in the statement issued to the press. It would however naturally raise the hopes of investors including the NIS. It would be painful if that assurance turns out to be false.
Yours faithfully,
Christopher Ram
7 Comments (Open | Close)
7 Comments To "Information which was challenged in column came from Insurance Commissioner’s office"
#1 Comment By colin2nice On March 15, 2009 @ 8:21 am
Thanks Mr. Ram for keeping them on their toes.
#2 Comment By Andy On March 15, 2009 @ 9:56 am
We thank Christopher Ram for his outstanding crystallization of the issues that only a man of his knowledge and expetrise can do. He is correct in keeping the focus on van Beek’s culpability in the CLICO (Gy)’s fiasco, because I understand - and Ram can verify it - there are clauses in the Insurance Act that stipulate insurance companies in violation of the Act must be fined GY$1M instantly and GY$100k a day for as long as the violation continues. If the Insurance Commissioner made CLICO (Gy) aware since 2007 of its violation by investing in excess of 15% of its local funds overseas, then where are the fines against CLICO (Gy)?
Second, the assurances by the President, Finance Minister and Insurance Commissioner that claims will be honored are not guaranteed, for the President previously made assurances that investors/depositors interests were protected, then there came the GY$6.9B loss! Why should anyone believe the government anymore? And even if the government backs claims, it likely will be dipping into taxpayers funds, which means the people of Guyana will be paying twice for the government’s failure!
#3 Comment By Christopher Ram On March 15, 2009 @ 3:12 pm
Note by Christopher Ram
Under S 19 of the Insurance Act the breach of any direction or requirement by the Commissioner constitutes an offence for as long as the offence continues.
In the case of a company, the company is liable. But if the offence has been proved to have been committed with the consent or connivance of or facilitated by the neglect of any director, principal officer, or other officer or actuary or auditor of the company, then that person is also liable.
The Commissioner of Insurance is required to appoint a Special Prosecutor for the case.
The fine for a company is $1 M plus $100,000 for each day the offence continues. In the case of the individuals mentioned in the preceding paragraph the fine is $100,000 or 3 years and $10,000 for each day after conviction.
The fines and imprisonment are maximum.
The appointment of a Judicial Manager or Liquidator does not affect the prosecution of the company/person(s) once the action is brought within 3 years after the offence has been committed. I believe there is authority for the proposition that continuing offences relate not to the first day of the offence but to the last date on which the offence continued.
#4 Comment By Brendan Samaroo On March 15, 2009 @ 3:16 pm
Chris Ram is in a different league than those in the government.
You would think if this government was serious about running a tight ship they would have more chris ram’s in the government running things.
But ahhhh Mr. Home Economics himself does not like free thinkers. It is about control freakism.
#5 Comment By Andy On March 16, 2009 @ 12:05 am
Thanks Chris! Now you should seriously consider writing a column on the punitive aspect of this saga that Van Beek overlooked in her handling of Clico (Gy), because not only was Clico (Gy) in violation, but so was its CEO! And how can we talk about fining Clico (Gy) and its CEO, which are yet to happen, but no action is taken against the Insurance Commissioner for her inaction in not upholding the law she is sworn to uphold?
In fact, how can goverment allow the Insurance Comissioner to now become Judicial Manager of the same firm that experienced a major loss under her regulation?
Isn’t this the height of arrogance and or ignorance?
#6 Comment By Prospector On March 16, 2009 @ 10:39 am
What Ram does not spell at clearly (as he only points out the facts that support his arguments after all) is that the appointment of a special prosecutor means that the case has to tried in Court - the ‘offence must be proved to have been committed’ S 19(2).
The average Court case takes six years to hear in Guyana. So perhaps in 2015 the fines will be paid.
#7 Comment By Prospector On March 16, 2009 @ 10:44 am
Andy
1) The Court appoints the Judicial Manager not the Government. As far as I know the Petition filed with the Court does not even mention the Government of Guyana and it was filed with a private lawyer not the Attonery General’s chambers.
2) S 69 (2) of the Act states ‘The Court shall appoint the Commissioner as Judicial Manager’
What nobody seems to realise is that even if the Commissioner had filed in 2007 against CLICO the matter would still be before the Courts, and the outcome would have been exactly the same.
Article printed from Stabroek News: http://www.stabroeknews.com
URL to article: http://www.stabroeknews.com/2009/letters/03/15/information-which-was-challenged-in-column-came-from-insurance-commissioner%e2%80%99s-office/
Posted By Stabroek staff On March 15, 2009 @ 5:01 am In Letters | 7 Comments
Dear Editor,
The tone of the March 3 letter of Commissioner of Insurance Maria Van Beek seems to suggest that she is reacting to the pressure from several quarters over her supervision of Clico. To accuse sections of the victims of the worst insurance failure in the country under her watch of making “reckless, uninformed and irresponsible pronouncements” (GINA release published March 1) might seem to indicate that Ms Van Beek is reluctant to acknowledge the scale of the problem or the extent of public concerns about potential personal and national losses of billions of dollars. Even if the government gives a complete bailout of Clico it is we the taxpayers who will pay it, while those who contributed to the crisis lecture us on how much they have done to protect us.
A number of persons have suggested to me that I should respond to the three issues she challenged me on: 1) the statutory fund/assets; 2) her reason for the approach to the court for a winding up of Clico; and 3) the name of the company, Clico.
1. I never claim to be an expert on insurance, accounting or indeed on any subject. However Ms Van Beek can rest assured that the provisions of the Insurance Act, including the difference between statutory assets and the statutory fund, would not escape any practising accountant. It is Ms Van Beek who has some explaining to do for apparently missing the assertion in Clico’s 2007 financial statements that the company had a “statutory fund” of $46 million and not the $9B she says it should be! As the expert and regulator of the sector, Ms Van Beek should tell the public what steps she took to have such an error in the audited financial statements rectified in a timely manner.
2. Ms Van Beek claims that I accused her of saying that it was Clico’s business model and investment strategy from which its problem stemmed. I did not invent that. Ms Van Beek said so in paragraph 10 of her affidavit. Ms Van Beek has insisted that it was the decision by The Bahamas authority to liquidate their Clico that triggered her move to the courts. It is not that decision which imperilled Clico Guyana’s investments.
Those unlawful and injudicious investments were impaired long before the move by The Bahamas authorities and required action, not excuse. But no, she waited until the property market in the US had collapsed taking with it huge amounts of Clico’s funds and then waited even further and longer on the Bahamian authorities.
3. Ms Van Beek writes that I wrote from an uninformed position concerning the name of the company. In her very affidavit she also refers to the company as SA!
In other words, everything Ms Van Beek accuses me of came out of her office.
Finally let me say that I welcome the press statement made by Ms Van Beek on the state of the company and note that she has taken several of the steps I advocated some weeks ago, including calling in the debts and guarantees of the related parties and giving specific advice to policyholders about the state of their insurance coverage. However she continues to repeat the vague promise she “attributes” to President Jagdeo that “no policyholder in Clico (Guyana) will lose their money.”
By now she should have sought written confirmation from the Minister of Finance to whom she reports, and not the President, of the precise nature and scope of the guarantee which in my view has to have parliamentary approval. Perhaps Stabroek News can clarify their report that Ms Van Beek “re-emphasised the assurances given by President Bharrat Jagdeo and Finance Minister Dr Ashni Singh, that no one with investments in the company will lose their money.” That goes well beyond policyholders and was not contained in the statement issued to the press. It would however naturally raise the hopes of investors including the NIS. It would be painful if that assurance turns out to be false.
Yours faithfully,
Christopher Ram
7 Comments (Open | Close)
7 Comments To "Information which was challenged in column came from Insurance Commissioner’s office"
#1 Comment By colin2nice On March 15, 2009 @ 8:21 am
Thanks Mr. Ram for keeping them on their toes.
#2 Comment By Andy On March 15, 2009 @ 9:56 am
We thank Christopher Ram for his outstanding crystallization of the issues that only a man of his knowledge and expetrise can do. He is correct in keeping the focus on van Beek’s culpability in the CLICO (Gy)’s fiasco, because I understand - and Ram can verify it - there are clauses in the Insurance Act that stipulate insurance companies in violation of the Act must be fined GY$1M instantly and GY$100k a day for as long as the violation continues. If the Insurance Commissioner made CLICO (Gy) aware since 2007 of its violation by investing in excess of 15% of its local funds overseas, then where are the fines against CLICO (Gy)?
Second, the assurances by the President, Finance Minister and Insurance Commissioner that claims will be honored are not guaranteed, for the President previously made assurances that investors/depositors interests were protected, then there came the GY$6.9B loss! Why should anyone believe the government anymore? And even if the government backs claims, it likely will be dipping into taxpayers funds, which means the people of Guyana will be paying twice for the government’s failure!
#3 Comment By Christopher Ram On March 15, 2009 @ 3:12 pm
Note by Christopher Ram
Under S 19 of the Insurance Act the breach of any direction or requirement by the Commissioner constitutes an offence for as long as the offence continues.
In the case of a company, the company is liable. But if the offence has been proved to have been committed with the consent or connivance of or facilitated by the neglect of any director, principal officer, or other officer or actuary or auditor of the company, then that person is also liable.
The Commissioner of Insurance is required to appoint a Special Prosecutor for the case.
The fine for a company is $1 M plus $100,000 for each day the offence continues. In the case of the individuals mentioned in the preceding paragraph the fine is $100,000 or 3 years and $10,000 for each day after conviction.
The fines and imprisonment are maximum.
The appointment of a Judicial Manager or Liquidator does not affect the prosecution of the company/person(s) once the action is brought within 3 years after the offence has been committed. I believe there is authority for the proposition that continuing offences relate not to the first day of the offence but to the last date on which the offence continued.
#4 Comment By Brendan Samaroo On March 15, 2009 @ 3:16 pm
Chris Ram is in a different league than those in the government.
You would think if this government was serious about running a tight ship they would have more chris ram’s in the government running things.
But ahhhh Mr. Home Economics himself does not like free thinkers. It is about control freakism.
#5 Comment By Andy On March 16, 2009 @ 12:05 am
Thanks Chris! Now you should seriously consider writing a column on the punitive aspect of this saga that Van Beek overlooked in her handling of Clico (Gy), because not only was Clico (Gy) in violation, but so was its CEO! And how can we talk about fining Clico (Gy) and its CEO, which are yet to happen, but no action is taken against the Insurance Commissioner for her inaction in not upholding the law she is sworn to uphold?
In fact, how can goverment allow the Insurance Comissioner to now become Judicial Manager of the same firm that experienced a major loss under her regulation?
Isn’t this the height of arrogance and or ignorance?
#6 Comment By Prospector On March 16, 2009 @ 10:39 am
What Ram does not spell at clearly (as he only points out the facts that support his arguments after all) is that the appointment of a special prosecutor means that the case has to tried in Court - the ‘offence must be proved to have been committed’ S 19(2).
The average Court case takes six years to hear in Guyana. So perhaps in 2015 the fines will be paid.
#7 Comment By Prospector On March 16, 2009 @ 10:44 am
Andy
1) The Court appoints the Judicial Manager not the Government. As far as I know the Petition filed with the Court does not even mention the Government of Guyana and it was filed with a private lawyer not the Attonery General’s chambers.
2) S 69 (2) of the Act states ‘The Court shall appoint the Commissioner as Judicial Manager’
What nobody seems to realise is that even if the Commissioner had filed in 2007 against CLICO the matter would still be before the Courts, and the outcome would have been exactly the same.
Article printed from Stabroek News: http://www.stabroeknews.com
URL to article: http://www.stabroeknews.com/2009/letters/03/15/information-which-was-challenged-in-column-came-from-insurance-commissioner%e2%80%99s-office/
Wednesday, March 11, 2009
Fighting corruption requires institutional reform not polygraph tests
Fighting corruption requires institutional reform not polygraph tests
Posted By Stabroek staff On March 11, 2009 @ 5:02 am In Letters | 2 Comments
Dear Editor,
I am amused that the President and certain agencies are promoting polygraph testing as a panacea for combating corruption in the public sector. As far as I am aware, the polygraph test remains mainly an investigative tool, and should be viewed primarily as that. Identifying whether an official is right for the job is one thing; resolving the wider problem of corruption via the polygraph seems less of an attainable goal.
Corruption arises from institutional attributes of the state and societal attitudes toward formal political processes. Institutional attributes that encourage corruption include the wide authority of the state, which offers significant opportunities for corruption; minimal accountability, which reduces the cost of corrupt behaviour; and perverse incentives in government procurement and contracting, which induce self-serving rather than public-serving behaviour. Societal attitudes fostering corruption include allegiance to personal loyalties over objective rules, the low legitimacy of government, and the dominance of a political party or ruling elite over political and economic processes.
The possible responses to these underlying causes of corruption in Guyana include institutional reforms to limit authority, improve accountability, and realign incentives, as well as societal reforms to change attitudes and mobilize political will for sustained anti-corruption interventions.
A strategy must be tailored to fit the particular circumstances of this country; the government needs to design a strategy that requires assessing the level, forms, and causes of corruption for Guyana as a whole and for specific government institutions. In particular, strategy formulation requires taking a hard look at the level of political will for anti-corruption reform in government and civil society. Corruption in state agencies does not exist in isolation.
To some extent, it is a manifestation of the prevailing ethical standards in the public sector. If ruling politicians and senior civil servants, who are supposed to uphold integrity in the public sector, are seen to be corrupt, if public office is generally viewed as an asset to be exploited for personal benefit, if public servants have no compunction about flaunting ill-gotten wealth, it becomes very difficult for officers to remain immune to the lure of illicit enrichment.
Opportunities for reform must stem from reformist tendencies within the government, public outrage over scandals or an opposition movement.
The government currently provides little or no opening to work in anti-corruption, and as such, civil society must take the lead and focus on societal measures to increase awareness of the problem and develop a constituency for reform.
The real issue which needs to be addressed, however, is the environment within Guyana which permits public officials to stray so far from their mission in the first instance.
It starts at the top. If people in the society or within the public sector don’t have confidence in or respect for the politicians or executives managing the government, it’s going to be reflected within the ministries and agencies. I should hasten to add that these latest problems within the public sector became pervasive under the leadership of the current administration.
I would therefore encourage the government to seriously consider aligning the anti-corruption agenda to national initiatives such as a national anti-corruption policy as an explicit national integrity agenda that would emerge with commitment to succeed shared jointly by civil society, the business community and the government.
Yours faithfully,
K. Bonnett
2 Comments (Open | Close)
2 Comments To "Fighting corruption requires institutional reform not polygraph tests"
#1 Comment By critik On March 11, 2009 @ 8:09 am
To suggest structural reform is like asking this gov’t to carry water in a basket since they will very well heed the call by appointing a committee headed by one of their own to reform.I really would support polygraph tests over any other option if every Minister and the GRA boss himself would take the same.
We are beginning to see communism at its ’stupidest’ with Jagdeo now providing ’school boy’ excuse in the form of organisation size being a premise for the polygraph applicability.
Your weaknesses are becoming too glaring now El Presidente.You’re running out of explanations.
Something’s wrong with the propaganda machinery.
#2 Comment By amen-ra On March 11, 2009 @ 9:13 am
I agree, polygraps testing can’t root out corruption, and it’s inaccurate.
Article printed from Stabroek News: http://www.stabroeknews.com
URL to article: http://www.stabroeknews.com/2009/letters/03/11/fighting-corruption-requires-institutional-reform-not-polygraph-tests/
Posted By Stabroek staff On March 11, 2009 @ 5:02 am In Letters | 2 Comments
Dear Editor,
I am amused that the President and certain agencies are promoting polygraph testing as a panacea for combating corruption in the public sector. As far as I am aware, the polygraph test remains mainly an investigative tool, and should be viewed primarily as that. Identifying whether an official is right for the job is one thing; resolving the wider problem of corruption via the polygraph seems less of an attainable goal.
Corruption arises from institutional attributes of the state and societal attitudes toward formal political processes. Institutional attributes that encourage corruption include the wide authority of the state, which offers significant opportunities for corruption; minimal accountability, which reduces the cost of corrupt behaviour; and perverse incentives in government procurement and contracting, which induce self-serving rather than public-serving behaviour. Societal attitudes fostering corruption include allegiance to personal loyalties over objective rules, the low legitimacy of government, and the dominance of a political party or ruling elite over political and economic processes.
The possible responses to these underlying causes of corruption in Guyana include institutional reforms to limit authority, improve accountability, and realign incentives, as well as societal reforms to change attitudes and mobilize political will for sustained anti-corruption interventions.
A strategy must be tailored to fit the particular circumstances of this country; the government needs to design a strategy that requires assessing the level, forms, and causes of corruption for Guyana as a whole and for specific government institutions. In particular, strategy formulation requires taking a hard look at the level of political will for anti-corruption reform in government and civil society. Corruption in state agencies does not exist in isolation.
To some extent, it is a manifestation of the prevailing ethical standards in the public sector. If ruling politicians and senior civil servants, who are supposed to uphold integrity in the public sector, are seen to be corrupt, if public office is generally viewed as an asset to be exploited for personal benefit, if public servants have no compunction about flaunting ill-gotten wealth, it becomes very difficult for officers to remain immune to the lure of illicit enrichment.
Opportunities for reform must stem from reformist tendencies within the government, public outrage over scandals or an opposition movement.
The government currently provides little or no opening to work in anti-corruption, and as such, civil society must take the lead and focus on societal measures to increase awareness of the problem and develop a constituency for reform.
The real issue which needs to be addressed, however, is the environment within Guyana which permits public officials to stray so far from their mission in the first instance.
It starts at the top. If people in the society or within the public sector don’t have confidence in or respect for the politicians or executives managing the government, it’s going to be reflected within the ministries and agencies. I should hasten to add that these latest problems within the public sector became pervasive under the leadership of the current administration.
I would therefore encourage the government to seriously consider aligning the anti-corruption agenda to national initiatives such as a national anti-corruption policy as an explicit national integrity agenda that would emerge with commitment to succeed shared jointly by civil society, the business community and the government.
Yours faithfully,
K. Bonnett
2 Comments (Open | Close)
2 Comments To "Fighting corruption requires institutional reform not polygraph tests"
#1 Comment By critik On March 11, 2009 @ 8:09 am
To suggest structural reform is like asking this gov’t to carry water in a basket since they will very well heed the call by appointing a committee headed by one of their own to reform.I really would support polygraph tests over any other option if every Minister and the GRA boss himself would take the same.
We are beginning to see communism at its ’stupidest’ with Jagdeo now providing ’school boy’ excuse in the form of organisation size being a premise for the polygraph applicability.
Your weaknesses are becoming too glaring now El Presidente.You’re running out of explanations.
Something’s wrong with the propaganda machinery.
#2 Comment By amen-ra On March 11, 2009 @ 9:13 am
I agree, polygraps testing can’t root out corruption, and it’s inaccurate.
Article printed from Stabroek News: http://www.stabroeknews.com
URL to article: http://www.stabroeknews.com/2009/letters/03/11/fighting-corruption-requires-institutional-reform-not-polygraph-tests/
Tuesday, March 10, 2009
GRA condemns publication of draft tax review report
GRA condemns publication of draft tax review report
Guyana Chronicle, 10 March 2009
The Guyana Revenue Authority has deemed as irresponsible the publishing of a draft report on the tax system review
Following is a GRA statement on the matter:
It was recently observed that a reputable newspaper, for the purpose of sensationalism, published the contents of a draft report on the review of the tax system prepared under the Guyana Threshold Country Plan Implementation Project (GTCP/IP).
The Guyana Revenue Authority views such an approach as irresponsible and completely inconsistent with the practice of responsible journalism by knowledgeable professionals.
Draft reports should not be taken and published wholesale; rather they should be analysed since there is the likelihood of errors, especially where figures may be amplified. Further, given the date of the report, it would be good to note what progress was made since it was penned.
Attempts should have been made to find out from the Guyana Revenue Authority if steps were taken to strengthen enforcement and improve compliance since the draft was submitted.
Further, since the writer was unclear of Government’s response to the draft report, much care should have been taken in publishing it. It would appear that the intention was to have a field day and embarrass the Government and the GRA, and undermine revenue collection.
It gives a false impression of the GRA which can affect the organisation as well as the morale of the staff.
In conjunction with the publication of various aspects of the draft of the “Review of the tax system”, it must be noted that since the commencement of the project in January 2008, the GRA has made significant progress in moving toward a functional organisation.
Under the two-year project, which commenced on January 14, 2008, the GRA’s governing board and the Commissioner-General have already taken steps to improve the organisation’s efficiency in administration and tax collections.
The reforms started several years ago and was funded by several donor agencies, the latest being the Millennium Challenge Corporation. The GRA is receiving technical assistance to implement several tax reform measures aimed at improving the organisation’s effectiveness in revenue generation.
Guyana Chronicle, 10 March 2009
The Guyana Revenue Authority has deemed as irresponsible the publishing of a draft report on the tax system review
Following is a GRA statement on the matter:
It was recently observed that a reputable newspaper, for the purpose of sensationalism, published the contents of a draft report on the review of the tax system prepared under the Guyana Threshold Country Plan Implementation Project (GTCP/IP).
The Guyana Revenue Authority views such an approach as irresponsible and completely inconsistent with the practice of responsible journalism by knowledgeable professionals.
Draft reports should not be taken and published wholesale; rather they should be analysed since there is the likelihood of errors, especially where figures may be amplified. Further, given the date of the report, it would be good to note what progress was made since it was penned.
Attempts should have been made to find out from the Guyana Revenue Authority if steps were taken to strengthen enforcement and improve compliance since the draft was submitted.
Further, since the writer was unclear of Government’s response to the draft report, much care should have been taken in publishing it. It would appear that the intention was to have a field day and embarrass the Government and the GRA, and undermine revenue collection.
It gives a false impression of the GRA which can affect the organisation as well as the morale of the staff.
In conjunction with the publication of various aspects of the draft of the “Review of the tax system”, it must be noted that since the commencement of the project in January 2008, the GRA has made significant progress in moving toward a functional organisation.
Under the two-year project, which commenced on January 14, 2008, the GRA’s governing board and the Commissioner-General have already taken steps to improve the organisation’s efficiency in administration and tax collections.
The reforms started several years ago and was funded by several donor agencies, the latest being the Millennium Challenge Corporation. The GRA is receiving technical assistance to implement several tax reform measures aimed at improving the organisation’s effectiveness in revenue generation.
Sunday, March 8, 2009
Clico and the related crisis: Confusion continues
The Business Page
Posted By Christopher Ram On March 8, 2009 @ 5:12 am In Features, Sunday
Clico and the related crisis: Confusion continues
Introduction
It has been an incredibly hot week in Guyana. In fact so hot that the President who was directly or indirectly involved with every single financial decision made in the public sector for the past sixteen years decided it was just too hot and took off for a change of climate engagement. He asked his Finance Minister Dr Ashni Singh who has carried statutory responsibility for the operation of the Insurance Act and therefore supervision of Clico for more than two years as well as of the National Insurance Scheme, the biggest single potential loser in the Clico debacle, to make a statement to the National Assembly.
Clearly stung by the revelations of what may prove to be a major loss to the country there has been heightened activity by the government. Even as lower-level letter writers were at work, the government called into their corner big guns like Messrs Yesu Persaud and Clifford Reis for a panel discussion with the Minister of Finance. We heard again from the Bank of Guyana not on whether it has continued to track and assess “every bit of information being provided on the issue as it develops” but to “dispel the misrepresentations” by persons whom the Bank did not name. We heard as well from Ms Maria Van Beek, the Commissioner of Insurance/Judicial Manager of Clico, witnessed a press conference by the directors and management of Hand-in-Hand Trust, TV interviews with economist Ramon Gaskin and TUC President Gillian Burton and disturbing but not surprising fears expressed by insurance broker Mr Bishwa Panday and leaders of the teachers’ union. By the end of the week it was clear that there was little confidence in everything said by the government and the regulator in relation to Clico. Having done next to little so far, the Minister of Finance rather than the Judicial Manager is impressively rushing papers to The Bahamas to prove our debt. We all hope it is not too late.
Red herring
The Bank of Guyana and the big guns were called out mainly to speak about the strength of the banking system, as if that was the issue. There are currently many questions about the banking system but not about its strength. Yes, different persons in varying degrees and sometimes with varying justification question many things, such as the role of the non-bank cambios in the underground economy, the absence of any meaningful interest or effective efforts to stamp out money laundering, the interest rate policies and the conservative approach inherent in banking, and the increasingly troubling failure of the Bank of Guyana and the government to bring the New Building Society under the Financial Institutions Act. But the strength of the banking system has not been an issue to academics or depositors who place increasing sums with the sector, which must surely be a big test. Raising it was a pure red herring.
Experience has taught that the public is more sensible than it is given credit for. It knows that failures do not arise only in weak systems, with Globe Trust being a good case in point. It knows how toxic assets can contaminate good ones akin to Gresham’s law and money. It is concerned that the NBS has just invested some $1.5 B in the Berbice Bridge, hardly on the grounds of an investment but more as a bail-out using poor people’s money. It would still be sceptical about the optimism of the Board of HIHT to withstand a near billion dollar loss in Stanford and wonder whether the Bank of Guyana was too soft in allowing such a concentration of assets. None of these issues was raised by the moderator of the panel or by the Bank of Guyana. It is wrong to believe that because the public does not have access and opportunities it is voiceless or does not understand.
Revelation
Much of what was said by our men of learning had little impact. What really had the country and the Minister of Finance going was a statement by the Prime Minister of The Bahamas that “there appears to be no record available at this time” of Clico (Guyana)’s investment in Clico (Bahamas). That is contrary to everything accepted by all including the company’s auditors Deloitte and Touche and the Commissioner of Insurance. In fact the Minister of Finance confidently told the press that there was “a plethora of correspondence, including wire transfers of substantial amounts, dating as far back as 2004” supporting the investment.
I have looked at the 2006 and 2007 financial statements of Clico (Bahamas) and these seem to support the qualified statement by the PM. In the books of the Bahamian company, note 12 (2007) and note 10 (2006) show the following (in Bahamian dollars which is equivalent to US dollars):
12. Due to Related Parties 2007 2006 2005
Due from CL Financial Limited and subsidiaries - - 939,210
Due to CL Financial Limited and subsidiaries (212,723) (22,473,803) (56,250)
And note 22 (2007) shows that the figure of $212,723 at December 31, 2007 is made up of amounts owing to Barbados, Suriname and CL Financial Limited which is the parent company. Nothing is shown as owing to Guyana. Over the three years 2005-2007 the only year shown with a balance with Guyana is 2006 where the amount was stated at $275,317.
Transactions with Guyana over the same years are shown as follows:
2007 2006 2005
Sale (withdrawal) of insurance contracts (1,656,302) (15,114,138) 6,238,297
Payments received on behalf of related
parties for Guyana - 275,000 -
The Guyana books showed investments at 31 December 2007 in Clico Bahamas of $5.95B and accrued investment income of $329M. Can it be that the balance owed by the Bahamas company to the Guyana company is shown somewhere else in the accounts? That is possible, but given that the accounts are both audited and in both cases by the same auditing firm − but by different offices − it is hard to understand why the Minister chose the route of the plethora of documentation rather than having the Judicial Manager call in the auditors for an explanation, to be followed by the paperwork. After all, the auditors would respond quickly, bringing their audit working papers files, anxious to avoid the implications of what seems on the face of the financial statements to be a major discrepancy which routine audit procedures should have revealed. Yes the paperwork is necessary, but surely the persons who have given their stamp of approval on the accounts would be a good place to start.
Different strokes…
One of the very striking features of the still far-from-over saga is how the two countries have treated the matter at the regulatory and more so at the political level. The Prime Minister of The Bahamas made an early and clear statement to their Parliament on the whole issue including offering advice to affected persons. Our President has chosen to make several statements including one before he departed these shores repeating his assurances about meeting all valid claims against Clico. From reports of a meeting Mr Panday had with Ms Van Beek and the information conveyed to the teachers, it does not appear that Clico is relying on those assurances.
There is also some discrepancy about the timing of Mr Jagdeo’s contacts with his counterpart in The Bahamas with the latter saying that it was after the announcement of the move to liquidate the Bahamas company that President Jagdeo called him. But what is more significant is Mr Jagdeo’s revelation that he had proposed as (part) settlement of the debt by Clico (Bahamas) to Clico (Guyana) to take over the Florida real estate in which the Bahamian funds were invested through one of its subsidiaries. It is not clear whether his intention is that our politically-controlled Privatisation Unit would then sell the asset, but surely our President, who is never hesitant to pronounce on matters legal, ought to have realised that that was not possible as a potentially fraudulent preference. The suggestion by a columnist in another newspaper that our President say nothing further in this matter has a lot of merit and was reflected in the call by the Finance Minister to “ensure that the court appointed process is allowed time to exhaust all avenues to protect the assets of CLICO Guyana.” Regrettably there is too much at stake for the public to wait on the necessarily cautious and deliberate court process.
Huge costs
Liquidation costs are enormous and are a first call on the proceeds of any sale of company assets. Many of the assets of the Bahamas company are pledged to secure debts other than deposits, and we therefore need to prepare ourselves for a substantial loss by Clico (Guyana) of its investment in the Bahamian company, assuming that there is such an investment. This then raises the question about Mr Jagdeo’s assurances which the Commissioner of Insurance through GINA initially reaffirmed, ie that all polices held in CLICO (Guyana) will be protected. This of course, whatever form it takes, will have to come from the taxpayers.
The Commissioner as Judicial Manager has to act independently and professionally. She has been instructed by the court to return promptly to them with a plan and no court will accept such vague assurances as those given by President Jagdeo and later repeated by her. She should not be unmindful that medical service providers have refused to extend further credit to the company while holders of short-term policies are already looking elsewhere for their coverage. In repeating the President’s assurance about guarantee, Ms Van Beek will recognise that this cannot be open-ended. If we care about our constitution and the Fiscal Management and Accountability Act, any such guarantee has to be given by Parliament.
In this regard, it seems a fair assessment that the President has not been sufficiently informed of the liabilities which his assurances that “all claims” will be met are interpreted to guarantee. The motion submitted by the PNCR calls on the government to take all necessary steps “to guarantee the savings, pensions and investments of all CLICO (Guyana) investors including the National Insurance Scheme (NIS), depositors, policyholders and contributors.” That would cost the government billions of dollars even if Clico’s actual and contingent assets are taken over. In Trinidad and Tobago Mr Lawrence Duprey had to give up huge chunks of assets in exchange for the government’s assumption of liabilities. Assuming we take over the liabilities, what do we get in return and how? It seems that Clico (Guyana)’s main assets – other than the Bahamas investment, are the loan to Caribbean Resources Limited ($1B), shares in the Berbice Bridge Company with a book value of less than $80M and any remaining bonds in the Berbice Bridge Company.
Conclusion
The President in his typical style has threatened prosecution against the directors and management of Clico if fraud were found. The President may not be aware, as disclosed by Business Page of February 8, that there is only one Guyanese director who is also the CEO who less than ten weeks ago he lavishly praised and made a director of his revamped GuySuCo Board. We are now paying the price for our failure to take governance seriously, not only in what I have referred to as public interest companies but in all public and state-owned companies.
Next week I will continue looking at the implications of this debacle but for now, please if we are thinking of selling off any of the policies to other companies, remember that there will have to be actuarial valuations done. From what I have seen we have not even begun to deal with this problem.
Article printed from Stabroek News: http://www.stabroeknews.com
URL to article: http://www.stabroeknews.com/2009/features/03/08/the-business-page-2/
Posted By Christopher Ram On March 8, 2009 @ 5:12 am In Features, Sunday
Clico and the related crisis: Confusion continues
Introduction
It has been an incredibly hot week in Guyana. In fact so hot that the President who was directly or indirectly involved with every single financial decision made in the public sector for the past sixteen years decided it was just too hot and took off for a change of climate engagement. He asked his Finance Minister Dr Ashni Singh who has carried statutory responsibility for the operation of the Insurance Act and therefore supervision of Clico for more than two years as well as of the National Insurance Scheme, the biggest single potential loser in the Clico debacle, to make a statement to the National Assembly.
Clearly stung by the revelations of what may prove to be a major loss to the country there has been heightened activity by the government. Even as lower-level letter writers were at work, the government called into their corner big guns like Messrs Yesu Persaud and Clifford Reis for a panel discussion with the Minister of Finance. We heard again from the Bank of Guyana not on whether it has continued to track and assess “every bit of information being provided on the issue as it develops” but to “dispel the misrepresentations” by persons whom the Bank did not name. We heard as well from Ms Maria Van Beek, the Commissioner of Insurance/Judicial Manager of Clico, witnessed a press conference by the directors and management of Hand-in-Hand Trust, TV interviews with economist Ramon Gaskin and TUC President Gillian Burton and disturbing but not surprising fears expressed by insurance broker Mr Bishwa Panday and leaders of the teachers’ union. By the end of the week it was clear that there was little confidence in everything said by the government and the regulator in relation to Clico. Having done next to little so far, the Minister of Finance rather than the Judicial Manager is impressively rushing papers to The Bahamas to prove our debt. We all hope it is not too late.
Red herring
The Bank of Guyana and the big guns were called out mainly to speak about the strength of the banking system, as if that was the issue. There are currently many questions about the banking system but not about its strength. Yes, different persons in varying degrees and sometimes with varying justification question many things, such as the role of the non-bank cambios in the underground economy, the absence of any meaningful interest or effective efforts to stamp out money laundering, the interest rate policies and the conservative approach inherent in banking, and the increasingly troubling failure of the Bank of Guyana and the government to bring the New Building Society under the Financial Institutions Act. But the strength of the banking system has not been an issue to academics or depositors who place increasing sums with the sector, which must surely be a big test. Raising it was a pure red herring.
Experience has taught that the public is more sensible than it is given credit for. It knows that failures do not arise only in weak systems, with Globe Trust being a good case in point. It knows how toxic assets can contaminate good ones akin to Gresham’s law and money. It is concerned that the NBS has just invested some $1.5 B in the Berbice Bridge, hardly on the grounds of an investment but more as a bail-out using poor people’s money. It would still be sceptical about the optimism of the Board of HIHT to withstand a near billion dollar loss in Stanford and wonder whether the Bank of Guyana was too soft in allowing such a concentration of assets. None of these issues was raised by the moderator of the panel or by the Bank of Guyana. It is wrong to believe that because the public does not have access and opportunities it is voiceless or does not understand.
Revelation
Much of what was said by our men of learning had little impact. What really had the country and the Minister of Finance going was a statement by the Prime Minister of The Bahamas that “there appears to be no record available at this time” of Clico (Guyana)’s investment in Clico (Bahamas). That is contrary to everything accepted by all including the company’s auditors Deloitte and Touche and the Commissioner of Insurance. In fact the Minister of Finance confidently told the press that there was “a plethora of correspondence, including wire transfers of substantial amounts, dating as far back as 2004” supporting the investment.
I have looked at the 2006 and 2007 financial statements of Clico (Bahamas) and these seem to support the qualified statement by the PM. In the books of the Bahamian company, note 12 (2007) and note 10 (2006) show the following (in Bahamian dollars which is equivalent to US dollars):
12. Due to Related Parties 2007 2006 2005
Due from CL Financial Limited and subsidiaries - - 939,210
Due to CL Financial Limited and subsidiaries (212,723) (22,473,803) (56,250)
And note 22 (2007) shows that the figure of $212,723 at December 31, 2007 is made up of amounts owing to Barbados, Suriname and CL Financial Limited which is the parent company. Nothing is shown as owing to Guyana. Over the three years 2005-2007 the only year shown with a balance with Guyana is 2006 where the amount was stated at $275,317.
Transactions with Guyana over the same years are shown as follows:
2007 2006 2005
Sale (withdrawal) of insurance contracts (1,656,302) (15,114,138) 6,238,297
Payments received on behalf of related
parties for Guyana - 275,000 -
The Guyana books showed investments at 31 December 2007 in Clico Bahamas of $5.95B and accrued investment income of $329M. Can it be that the balance owed by the Bahamas company to the Guyana company is shown somewhere else in the accounts? That is possible, but given that the accounts are both audited and in both cases by the same auditing firm − but by different offices − it is hard to understand why the Minister chose the route of the plethora of documentation rather than having the Judicial Manager call in the auditors for an explanation, to be followed by the paperwork. After all, the auditors would respond quickly, bringing their audit working papers files, anxious to avoid the implications of what seems on the face of the financial statements to be a major discrepancy which routine audit procedures should have revealed. Yes the paperwork is necessary, but surely the persons who have given their stamp of approval on the accounts would be a good place to start.
Different strokes…
One of the very striking features of the still far-from-over saga is how the two countries have treated the matter at the regulatory and more so at the political level. The Prime Minister of The Bahamas made an early and clear statement to their Parliament on the whole issue including offering advice to affected persons. Our President has chosen to make several statements including one before he departed these shores repeating his assurances about meeting all valid claims against Clico. From reports of a meeting Mr Panday had with Ms Van Beek and the information conveyed to the teachers, it does not appear that Clico is relying on those assurances.
There is also some discrepancy about the timing of Mr Jagdeo’s contacts with his counterpart in The Bahamas with the latter saying that it was after the announcement of the move to liquidate the Bahamas company that President Jagdeo called him. But what is more significant is Mr Jagdeo’s revelation that he had proposed as (part) settlement of the debt by Clico (Bahamas) to Clico (Guyana) to take over the Florida real estate in which the Bahamian funds were invested through one of its subsidiaries. It is not clear whether his intention is that our politically-controlled Privatisation Unit would then sell the asset, but surely our President, who is never hesitant to pronounce on matters legal, ought to have realised that that was not possible as a potentially fraudulent preference. The suggestion by a columnist in another newspaper that our President say nothing further in this matter has a lot of merit and was reflected in the call by the Finance Minister to “ensure that the court appointed process is allowed time to exhaust all avenues to protect the assets of CLICO Guyana.” Regrettably there is too much at stake for the public to wait on the necessarily cautious and deliberate court process.
Huge costs
Liquidation costs are enormous and are a first call on the proceeds of any sale of company assets. Many of the assets of the Bahamas company are pledged to secure debts other than deposits, and we therefore need to prepare ourselves for a substantial loss by Clico (Guyana) of its investment in the Bahamian company, assuming that there is such an investment. This then raises the question about Mr Jagdeo’s assurances which the Commissioner of Insurance through GINA initially reaffirmed, ie that all polices held in CLICO (Guyana) will be protected. This of course, whatever form it takes, will have to come from the taxpayers.
The Commissioner as Judicial Manager has to act independently and professionally. She has been instructed by the court to return promptly to them with a plan and no court will accept such vague assurances as those given by President Jagdeo and later repeated by her. She should not be unmindful that medical service providers have refused to extend further credit to the company while holders of short-term policies are already looking elsewhere for their coverage. In repeating the President’s assurance about guarantee, Ms Van Beek will recognise that this cannot be open-ended. If we care about our constitution and the Fiscal Management and Accountability Act, any such guarantee has to be given by Parliament.
In this regard, it seems a fair assessment that the President has not been sufficiently informed of the liabilities which his assurances that “all claims” will be met are interpreted to guarantee. The motion submitted by the PNCR calls on the government to take all necessary steps “to guarantee the savings, pensions and investments of all CLICO (Guyana) investors including the National Insurance Scheme (NIS), depositors, policyholders and contributors.” That would cost the government billions of dollars even if Clico’s actual and contingent assets are taken over. In Trinidad and Tobago Mr Lawrence Duprey had to give up huge chunks of assets in exchange for the government’s assumption of liabilities. Assuming we take over the liabilities, what do we get in return and how? It seems that Clico (Guyana)’s main assets – other than the Bahamas investment, are the loan to Caribbean Resources Limited ($1B), shares in the Berbice Bridge Company with a book value of less than $80M and any remaining bonds in the Berbice Bridge Company.
Conclusion
The President in his typical style has threatened prosecution against the directors and management of Clico if fraud were found. The President may not be aware, as disclosed by Business Page of February 8, that there is only one Guyanese director who is also the CEO who less than ten weeks ago he lavishly praised and made a director of his revamped GuySuCo Board. We are now paying the price for our failure to take governance seriously, not only in what I have referred to as public interest companies but in all public and state-owned companies.
Next week I will continue looking at the implications of this debacle but for now, please if we are thinking of selling off any of the policies to other companies, remember that there will have to be actuarial valuations done. From what I have seen we have not even begun to deal with this problem.
Article printed from Stabroek News: http://www.stabroeknews.com
URL to article: http://www.stabroeknews.com/2009/features/03/08/the-business-page-2/
Thursday, March 5, 2009
Ms Lowden has been misguided by her ‘sources’
Ms Lowden has been misguided by her ‘sources’
Posted By Stabroek staff On March 5, 2009 @ 5:05 am In Letters | 4 Comments
http://www.stabroeknews.com/2009/letters/03/05/ms-lowden-has-been-misguided-by-her-%e2%80%98sources%e2%80%99/
Dear Editor,
I refer to the editor’s note to my letter on March 4, 2009 of Stabroek News with the caption ‘Heritage Foundation did not use Ram and McRae as a “source” for the economic freedom index.’
I note the response from Mr Rakesh Latchana of Ram and McRae in which he claimed that Ram and McRae had no affiliation in the compilation of the Index of the Heritage Foundation and that they were never consulted by the Heritage Foundation and/or The Wall Street Journal.
However, my sources still claim that input was made by members of Ram and McRae.
I also would like to note that the aim of my letter originally titled ‘Our nation’s ranking’ was intended to demonstrate how inaccurate information inserted in international reports, can retard any nation’s development, using Guyana as an example. As such, it is unfair that international funding organizations use these flawed reports, since they do not represent a true reflection of Guyana’s economy.
Yours faithfully,
Marissa Lowden
Editor’s note
We sent a copy of this letter to Ram and McRae for any comments they might have wished to make and received the following response from Mr Rakesh Latchana:
“Thank you again for the opportunity to respond to the letter by Ms Marissa Lowden in which she stated that her ‘sources still claim that input was made by members of Ram & McRae.’ “Following receipt of her first letter, I sought confirmation from the Heritage Foundation and received the following note: “This is to confirm that at no point in our research for the 2009 Index of Economic Freedom did we consult Ram & McRae directly or use any materials from their website or elsewhere.”
“Ms Lowden therefore continues to be misguided by her ‘sources’ and I would respectfully suggest that she considers their reliability before using them again.
“It is also worthwhile to note that my sources claim that Ms Lowden is associated with the Office of the President and her letters therefore come as no surprise.
The firm currently has more pressing matters to attend to and we hope that you would publish this as our full and final response on this matter.”
Posted By Stabroek staff On March 5, 2009 @ 5:05 am In Letters | 4 Comments
http://www.stabroeknews.com/2009/letters/03/05/ms-lowden-has-been-misguided-by-her-%e2%80%98sources%e2%80%99/
Dear Editor,
I refer to the editor’s note to my letter on March 4, 2009 of Stabroek News with the caption ‘Heritage Foundation did not use Ram and McRae as a “source” for the economic freedom index.’
I note the response from Mr Rakesh Latchana of Ram and McRae in which he claimed that Ram and McRae had no affiliation in the compilation of the Index of the Heritage Foundation and that they were never consulted by the Heritage Foundation and/or The Wall Street Journal.
However, my sources still claim that input was made by members of Ram and McRae.
I also would like to note that the aim of my letter originally titled ‘Our nation’s ranking’ was intended to demonstrate how inaccurate information inserted in international reports, can retard any nation’s development, using Guyana as an example. As such, it is unfair that international funding organizations use these flawed reports, since they do not represent a true reflection of Guyana’s economy.
Yours faithfully,
Marissa Lowden
Editor’s note
We sent a copy of this letter to Ram and McRae for any comments they might have wished to make and received the following response from Mr Rakesh Latchana:
“Thank you again for the opportunity to respond to the letter by Ms Marissa Lowden in which she stated that her ‘sources still claim that input was made by members of Ram & McRae.’ “Following receipt of her first letter, I sought confirmation from the Heritage Foundation and received the following note: “This is to confirm that at no point in our research for the 2009 Index of Economic Freedom did we consult Ram & McRae directly or use any materials from their website or elsewhere.”
“Ms Lowden therefore continues to be misguided by her ‘sources’ and I would respectfully suggest that she considers their reliability before using them again.
“It is also worthwhile to note that my sources claim that Ms Lowden is associated with the Office of the President and her letters therefore come as no surprise.
The firm currently has more pressing matters to attend to and we hope that you would publish this as our full and final response on this matter.”
Wednesday, March 4, 2009
Heritage Foundation did not use Ram & McRae as a ‘source’ for the economic freedom index
Heritage Foundation did not use Ram & McRae as a ‘source’ for the economic freedom index
Posted By Stabroek staff On March 4, 2009
Dear Editor,
There seems to be a trend to unjustly rank ‘small economy’ countries by many international organisations. On many occasions, the international organizations’ reports are conducted to achieve a certain narrow agenda, and in most cases, not for the benefit of the country which is the subject of the study. Guyana was ranked unfavourably in the Trafficking in Persons report; Guyana has been placed on the highest human trafficking index, even though there have only been two confirmed cases. I wish to point out that in order to position a country on the third tier, there must be “100 documented cases.”
The Government of Guyana’s efforts to unearth any existing evidence of the “100 documented cases” is a matter of transparency and has been futile.
On another international organization’s report, Guyana recently received an economic freedom score of 48.4 from the Heritage Foundation, ranking Guyana at 155 out of the 183 nations surveyed.
These rankings are based on the results of a few selected interviews that are predisposed to partisanship, and lack plausible sources. These international reports carry a constricted agenda, and so should not be read as scriptural; they should be read as a ploy to impair a country’s image.
The recycling of these reports will have a devastating impact on developing countries and will hamper many from obtaining loans for the development of their economies, since these funding organizations insist on certain prerequisites to be achieved by developing countries in order for them to be eligible for loans.
It should be noted that no one from the Heritage Foundation has ever set foot in Guyana; however, this organization encumbered Guyana with a prejudicial ranking. I must point out that the Heritage Foundation sources were Christopher Ram and another member of staff from his auditing firm (Ram and McRae), who are critics of the government, who carry biases and do not report justly, since their aim is to score political points and gain recognition.
Why should we sit back and accept these reports?
There is no evidence to support the findings of these assessments, as they are biased and generalized.
And these reports are supportive of western interests.
It is unfair that international funding organizations use these flawed reports, since they do not represent a true reflection of Guyana’s economy, and the blemished reports do not separate fact from fiction.
Yours faithfully,
Marissa Lowden
Editor’s note
We sent a copy of this letter to Mr Rakesh Latchana of Ram & McRae for any comments he wished to make and received the following response:
“Thank you for the opportunity to respond to the letter by Ms Marissa Lowden in which she sought to associate Mr Christopher Ram and another member of staff of Ram & McRae with the 2009 Index of Economic Freedom. Ms Lowden is very irresponsible in not seeking to confirm from Ram & McRae whether any of its partners or staff were used as a “source” by the Heritage Foundation. Such claims were previously made in a GINA release of January 19, 2009 which incorrectly quoted the President as making the same association.
I wish to confirm that at no time was Ram & McRae or its partners or staff consulted by the Heritage Foundation and/or the Wall Street Journal in their compilation of the Index. We have for example noted several errors in the publication which if corrected may result in an even lower ranking for Guyana.
“The Index, including the methodology used in its compilation, can be downloaded from www.heritage.org and notes the sources of information. It should also be noted that publications of some of the very international funding organisations to which Ms Lowden has appealed were included in the list of sources.
“Finally, I wish to suggest that Ms Lowden read the report and seek to understand the statements made in relation to Guyana. She would then be in a position to make constructive recommendations to the Government on how the difficulties (perceived or actual) could be remedied and consequently the ranking improved.”
Article printed from Stabroek News: http://www.stabroeknews.com
URL to article: http://www.stabroeknews.com/2009/letters/03/04/heritage-foundation-did-not-use-ram-mcrae-as-a-%e2%80%98source%e2%80%99-for-the-economic-freedom-index/
Posted By Stabroek staff On March 4, 2009
Dear Editor,
There seems to be a trend to unjustly rank ‘small economy’ countries by many international organisations. On many occasions, the international organizations’ reports are conducted to achieve a certain narrow agenda, and in most cases, not for the benefit of the country which is the subject of the study. Guyana was ranked unfavourably in the Trafficking in Persons report; Guyana has been placed on the highest human trafficking index, even though there have only been two confirmed cases. I wish to point out that in order to position a country on the third tier, there must be “100 documented cases.”
The Government of Guyana’s efforts to unearth any existing evidence of the “100 documented cases” is a matter of transparency and has been futile.
On another international organization’s report, Guyana recently received an economic freedom score of 48.4 from the Heritage Foundation, ranking Guyana at 155 out of the 183 nations surveyed.
These rankings are based on the results of a few selected interviews that are predisposed to partisanship, and lack plausible sources. These international reports carry a constricted agenda, and so should not be read as scriptural; they should be read as a ploy to impair a country’s image.
The recycling of these reports will have a devastating impact on developing countries and will hamper many from obtaining loans for the development of their economies, since these funding organizations insist on certain prerequisites to be achieved by developing countries in order for them to be eligible for loans.
It should be noted that no one from the Heritage Foundation has ever set foot in Guyana; however, this organization encumbered Guyana with a prejudicial ranking. I must point out that the Heritage Foundation sources were Christopher Ram and another member of staff from his auditing firm (Ram and McRae), who are critics of the government, who carry biases and do not report justly, since their aim is to score political points and gain recognition.
Why should we sit back and accept these reports?
There is no evidence to support the findings of these assessments, as they are biased and generalized.
And these reports are supportive of western interests.
It is unfair that international funding organizations use these flawed reports, since they do not represent a true reflection of Guyana’s economy, and the blemished reports do not separate fact from fiction.
Yours faithfully,
Marissa Lowden
Editor’s note
We sent a copy of this letter to Mr Rakesh Latchana of Ram & McRae for any comments he wished to make and received the following response:
“Thank you for the opportunity to respond to the letter by Ms Marissa Lowden in which she sought to associate Mr Christopher Ram and another member of staff of Ram & McRae with the 2009 Index of Economic Freedom. Ms Lowden is very irresponsible in not seeking to confirm from Ram & McRae whether any of its partners or staff were used as a “source” by the Heritage Foundation. Such claims were previously made in a GINA release of January 19, 2009 which incorrectly quoted the President as making the same association.
I wish to confirm that at no time was Ram & McRae or its partners or staff consulted by the Heritage Foundation and/or the Wall Street Journal in their compilation of the Index. We have for example noted several errors in the publication which if corrected may result in an even lower ranking for Guyana.
“The Index, including the methodology used in its compilation, can be downloaded from www.heritage.org and notes the sources of information. It should also be noted that publications of some of the very international funding organisations to which Ms Lowden has appealed were included in the list of sources.
“Finally, I wish to suggest that Ms Lowden read the report and seek to understand the statements made in relation to Guyana. She would then be in a position to make constructive recommendations to the Government on how the difficulties (perceived or actual) could be remedied and consequently the ranking improved.”
Article printed from Stabroek News: http://www.stabroeknews.com
URL to article: http://www.stabroeknews.com/2009/letters/03/04/heritage-foundation-did-not-use-ram-mcrae-as-a-%e2%80%98source%e2%80%99-for-the-economic-freedom-index/
Tuesday, March 3, 2009
Christopher Ram demonstrates deeply flawed knowledge of insurance
Christopher Ram demonstrates deeply flawed knowledge of insurance
Posted By Stabroek staff On March 3, 2009 @ 5:02 am In Letters | 10 Comments
http://www.stabroeknews.com/2009/letters/03/03/christopher-ram-demonstrates-deeply-flawed-knowledge-of-insurance/
Dear Editor,
In an article in Sunday Stabroek of Sunday March 1, 2009 entitled “Clico, Contagion, Containment and Concealment” Mr Christopher Ram makes sweeping charges against me and my ability and peddles incorrect information and analysis in relation to the issues surrounding Clico.
Please allow me to answer these grave charges.
Mr Ram asks how a company which issued insurance policies running into billions of dollars needed a statutory fund of only $50 million. Mr Ram, who is one of Guyana’s most experienced accountants and an aspiring lawyer, does not understand the difference between a statutory fund and a statutory deposit. The statutory fund as at 31st December 2007 is $9 billion, while the statutory deposit is $46.5 million. Mr Ram here demonstrates a deeply flawed knowledge of insurance and a less than adequate knowledge of the Insurance Act.
Mr Ram accuses the President of contradicting what I said in my affidavit in support of the application to the court. He said that President Jagdeo told the nation that it was the collapse of Clico Bahamas that triggered the action by me. He then accused me of saying in my affidavit that the problem stemmed from the business model and investment policies of the company. Mr Ram either did not read my affidavit, or read it and did not pay any attention to what I said in it, or decided to deliberately misrepresent what I said. I averred in my affidavit that “Clico Bahamas… was made the subject of a winding up order;
“Clico Bahamas… does not have sufficient cash to meet surrender claims: of Clico Guyana;
“That in the event that the funds so invested are not returned as requested the Respondent would thereby be in breach of… the Act;
“That further to the foregoing the Respondent would be unable to meet its obligation.” I therefore set out the full and complete story for the benefit of the court. For Mr Ram to imply that I did not rely on what had occurred to Clico Bahamas is gross dishonesty.
Mr Ram talks about investment products dressed up as insurance. The Act includes a description of insurance products. It is on this basis that insurance professionals have to determine whether a particular investment is permissible or illegal. As an accounting professional and a business journalist, one would expect Mr Ram to know that insurance products do sometimes have significant investment elements. One would similarly expect Mr Ram to know that the accounting profession, in recognition of this fact, has called for a clear separation of these two elements in the presentation of insurance accounts.
Mr Ram accused me of wrongly identifying the name of Clico in my petition to the court. The name I identified was “Clico Life and General Insurance Company (South America) Limited.” I enclose a copy of the Resolution changing Colonial Life Insurance (Guyana) Limited to Clico Life and General Insurance Company (South America) Limited as well as the Certificate of Continuance showing the latter name. This is yet another example of Mr Ram writing from an uninformed position. Mr Ram might consider doing the right thing but I have no expectations.
Yours faithfully,
Maria van Beek
Commissioner of Insurance (Guyana)
Posted By Stabroek staff On March 3, 2009 @ 5:02 am In Letters | 10 Comments
http://www.stabroeknews.com/2009/letters/03/03/christopher-ram-demonstrates-deeply-flawed-knowledge-of-insurance/
Dear Editor,
In an article in Sunday Stabroek of Sunday March 1, 2009 entitled “Clico, Contagion, Containment and Concealment” Mr Christopher Ram makes sweeping charges against me and my ability and peddles incorrect information and analysis in relation to the issues surrounding Clico.
Please allow me to answer these grave charges.
Mr Ram asks how a company which issued insurance policies running into billions of dollars needed a statutory fund of only $50 million. Mr Ram, who is one of Guyana’s most experienced accountants and an aspiring lawyer, does not understand the difference between a statutory fund and a statutory deposit. The statutory fund as at 31st December 2007 is $9 billion, while the statutory deposit is $46.5 million. Mr Ram here demonstrates a deeply flawed knowledge of insurance and a less than adequate knowledge of the Insurance Act.
Mr Ram accuses the President of contradicting what I said in my affidavit in support of the application to the court. He said that President Jagdeo told the nation that it was the collapse of Clico Bahamas that triggered the action by me. He then accused me of saying in my affidavit that the problem stemmed from the business model and investment policies of the company. Mr Ram either did not read my affidavit, or read it and did not pay any attention to what I said in it, or decided to deliberately misrepresent what I said. I averred in my affidavit that “Clico Bahamas… was made the subject of a winding up order;
“Clico Bahamas… does not have sufficient cash to meet surrender claims: of Clico Guyana;
“That in the event that the funds so invested are not returned as requested the Respondent would thereby be in breach of… the Act;
“That further to the foregoing the Respondent would be unable to meet its obligation.” I therefore set out the full and complete story for the benefit of the court. For Mr Ram to imply that I did not rely on what had occurred to Clico Bahamas is gross dishonesty.
Mr Ram talks about investment products dressed up as insurance. The Act includes a description of insurance products. It is on this basis that insurance professionals have to determine whether a particular investment is permissible or illegal. As an accounting professional and a business journalist, one would expect Mr Ram to know that insurance products do sometimes have significant investment elements. One would similarly expect Mr Ram to know that the accounting profession, in recognition of this fact, has called for a clear separation of these two elements in the presentation of insurance accounts.
Mr Ram accused me of wrongly identifying the name of Clico in my petition to the court. The name I identified was “Clico Life and General Insurance Company (South America) Limited.” I enclose a copy of the Resolution changing Colonial Life Insurance (Guyana) Limited to Clico Life and General Insurance Company (South America) Limited as well as the Certificate of Continuance showing the latter name. This is yet another example of Mr Ram writing from an uninformed position. Mr Ram might consider doing the right thing but I have no expectations.
Yours faithfully,
Maria van Beek
Commissioner of Insurance (Guyana)
Monday, March 2, 2009
Gov’t disappointed in coverage of President’s press conference –GINA.
Gov’t disappointed in coverage of President’s press conference –GINA. Stabroek News. On March 2, 2009
http://www.stabroeknews.com/2009/news/local/03/02/gov%E2%80%99t-disappointed-in-coverage-of-president%E2%80%99s-press-conference-%E2%80%93gina/
In a GINA release on Friday, the Government of Guyana said it was disappointed with what it said appeared to be “deliberate attempts” to misrepresent aspects of a press conference held by President Bharrat Jagdeo on matters related to the financial sector.
The release cited articles in Stabroek News (SN) and the Guyana Times. In relation to SN, the release referred to a news item on page 10 of the February 27 edition entitled `PNCR, AFC call for finance minister, insurance commissioner to resign’ and referred to a statement made by the AFC that the move to the courts for judicial management of Clico (Guyana) came in the wake of statements by the President that the Guyana economy was sufficiently insulated from the effect of the global financial crisis and that Clico (Guyana) would not be affected by problems in the Clico group.
GINA asserted “This is a blatant distortion of all previous pronouncements made by the President on the matter. Indeed, the President has been widely quoted as explaining the potential for mismatch between asset and liability maturities in the event of a run on any financial institution, including Clico, at the press conference he hosted immediately after returning from his official visit to the Middle East. The same today’s Stabroek News on page 11 states that the President had at his earlier press conference `added that the only problem he could envisage in the short term is a mismatch between liabilities and assets in the event of significant changes of the company’s investments abroad’. In fact, the developments of earlier this week in The Bahamas constituted exactly that, a significant change in the status of the company’s investments abroad. By no stretch of the imagination, therefore, could any of the President’s earlier statements be interpreted as suggesting that Guyana was fully insulated.”
Stabroek News Editor-in-Chief Anand Persaud in response said it was unclear why GINA would raise this as the President’s statement was clear that he did not see a greater danger than a short-term mismatch between assets and liabilities. Persaud said what has since occurred as a result of the liquidation of Clico (Bahamas) can hardly be described as a mismatch.
GINA also referred to the page 11 report in the same edition entitled `President defends handling of Clico crisis’ where the reporter had described the President as being “clearly irate” when asked whether the government had deceived the public by its reluctance to reveal the true state of Clico (Guyana).
GINA said: “It would be eminently obvious to anyone viewing a recording of the press conference that any hint of exasperation or impatience in the President’s responses was the result of redundant, repetitive, and clearly uninformed questions being asked by certain reporters, including the reporter from Stabroek News. Indeed, in at least one instance during the press conference, a reporter repeated a question that the President had just answered, resulting in the President responding by indicating that he would give the same answer that he had just already given.”
In response, Persaud said he was satisfied that the question posed by the SN reporter was an appropriate one.
GINA also said “In addition, at no time did the President suggest the avoidance of `unnecessary unease among the populace’ as a reason why Government did not indicate to the public earlier the likely financial difficulties faced by Clico Guyana. Instead, the President explained that no responsible Government or regulator would make premature statements which, simply by virtue of being made, could precipitate the demise of a functioning financial institution. Indeed, this is evidenced and corroborated in all of the countries where action was taken in relation to Clico. Neither in Trinidad nor The Bahamas did the Government pre-empt regulatory intervention by making irresponsible statements to cast doubt on the strength of the institutions. In both countries, the first pronouncement by the authorities was the announcement of regulatory action or intervention.”
GINA also complained that in the same page 11 article the writer stated “that the President indicated that, if the NIS were to lose its investment of $6 billion, the Government would not be bound to provide the lost sum of money. In the first place, this discussion did not take place during the press conference but during a post-press conference informal chat with some of the journalists who remained in the room. In the second place, the President never made such a statement. When asked by a reporter if the law requires that the Government cover losses on NIS investments, the President indicated that he did not think so.
He went on to explain that if there are financial shortfalls at the NIS, such as might be indicated by an actuarial review, the Scheme would normally be required to reverse this deficit either by increasing its investment returns or raising its contribution rates. At no point in time did the President indicate a departure from the commitment given during the press conference that steps will be taken to protect the pensions of those who have saved and invested in the institutions affected by these recent events, including NIS.”
In response Persaud said that SN acknowledges an incorrect conflation of the issue related to where the NIS places its investments and what happens if there is a shortfall in the ability of the scheme to meet its benefit obligations. It was in that respect that the President said such a shortfall would have to be made up by boosting the returns from its investments or raising contribution rates. Persaud said that SN regretted this error.
GINA also complained about another report on page 3 of the same edition entitled `President to check report Guyana cut from Canada bilateral aid list’. GINA said “During the press conference, a Stabroek News reporter asked about an alleged release that Guyana had been dropped from the list of countries to receive aid from Canada. Several reporters present at the press conference immediately turned to the Stabroek News reporter and advised him that there was no such report, and that they had already checked the matter with the Canadian authorities. The President likewise indicated that he was not aware of any such release. Instead of clarifying the fact that there was no such release and that previous reports to this effect were inaccurate, the page 3 story attempts to suggest that the President undertook to check whether there was such a release. In fact, there was no such release, and this was made clear at the press conference, including by other reporters to the Stabroek News reporter.”
In response, Persaud said he was unaware that SN should be influenced by the antics of other reporters at the briefing who appeared to be doing the government’s bidding. Persaud said he was gratified that the question was asked and the report that was subsequently carried in SN was based on an official release from the Canadian International Development Agency. Further, contrary to the GINA release, President Jagdeo had committed to checking the report as conveyed in the SN report. Persaud said a transcript of the press conference revealed the President as saying as follows: “Okay, I’m going to check what CIDA’s statement… I’m gonna check on the statement. Let’s get a copy of the statement.”
http://www.stabroeknews.com/2009/news/local/03/02/gov%E2%80%99t-disappointed-in-coverage-of-president%E2%80%99s-press-conference-%E2%80%93gina/
In a GINA release on Friday, the Government of Guyana said it was disappointed with what it said appeared to be “deliberate attempts” to misrepresent aspects of a press conference held by President Bharrat Jagdeo on matters related to the financial sector.
The release cited articles in Stabroek News (SN) and the Guyana Times. In relation to SN, the release referred to a news item on page 10 of the February 27 edition entitled `PNCR, AFC call for finance minister, insurance commissioner to resign’ and referred to a statement made by the AFC that the move to the courts for judicial management of Clico (Guyana) came in the wake of statements by the President that the Guyana economy was sufficiently insulated from the effect of the global financial crisis and that Clico (Guyana) would not be affected by problems in the Clico group.
GINA asserted “This is a blatant distortion of all previous pronouncements made by the President on the matter. Indeed, the President has been widely quoted as explaining the potential for mismatch between asset and liability maturities in the event of a run on any financial institution, including Clico, at the press conference he hosted immediately after returning from his official visit to the Middle East. The same today’s Stabroek News on page 11 states that the President had at his earlier press conference `added that the only problem he could envisage in the short term is a mismatch between liabilities and assets in the event of significant changes of the company’s investments abroad’. In fact, the developments of earlier this week in The Bahamas constituted exactly that, a significant change in the status of the company’s investments abroad. By no stretch of the imagination, therefore, could any of the President’s earlier statements be interpreted as suggesting that Guyana was fully insulated.”
Stabroek News Editor-in-Chief Anand Persaud in response said it was unclear why GINA would raise this as the President’s statement was clear that he did not see a greater danger than a short-term mismatch between assets and liabilities. Persaud said what has since occurred as a result of the liquidation of Clico (Bahamas) can hardly be described as a mismatch.
GINA also referred to the page 11 report in the same edition entitled `President defends handling of Clico crisis’ where the reporter had described the President as being “clearly irate” when asked whether the government had deceived the public by its reluctance to reveal the true state of Clico (Guyana).
GINA said: “It would be eminently obvious to anyone viewing a recording of the press conference that any hint of exasperation or impatience in the President’s responses was the result of redundant, repetitive, and clearly uninformed questions being asked by certain reporters, including the reporter from Stabroek News. Indeed, in at least one instance during the press conference, a reporter repeated a question that the President had just answered, resulting in the President responding by indicating that he would give the same answer that he had just already given.”
In response, Persaud said he was satisfied that the question posed by the SN reporter was an appropriate one.
GINA also said “In addition, at no time did the President suggest the avoidance of `unnecessary unease among the populace’ as a reason why Government did not indicate to the public earlier the likely financial difficulties faced by Clico Guyana. Instead, the President explained that no responsible Government or regulator would make premature statements which, simply by virtue of being made, could precipitate the demise of a functioning financial institution. Indeed, this is evidenced and corroborated in all of the countries where action was taken in relation to Clico. Neither in Trinidad nor The Bahamas did the Government pre-empt regulatory intervention by making irresponsible statements to cast doubt on the strength of the institutions. In both countries, the first pronouncement by the authorities was the announcement of regulatory action or intervention.”
GINA also complained that in the same page 11 article the writer stated “that the President indicated that, if the NIS were to lose its investment of $6 billion, the Government would not be bound to provide the lost sum of money. In the first place, this discussion did not take place during the press conference but during a post-press conference informal chat with some of the journalists who remained in the room. In the second place, the President never made such a statement. When asked by a reporter if the law requires that the Government cover losses on NIS investments, the President indicated that he did not think so.
He went on to explain that if there are financial shortfalls at the NIS, such as might be indicated by an actuarial review, the Scheme would normally be required to reverse this deficit either by increasing its investment returns or raising its contribution rates. At no point in time did the President indicate a departure from the commitment given during the press conference that steps will be taken to protect the pensions of those who have saved and invested in the institutions affected by these recent events, including NIS.”
In response Persaud said that SN acknowledges an incorrect conflation of the issue related to where the NIS places its investments and what happens if there is a shortfall in the ability of the scheme to meet its benefit obligations. It was in that respect that the President said such a shortfall would have to be made up by boosting the returns from its investments or raising contribution rates. Persaud said that SN regretted this error.
GINA also complained about another report on page 3 of the same edition entitled `President to check report Guyana cut from Canada bilateral aid list’. GINA said “During the press conference, a Stabroek News reporter asked about an alleged release that Guyana had been dropped from the list of countries to receive aid from Canada. Several reporters present at the press conference immediately turned to the Stabroek News reporter and advised him that there was no such report, and that they had already checked the matter with the Canadian authorities. The President likewise indicated that he was not aware of any such release. Instead of clarifying the fact that there was no such release and that previous reports to this effect were inaccurate, the page 3 story attempts to suggest that the President undertook to check whether there was such a release. In fact, there was no such release, and this was made clear at the press conference, including by other reporters to the Stabroek News reporter.”
In response, Persaud said he was unaware that SN should be influenced by the antics of other reporters at the briefing who appeared to be doing the government’s bidding. Persaud said he was gratified that the question was asked and the report that was subsequently carried in SN was based on an official release from the Canadian International Development Agency. Further, contrary to the GINA release, President Jagdeo had committed to checking the report as conveyed in the SN report. Persaud said a transcript of the press conference revealed the President as saying as follows: “Okay, I’m going to check what CIDA’s statement… I’m gonna check on the statement. Let’s get a copy of the statement.”
Clico and the failure of leadership
Clico and the failure of leadership
Posted By Stabroek staff On March 2, 2009 @ 5:01 am In Editorial | 4 Comments
http://www.stabroeknews.com/2009/editorial/03/02/clico-and-the-failure-of-leadership/
On January 30, the day Trinidad was rocked by the news that the government would in effect be bailing out C L Financial – or CLICO – as it is branded in the region, a terse statement was issued in Georgetown by the Chief Executive Officer of its operations here, Ms Geeta Singh-Knight to the effect that Clico (Guyana) was “solid” and that none of its assets were intertwined with the troubled Clico (Trinidad) or Clico Investment Bank and that developments involving the parent company had no financial impact on it. However, she never uttered a word about The Bahamas.
With the placing of Clico (Guyana) under judicial management on Thursday, Ms Singh-Knight’s statement may well go down in insurance history as the most audacious attempt to throw a positive light on what was clearly a disastrous situation. That attempt collapsed in ignominy after the liquidation of Clico (Bahamas). One can almost understand why the statement was made. Ms Singh-Knight was presiding over a volatile situation and the slightest slip of the tongue could trigger an enormous run on the business. After all, confidence is the name of the game. But what if it did precipitate a run of seismic proportions? A well-operated business with the requisite statutory funds salted away and a prudent mix of short-term and long-term investments should be able to withstand a stampede to its doors while at the same time assuaging those who might have been thinking of doing the same. That was clearly not the case. Nearly 53% of its assets were locked away in the doomed Clico (Bahamas) which had in turn sunk most of its monies in other C L Financial subsidiaries which had in turn gone on a riotous real estate spending spree in Miami only to see that market implode leaving assets not easily converted into cash and worth much less than they were purchased for.
So when the inevitable run began on Clico (Guyana) it came under enormous pressure and quietly sold its Berbice Bridge bond to the New Building Society all the time hoping for the best. The liquidation of Clico (Bahamas) ended the charade as there was no chance of liquefying the petrified Miami assets.
As we said, Ms Singh-Knight’s stance could almost be understood. What however was inexplicable were the stances adopted by President Jagdeo, Finance Minister Singh and Insurance Commissioner van Beek. While the Finance Minister did summon a meeting on January 30 with Ms van Beek and Ms Singh-Knight it remains unclear what his objectives were as he did not spell them out. He requested some information from Ms Singh-Knight though it was never made clear what was requested, what was supplied and what he then expected to happen.
A GINA statement on that meeting said the following “Minister Singh requested that the company supply to the Commissioner of Insurance by Monday further information on the financial status of the Group, details of the transaction agreed with the authorities in Trinidad and Tobago, and of the implications of these developments for the operations of the Group as a whole and the Guyana company in particular.”
Given what is now known about Clico (Guyana’s) asset impairments the Minister of Finance did not act decisively although it must be noted that the Commissioner of Insurance is fully empowered under the Insurance Act 1998 to act on her own. What Minister Singh should immediately have heard from Ms van Beek was that Clico (Guyana) was heavily invested in Clico (Bahamas) and this had been a constant source of worry to the Insurance Commissioner, which the public learnt from President Jagdeo at Thursday’s press conference. Minister Singh should also have been apprised of a large debt to Clico (Trinidad) which could have potentially been called in since the Trinidad government was now in charge of it. These dangers should then have been raised immediately by the Minister with Ms Singh-Knight and failing a convincing response or one shorn of inspiration beyond `we are solid’ the Minister could very well have communicated his deep concern and the best course of action would have been to move to have Clico (Guyana) placed immediately under judicial management as is catered for by the law with the option of a return to normal business if the situation stabilized. What was unacceptable was the issuing of a statement that didn’t reflect the seriousness of the matter. Notwithstanding the Minister’s position, the Commissioner of Insurance was free to act on her own but did not.
The business-as-usual stance was continued by President Jagdeo at a press conference on February 5. When asked about Clico (Guyana), he said that the only problem he could envisage in the short-term was a mismatch between liabilities and assets but evinced no major cause for concern. It now transpires, based on his statement at Thursday’s press conference, that even at this time his government was in touch with The Bahamas to determine how the situation could be retrieved and options such as purchasing the Miami real estate were considered. This effort by Guyana failed and that in itself was disappointing. Was Bahamian Prime Minister and Finance Minister Ingraham approached about the prospect of the failure of Clico (Bahamas) precipitating the collapse of Clico (Guyana)? Could he not be importuned to consider some option that would keep both subsidiaries going until the real estate knot was disentangled? Couldn’t both governments make simultaneous deposits in the subsidiaries as a means of boosting confidence as was done by the government in Barbados? That was the kind of effort that was required if a real attempt was to be made to protect the policyholders and depositors of Clico (Guyana). Indeed, the Bahamian government only sought the liquidation of the company after what it said were “discussions with the principals of the company over many months urging and directing them to inject additional capital and liquidity into the company but to no avail”.
All along, however, the ball was in the court of Commissioner van Beek and she unfortunately chose not to act. If she was concerned about the scale of the Bahamas deposit for more than a year and had even communicated this recently to Clico (Guyana) why didn’t she take steps against the company as the Insurance Act permits? The only conclusion that can be drawn from this inaction was that she did not think that the $6B Clico (Guyana) deposit with the Bahamas company could be in any jeopardy, did not anticipate the liquidation of Clico (Bahamas) and did not expect that Clico (Guyana) would eventually be in this crisis.
At his press conference on Thursday, President Jagdeo read a statement entitled in part `The Government of Guyana takes steps to protect policyholders of CLICO…’ Those steps came four weeks too late. In the four lost weeks, there is a real possibility that those with better knowledge of what was going on and with access to market information were able to make sizeable withdrawals of deposits at Clico (Guyana) and surrender their policies while hundreds of salt-of-the-earth policyholders who were less aware of what was going on were left in the lurch though they, too, should have had an equal opportunity to redeem their investments in Clico (Guyana). Moreover, it was also possible that there continued to be transfers from the Guyana company to its parent company and subsidiaries. In the judicial management process, all of the transactions that ensued between January 30 and last Thursday should be detailed for further inspection by the regulatory authorities.
In the light of all of the information that is now available, it was unacceptable for President Jagdeo not to detail on February 5 the fullness of the danger that faced Clico (Guyana). In particular, he should have spoken about the danger to the National Insurance Scheme’s $6B deposit in Clico (Guyana) which pertains to thousands of ordinary Guyanese. His role was not to put the best spin possible on the situation but to tell it as it was warts and all. That’s what leaders do and that’s what the Guyanese public would have expected.
The way forward requires action on two fronts. Legislative reforms are clearly necessary. It is inappropriate for the Commissioner of Insurance to be assigned the role of judicial manager when her actions or lack thereof could have contributed to the debacle at Clico (Guyana). Management should be under the jurisdiction of the court but executed by someone other than the Commissioner of Insurance.
The Insurance Act doesn’t adequately address the case of insurance companies which also act as deposit-taking institutions like Clico (Guyana) was. The Act establishes benchmarks in relation to the insurance business but is silent on the impairment of ordinary bank-like deposits that could arise from this commingling and did arise from the general conduct of the company’s business. There should be explicit provisions on what a multi-purpose company of this type is obligated to do to provide reasonable protections to depositors and the steps necessary to prevent risk from the insurance side demolishing the deposit accounts.
Moreover, given the labyrinthine-like related-party transactions that led to the ravaging of Clico (Guyana) and other subsidiaries the legislation must expressly set out limits on the value of transactions that can be conducted with related parties and the types of securities that would be absolutely essential to these transactions. Allied to that the Commissioner of Insurance must be adequately resourced and accoutred to track the maze-like transactions engaged in by companies like Clico (Guyana) and to test the safety of the investments. Presumably the Caricom financial services agreement referred to on Friday by former Barbados PM Owen Arthur would be helpful in this case.
Finally, no matter how sound the legislation, if it isn’t properly utilized by the regulator the law will be of no use. We can find no good reason why Ms van Beek didn’t act earlier and decisively. Even before the winding up point, Clause 65 enables broad intervention powers which include requiring the realization of investments before the period specified and to take whatever actions are necessary to protect policyholders from the risk that the insurer might not be able to meet its liabilities. Clause 32 also mandates the appointment of an actuary every three years into the financial condition of the insurer. It would be interesting to see what the last triennial report on Clico (Guyana) said. Ms van Beek’s deferring to the Minister of Finance and the President suggests that they were the ones calling the shots. That should not have been the case.
Posted By Stabroek staff On March 2, 2009 @ 5:01 am In Editorial | 4 Comments
http://www.stabroeknews.com/2009/editorial/03/02/clico-and-the-failure-of-leadership/
On January 30, the day Trinidad was rocked by the news that the government would in effect be bailing out C L Financial – or CLICO – as it is branded in the region, a terse statement was issued in Georgetown by the Chief Executive Officer of its operations here, Ms Geeta Singh-Knight to the effect that Clico (Guyana) was “solid” and that none of its assets were intertwined with the troubled Clico (Trinidad) or Clico Investment Bank and that developments involving the parent company had no financial impact on it. However, she never uttered a word about The Bahamas.
With the placing of Clico (Guyana) under judicial management on Thursday, Ms Singh-Knight’s statement may well go down in insurance history as the most audacious attempt to throw a positive light on what was clearly a disastrous situation. That attempt collapsed in ignominy after the liquidation of Clico (Bahamas). One can almost understand why the statement was made. Ms Singh-Knight was presiding over a volatile situation and the slightest slip of the tongue could trigger an enormous run on the business. After all, confidence is the name of the game. But what if it did precipitate a run of seismic proportions? A well-operated business with the requisite statutory funds salted away and a prudent mix of short-term and long-term investments should be able to withstand a stampede to its doors while at the same time assuaging those who might have been thinking of doing the same. That was clearly not the case. Nearly 53% of its assets were locked away in the doomed Clico (Bahamas) which had in turn sunk most of its monies in other C L Financial subsidiaries which had in turn gone on a riotous real estate spending spree in Miami only to see that market implode leaving assets not easily converted into cash and worth much less than they were purchased for.
So when the inevitable run began on Clico (Guyana) it came under enormous pressure and quietly sold its Berbice Bridge bond to the New Building Society all the time hoping for the best. The liquidation of Clico (Bahamas) ended the charade as there was no chance of liquefying the petrified Miami assets.
As we said, Ms Singh-Knight’s stance could almost be understood. What however was inexplicable were the stances adopted by President Jagdeo, Finance Minister Singh and Insurance Commissioner van Beek. While the Finance Minister did summon a meeting on January 30 with Ms van Beek and Ms Singh-Knight it remains unclear what his objectives were as he did not spell them out. He requested some information from Ms Singh-Knight though it was never made clear what was requested, what was supplied and what he then expected to happen.
A GINA statement on that meeting said the following “Minister Singh requested that the company supply to the Commissioner of Insurance by Monday further information on the financial status of the Group, details of the transaction agreed with the authorities in Trinidad and Tobago, and of the implications of these developments for the operations of the Group as a whole and the Guyana company in particular.”
Given what is now known about Clico (Guyana’s) asset impairments the Minister of Finance did not act decisively although it must be noted that the Commissioner of Insurance is fully empowered under the Insurance Act 1998 to act on her own. What Minister Singh should immediately have heard from Ms van Beek was that Clico (Guyana) was heavily invested in Clico (Bahamas) and this had been a constant source of worry to the Insurance Commissioner, which the public learnt from President Jagdeo at Thursday’s press conference. Minister Singh should also have been apprised of a large debt to Clico (Trinidad) which could have potentially been called in since the Trinidad government was now in charge of it. These dangers should then have been raised immediately by the Minister with Ms Singh-Knight and failing a convincing response or one shorn of inspiration beyond `we are solid’ the Minister could very well have communicated his deep concern and the best course of action would have been to move to have Clico (Guyana) placed immediately under judicial management as is catered for by the law with the option of a return to normal business if the situation stabilized. What was unacceptable was the issuing of a statement that didn’t reflect the seriousness of the matter. Notwithstanding the Minister’s position, the Commissioner of Insurance was free to act on her own but did not.
The business-as-usual stance was continued by President Jagdeo at a press conference on February 5. When asked about Clico (Guyana), he said that the only problem he could envisage in the short-term was a mismatch between liabilities and assets but evinced no major cause for concern. It now transpires, based on his statement at Thursday’s press conference, that even at this time his government was in touch with The Bahamas to determine how the situation could be retrieved and options such as purchasing the Miami real estate were considered. This effort by Guyana failed and that in itself was disappointing. Was Bahamian Prime Minister and Finance Minister Ingraham approached about the prospect of the failure of Clico (Bahamas) precipitating the collapse of Clico (Guyana)? Could he not be importuned to consider some option that would keep both subsidiaries going until the real estate knot was disentangled? Couldn’t both governments make simultaneous deposits in the subsidiaries as a means of boosting confidence as was done by the government in Barbados? That was the kind of effort that was required if a real attempt was to be made to protect the policyholders and depositors of Clico (Guyana). Indeed, the Bahamian government only sought the liquidation of the company after what it said were “discussions with the principals of the company over many months urging and directing them to inject additional capital and liquidity into the company but to no avail”.
All along, however, the ball was in the court of Commissioner van Beek and she unfortunately chose not to act. If she was concerned about the scale of the Bahamas deposit for more than a year and had even communicated this recently to Clico (Guyana) why didn’t she take steps against the company as the Insurance Act permits? The only conclusion that can be drawn from this inaction was that she did not think that the $6B Clico (Guyana) deposit with the Bahamas company could be in any jeopardy, did not anticipate the liquidation of Clico (Bahamas) and did not expect that Clico (Guyana) would eventually be in this crisis.
At his press conference on Thursday, President Jagdeo read a statement entitled in part `The Government of Guyana takes steps to protect policyholders of CLICO…’ Those steps came four weeks too late. In the four lost weeks, there is a real possibility that those with better knowledge of what was going on and with access to market information were able to make sizeable withdrawals of deposits at Clico (Guyana) and surrender their policies while hundreds of salt-of-the-earth policyholders who were less aware of what was going on were left in the lurch though they, too, should have had an equal opportunity to redeem their investments in Clico (Guyana). Moreover, it was also possible that there continued to be transfers from the Guyana company to its parent company and subsidiaries. In the judicial management process, all of the transactions that ensued between January 30 and last Thursday should be detailed for further inspection by the regulatory authorities.
In the light of all of the information that is now available, it was unacceptable for President Jagdeo not to detail on February 5 the fullness of the danger that faced Clico (Guyana). In particular, he should have spoken about the danger to the National Insurance Scheme’s $6B deposit in Clico (Guyana) which pertains to thousands of ordinary Guyanese. His role was not to put the best spin possible on the situation but to tell it as it was warts and all. That’s what leaders do and that’s what the Guyanese public would have expected.
The way forward requires action on two fronts. Legislative reforms are clearly necessary. It is inappropriate for the Commissioner of Insurance to be assigned the role of judicial manager when her actions or lack thereof could have contributed to the debacle at Clico (Guyana). Management should be under the jurisdiction of the court but executed by someone other than the Commissioner of Insurance.
The Insurance Act doesn’t adequately address the case of insurance companies which also act as deposit-taking institutions like Clico (Guyana) was. The Act establishes benchmarks in relation to the insurance business but is silent on the impairment of ordinary bank-like deposits that could arise from this commingling and did arise from the general conduct of the company’s business. There should be explicit provisions on what a multi-purpose company of this type is obligated to do to provide reasonable protections to depositors and the steps necessary to prevent risk from the insurance side demolishing the deposit accounts.
Moreover, given the labyrinthine-like related-party transactions that led to the ravaging of Clico (Guyana) and other subsidiaries the legislation must expressly set out limits on the value of transactions that can be conducted with related parties and the types of securities that would be absolutely essential to these transactions. Allied to that the Commissioner of Insurance must be adequately resourced and accoutred to track the maze-like transactions engaged in by companies like Clico (Guyana) and to test the safety of the investments. Presumably the Caricom financial services agreement referred to on Friday by former Barbados PM Owen Arthur would be helpful in this case.
Finally, no matter how sound the legislation, if it isn’t properly utilized by the regulator the law will be of no use. We can find no good reason why Ms van Beek didn’t act earlier and decisively. Even before the winding up point, Clause 65 enables broad intervention powers which include requiring the realization of investments before the period specified and to take whatever actions are necessary to protect policyholders from the risk that the insurer might not be able to meet its liabilities. Clause 32 also mandates the appointment of an actuary every three years into the financial condition of the insurer. It would be interesting to see what the last triennial report on Clico (Guyana) said. Ms van Beek’s deferring to the Minister of Finance and the President suggests that they were the ones calling the shots. That should not have been the case.
General practical guidance for persons who have relationships with Clico (Guyana)
General practical guidance for persons who have relationships with Clico (Guyana)
Posted By Stabroek staff On March 1, 2009 @ 5:01 am In Letters | 1 Comment
http://www.stabroeknews.com/2009/letters/03/01/general-practical-guidance-for-persons-who-have-relationships-with-clico-guyana/
Dear Editor,
Following the order by Chief Justice Ian Chang appointing Ms Maria Van Beek, the Commissioner of Insurance as Judicial Manager of the Clico Life and General Insurance Company (SA) Inc, Ram & McRae has been receiving enquiries from a range of persons who have various types of relationships with the company.
This appointment is the first of its kind in Guyana and Business Page of today’s date has raised a number of issues about the process. However, since the appointment is now in place we consider it may be helpful to readers if we share with them some practical guidance of a general nature on the understanding that Ram and McRae is not engaging in offering professional advice.
1. Persons who have claims with the company.
a) Lodge all outstanding claims.
b) Re-submit any claims lodged but not processed.
2. Ordinary creditors
Submit your claims as soon as possible.
3. Service providers under medical schemes including doctors and hospitals
a) Submit all outstanding claims against the company as soon as possible.
b) Re-submit any claims lodged but not processed.
c) Obtain from the Judicial Manager confirmation that all claims against the company at the date of her appointment will be settled and that the existing terms and conditions still apply to any future services.
4. Employers and Workers’ Representatives who have life, pension and medical schemes
Seek urgent meeting with the Judicial Manager about
a) the status of existing scheme, its liabilites and assets including the nature of the investments and
b) the continuation of the scheme. In those discussions ask the Judicial Manager to advise both in her capacity as Commissioner of Insurance and as Judicial Manager. Bear in mind the real possibility that it may be necessary to move the policy elsewhere. This will have actuarial implications. The Judicial Manager should also be asked to obtain clarification from the President of his undertaking to protect such Schemes.
5. Holders of life insurance policies
Confirm with the Judicial Manager the validity of the policies and the implications for renewals. We would advise that you obtain confirmation before renewing any such policies.
You may wish to ask the Commissioner about the implications for the continuation of existing policies with another company. This too will have actuarial implications.
6. Holders of general insurance policies
Confirm with the Judicial Manager the validity of the policies to the end of their terms and the implications for renewals. We would advise that you obtain confirmation before renewing any such policies.
Again you may wish to ask the Commissioner about the implications for the continuation of existing policies with another company including reduced premium for good record.
General
a) If you can afford it or if you think your case warrants it, you should seek legal advice.
b) The guidance offered by this letter is naturally subject to any further order the court makes or bulletins issued by the Judicial Manager
Yours faithfully,
Christopher Ram
Managing Partner
Ram & McRae
Chartered Accountants
Posted By Stabroek staff On March 1, 2009 @ 5:01 am In Letters | 1 Comment
http://www.stabroeknews.com/2009/letters/03/01/general-practical-guidance-for-persons-who-have-relationships-with-clico-guyana/
Dear Editor,
Following the order by Chief Justice Ian Chang appointing Ms Maria Van Beek, the Commissioner of Insurance as Judicial Manager of the Clico Life and General Insurance Company (SA) Inc, Ram & McRae has been receiving enquiries from a range of persons who have various types of relationships with the company.
This appointment is the first of its kind in Guyana and Business Page of today’s date has raised a number of issues about the process. However, since the appointment is now in place we consider it may be helpful to readers if we share with them some practical guidance of a general nature on the understanding that Ram and McRae is not engaging in offering professional advice.
1. Persons who have claims with the company.
a) Lodge all outstanding claims.
b) Re-submit any claims lodged but not processed.
2. Ordinary creditors
Submit your claims as soon as possible.
3. Service providers under medical schemes including doctors and hospitals
a) Submit all outstanding claims against the company as soon as possible.
b) Re-submit any claims lodged but not processed.
c) Obtain from the Judicial Manager confirmation that all claims against the company at the date of her appointment will be settled and that the existing terms and conditions still apply to any future services.
4. Employers and Workers’ Representatives who have life, pension and medical schemes
Seek urgent meeting with the Judicial Manager about
a) the status of existing scheme, its liabilites and assets including the nature of the investments and
b) the continuation of the scheme. In those discussions ask the Judicial Manager to advise both in her capacity as Commissioner of Insurance and as Judicial Manager. Bear in mind the real possibility that it may be necessary to move the policy elsewhere. This will have actuarial implications. The Judicial Manager should also be asked to obtain clarification from the President of his undertaking to protect such Schemes.
5. Holders of life insurance policies
Confirm with the Judicial Manager the validity of the policies and the implications for renewals. We would advise that you obtain confirmation before renewing any such policies.
You may wish to ask the Commissioner about the implications for the continuation of existing policies with another company. This too will have actuarial implications.
6. Holders of general insurance policies
Confirm with the Judicial Manager the validity of the policies to the end of their terms and the implications for renewals. We would advise that you obtain confirmation before renewing any such policies.
Again you may wish to ask the Commissioner about the implications for the continuation of existing policies with another company including reduced premium for good record.
General
a) If you can afford it or if you think your case warrants it, you should seek legal advice.
b) The guidance offered by this letter is naturally subject to any further order the court makes or bulletins issued by the Judicial Manager
Yours faithfully,
Christopher Ram
Managing Partner
Ram & McRae
Chartered Accountants
The exposure of NIS to Clico (Guyana) is a far more important problem than an erroneous blog
The exposure of NIS to Clico (Guyana) is a far more important problem than an erroneous blog
Posted By Stabroek staff On March 2, 2009 @ 5:08 am In Letters | 4 Comments
http://www.stabroeknews.com/2009/letters/03/02/the-exposure-of-nis-to-clico-guyana-is-a-far-more-important-problem-than-an-erroneous-blog/
Dear Editor,
Permit me to respond to your news report, ‘Rumors of GBTI bail-out false,’ (February 28), in which it was reported that the police became involved in an investigation of a Guyanese-run blog, ‘Living Guyana,’ for allowing an “erroneous” post related to a run being made on the GBTI by depositors in the wake of the CLICO fiasco.
First, as a regular reader of items on that blog, I have to admit there are some posts that definitely raised my eyebrows and also my ire, but I have since come to realize the blog is living up to its creed of antagonizing the status quo, by engaging in harsh criticism of local media operatives, politicians (government and opposition) and just about any public figure in and out of Guyana. On a few occasions it has managed to scoop the real news before the three major dailies, so it has developed an audience that seeks ‘table or bar talk’ information.
I thought the post about GBTI was plausible given the prevailing circumstances that generated a great degree of concern among investors and depositors. I subsequently read where the blog owners offered a mea culpa and retracted the offending post, but instead of accepting the mea culpa the authorities are looking for blood by ‘siccing’ the police on the owners to determine who authored the offending article.
This brings me to my third and most important point: the authorities. Are the authorities using this blog’s alleged offence as a deliberate distraction from their own failure in a much bigger and more serious problem, which is the safety of $6B of Guyanese money? NIS money is Guyanese money, not government money! That’s what Guyanese paid from their blood, sweat and tears for future eventualities! This, to me, is worse than any erroneous report of a raid being done by depositors at any local bank in the wake of CLICO/NIS!
In your Friday, February 27 edition, there was a news article, ‘President defends handling of CLICO crisis,’ and it exposed the President, the Commissioner of Insurance and the CEO of CLICO as being irresponsible in dealing with the CLICO crisis long before its volcanic-like eruption that spewed ashes of doubt and anger across the country.
For example, according to the President, CLICO (Guyana) had invested $6.9 billion (US$34 million) in CLICO (Bahamas) which represented 53 per cent of the firm’s assets, and while the firm should not have had such a substantial portion of its investment overseas, the company persisted with this practice despite “instructions from the Commissioner to the company over a year ago and more recently to reduce this exposure.”
The auditors, Deloitte and Touche had noted in the 2007 accounts that the Guyana company was also in breach of Section 55 of the Insurance Act which required that it invest 85% of its statutory fund locally. So how long ago did the President know about this pending explosion? And since CLICO was in breach of Section 55 of the Insurance Act since 2007, where are the penalties against CLICO to force it to correct this financial incongruity since 2007?
When the global meltdown started last September, the President also boldly assured Guyanese investors/depositors that his government had a ‘firewall’ in place to shield the local financial sector from the effects of the meltdown. To suggest he had a ‘firewall’ would imply he had called in and spoken to leading members of the local financial sector, so there is a bigger problem with his claim of having a ‘firewall’ that failed to protect $6B belonging to Guyanese in the NIS than any erroneous report on a blog of Guyanese raiding GBTI.
Another point of interest in your February 27 article relates to a February 5 press conference where the head of state was asked about CLICO (Guyana) and he gave the assurance that his government was monitoring the situation closely and that their interests were protected. Given what has since obtained, wasn’t the President making an erroneous statement on his ‘firewall’ claim?
That press conference followed the spectacular takeover by the Trinidad Central Bank of parts of the CL Financial Group on January 30, in which CLICO (Guyana) declared that same day that it was solid and its statutory fund was in good standing. In fact, CLICO (Guyana) released a statement in which it wished “to make it clear that developments in Port of Spain, Trinidad involving CL Financial Limited have no financial impact on CLlCO (Guyana). CLlCO (Guyana) is a separate entity within the CL Financial Group, and none of its assets are intertwined with CLlCO [Trinidad] or CLlCO lnvestment Bank.”
Given what has since obtained, wasn’t the CEO of CLICO (Guyana) making an erroneous or misleading statement by advertently or inadvertently omitting mention of CLICO (Bahamas) which was where the real problem rested for Guyanese private investors (and the NIS especially which had $6B invested)? And the authorities have the temerity to make noise about going after a blog for making an erroneous report?
And where was Guyana’s Commissioner of Insurance Maria van Beek in the midst of all of this? How can she be absolved of culpability?
But what has to be even more disturbing, Editor, is the President’s callous response to a question about the huge loss which could potentially be suffered by the NIS in this matter. According to your newspaper, “When quizzed [Thursday] about the funds that the NIS had invested in CLICO (Guyana) , Jagdeo said that the National Insurance Scheme is an independent body that covers workers from all over Guyana and that the government had no authority to influence where such entities made investments. He explained that if the NIS were to lose its investment of $6 billion, the government will not be bound to provide the lost sum of money. He explained that the NIS will have to raise funds by raising its rates or other means to make up this amount.”
The NIS is an independent body and the government had no authority to influence where such entities made investments, yet the government took NIS money to help finance the Berbice Bridge? Worse, the President is sending a clear signal that his government is blameless in this mess and those contributors who sacrificed over the decades to the coffers of the NIS might possibly face increased rates to help recoup the NIS loss!
I wish I could say this particular remark attributed to the President was erroneous, but the least I could say is that the President appears to be totally oblivious of the plight of pensioners and others who rely on the NIS for better services. Instead of going after a blog, the authorities should be worried about the huge blot on their record as ‘safe-keepers’ of the people’s finances!
Yours faithfully,
Emile Mervin
Posted By Stabroek staff On March 2, 2009 @ 5:08 am In Letters | 4 Comments
http://www.stabroeknews.com/2009/letters/03/02/the-exposure-of-nis-to-clico-guyana-is-a-far-more-important-problem-than-an-erroneous-blog/
Dear Editor,
Permit me to respond to your news report, ‘Rumors of GBTI bail-out false,’ (February 28), in which it was reported that the police became involved in an investigation of a Guyanese-run blog, ‘Living Guyana,’ for allowing an “erroneous” post related to a run being made on the GBTI by depositors in the wake of the CLICO fiasco.
First, as a regular reader of items on that blog, I have to admit there are some posts that definitely raised my eyebrows and also my ire, but I have since come to realize the blog is living up to its creed of antagonizing the status quo, by engaging in harsh criticism of local media operatives, politicians (government and opposition) and just about any public figure in and out of Guyana. On a few occasions it has managed to scoop the real news before the three major dailies, so it has developed an audience that seeks ‘table or bar talk’ information.
I thought the post about GBTI was plausible given the prevailing circumstances that generated a great degree of concern among investors and depositors. I subsequently read where the blog owners offered a mea culpa and retracted the offending post, but instead of accepting the mea culpa the authorities are looking for blood by ‘siccing’ the police on the owners to determine who authored the offending article.
This brings me to my third and most important point: the authorities. Are the authorities using this blog’s alleged offence as a deliberate distraction from their own failure in a much bigger and more serious problem, which is the safety of $6B of Guyanese money? NIS money is Guyanese money, not government money! That’s what Guyanese paid from their blood, sweat and tears for future eventualities! This, to me, is worse than any erroneous report of a raid being done by depositors at any local bank in the wake of CLICO/NIS!
In your Friday, February 27 edition, there was a news article, ‘President defends handling of CLICO crisis,’ and it exposed the President, the Commissioner of Insurance and the CEO of CLICO as being irresponsible in dealing with the CLICO crisis long before its volcanic-like eruption that spewed ashes of doubt and anger across the country.
For example, according to the President, CLICO (Guyana) had invested $6.9 billion (US$34 million) in CLICO (Bahamas) which represented 53 per cent of the firm’s assets, and while the firm should not have had such a substantial portion of its investment overseas, the company persisted with this practice despite “instructions from the Commissioner to the company over a year ago and more recently to reduce this exposure.”
The auditors, Deloitte and Touche had noted in the 2007 accounts that the Guyana company was also in breach of Section 55 of the Insurance Act which required that it invest 85% of its statutory fund locally. So how long ago did the President know about this pending explosion? And since CLICO was in breach of Section 55 of the Insurance Act since 2007, where are the penalties against CLICO to force it to correct this financial incongruity since 2007?
When the global meltdown started last September, the President also boldly assured Guyanese investors/depositors that his government had a ‘firewall’ in place to shield the local financial sector from the effects of the meltdown. To suggest he had a ‘firewall’ would imply he had called in and spoken to leading members of the local financial sector, so there is a bigger problem with his claim of having a ‘firewall’ that failed to protect $6B belonging to Guyanese in the NIS than any erroneous report on a blog of Guyanese raiding GBTI.
Another point of interest in your February 27 article relates to a February 5 press conference where the head of state was asked about CLICO (Guyana) and he gave the assurance that his government was monitoring the situation closely and that their interests were protected. Given what has since obtained, wasn’t the President making an erroneous statement on his ‘firewall’ claim?
That press conference followed the spectacular takeover by the Trinidad Central Bank of parts of the CL Financial Group on January 30, in which CLICO (Guyana) declared that same day that it was solid and its statutory fund was in good standing. In fact, CLICO (Guyana) released a statement in which it wished “to make it clear that developments in Port of Spain, Trinidad involving CL Financial Limited have no financial impact on CLlCO (Guyana). CLlCO (Guyana) is a separate entity within the CL Financial Group, and none of its assets are intertwined with CLlCO [Trinidad] or CLlCO lnvestment Bank.”
Given what has since obtained, wasn’t the CEO of CLICO (Guyana) making an erroneous or misleading statement by advertently or inadvertently omitting mention of CLICO (Bahamas) which was where the real problem rested for Guyanese private investors (and the NIS especially which had $6B invested)? And the authorities have the temerity to make noise about going after a blog for making an erroneous report?
And where was Guyana’s Commissioner of Insurance Maria van Beek in the midst of all of this? How can she be absolved of culpability?
But what has to be even more disturbing, Editor, is the President’s callous response to a question about the huge loss which could potentially be suffered by the NIS in this matter. According to your newspaper, “When quizzed [Thursday] about the funds that the NIS had invested in CLICO (Guyana) , Jagdeo said that the National Insurance Scheme is an independent body that covers workers from all over Guyana and that the government had no authority to influence where such entities made investments. He explained that if the NIS were to lose its investment of $6 billion, the government will not be bound to provide the lost sum of money. He explained that the NIS will have to raise funds by raising its rates or other means to make up this amount.”
The NIS is an independent body and the government had no authority to influence where such entities made investments, yet the government took NIS money to help finance the Berbice Bridge? Worse, the President is sending a clear signal that his government is blameless in this mess and those contributors who sacrificed over the decades to the coffers of the NIS might possibly face increased rates to help recoup the NIS loss!
I wish I could say this particular remark attributed to the President was erroneous, but the least I could say is that the President appears to be totally oblivious of the plight of pensioners and others who rely on the NIS for better services. Instead of going after a blog, the authorities should be worried about the huge blot on their record as ‘safe-keepers’ of the people’s finances!
Yours faithfully,
Emile Mervin
Sunday, March 1, 2009
The ostrich and the sandhill
The ostrich and the sandhill
Stabroek News. Editorial. March 1, 2009
http://www.stabroeknews.com/2009/editorial/03/01/the-ostrich-and-the-sandhill/
So the global financial turmoil has finally reached these shores. If the government really believed all those reassuring words they have been plying us with all this time, they should now be in a state of total shock. Alternatively, perhaps they didn’t believe what they were telling us after all, and instead of sticking their heads ostrich-like in the sand, they planted their rear ends firmly on the sandhill where the bad news was buried.
But bad news will out, and on Thursday a very tetchy President was at pains to defend how his government had handled the Clico crisis. Mr Jagdeo was asked if the government had not deceived the public by its reluctance to reveal the true state of Clico (Guyana) earlier, to which he responded, “So what would we have said? You give me a hypothetical situation… I should have gotten up one day and said this institution would collapse tomorrow? We feel it would collapse tomorrow? That’s what you expect me to say huh? Because the institution is still very viable. We feel that over time we can recover all the assets, clear all the liabilities from assets, so that the treasury is not exposed. The worst that will happen, maybe, we think, is that you may have to wind up the institution… But we still hope to cover all of their liabilities from assets.”
The inference could possibly be drawn from this that at the time the citizenry was being fed the ‘monitoring’ mantra, the government may have known more than it was saying, but that at the same time, it took the line it did because it believed it could “cover all [Clico (Guyana)’s] liabilities from assets.” A kind of combination of the ostrich and the sandhill, you might say.
The truth of the matter is, however, that the exact chronology of what the government knew and when, and exactly what they did as a consequence of what they knew, is a little fuzzy. At a February 5 press conference, we reported President Jagdeo as saying that the government was monitoring the situation closely, but that citizens could be assured that their interests were protected. We also reported him as telling the media that he had looked at the liquidity position of Clico (Guyana) as well as at its assets and liabilities. The only problem he could envisage in the short term, he said, was a mismatch between liabilities and assets in the event of significant changes in the company’s investments abroad. “But we are paying close attention to the issue,” he was quoted as reassuring everyone.
How close, one wonders. And did he mean that if there was a ‘mismatch’ between assets and liabilities in the short term, nevertheless, citizens could still be assured that their interests were protected? Nobody knows, although as indicated above three weeks later, on the day of his second press conference, he seemed to be suggesting that they could. The least that can be said about this is that not everyone connected to the financial sector shares the President’s confidence. In addition, considering that last Wednesday a petition was filed in the High Court as a consequence of which Clico (Guyana) was placed under judicial management, all citizens had more than a little justification for treating his remarks with scepticism. That petition followed news the day before that Clico (Bahamas) had gone into liquidation pursuant to an order granted by the Supreme Court there. It was this development which forced the government here to act because of the size of the local company’s investment in the Bahamas firm.
The degree of Clico (Guyana)’s exposure to Clico (Bahamas) was alluded to by the President at his Thursday press conference. The former company had invested $6.9B in the latter, representing 53% of its assets, and Mr Jagdeo conceded that the local entity should not have had such a large proportion of its assets invested outside the country. It should be noted that this is in contravention of the Insurance Act which requires that 85% of an insurance company’s statutory fund be invested locally, and in 2007 Deloitte and Touche, the auditors of Clico (Guyana)’s accounts, drew attention to the company’s failure to comply with the statute.
That the government was fully cognizant of the local company’s flouting of the law was made clear by the President, who was quoted in our report in Friday’s edition as saying that Clico (Guyana) had persisted in the practice despite “instructions from the Commissioner [of Insurance] to the company over a year ago and recently to reduce this exposure.” Well this is interesting, more especially as our report goes on to indicate that 51% of Clico (Guyana)’s assets were invested in the Bahamas company in 2007, and that this figure increased to 53% in 2008. What action, if any, Commissioner of Insurance Maria van Beek took to ensure compliance with the law and her instructions was not mentioned; all that can be said is that if she did anything at all it was ineffectual, which at the very least would be an adverse reflection on the regulatory environment.
As stated above, when he spoke to the media on February 5, President Jagdeo informed those present that he had looked at the assets and liabilities of Clico (Guyana), leaving no doubt that he must have been aware of the company’s Bahamas investment. Did he inquire into the status of that investment? Did any of the responsible officials do so? One would have expected that detailed investigations would have commenced from the time the news broke about CL Financial Ltd of Trinidad a month ago. Certainly one does not imagine that government officials would just have accepted the soothing noises emanating from Clico (Guyana) as gospel; to do so would have been nothing short of irresponsible.
So when did they find out that there might be problems with Clico (Bahamas)? Even if they did not know before, like the rest of the nation they surely must have been alerted on February 8 that the Bahamian company might hold the fate of the local insurance entity in its hands. In his Business Page of that date Mr Christopher Ram in very careful language had mentioned (among other things) that in 2008 AM Best Co Inc, a financial services credit rating organisation had “downgraded Clico (Bahamas) Limited’s financial strength rating…” He had gone on to observe that the ratings for Colonial Life Insurance Company (Trinidad) had been similarly downgraded on February 2, “as news broke of its troubles…” He had also adverted to the fact that 59% of the Bahamas company’s assets had been invested in a related company, Clico Enterprises Ltd.
He had ended by recommending that the authorities act now, and in addition to other measures, actually send someone to the Bahamas (and Trinidad) to obtain details of what the situation really was. Clearly this piece of sensible advice was not taken, and in the absence of any statements to the contrary, one must assume as well that no other kind of contact was made at the time with the Bahamian authorities, such as with Prime Minister Ingraham, who holds the portfolio of Minister of Finance. However, if it was, and the Government of Guyana was in fact advised of the exposure of the Bahamas company and the likely evolution of events there, why did it not act immediately here? Why wait until the liquidation of Clico (Bahamas)?
As it was, the fears of Clico (Guyana) customers were assuaged neither by the statements issued by the company’s CEO, Ms Geeta Singh-Knight, nor by those of the government, and many moved to close their accounts long before the bombshell news of last Thursday. Certainly after February 8, the discerning reader of Business Page would have had questions in his/her mind, so why not the government?
The entire fiasco raises a host of issues, not least those of regulation and government action or inaction at critical junctures. However, there is also the matter of what the public is told, and when. Given what has happened citizens will now have little faith in anything the administration has to say on the subject of the financial sector, thereby undermining public confidence in our financial institutions as a whole, despite the fact they are solid. It is true, of course, that if the government is doing nothing there is very little it can tell people without causing a panic. The bottom line is, however, that if it had some notion of the situation with Clico (Bahamas) it should have acted much sooner, in which case it would not have been required to dissemble in public; and if it didn’t know, it stands condemned on the grounds of not discharging its obligations to the people of Guyana in the way that it should have.
Stabroek News. Editorial. March 1, 2009
http://www.stabroeknews.com/2009/editorial/03/01/the-ostrich-and-the-sandhill/
So the global financial turmoil has finally reached these shores. If the government really believed all those reassuring words they have been plying us with all this time, they should now be in a state of total shock. Alternatively, perhaps they didn’t believe what they were telling us after all, and instead of sticking their heads ostrich-like in the sand, they planted their rear ends firmly on the sandhill where the bad news was buried.
But bad news will out, and on Thursday a very tetchy President was at pains to defend how his government had handled the Clico crisis. Mr Jagdeo was asked if the government had not deceived the public by its reluctance to reveal the true state of Clico (Guyana) earlier, to which he responded, “So what would we have said? You give me a hypothetical situation… I should have gotten up one day and said this institution would collapse tomorrow? We feel it would collapse tomorrow? That’s what you expect me to say huh? Because the institution is still very viable. We feel that over time we can recover all the assets, clear all the liabilities from assets, so that the treasury is not exposed. The worst that will happen, maybe, we think, is that you may have to wind up the institution… But we still hope to cover all of their liabilities from assets.”
The inference could possibly be drawn from this that at the time the citizenry was being fed the ‘monitoring’ mantra, the government may have known more than it was saying, but that at the same time, it took the line it did because it believed it could “cover all [Clico (Guyana)’s] liabilities from assets.” A kind of combination of the ostrich and the sandhill, you might say.
The truth of the matter is, however, that the exact chronology of what the government knew and when, and exactly what they did as a consequence of what they knew, is a little fuzzy. At a February 5 press conference, we reported President Jagdeo as saying that the government was monitoring the situation closely, but that citizens could be assured that their interests were protected. We also reported him as telling the media that he had looked at the liquidity position of Clico (Guyana) as well as at its assets and liabilities. The only problem he could envisage in the short term, he said, was a mismatch between liabilities and assets in the event of significant changes in the company’s investments abroad. “But we are paying close attention to the issue,” he was quoted as reassuring everyone.
How close, one wonders. And did he mean that if there was a ‘mismatch’ between assets and liabilities in the short term, nevertheless, citizens could still be assured that their interests were protected? Nobody knows, although as indicated above three weeks later, on the day of his second press conference, he seemed to be suggesting that they could. The least that can be said about this is that not everyone connected to the financial sector shares the President’s confidence. In addition, considering that last Wednesday a petition was filed in the High Court as a consequence of which Clico (Guyana) was placed under judicial management, all citizens had more than a little justification for treating his remarks with scepticism. That petition followed news the day before that Clico (Bahamas) had gone into liquidation pursuant to an order granted by the Supreme Court there. It was this development which forced the government here to act because of the size of the local company’s investment in the Bahamas firm.
The degree of Clico (Guyana)’s exposure to Clico (Bahamas) was alluded to by the President at his Thursday press conference. The former company had invested $6.9B in the latter, representing 53% of its assets, and Mr Jagdeo conceded that the local entity should not have had such a large proportion of its assets invested outside the country. It should be noted that this is in contravention of the Insurance Act which requires that 85% of an insurance company’s statutory fund be invested locally, and in 2007 Deloitte and Touche, the auditors of Clico (Guyana)’s accounts, drew attention to the company’s failure to comply with the statute.
That the government was fully cognizant of the local company’s flouting of the law was made clear by the President, who was quoted in our report in Friday’s edition as saying that Clico (Guyana) had persisted in the practice despite “instructions from the Commissioner [of Insurance] to the company over a year ago and recently to reduce this exposure.” Well this is interesting, more especially as our report goes on to indicate that 51% of Clico (Guyana)’s assets were invested in the Bahamas company in 2007, and that this figure increased to 53% in 2008. What action, if any, Commissioner of Insurance Maria van Beek took to ensure compliance with the law and her instructions was not mentioned; all that can be said is that if she did anything at all it was ineffectual, which at the very least would be an adverse reflection on the regulatory environment.
As stated above, when he spoke to the media on February 5, President Jagdeo informed those present that he had looked at the assets and liabilities of Clico (Guyana), leaving no doubt that he must have been aware of the company’s Bahamas investment. Did he inquire into the status of that investment? Did any of the responsible officials do so? One would have expected that detailed investigations would have commenced from the time the news broke about CL Financial Ltd of Trinidad a month ago. Certainly one does not imagine that government officials would just have accepted the soothing noises emanating from Clico (Guyana) as gospel; to do so would have been nothing short of irresponsible.
So when did they find out that there might be problems with Clico (Bahamas)? Even if they did not know before, like the rest of the nation they surely must have been alerted on February 8 that the Bahamian company might hold the fate of the local insurance entity in its hands. In his Business Page of that date Mr Christopher Ram in very careful language had mentioned (among other things) that in 2008 AM Best Co Inc, a financial services credit rating organisation had “downgraded Clico (Bahamas) Limited’s financial strength rating…” He had gone on to observe that the ratings for Colonial Life Insurance Company (Trinidad) had been similarly downgraded on February 2, “as news broke of its troubles…” He had also adverted to the fact that 59% of the Bahamas company’s assets had been invested in a related company, Clico Enterprises Ltd.
He had ended by recommending that the authorities act now, and in addition to other measures, actually send someone to the Bahamas (and Trinidad) to obtain details of what the situation really was. Clearly this piece of sensible advice was not taken, and in the absence of any statements to the contrary, one must assume as well that no other kind of contact was made at the time with the Bahamian authorities, such as with Prime Minister Ingraham, who holds the portfolio of Minister of Finance. However, if it was, and the Government of Guyana was in fact advised of the exposure of the Bahamas company and the likely evolution of events there, why did it not act immediately here? Why wait until the liquidation of Clico (Bahamas)?
As it was, the fears of Clico (Guyana) customers were assuaged neither by the statements issued by the company’s CEO, Ms Geeta Singh-Knight, nor by those of the government, and many moved to close their accounts long before the bombshell news of last Thursday. Certainly after February 8, the discerning reader of Business Page would have had questions in his/her mind, so why not the government?
The entire fiasco raises a host of issues, not least those of regulation and government action or inaction at critical junctures. However, there is also the matter of what the public is told, and when. Given what has happened citizens will now have little faith in anything the administration has to say on the subject of the financial sector, thereby undermining public confidence in our financial institutions as a whole, despite the fact they are solid. It is true, of course, that if the government is doing nothing there is very little it can tell people without causing a panic. The bottom line is, however, that if it had some notion of the situation with Clico (Bahamas) it should have acted much sooner, in which case it would not have been required to dissemble in public; and if it didn’t know, it stands condemned on the grounds of not discharging its obligations to the people of Guyana in the way that it should have.
Business Page - Clico, contagion, containment and concealment
Business Page - Clico, contagion, containment and concealment
Posted By Christopher Ram On
Stabroek News, March 1, 2009
http://www.stabroeknews.com/2009/features/03/01/business-page-clico-contagion-containment-and-concealment/
If a loss of public moneys should occur and, at the time of that loss, a Minister or official has caused or contributed to that loss through misconduct or through deliberate or serious disregard of reasonable standards of care, that Minister or official shall be personally liable to the Government for the amount of the loss.
Introduction
This is a direct quote from section 49 of the Fiscal Management and Accountability Act which President Jagdeo signed into law in late December 2003. The Clico affair and related matters may be a good time to draw attention to the provision which has never been tested at the higher levels. When the dust settles, the taxpayers, NIS contributors and beneficiaries, members of pension and medical schemes and depositors in Clico and potentially in Hand-in-Hand Trust (HIHT) and the New Building Society could lose collectively several billions from the fall-out in the financial sector.
Other consequences will be equally severe, if not always as direct. Jobs will have to go. Moreover, with perhaps billions invested in Stanford Investment Bank (Stanford) by the HIHT and other so far unidentified pension schemes and individuals, their losses and their income stream - all in US dollars – will be gone. With the assertion that our economy is ring-fenced having proved naively misleading, and claims by Clico, the President, the Minister of Finance and the Commissioner of Insurance - all acknowledged as very bright persons - having proved to have been misguided at best and been guilty of misrepresentations at worst, there is a loss of confidence not only in the judgment and competence of our economic managers, but also in the independence and ability of the regulators to protect the public interest.
Last Wednesday, Ms Maria Van Beek, the Commissioner of Insurance, presented a petition to the court seeking an order that Clico be wound up or alternatively, that a Judicial Manager be appointed. One day later, Ms Van Beek was granted her wish by Chief Justice Ian Chang in an order returnable tomorrow, Monday, appointing her as Judicial Manager of the entity which she has supervised for more than five years. Instead of immediately issuing a statement advising affected persons – numbering tens of thousands – of the implications that flow from the order, Ms Van Beek proceeded to the Office of the President for a press conference, where along with the Minister of Finance Dr Ashni Singh and the Governor of the Bank of Guyana (the Bank) Mr Lawrence Williams, she sat silently as the President made excuse after excuse for the failure of Clico and gave vague statements about protecting pensioners without once using the G word – guarantee - which is what people, worried about their savings, pensions, medical schemes and jobs most need.
Blame The Bahamas
President Jagdeo, who is not the responsible Minister, told the nation that it was the collapse of Clico Bahamas that triggered the action by the commissioner. Yet that is not what the commissioner said in an affidavit sworn to the court one day earlier. She said it was the business model and investment policies pursued by the company. The President, seeking to protect Ms Van Beek and by extension his Minister of Finance, told the nation that the commissioner had told Clico more than one year ago that they should have regularised their investment position. So, did the commissioner write the company and then sit back as they breached the law even further? The problem with the President’s style of intervention is that at best, he does not check the accuracy and implications of the statements he makes and increasingly often, he is wrong. There is no need to remind anyone of the damage caused by such lack of respect for accuracy as we saw in the saga of tax concessions necessitating an amendment in the law to facilitate Queens Atlantic Investment Inc’s tax concessions.
In matters financial details are important and so is judgment, particularly when it involves self-serving statements. When the President assured the nation on February 5 that Clico’s assets were sufficient to meet its liabilities he was repeating a company line without having read the December 31, 2007 analysis showing that 81% of the company’s assets was invested in related parties, all of which were under various degrees of threat (SN February 7 and Business Page Feb 8 reported on this analysis). In fact as Minister-Extraordinaire he should have known that the 2008 figures had shown some deterioration, suggesting that the commissioner’s call was ineffective and/or ignored. Both he and the Minister of Finance should have wondered how a company that issued “insurance policies” with premiums running into billions of dollars only needed a statutory fund of under fifty million dollars.
Disregard for reasonable care
The disregard for reasonable care does not end with them. The nation would have expected the Commissioner of Insurance and the Bank of Guyana to recognise that those policies were investment products dressed up as insurance. It is hard to believe that such a major issue would have escaped the attention of the Bank with illustrious directors of the calibre of Drs Gobin Ganga, Prem Misir and Cyril Solomon.
Given the poor oversight exercised by the regulators in general and the Commissioner of Insurance in particular, the court would have been reluctant to appoint Ms Van Beek to manage the operations of Clico under its supervision. Her demonstrable failures to act expose her inappropriateness for such a job, or even to have been the lead regulator for an industry which also required legal expertise. The problem for the court is that the law appears to have given it little choice. Yes, the court could have made a winding up order on the ground that Clico is insolvent, and use the more practical test of “inability to pay one’s debt on demand” that may very well have been the case. But the Insurance Act makes it a bit more difficult for the court by requiring a determination of the value of a troubled company’s assets and liabilities, never an easy task even for accountants. The President compounded the difficulty by volunteering that he hoped that the entire sum from The Bahamas company would be recovered even as he failed to address the billion dollar debt owed by CRL, the Guyana forestry product subsidiary of the troubled CL Financial which has guaranteed the debt.
Once the court chose not to go with the winding-up option – though this may still happen at some time – section 68 of the act gave it no choice but to appoint the commissioner as the Judicial Manager. Apart from the fact that her past supervision of Clico inspires little confidence, and her inattention to detail was embarrassingly exposed when she wrongly identified the name of Clico in her petition, what then becomes of her statutory role and function as Commissioner of Insurance over Clico and the rest of the industry, including Fidelity, which would ordinarily require full-time attention? Additionally, there appears to be a conflict between her two roles which the court would have to consider given that the court itself is not equipped to make business judgments.
NIS
The poor NIS could stand to lose six billion dollars in investments in Clico which may not have been made in compliance with the NIS Act. This is no small change. It is the equivalent of more than 20% of earnings accumulated over forty years by the Scheme and about one year’s benefits payment. To check on the propriety of the investments, I wrote Minister of Finance Dr Ashni Singh a letter on February 24, pointing out that the NIS Act only allows the NIS to invest in securities approved of by the Co-operative Finance Administration (COFA) established under the Co-operative Financial Institutions. I pointed out that he is not only the Chairman of COFA but as Minister, appoints the Board of COFA. The Minister of course also appoints the Board of the NIS. I asked him the following questions:
1. The names of the persons he appointed to COFA currently serving as members of the administration, and the commencement and termination dates of their appointments.
2. The securities which COFA approved for purposes of investment.
3. Whether the NIS had sought and received approval for any investments other than those determined by the administration and if so, the securities which have been so approved.
4. Whether the administration during his tenure as Minister has ever taken the opportunity under section 4 of the act for its Chairman or Secretary to attend any meeting of the National Insurance Board, and in particular the meeting at which any decision was made by the board for any special investments.
I am awaiting his response. But if it were owing to the Minister’s “misconduct or through deliberate or serious disregard of reasonable standards of care” COFA did not approve of NIS investing in Clico the Minister would have some serious questions to answer, not to Business Page but to the nation.
To make matters worse for the NIS, Clico was allowed, even while Commissioner Van Beek, the Minister of Finance, the President and the Bank of Guyana were “monitoring” the imperilled insurance company, to divest itself of $1.5 billion dollars of bonds in the Berbice Bridge Company Inc. The Board of the NIS, all the members of which are either ducking or hiding, needs to explain to the nation whether the terms of their $6 billion investment in Clico were breached by the sale of the bonds and whether the Scheme feels that its investment is any safer now.
The New Building Society
More than ten years after privately as a director of NBS and publicly as a columnist, I advocated that the country’s only building society with more than one hundred thousand persons’ savings and loans involved be brought under the supervision of the Bank of Guyana, the Bank exercises no jurisdiction over the NBS. During that time the government has drastically increased the lending limits while relaxing the conditions and security required to back the loans made. One only has to consider the Savings and Loans crisis in the US in the late eighties to appreciate the possible consequences of such laxity. But there is more to worry about. The board has also become increasingly politicized with its current Chairman being Head of the Public Service in the Office of the President and the decision about the new Head Office involving hundreds of millions of dollars being made against technical professional advice. Quietly, the NBS has been joined in the failed attempt to prevent the demise of Clico. The NBS has bought over $1.5 billion dollars of bonds in the Berbice Bridge Company Inc from Clico, and it is unlikely that this would have happened without the official agreement and sanction of the Office of the President in which both the Chairman of the NIS and the Chairman and one director of the NBS are based, or the Ministry of Finance which has to approve investment in securities issued by the Berbice Bridge Company.
The danger is obvious. The NBS with assets in excess of $30 billion is unsupervised and unregulated but subject to powerful political influences. If the bridge company which is proving the sceptics right about the hugely optimistic traffic projections, and the board, which is chaired by the Clico CEO, cannot meet its financial obligations to bondholders, $1.8 billion of the funds of the NBS – representing about 40% of its reserves – would be at risk. That is real money which added to the Head Office being constructed at a cost of approximately $800 million could pose real trouble for the society.
Once again the recurring players are the President, the Minister of Finance and the Bank of Guyana, the last-named of which has failed to assume any jurisdiction as it should have. Of course this in no way exonerates the Chairman and directors of the NBS from their fiduciary obligations.
Hand-in-Hand Trust
The President also referred at the press conference to the investments made in Stanford by the Hand-in-Hand Trust, which holds depositors’ funds and manages some of the country’s largest pension schemes. He said that in the case of the HIHT, “total current exposure” to the Stanford Group amounts to $827 million or US$4 million, in addition to $297 million or US$1.5 million invested on behalf of pension funds. He then went on to confuse the nation by referring to the direct exposure which he said represented 9 per cent of the total assets of HIHT.” Whether it is 9% or closer to 10% is less important than the fact that this is not how one measures exposure. With the head of the Bank of Guyana and the Minister of Finance sitting in at the press conference as his technical advisors, the President as an economist should know that the measure should have been total exposure of the company – direct and indirect – relative not against total assets which do not belong to the company but only to equity which does. In other words he was downplaying the problem in more than one way.
The question has also been raised whether it was permissible for the HIHT, regulated by the Bank of Guyana under the Financial Institutions Act, to place so much of its funds in a single investment – what lay persons would refer to as putting too many eggs in one basket, but which the more technically-minded Bank of Guyana would call asset concentration. In the case of the failed Globe Trust, the Bank of Guyana received more than a mild criticism from then Chief Justice Carl Singh for its poor oversight. It must now hope that by some miracle the investment by HIHT in Stanford will be recovered. If that does not happen, then the Bank can expect not only a strong rebuke but perhaps even a lawsuit.
Conclusion
Faced with a financial crisis, the first step is containment. Instead we had concealment with the consequence that it has widened and enlarged now including, with potential negative and costly consequences, the National Insurance Scheme, the New Building Society, pension schemes and savings accounts of hundreds of thousands. Confidence is also crucial but this comes only from the competence, judgement and independence of our leaders and regulators. None of these qualities has been adequately demonstrated in this instance by the President, the Minister of Finance, the Commissioner of Insurance, the Bank of Guyana, the National Insurance Scheme and the New Building Society.
The rest of the financial sector and perhaps with one exception the insurance sector all appear very solid. Every effort must be made not to contaminate them and to restore confidence in the entire system. I believe that the National Assembly needs to take an active role in this.
Posted By Christopher Ram On
Stabroek News, March 1, 2009
http://www.stabroeknews.com/2009/features/03/01/business-page-clico-contagion-containment-and-concealment/
If a loss of public moneys should occur and, at the time of that loss, a Minister or official has caused or contributed to that loss through misconduct or through deliberate or serious disregard of reasonable standards of care, that Minister or official shall be personally liable to the Government for the amount of the loss.
Introduction
This is a direct quote from section 49 of the Fiscal Management and Accountability Act which President Jagdeo signed into law in late December 2003. The Clico affair and related matters may be a good time to draw attention to the provision which has never been tested at the higher levels. When the dust settles, the taxpayers, NIS contributors and beneficiaries, members of pension and medical schemes and depositors in Clico and potentially in Hand-in-Hand Trust (HIHT) and the New Building Society could lose collectively several billions from the fall-out in the financial sector.
Other consequences will be equally severe, if not always as direct. Jobs will have to go. Moreover, with perhaps billions invested in Stanford Investment Bank (Stanford) by the HIHT and other so far unidentified pension schemes and individuals, their losses and their income stream - all in US dollars – will be gone. With the assertion that our economy is ring-fenced having proved naively misleading, and claims by Clico, the President, the Minister of Finance and the Commissioner of Insurance - all acknowledged as very bright persons - having proved to have been misguided at best and been guilty of misrepresentations at worst, there is a loss of confidence not only in the judgment and competence of our economic managers, but also in the independence and ability of the regulators to protect the public interest.
Last Wednesday, Ms Maria Van Beek, the Commissioner of Insurance, presented a petition to the court seeking an order that Clico be wound up or alternatively, that a Judicial Manager be appointed. One day later, Ms Van Beek was granted her wish by Chief Justice Ian Chang in an order returnable tomorrow, Monday, appointing her as Judicial Manager of the entity which she has supervised for more than five years. Instead of immediately issuing a statement advising affected persons – numbering tens of thousands – of the implications that flow from the order, Ms Van Beek proceeded to the Office of the President for a press conference, where along with the Minister of Finance Dr Ashni Singh and the Governor of the Bank of Guyana (the Bank) Mr Lawrence Williams, she sat silently as the President made excuse after excuse for the failure of Clico and gave vague statements about protecting pensioners without once using the G word – guarantee - which is what people, worried about their savings, pensions, medical schemes and jobs most need.
Blame The Bahamas
President Jagdeo, who is not the responsible Minister, told the nation that it was the collapse of Clico Bahamas that triggered the action by the commissioner. Yet that is not what the commissioner said in an affidavit sworn to the court one day earlier. She said it was the business model and investment policies pursued by the company. The President, seeking to protect Ms Van Beek and by extension his Minister of Finance, told the nation that the commissioner had told Clico more than one year ago that they should have regularised their investment position. So, did the commissioner write the company and then sit back as they breached the law even further? The problem with the President’s style of intervention is that at best, he does not check the accuracy and implications of the statements he makes and increasingly often, he is wrong. There is no need to remind anyone of the damage caused by such lack of respect for accuracy as we saw in the saga of tax concessions necessitating an amendment in the law to facilitate Queens Atlantic Investment Inc’s tax concessions.
In matters financial details are important and so is judgment, particularly when it involves self-serving statements. When the President assured the nation on February 5 that Clico’s assets were sufficient to meet its liabilities he was repeating a company line without having read the December 31, 2007 analysis showing that 81% of the company’s assets was invested in related parties, all of which were under various degrees of threat (SN February 7 and Business Page Feb 8 reported on this analysis). In fact as Minister-Extraordinaire he should have known that the 2008 figures had shown some deterioration, suggesting that the commissioner’s call was ineffective and/or ignored. Both he and the Minister of Finance should have wondered how a company that issued “insurance policies” with premiums running into billions of dollars only needed a statutory fund of under fifty million dollars.
Disregard for reasonable care
The disregard for reasonable care does not end with them. The nation would have expected the Commissioner of Insurance and the Bank of Guyana to recognise that those policies were investment products dressed up as insurance. It is hard to believe that such a major issue would have escaped the attention of the Bank with illustrious directors of the calibre of Drs Gobin Ganga, Prem Misir and Cyril Solomon.
Given the poor oversight exercised by the regulators in general and the Commissioner of Insurance in particular, the court would have been reluctant to appoint Ms Van Beek to manage the operations of Clico under its supervision. Her demonstrable failures to act expose her inappropriateness for such a job, or even to have been the lead regulator for an industry which also required legal expertise. The problem for the court is that the law appears to have given it little choice. Yes, the court could have made a winding up order on the ground that Clico is insolvent, and use the more practical test of “inability to pay one’s debt on demand” that may very well have been the case. But the Insurance Act makes it a bit more difficult for the court by requiring a determination of the value of a troubled company’s assets and liabilities, never an easy task even for accountants. The President compounded the difficulty by volunteering that he hoped that the entire sum from The Bahamas company would be recovered even as he failed to address the billion dollar debt owed by CRL, the Guyana forestry product subsidiary of the troubled CL Financial which has guaranteed the debt.
Once the court chose not to go with the winding-up option – though this may still happen at some time – section 68 of the act gave it no choice but to appoint the commissioner as the Judicial Manager. Apart from the fact that her past supervision of Clico inspires little confidence, and her inattention to detail was embarrassingly exposed when she wrongly identified the name of Clico in her petition, what then becomes of her statutory role and function as Commissioner of Insurance over Clico and the rest of the industry, including Fidelity, which would ordinarily require full-time attention? Additionally, there appears to be a conflict between her two roles which the court would have to consider given that the court itself is not equipped to make business judgments.
NIS
The poor NIS could stand to lose six billion dollars in investments in Clico which may not have been made in compliance with the NIS Act. This is no small change. It is the equivalent of more than 20% of earnings accumulated over forty years by the Scheme and about one year’s benefits payment. To check on the propriety of the investments, I wrote Minister of Finance Dr Ashni Singh a letter on February 24, pointing out that the NIS Act only allows the NIS to invest in securities approved of by the Co-operative Finance Administration (COFA) established under the Co-operative Financial Institutions. I pointed out that he is not only the Chairman of COFA but as Minister, appoints the Board of COFA. The Minister of course also appoints the Board of the NIS. I asked him the following questions:
1. The names of the persons he appointed to COFA currently serving as members of the administration, and the commencement and termination dates of their appointments.
2. The securities which COFA approved for purposes of investment.
3. Whether the NIS had sought and received approval for any investments other than those determined by the administration and if so, the securities which have been so approved.
4. Whether the administration during his tenure as Minister has ever taken the opportunity under section 4 of the act for its Chairman or Secretary to attend any meeting of the National Insurance Board, and in particular the meeting at which any decision was made by the board for any special investments.
I am awaiting his response. But if it were owing to the Minister’s “misconduct or through deliberate or serious disregard of reasonable standards of care” COFA did not approve of NIS investing in Clico the Minister would have some serious questions to answer, not to Business Page but to the nation.
To make matters worse for the NIS, Clico was allowed, even while Commissioner Van Beek, the Minister of Finance, the President and the Bank of Guyana were “monitoring” the imperilled insurance company, to divest itself of $1.5 billion dollars of bonds in the Berbice Bridge Company Inc. The Board of the NIS, all the members of which are either ducking or hiding, needs to explain to the nation whether the terms of their $6 billion investment in Clico were breached by the sale of the bonds and whether the Scheme feels that its investment is any safer now.
The New Building Society
More than ten years after privately as a director of NBS and publicly as a columnist, I advocated that the country’s only building society with more than one hundred thousand persons’ savings and loans involved be brought under the supervision of the Bank of Guyana, the Bank exercises no jurisdiction over the NBS. During that time the government has drastically increased the lending limits while relaxing the conditions and security required to back the loans made. One only has to consider the Savings and Loans crisis in the US in the late eighties to appreciate the possible consequences of such laxity. But there is more to worry about. The board has also become increasingly politicized with its current Chairman being Head of the Public Service in the Office of the President and the decision about the new Head Office involving hundreds of millions of dollars being made against technical professional advice. Quietly, the NBS has been joined in the failed attempt to prevent the demise of Clico. The NBS has bought over $1.5 billion dollars of bonds in the Berbice Bridge Company Inc from Clico, and it is unlikely that this would have happened without the official agreement and sanction of the Office of the President in which both the Chairman of the NIS and the Chairman and one director of the NBS are based, or the Ministry of Finance which has to approve investment in securities issued by the Berbice Bridge Company.
The danger is obvious. The NBS with assets in excess of $30 billion is unsupervised and unregulated but subject to powerful political influences. If the bridge company which is proving the sceptics right about the hugely optimistic traffic projections, and the board, which is chaired by the Clico CEO, cannot meet its financial obligations to bondholders, $1.8 billion of the funds of the NBS – representing about 40% of its reserves – would be at risk. That is real money which added to the Head Office being constructed at a cost of approximately $800 million could pose real trouble for the society.
Once again the recurring players are the President, the Minister of Finance and the Bank of Guyana, the last-named of which has failed to assume any jurisdiction as it should have. Of course this in no way exonerates the Chairman and directors of the NBS from their fiduciary obligations.
Hand-in-Hand Trust
The President also referred at the press conference to the investments made in Stanford by the Hand-in-Hand Trust, which holds depositors’ funds and manages some of the country’s largest pension schemes. He said that in the case of the HIHT, “total current exposure” to the Stanford Group amounts to $827 million or US$4 million, in addition to $297 million or US$1.5 million invested on behalf of pension funds. He then went on to confuse the nation by referring to the direct exposure which he said represented 9 per cent of the total assets of HIHT.” Whether it is 9% or closer to 10% is less important than the fact that this is not how one measures exposure. With the head of the Bank of Guyana and the Minister of Finance sitting in at the press conference as his technical advisors, the President as an economist should know that the measure should have been total exposure of the company – direct and indirect – relative not against total assets which do not belong to the company but only to equity which does. In other words he was downplaying the problem in more than one way.
The question has also been raised whether it was permissible for the HIHT, regulated by the Bank of Guyana under the Financial Institutions Act, to place so much of its funds in a single investment – what lay persons would refer to as putting too many eggs in one basket, but which the more technically-minded Bank of Guyana would call asset concentration. In the case of the failed Globe Trust, the Bank of Guyana received more than a mild criticism from then Chief Justice Carl Singh for its poor oversight. It must now hope that by some miracle the investment by HIHT in Stanford will be recovered. If that does not happen, then the Bank can expect not only a strong rebuke but perhaps even a lawsuit.
Conclusion
Faced with a financial crisis, the first step is containment. Instead we had concealment with the consequence that it has widened and enlarged now including, with potential negative and costly consequences, the National Insurance Scheme, the New Building Society, pension schemes and savings accounts of hundreds of thousands. Confidence is also crucial but this comes only from the competence, judgement and independence of our leaders and regulators. None of these qualities has been adequately demonstrated in this instance by the President, the Minister of Finance, the Commissioner of Insurance, the Bank of Guyana, the National Insurance Scheme and the New Building Society.
The rest of the financial sector and perhaps with one exception the insurance sector all appear very solid. Every effort must be made not to contaminate them and to restore confidence in the entire system. I believe that the National Assembly needs to take an active role in this.
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