TWO Sundays ago, a group of CL Financial shareholders sent a pre-action protocol letter threatening to embark on legal action aimed at getting the Central Bank to relinquish its control of CLICO and stop the sale of the insurance company’s traditional portfolio to Sagicor Financial.
That initial letter from the CL Financial shareholders is interesting for several reasons, including the fact that its release took the shareholders four months from the announcement of Sagicor as the preferred purchaser of the CLICO traditional portfolio by the Central Bank on September 30, 2019.
In responding to the reporting by two Sunday newspapers of the pre-action protocol letter, Finance Minister Colm Imbert tweeted the following: “CLICO and CL Financial still owe the Government billions of dollars of taxpayers’ funds for the 2009 bailout and CL Financial is under the control of a court-appointed liquidator.
“Why do these former owners of these companies feel they could bully the Government into sacrificing the public interest.”
The first sentence of Mr Imbert’s tweet is accurate—the fact is that CLICO and CL Financial do still owe the Government billions of dollars and CL Financial is under the control of a court-appointed liquidator.
The reference to the shareholders of CL Financial as the former owners of “these companies” is not accurate. As far as I am aware, the facts are that the shareholders of CL Financial still own 100 per cent of the group and CL Financial, as a company, still owns 51 per cent of CLICO. Corporation Sole, which is represented by the Minister of Finance, owns 49 per cent of CLICO and about 14 per of CL Financial.
Therefore, it is clear in law that the CL Financial shareholders have property rights in both the group and its insurance subsidiary and according to T&T’s Republic Constitution, they have the fundamental human right to the “enjoyment of (their) property,” as well as “the right not to be deprived thereof except by due process of law.”
The common-sense approach to establishing where the public interest lies with regard to both CLICO and CL Financial must be premised on the fact that the shareholders of those companies have a constitutional right to the enjoyment of their property (the shares in those entities).
It is my view, then, that holding on to someone’s property for one day longer than absolutely necessary is an abuse of that person’s constitutional right to the enjoyment of property and “the right not to be deprived thereof except by due process of law”.
So, the rights of the shareholders of CL Financial and CLICO are not to be trifled with–more so because of the fact that they have been deprived of their property rights in those companies for more than 11 years.
So, while the shareholders have rights, what is crystal clear to me is that the taxpayers of this country have rights as well.
The taxpayers have a right to ensure that every dollar that the State pumped into bailing out the CL Financial group in 2009 and beyond is recovered and placed back into the Consolidated Fund.
That is because the $24 billion that was spent bailing out the CL Financial group–and this includes the thousands of owners of CLICO short-term investment products who agreed to assign their policies to the Government and the thousands of depositors with CLICO investment Bank who were transitioned into the safety of First Citizens Bank–was tax revenue that could have been used to increase the salaries of public servants and teachers and build roads, hospitals, a forensic centre etc.
In other words–and again, this must be the common-sense approach–the CL Financial/CLICO shareholders have the right to recover their property in the companies ONLY WHEN their debt to the taxpayers of T&T has been fully repaid and those taxpayers have been made whole.
The CL Financial/CLICO
debt to T&T’s taxpayers
In responding to a question in Parliament on November 27, 2019, Mr Imbert revealed that the amount owed by CL Financial and its subsidiaries under the Memorandum of Understanding and the shareholders agreement was $23.095 billion.
Mr Imbert said: “Of the total $23.1 billion, the debt owed to the Government by CLICO was $18.085 billion, inclusive of interest of $2.29 billion. To date the only member of the CL Financial group that has repaid monies to the Government is CLICO.
“As at September 30, 2019, CLICO has repaid a total of $14,986,000,000 including interest in the amount of $2.159 billion. As at September 30, 2019, the amount still outstanding by the CL Financial group and its subsidiaries is $8,109,000,000, plus legal fees, interests and other costs, of which CLICO’s outstanding debt is $3,098,000,000. inclusive of interest to date.”
According to the Minister of Finance, therefore, the total debt of CL Financial and its subsidiaries to taxpayers is $8.109 billion. Of that amount, CLICO owes taxpayers $3.098 billion and CL Financial’s non-CLICO subsidiaries owe taxpayers $5.011 billion.
Can CLICO repay $3.098 b?
According to CLICO’s 2018 financial statement, the insurer had assets worth $15.33 billion and liabilities worth $12.66 billion as at December 31 2018. This left a surplus of assets over liabilities of $2.67 billion. In other words, and assuming the insurer’s balance sheet did not change between the end of 2018 and the end of September 2019, if CLICO paid off all of its liabilities, it would still be left with assets worth $2.67 billion.
Since CLICO’s liabilities include the $3.098 billion that Mr Imbert said the insurer still owed taxpayers up to the end of September 2019, there is no doubt that the company can fully repay its debt to taxpayers.
What’s more is that CLICO’s 2018 financials reveal the company has close to $9 billion in Government debt securities on its balance sheet.
If CLICO still owes taxpayers $3.098 billion, the equivalent amount of Government securities can be transferred back to the Government and cancelled, which would reduce the Government’s total debt by that amount. Or $3.098 billion of CLICO’s Government securities can be offered to the general public with the Government placing the resulting cash in the Consolidated Fund.
What then of CL
Financial’s $5 b debt?
In my view, it would be much more difficult–and would therefore take a much longer time–for the Government to recover $5 billion from CL Financial than it would be to recover the $3.098 billion from CLICO. This is primarily because CLICO has always had more assets than CL Financial.
The main asset of CL Financial now is its 44.87 per cent stake in Angostura and the group’s 92,551,212 shares had a market value of $1.5 billion on Monday. If CLICO’s $2.67 billion surplus at the end of 2018 is factored into the calculation, that will bring potential CL Financial recoverables to $4.17 billion.
Would it be in the public interest for the Government to release CLICO if its CL FInancial debt has not been fully repaid?