MAJORITY shareholders of CL Financial Limited (CLF) have initiated legal action against the State in a bid to stop the sale of Colonial Life Insurance Company (Clico) and British American Insurance Trinidad Ltd (BAT).
At a press conference in March last year, Finance Minister Colm Imbert said the two main bidders were Sagicor and Maritime, with the preferred bidder being Sagicor, even though the company’s bid was $300 million lower than Maritime.
In their 30-page pre-action protocol letter, sent to Imbert, Central Bank Governor Alvin Hilaire and Attorney General Faris Al-Rawi the shareholders’ attorneys Nalini Jagnarine asked for the ceasing of the sale and an independent valuation done on the companies.
On Saturday, Al-Rawi said he did not receive the letter dated January 31.
In May last year, Hilaire cited a confidentiality agreement that prevented him from commenting on the bidding, who was the preferred buyer or the value of the transaction.
The bank took emergency control of Clico/BAT when the parent conglomerate, CL Financial, approached the State in 2009 for a bailout. Taxpayers funded an over $20 billion payout to prevent the company from collapsing and refunded depositors.
The legal letter referred to a Central Bank report in 2019 which stated a valuation done on Clico’s portfolio done in 2016. International firm Oliver Wyman was hired to consult on the sale, the letter stated.
Jagnarine stated that the Central Bank failed to relinquish control of the entities after it became evident that they were profitable, contrary to Section 44 of the Central Bank Act. The Act gave the Central Bank the authority to seize control of the entities. This was done in 2009 and continues today.
Clause 9.1 of the agreement for the bailout, she said, stipulated that CLF repay the State all the monies used to bailout the cash-strapped conglomerate. She added that CLF was no longer insolvent as evident by two former central bank governor, Winston Dookeran in 2011 and Jwala Rambarran in 2017.
Both men, she said, publicly stated that CLF’s statutory fund had been replenished and was in a position to repay its debt to the State and other liabilities and remain with a profit.
“The governor (Hillaire)...on June 21, 2018 was reported as having said: The Central Bank is not in the business of running an insurance company. We have a policy and it’s been managed well but we would like to (cede control) as quickly as feasible while maintaining financial stability.”
Jagnarine added that any attempt to sell the insurance company will be null and void given that the Central Bank should no longer be in control of the insurance companies as the conditions for it to be in control were no longer applicable. This, she said, opened the Central Bank up to liability to set aside the sale.
She added that even if the orders to sell the companies came from the Finance Minister and not a decision of the Central Bank, Imbert’s directive is also null for the same reason. She regarded the sale as illegal.
Jagnarine called for the full details of the valuation to sell the insurance companies saying that the Central Bank lacks the power to sell at a lesser value than the best offer received. Jagnarine added that under the Insurance Act, the Central Bank ought to have considered that by selling the insurance companies to Sagicor, it would create a monopoly, contrary to the Act.
As a result, she is asking that the State immediately cease from taking any further steps towards selling the insurance portfolios and the State relinquish the power of the insurance companies back to CLF with immediate effect.
In 2013, the Central Bank initiated a civil lawsuit against former top-ranking CLF executives and their privately-owned investment companies. The lawsuit claimed Clico's assets and income were fraudulently misappropriated to the detriment of policyholders and mutual fund investors. The Central Bank's lawsuit is based on an investigation conducted by forensic accountant Bob Lindquist following the January 2009 collapse of the CL Financial empire.
The State paid hundreds of millions in legal fees during a Commission of Inquiry into the collapse of the Clico.
In March last year, Al-Rawi told the Parliament that the inquiry into Clico and the Hindu Credit Union cost taxpayers an estimated half a billion dollars.
In 2012, the Office of the Director of Public Prosecutions entered an agreement with international accounting firm Deloitte and Touche to assist the police in a criminal investigation into the operations of CLF and the collapse of Clico. That matter is still under investigation.