FORMER Clico Investment Bank (CIB) chairman Andre Monteil, his company Stone Street Capital (SSC), and the bank’s former CEO Richard Trotman have been ordered to repay a whopping $78 million, plus almost $20 million in interest, to the bank.
In a recent decision, Justice Avason Quinlan-Williams also gave CIB permission to trace assets owned by the two men and SSC from a $78 million loan agreement back in 2007.
The CIB – which is currently in compulsory liquidation and therefore under the management of the Central Bank (CB) — sued Monteil. It alleged that a $78 million loan paid out in 2007 to facilitate Stone Street Capital’s acquisition of Clico’s 43.8 per cent interest in the Home Mortgage Bank (HMB), of which he was chairman until April 2008, breached the bank’s internal controls and was an act of “self-dealing.”
The bank sought the return of some $110 million as a result of the loan transaction. The money sought represented the outstanding $78 million loan balance, plus interest payments on the February 14, 2007 issued to Stone Street.
The deal consisted of a series of complex financial transactions that took place between 2007 and 2008.
The judge said, “This case involves a web of transactions and a cast of players – individual and corporate.”
According to the evidence in the case, Monteil sought and obtained the loan through Stone Street in February 2007.
Shortly after, the debt was transferred to Monteil’s other company, First Capital, which held his 300,000-plus shares in CIB’s parent company, CL Financial (CLF).
At the time, the shares were valued at almost $444 million.
Monteil struck a deal with Duprey for Duprey to take control of First Capital’s debt and assets in exchange for an option to purchase CLF’s 43 per cent shareholding in the HMB.
Monteil bought the HMB shares for $110 million and sold them to the National Insurance Board (NIB) for almost exactly the purchase price.
The lawsuit accused Monteil and Trotman of a series of wrongful actions, and also took the entire CIB board of directors to task for mishandling the situation and breach of fiduciary duties on several counts. Key among them was the failure to ensure the loan was fully secured.
Both men were found to have breached their fiduciary duties and the court voided the2007 loan agreement.
In her ruling, Quinlan-Williams said of Monteil, “He knew that the payment of $78 million by CIB on February 14, 2007 for the benefit of Stone Street was unauthorised, was purely on oral terms, and no or no adequate security, was completely undocumented and was procured by Mr Trotman without having done any due diligence.”
She said Monteil knew it was “highly irregular and not in CIB's best interests, yet as chairman and a director of CIB, he allowed it to happen, leaving CIB exposed and unsecured.”
The judge also held that Monteil failed to declare the full nature and extent of his interest and for it to be recorded in CIB’s board minutes; “acted dishonestly” by not disclosing the true purpose of the transfer and substitution of the 2007 agreements; and “deliberately” misled Trotman and the CIB board that the transfer of loan obligations was to another of his companies –First Capital Ltd, St Kitts (a subsidiary of SSC).
While still chairman and a director of CIB, Monteil was also found to have participated in, and approved, the transfer of loan obligation to FCL, which was not in existence at the time, the court held.
CIB’s claim against FCL was dismissed.
At the trial, Monteil defended his borrowing from CIB to finance a share purchase for his private investment firm and denied there was anything underhanded in his transferring a $78 million loan debt, and $315 million worth of CLF shares in HMB to his former boss, billionaire businessman Lawrence Duprey.
Monteil confirmed that Stone Street Capital did not repay the $78 million but transferred it to Duprey, who wanted the 337,269 shares the former CIB chairman had in CLF. Monteil said the agreement was for Duprey to take over the loan debt and buy the CLF shares, which would have been transferred to First Capital Ltd and later to Dalco – another company owned by Duprey.
Monteil said he did not inform Trotman of the deal he struck with Duprey, since the chairman of the CLF conglomerate said he would do so himself.
In her findings against Trotman, whom she ordered to pay the restitution sum, the judge said it was for his breaches of his duty to act “honestly and in good faith and in the best interests of CIB” and to “exercise the care, diligence and skill that a reasonably prudent director would exercise.”
She also found Trotman breached his fiduciary duties of loyalty, honesty, good faith and acting in the best interests of CIB and to avoid conflicts of interest; his contractual duty to act with the highest standard of professional and ethical competence and integrity; and his no-self-dealing duty to ensure Monteil fully disclosed the nature and extent of his interest in the transactions.
Against Stone Street, she said having received the $78 million from CIB, knowing it was unauthorised and procured in breach of Monteil and Trotman’s fiduciary duties, it held the millions, or its traceable proceeds, on constructive trust for CIB.
Having voided the 2007 agreements, Quinlan-Williams also ordered them rescinded forthwith and that the defendants were liable to account to CIB for all assets now or previously in their possession acquired from the $78 million loan disbursement.
In addition to being allowed to trace these assets, and all necessary accounts, she also ordered them returned to CIB.
In her 129-page decision, the judge said the 2008 agreements – the transfer of the loan by CIB to SSC and the HMB shares as security – were “ingeniously crafted for the purpose of deceit.”
“Trotman and Monteil exhibited extreme dishonesty and breaches of duty in relation to both the loan and its transfer to conceal the true state of affairs,” she said, adding the dishonesty was “well-hidden and was only revealed upon careful scrutiny of all the details relating to the loan and transfer.”
She also pointed out that CIB, up to now, has not been paid the principal of the $78 million loan or any interest, and did not hold the HMB shares as security.
She also said, “I have found the first and second defendants to lack credibility and in many respects to be untruthful witnesses,” she said, repeating the assertion that the two men “blatantly lied” in several parts of her judgment.
“Significantly, Monteil demonstrated his ability to be dishonest when he deliberately concealed the deal struck with Duprey. He caused Trotman to mislead the other directors of CIB to believe that the loan was being transferred to a wholly owned subsidiary of Stone Street.
“Monteil failed to disclose the sole purpose of the transfer and substitution and he lied to Trotman in pretending that the transfer was to rationalise Stone Street’s affairs. He knew that was untruthful, and that the sole purpose was to remove Stone Street’s liability under the loan and to gain control of the HMB shares,” she said.
In addition to millions in restitution and interest, the judge also ordered the two men and SSC to pay CIB’s costs.
She ordered a stay of execution on her decision from April 27.
CIB was represented by Michael Green, QC, Nadine Ratiram and Keliah Granger. Jason Mootoo, Christopher Sieuchand and Shivangelie Ramoutar represented both Monteil and his company. Mathew Gayle represented Trotman.