The Government could not sit “idly back” and allow control of the CL Financial board and its companies to be taken away from it, in view of the over $23 billion of public funds used in the bailout of the failed conglomerate.
This was the rationale provided by Finance Minister Colm Imbert as he explained the background to Government's decision to approach the court to have CL Financial liquidated.
“Being the custodian of public money and (given that) so much of the public money has gone into this arrangement, we felt we had no choice as Government but to seek to protect the public purse, to protect taxpayers' fund and to make this application for CL Financial to be put into liquidation,” he said.
Speaking at yesterday's post-Cabinet news conference at the Diplomatic Centre, St Ann's, Imbert said :“The recovery (of taxpayers' money which was used for the bailout) after eight-and-a-half years, has only been about $7.5 billion and the Government has put in at least $23 billion. So that it was going very very slowly. And then there was reluctance on the part of the other shareholders to continue the original agreement and to sign another extension to the shareholders' agreement.
“I took a note to Cabinet for the Government to sign another extension to August and we sent that to the other shareholders and they didn't sign it. They sent it back.”
Instead, Imbert said, there was a move by the other shareholders to take control of the board.
Noting that the original agreement placed on the CL Financial board four Government directors and three directors from an entity called United Shareholders Ltd, (a body which purported to represent all of the other shareholders), he said this arrangement gave Government a majority in the board.
Imperfect accounting by former Govt
“But the other side asked for a special meeting of shareholders to add two of their people to the board, which would bring their membership up to five, against the Government's four, effectively causing the Government to lose control of the board and of the companies. And we could not sit idly by,” he said.
The special meeting of the shareholders is scheduled for July 26, Imbert said.
The Express reported exclusively yesterday that the Government has petitioned the High Court to have CL Financial wound up because it is unable to pay its debt.
The Government's petition to the High Court to appoint a liquidator for CL Financial will be heard on July 25.
Imbert said it was only when the PNM Government came into office, that there was a proper accounting of the money spent by taxpayers to bail out CL Financial.
“Prior to this Government coming into office the approach to that matter was less than perfect. We are the first Government since 2010, which did a proper accounting exercise using qualified accounting personnel and the records at the Ministry. And that is how the Permanent Secretary in the Ministry of Finance (Vishnu Dhanpaul) was able to put in his affidavit (to the court) the total sums expended by the Government. There has been a lot of loose talk about this and one of the good things that would come out of this application is that the matter is now in the public domain and the public can see for themselves based on the affidavit of the Permanent Secretary exactly how much money was spent and on what,” he said. He added that the Government application did not put a figure on legal fees and consultant fees.
Imbert said the bailout was supposed to have been completed after three years and the assets of CL Financial and subsidiary CLICO should have been disposed of by 2012 in order to repay the Government.
But that did not happen, he said.
CLICO not affected
Instead the original agreement was extended 17 times.
He said this Government got an extension when it came to office.
He said the only money recovered thus far came from a “forced situation”.
He referred to the MHTL arbitration in which the arbitrator ordered Government to sell the shares to the only shareholder and $7.5 billion came out of that.
He noted that in addition to the $23 billion, Government was faced with other liabilities, such as exposure to claims from third parties, with respect to deposits they may have had in CLICO Investment Bank.
“So the $23 billion is a base and it is anticipated that it is more. But these have not been quantified at this point in time,” he said.
Imbert stressed that Government had not taken legal action to wind up CLICO.
Imbert said CLICO has been under the control and management of the Central Bank.
“CLICO policyholders can be assured that the management of CLICO remains under the control of Central Bank,” he said, reiterating that the legal action being taken by Government did not affect CLICO.
Asked where was Republic Bank in all of this, Imbert said CLICO Investment Fund, a publicly traded entity, is backed by a significant block of Republic Bank shares (about 29 per cent). He said CLICO has laid claim to ownership of about seven per cent of Republic bank shares while CLICO Investment Bank has laid claim to 18 per cent.
He said when all the shares were added up it amounted to about 52 per cent of Republic Bank shares.
He said the 25 per cent owned by CLICO and CLICO Investment bank were not affected.
Imbert also disclosed that 150,000-plus property tax forms have been received so far from members of the public.
This is part of the preparatory work for the implementation of property tax.
While the court matter challenging the validity of property tax is scheduled to be heard in September, the Ministry has been accepting Valuation Return Forms from property owners who wish to submit them on a voluntary basis.