Friday, December 15, 2017

CLICO interest rate did not make sense

British lawyer:


TESTIFYING: Senior manager at PricewaterhouseCoopers Dwayne Rodriguez-Seijas. —Photo: JERMAINE CRUICKSHANK

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DESPITE being involved at varying levels in the audit of failed insurance company CLICO for over a decade, PricewaterhouseCoopers (PwC) director Dwayne Rodriguez-Seijas could not say if he would have invested in the insurance giant when questioned yesterday.

Rodriguez-Seijas took the witness stand at the Commission of Enquiry into the failure of CL Financial and four of its subsidiaries.

The enquiry, which is being held at the Winsure Building at Richmond Street in Port of Spain, is currently in its 11th evidence hearing.

During cross-examination yesterday by junior counsel to the commission, British barrister Marion Smith, Rodriguez-Seijas was told that he was talking "nonsense" when questioned about the "mismatch" between the interest paid on deposits and the interest received from investments made by CLICO.

Smith: You would certainly accept that the return on equity is a basic figure, a key indicator of the strength of a company, isn't it?

Rodriguez-Seijas: For an insurance company and particularly because the accounting standard in relation to insurance was not as prescriptive, I believe that a profit line is not as indicative of the performance of an insurance company.

Smith: I'm not talking about...that is nonsense actually, Mr Rodriguez, as a basic rule of thumb you have a return on equity of less than three per cent to this company, don't you?

Rodriguez-Seijas: As I said, I would not question you.

Smith: In the context of business which is paying over ten per cent on its EFPA (Executive Flexible Premium Annuity) policies.

Rodriguez-Seijas: That return on equity is after extracting the amounts that need to go to the policyholders, which I think is important.

Smith: Would you have invested in this company on that sort of return?

Rodriguez-Seijas: I think that is a hypothetical question and I am not in a position to answer it.

Smith: I take it that is a no.

Rodriguez-Seijas: I am not in a position to answer that question, I do not have the analysis to determine if I personally would invest in this company. It depends on the point in time.

Rodriguez-Seijas's first audit of CLICO was in 2001.

He held the post of team manager during the 2007 audit of the CLICO's financial statements.

Rodriguez-Seijas said CLICO's 2007 financial statement showed the insurance company in one of the strongest positions it had been in during his tenure auditing it.

In that financial statement CLICO's assets grew by almost 20 per cent to $22 billion, the excess of its assets over liabilities grew by almost 30 per cent and premium generated by 60 per cent.

Neal Bisnath, the legal representative for CLICO, said the insurance company had mechanisms in place to fix its books.

Smith yesterday highlighted a PwC internal e-mail correspondence where former CL chairman Lawrence Duprey was described as a "single dominant voice".

Duprey's ability to set CLICO's budgetary targets without any oversight was also labelled as a "fraud risk".

Smith alleged that the PwC audit of CLICO's 2007 financial statement "overstated" the strength of the insurance company.

Rodriguez-Seijas said "with the benefit of hindsight a lot of information that is available now could have been useful", to the PwC audit performed on the 2007 financial statements.

Nigel Panchoo of PwC is expected to testify today.