Even as Angostura Holdings Ltd, now under state control, prepares to bite the proverbial bullet and do some financial engineering on its balance sheet, questions are being raised about the culture of excess and corporate greed inside the iconic rum and bitters company.
A not so unfamiliar tale as Sunday Express investigations into the unraveling fortunes of Lawrence Duprey’s stricken CL Financial conglomerate have already revealed. And again, like much of the other CL-owned and controlled profit centres, including Clico, as the group’s globetrotting billionaire entrepreneur jetted off to some exotic location in pursuit of his big dream to grow Angostura into a rum empire and build an impressive cabinet of premium drinks brands, including cognac, scotch whisky and vodka, some of his cowboy executives were busy building fortunes of their own.
Much of this personal wealth creation, however, was done at the expense of the ordinary policyholders and depositors of the country’s biggest insurance company, Clico, finance house, Clico Investment Bank (CIB), and minority shareholders in public-listed companies like Angostura.
And as was standard operating procedure (SOP) in much of the Duprey-owned and run conglomerate, there was no rulebook on how business was done. The CL Financial model was a symbol of executive excess and large living; an economic powerhouse where risky deals were commonplace and unethical business practices just another feature of corporate life.
But as this Sunday Express investigation has found, some of Mr Duprey’s high-flying executives overstepped the line. And as we would show in this special report, none are prepared to do any explaining on damaging accusations of conflict of interest or reports that they benefited richly from related party transactions or lived high off the hog at the expense of ordinary citizens who have a financial interest in the CL Group.
Ten months and two weeks after Central Bank’s historic intervention in the cash-starved private conglomerate, most of Duprey’s men are gone. Those who have not been ousted by the Government-appointed management team are on their way out the door. All is quiet on the eve of this approaching first Christmas of State-imposed rule at the country’s largest business empire except for a reporter’s unwelcome call.
Steve Bideshi, former Citibanker and government’s fix-it man on the CL Financial problem, has said that the situation is well in hand. But is it really? And for who? And what of the tens of millions of dollars in questionable bonus payments and fees that have gone into the pockets of fat cat executives in the parent holding company CL Financial, in CIB, Clico, Home Construction Ltd (HCL) and other distressed companies within the CL Group?
To date, there has been no word on the State-commissioned investigation of Canadian accounting firm KPMG or ace forensic sleuth Robert Lindquist, retained separately to determine if there was evidence of corporate malfeasance in the maverick-styled financial giant. To a large extent, much of what went on behind the scenes is still a secret.
And as this newspaper is fast finding out, there are plenty of people who want it to stay that way.
To hear Angostura insiders tell the story, former executive chairman and majority shareholder Lawrence Duprey was an unwitting part of the rum giant’s faltering fortunes. They point to an evidence trail of:
- An emptied-out war chest left by predecessor Thomas Gatcliffe.
- The temporary suspension of trading following two missed deadlines to produce the 2008 financial accounts because of a maze of complex inter party transactions between Angostura and its parent, CL Financial Ltd.
- The not so good prospect of a $697.4 million hole in the otherwise pristine 2008 balance sheet which showed an increase in operating profit of $84.3 million over the previous year result of $52 million.
- The huge financial risks and big spending that put the rum company on the ropes.
- Sharp divisions over board and management appointments
- The murky politics and corporate boardroom apathy that allowed the majority shareholder to run the company as if it were his private fiefdom.
- And the wide autonomy given to recently ousted group executive director, technical operations, Patrick Patel and fired chief executive officer Iain Grant.
From all accounts, Mr Patel was a high-flying corporate chieftain who had the ear of his swashbuckling boss, enjoyed the finer things in life and until his October 31 ouster from the Laventille distillery, was one of only six people in the world who knew the secret recipe for the manufacture of the world famous Angostura Aromatic bitters.
Until his October ouster by the new State-hired management team, Patel, who retired in May last year was raking in generous pension benefits in addition to his full executive salary. Patel, who has an outstanding debt of some $4 million in borrowings to Angostura, according to documents obtained by the Sunday Express, until recently also received a car allowance of $80,000 a month. He had company-paid for lease rentals on a Jaguar and a Range Rover. He was also paid a house security allowance of $22,000 a month and an overall monthly package of some $235,000, according to sources.
Insiders say that the company had no control over Patrick Patel’s spending and attempts to rein in the high-end luxury travel (first class airfare all the way and stays at the finest hotels) were met with contempt. Patel is reported to have billed the rum company US$1,000 for a taxi ride to the Ascot races in England. Patel himself, in an initial meeting with this reporter, complained about the ’nitpicking people’ in the accounting department of Angostura not having a clue that his job at the top-end world of the spirits business required him to attend glamorous duty free shows and European festivals and to hobnob with the rich and famous.
But there was more to the Patel-Angostura affair than a super generous compensation package and his hobnobbing with celebrities. He had built close personal relationships with several suppliers during his 38-year career at Angostura. Relationships that caused sufficient worry to some board directors that they took their concerns to Duprey. Sources say some directors flagged Patel’s conduct as far back as 1998. They raised concerns about the award of contracts without tender and the overly-close personal friendships Patel had with several Angostura suppliers, among them Haroon Mohammed. Mohammed provided transportation and general maintenance services.
Mohammed would play a leading role in a US$2 million Cayman Island transaction a decade later but insiders say Duprey seemed not particularly bothered by the conflict of interest charges leveled against his top rum executive. Duprey himself led a far less lavish lifestyle and drove an old Honda.
Patel, the man credited for putting Grant in the CEO’s chair, has refused several requests for an interview, firstly on the basis of impending travel, then ill-health and finally, in late October, a lawyer’s letter. His leading counsel, Seenath Jairam, SC, in response to a list of questions from this reporter, said he was in the process of initiating legal action against Angostura for wrongful dismissal and deprivation of benefits to his client.
He said a careful study of the questions submitted to Patel has led him ’to the irresistible conclusion that they all touch and concern his case and the matters which are likely to be in dispute in the court proceedings.’
He said: ’It is my respectful view that the information you require would, if published, severely prejudice Mr Patel’s case. In any event, most, if not all, the questions are based on a false premise, according to my instructions.’ Jairam was clear that: ’If you and your newspaper were to publish anything about my client which is libelous, my client will immediately seek injunctive relief, exemplary damages etc.’
Some of the questions put to Patel relate to the purchase of labels from Canadian supplier, Cameo Crafts. Company insiders say Angostura was paying almost double what other printers were charging. We also wanted answers on the exclusive and very expensive arrangement with London distributor - Joseph Flach & Sons, for the supply of spices for the manufacture of the world famous bitters.
We raised questions as well about the high cost of molasses purchases and bulk alcohol and of reports that managers in the production process had identified alternative sources at substantially reduced prices. We also asked Patel to say why the bulk of the alcohol purchases were channeled through a company called Ex-Klar in Pawling, New York. Operated by a civil civil engineer, Ivan Cabrera, Ex-Klar was also used on several engineering projects at Angostura, TBTL, a subsidiary in the ethanol business and at Lawrenceburg Distillers Ltd, a US spirits distillery acquired by the Angostura Group in September 2007.
Patel and Cabrera, an American, are business partners in a local venture named Pawling Investments Ltd.
We also asked Patel about his relationship with Haroon Mohammed and the reported sale of ten ordinary shares in Ravenwing Ltd, one of 11 companies we found registered in his name. Patel purportedly sold the ten shares to Mohammed on January 15 last year for the huge sum of US$2 million. The sale agreement was drawn up by Angostura corporate secretary Kirk Nancoo, whom, when contacted, said there was no conflict of interest with any private work he did for Patel.
Nancoo confirms drawing up the sale agreement but cited lawyer-client privilege, declining further comment. His refusal to discuss the sale of the 10 Ravewing shares raises more questions than it provides answers given the fact that Ravenwing, a family-owned Patel company, is the beneficial owner of a Tobago Plantations villa, Lot No 129, which is secured by a $6 million mortgage held by the Unit Trust Corporation.
Sunday Express investigations found that Patel secured the release of a $4.5 million mortgage held on the Ravenwing-owned Tobago property by Republic Bank on October 30, 2007. He took a $6 million mortgage from UTC the following day on the same property. Checks by this newspaper show that there has been no release of the Tobago villa security and Lot No 129 is still on the books of the UTC. To add to the confusion of the alleged sale agreement, which was used to satisfy the anti-money laundering source of funds requirement at a Cayman bank, Patel has been tardy in the filing of his annual returns. The last filing for Ravenwing Ltd was November 30, 2007.
Adding to the intrigue is Mohammed, himself, who when contacted said he had no knowledge of any share or property transaction with Patel. Told that the Sunday Express had a copy of the sale agreement purportedly signed by him, he said he would have to check his private records. In response to further questioning, Mohammed said US$2 million was a lot of money and more than he could make in his lifetime.
He said he has no recollection of signing any document to purchase shares in Ravenwing Ltd or any other Patel company for that matter. Nancoo, pressed on the issue of the $6 million UTC security on the Ravenwing property allegedly sold to Mohammed via the sale of the ten shares, said only: ’That is something that would have to be dealt with by vendor and purchaser.’
Patel had wire-transferred the funds to an account at CIBC Private Wealth Management in the Cayman Islands in March last year. Extracts of the Cayman bank correspondence details Nancoo’s role as Patel’s attorney in meeting the source of funds requirement.
The true source of the US$2 million wire transfer to Patel’s Cayman bank account remains a mystery.
The saga continues next week.
