IN return for a US$10 million investment in CLICO Investment Bank (CIB), the National Insurance Board (NIB) received a "piece of paper worth 25 cents", attorney for the CLICO Policyholders Group Terrence Bharath said yesterday.
Bharath made the statement during his cross-examination of Inspector of Financial Institutions Carl Hiralal at the Commission of Enquiry into the collapse of CL Financial, three of its subsidiaries and the Hindu Credit Union (HCU).
"There was no assignment of any securities for the money. In other words, all it was was a piece of paper worth 25 cents in a photocopying store in exchange for US$10 million. Twenty-five cents essentially, when they thought they had a security."
Two State agencies, NIB and National Gas Company (NGC), both had deposits at CIB valued at a total of more than $1 billion, Bharath said.
"Now you have $1.6 billion of people's money invested in CIB and you get a piece of paper like this. When you go to collect and they cannot give it to you you get a piece of paper like this, that in return for your $1.6 billion at maturity."
Bharath described the situation as a "fraud perpetrated on people".
He accused the Central Bank of not protecting investors.
BHARATH: It perplexes me. It must have been apparent in 2008 when your team was there (investigating CIB) that there were significant obligations to NGC and NIB and if they certainly did not protect themselves by getting this piece of paper, which was worth nothing but 25 cents at the end of the day, in exchange for such a substantial amount of money. It was left up to you as the regulator to do so. You did not did you?
HIRALAL: Well the answer is that the company was supposed to be available to meet its obligations.
BHARATH: You did not protect the interests of these people who deposited their money in CIB in exchange for this piece of paper.
Bharath accused Hiralal and his team of having a lax approach to regulating.
"This is the manner in which you and your team at the Central Bank as regulators regulated these institutions and were protecting the interests of the companies, the State bodies, the persons who put and entrusted their life savings in this institution called CIB and CLICO."
He added: "It is the lax way in which you all conducted regulations into these entities that have us here today."
Bharath said the Central Bank should have intervened in the affairs of CLICO and CIB "long before" executive chairman Lawrence Duprey approached it for assistance.