Billionaire businessman Lawrence Duprey believed failed insurance giant CLICO was a cash fund which was easily accessible to finance investments for its parent company CL Financial.
Duprey was the former executive chairman of both CLICO and CL Financial.
His philosophy about CLICO was recorded in minutes from board meetings produced at the Commission of Enquiry into the collapse of CL Financial and the Hindu Credit Union (HCU) yesterday at the Winsure Building, Richmond Street, Port of Spain.
Duprey described the insurance giant as a "private equity fund" after executive director Gene Dziadyk expressed concerns about CLICO funding a significant portion of CL Financial's investments.
The conversation occurred during a CLICO board meeting on September 29, 2006.
Senior Counsel Fyard Hosein, legal representative for the Ministry of Finance, referred to the board minutes as he cross-examined former CLICO corporate secretary Geoffrey Leid yesterday.
HOSEIN: Is it not the position that as early as September 2006 Mr Dziadyk was expressing the view that CLF's appetite for money from CLICO is heavily dependent on CLICO's debt? Is that not so?
HOSEIN: And Mr Duprey the chairman responded, and I quote: "The company is being operated as a private equity fund indicating as an insurance holding company." You see that?
HOSEIN: The fundamentals in respect of an insurance company and how it invests its money is different from a mutual fund isn't it?
HOSEIN: It is also different from an equity fund isn't it? One guiding principle in the investment of money in an insurance company is you must be conservative, you must be prudent and you must aim to protect at all times your policyholders' money.
LEID: From an investment point of view, yes.
HOSEIN: If Mr Duprey at that time referred to CLICO that would have been an absolutely fundamental misconception
LEID: At that time, yes.
HOSEIN: At that time and for all times.
Hosein then referred Leid to a section of the board minutes where it was noted that Duprey was scheduled to meet with Wendy Ho Sing, deputy inspector of Financial Institutions, to "discuss inter-company and current accounts and how the $1.5 billion debt was to be addressed going forward".
Dziadyk expressed concern that CL Financial had no plans to pay off the billion-dollar debt, Hosein said.
In that 2006 meeting, CLICO director Shama Deonarine questioned whether "the regulator could close down the company", Hosein said as he read the minutes.
Hosein then referred to another board meeting on December 2, 2006.
HOSEIN: You see there again that Mr Duprey described the complex evolution of CLICO as though it were a private equity fund. You see that? That is not how an insurance company is conceived isn't it so?
LEID: No, that is not how it is conceived
Queen's Counsel Peter Carter, lead counsel to the commission also focussed on Duprey's philosophy of CLICO while referencing board minutes.
CARTER: In the course of these minutes Mr Duprey is suggesting ways of enhancing the money that comes into CLICO...the chairman: "The business model has to change, purchase undervalued entities and sell at an appreciated value." Now this is supposed to be the philosophy for CLICO, an insurance company. Is that right?
LEID: Yes but this is a comment, it is not a resolution or a decision
CARTER: But this reflects Mr Duprey's approach to business. Did you say "Mr Chairman this is an inappropriate approach to directing the activities of an insurance company"?
LEID: No I did not.
CARTER: This is old fashioned capitalism, isn't it?
LEID: It is
Carter then read from a minute which stated Duprey wanted CLICO to become a "buy out fund".
CARTER: Did you know in September of 2008 that Mr Duprey wanted CLICO to become part insurance company and part buy out fund?
LEID: No unless he envisaged setting up another company.
CARTER: But you as advisor to Mr Duprey as chairman of CL Financial does this come as a complete surprise to you?
LEID: For CLICO to be a buy out fund? Yes absolutely
CARTER: But in a sense you would agree to some extent that is what CLICO funds were used for. It was used to fund purchases by CL Financial
CARTER: Its funds were used as a private equity company.
Hosein said as at December 31, 2007, 83 per cent or $14.6 billion of CLICO assets were concentrated in connected companies.
As at that same date 80.4 per cent of CLICO's statutory fund assets were invested in connected companies, Hosein said.