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 Conflict of interest in $15m media deal

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Join date : 2011-01-27

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PostSubject: Conflict of interest in $15m media deal    Conflict of interest in $15m media deal  I_icon_minitimeFri Mar 29, 2013 6:21 pm

Monteil, Maharaj acquire control of CL Communications without board approval

By Camini Marajh Head Investigative Desk
Story Created: Nov 6, 2011 at 2:34 AM ECT
Story Updated: Nov 6, 2011 at 2:34 AM ECT

Louis Andre Monteil, the ex-group financial director of stricken conglomerate CL Financial (CLF) and the man who presided over an institutionalised conflict-of-interest business culture inside the CLF empire was wearing multiple hats when he disposed of a lucrative company asset on the cheap to a close pal and a private $2 family company owned by him and his wife, Sherlyn Monteil.

Continuing Sunday Express investigations into the sale of the group's media holdings, CL Communications, have found that Monteil, who was also the ex-chairman of CLICO Investment Bank (CIB), a CLF-owned financial institution, facilitated a $15 million loan to Anthony Maharaj in February 2007, two months before the two business partners acquired controlling interest of the group's media unit.

And following in the footprints of the contentious Home Mortgage Bank (HMB) transaction, which the Central Bank called incestuous self-dealing in court documents filed in a civil action lawsuit against Monteil and former CIB president Richard Trotman, CIB handed out $15 million to Maharaj without a corresponding loan account created on file.

The Monteil-chaired investment bank handed out a cheque for $15 million to a connected party in the CLF group—Maharaj was the chief executive officer of CL Communications—without any financial documentation or information about the collateral used to secure the $15 million borrowing, according to a post-Central Bank intervention statement of affairs by Ernst & Young.

Maharaj and Monteil, individually and through their private family firms, acquired controlling interest of the media group on April 17, 2007, without the requisite board approval of the holding company, CL Financial.

The board had taken a policy decision in March 2007 to divest some assets, including CL Communications.

The minutes of that board meeting, however, required that "all divestments be conducted at an arm's-length basis, in accordance with good governance practices and proper valuations".

The evidence on record suggests an absence of good corporate governance or any valuation undertaken of the CL Communications shares, the real value of which is said to be closer to $35 to $40 million.

On April 17, 2007—the day that Maharaj signed a promissory note to take control of CLF's 70,009 share interest in the media group, Monteil acquired a 36.5 per cent interest in the company from stock buys from Colfire, a wholly owned CLF subsidiary, and Maharaj.

The Monteil acquisition is warehoused in his private company, Stone Street Capital, which has a share capital of $2.

In their bid to push through the regulatory hurdles required for the transfer of the media licence and concession to the Maharaj-fronted CL Communications company, Monteil, on August 14, 2007, wrote to the Telecommunications Authority of Trinidad and Tobago (TATT), in his substantive role as group financial director of CLF, to formally advise that "the CL Financial Group has agreed to dispose of its shareholding in the CL Communications group to Mr Anthony Maharaj, CEO".

He omitted to tell TATT that three months earlier, he had acquired a substantial interest in the media company or that he appointed his son, Louis Stefan Monteil, a director of CL Communications, on April 17, 2007.

He also did not declare his conflict of interest to the CL Financial and CIB boards.
The private transaction brokered between billionaire owner and former executive chairman of the CL Financial Group Lawrence Duprey and Maharaj has left questions on the table concerning what monetary consideration, if any, Maharaj has paid for the CL Communications acquisition, which comprises four FM radio stations, a video production house and a TV station, IETV.

Maharaj said he paid $15 million for the group's media interests in CL Communications, but court filings dispute this claim.

On October 24, the State-appointed caretaker management of CL Financial filed a lawsuit against Maharaj, contending that he reneged on an April 17, 2007 promissory note to pay CLF $3.4 million for its share interest in the media company.

It is not clear from the series of transactions, which saw the transfer of CL Communications shares from related companies and trusts, namely insurance giant CLICO and Colonial Life Trust Fund, to Maharaj and his family business, Karma Communications Ltd, what consideration was paid to CLF.

There are also questions about whether Monteil's acquisition of 48,000 CL Communications shares, previously held by Colfire, formed part of that $15 million sale arrangement.

Either way, court papers filed by CL Financial say the group has received no financial consideration from Maharaj for its media holdings.

A demand for payment made early this year saw the production of an Andre Monteil cheque to CL Financial for $2.3 million.

CL Financial acknowledged receipt of the Monteil payment but countered that it was for an unrelated transaction.

Maharaj has categorically denied the claims made in the court filings, and save for the $2.3 million Monteil cheque produced via an attorney's letter, he has failed to show proof of the $15 million payment he said he made to CLICO on February 14, 2007.
No explanation either for why he would pre-pay two months in advance for the CL Financial interest in the media group or how the funds were to be applied.

He had said that $1,057,322 of the $15 million CIB-issued manager's cheque paid to CLICO was in respect of the CLF share purchase agreement.

Where the rest of the money was supposed to go, he has not said.
Monteil's $2.3 million, paid on November 19, 2007, according to Maharaj, made up the difference of what was owed on the CLF transaction.

Again, no explanation for what appears to be a breach of the promissory note agreement, which talked about "a lump sum payment of $3.4 million on or before June 30, 2007".

There is also the issue of the non-documented $15 million loan ex-CIB president Trotman gave to Maharaj.

A loan, Maharaj told this newspaper, he has repaid in full, with interest, over a period of some three to four years. The Ernst & Young statement of affairs found only one part of the puzzle: The $15 million cheque issued by the investment bank. Evidence in court pleadings suggests there was no proper governance of CIB, untold acts of self-dealing and breaches of fiduciary duty, among other things. The bank is now under court-supervised liquidation.

Sources familiar with the effort to untangle the media transaction say Monteil disposed of the asset at an undervalue, without any attempt to have Maharaj, or Maharaj and himself, as the alter ego of Stone Street Capital, pay an outstanding receivable balance of $13.4 million owed to CL Financial.

The $13.4 million represents cash advances made by the holding company to Video Associates Ltd, a production house which forms part of the media group and CL Communications Ltd.

Maharaj has attempted to offset the $13.4 million debt owed to CLF by monies, he says, is owed to him by CLICO. He has countered CLF's demand for payment with a $9,971,452.78 claim against the insurance company for money he said are owed to him for production costs related to the film Mystic Masseur and advance payments for Jazz Festival 2009 in Tobago, which was cancelled.

But here, again, things get somewhat sticky, with CL Financial making clear that CLICO is a separate entity, and Maharaj could not offset amounts owed by CLICO against what he owes CL Financial.

CLICO, for its part, has said it has no record of any debt owed to Maharaj and or CL Communications.

The insurance company has contributed some US$5 million to US$6 million a year to CL Communications for the annual hosting of the Plymouth Jazz Festival in Tobago, for which no proper accounts were ever produced.

Former CLF group financial director Michael Carballo, in a 91-page witness statement given to the commission of enquiry probing the collapse of the Duprey-built conglomerate, said he personally sought to investigate the media transaction but found that "the paper trail was non-existent and the flow of funds difficult to sift through". He said there was a strong legal case to unwind the transaction and have the shares returned to the CL Financial Group.

CL Communications, according to the Registrar General's records, is owned by Maharaj and Monteil.

Maharaj has a 60 per cent beneficial interest and Monteil, 40 per cent.
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