Subject: Clico/HCU inquiry Thu Jun 30, 2011 5:52 pm
Some people really feel they above law, he spend the people money and refusing to tell them what he did with it?
Quote :
Duprey blanked ANDRE BAGOO Thursday, June 30 2011
CHAIRMAN of the Clico Commission of Inquiry Sir Anthony Coleman yesterday refused an application by lawyers acting on behalf of former CL Financial chairman Lawrence Duprey to remain silent at the proceedings. The ruling effectively means Duprey will face penalties if he refuses to comply with orders to give oral evidence.
Lead attorney for Duprey, Andrew Mitchell QC, on Monday orally applied for Coleman to allow Duprey to remain a party to the proceedings without being called on to give evidence, given simultaneous civil court proceedings revolving around Clico. The application and resulting legal submissions in response absorbed almost three days of the inquiry’s proceedings.
Subject: Re: Clico/HCU inquiry Fri Jul 01, 2011 8:18 am
real shame the way these people operate
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TEN DAYS after he wrote to the Central Bank warning that the CL Financial (CLF) group needed funds to face-off liquidity problems, former CL Financial chairman Lawrence Duprey and the CLF board oversaw payment of $22.5 million in shareholder dividends — $10.7 million of which was paid to two companies of Duprey.
While Duprey had quietly written Central Bank Governor Ewart Williams on January 13, 2009, saying, “We may need urgent liquidity support to be made available to the group” and warning that the group’s assets could not immediately meet projected calls on cash reserves of the company, at a CLF shareholders meeting, ten days later, he presented a “bold and optimistic” report on the company. Dividends were approved for payment, mere days before the Central Bank’s intervention into CLF companies was announced.
“Such was the apparent affluence of CLF that a $3 dividend was declared for the year ending December 31, 2007,” said Peter Carter, QC, counsel to the Commission of Enquiry into Clico which continued hearings yesterday at the Winsure Building, Richmond Street, Port-of-Spain.
Subject: Re: Clico/HCU inquiry Fri Jul 01, 2011 9:32 am
I hope they jail his ass!
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THE LAWRENCE Duprey CL Financial empire was a "house of cards", Queen's Counsel Peter Carter, the lead counsel in the Commission of Enquiry into CLICO and the Hindu Credit Union (HCU), has said.
"Cross financing of CLICO Investment Bank, British American, CLICO, and CL Financial meant that there was a mutual dependency. The failure of one had a material effect on the others," Carter said yesterday.
Carter made the statement as he delivered his opening address at the enquiry yesterday.
Carter accused Duprey and the executive of the CL Financial of being less than honest to auditors PriceWaterhouseCoopers during an audit carried out on the companies the year before financial assistance was sought from the Central Bank.
Duprey's lavish lifestyle was responsible for the collapse of the empire, Carter said.
"He was more of publicity and public face rather than paying his debtors, Carter said.
One month before Duprey approached Central Bank Governor Ewart Williams in January 2009, for financial assistance a major transfer was made, Carter said.
Carter said on December 12, 2008, a wholly-owned subsidiary of CLICO Energy Ltd in which CLF had a 51 per cent share agreed to sell its 60 per cent holding to Eurtecnica Melamine SA to Swiss CLICO.
Swiss CLICO is not part of the CL Financial Group but is owned by Duprey, Carter said.
Carter also questioned the $10 million dividend paid to Duprey ten days after the meeting with Williams.
Carter said the Central Bank had a "corporate gun to their head" when they were approached by Duprey.
Queen's Counsel Bankim Thanki, the lead counsel for Central Bank, said CLICO complained "kicking and screaming abut the intense supervision by the Central Bank".
Thanki said this therefore showed that the "dedicated, hard-working, public servants should not be judged for the collapse".
Lynette Seebaran-Suite, the lead attorney for the CLICO Policyholders Group described the January 30, 2009 intervention by Central Bank as "the first shift in the financial tectonic plate of the country".
The second such shift was the bailout plan introduced by Finance Minister Winston Dookeran in last year's budget presentation.
"We are not responsible for this collapse. We were not Ponzi-scheme participants. We are the victims," Seebaran-Suite said.
Senior Counsel Fyard Hosein, the lead counsel for the Ministry of Finance, chastised Seebaran-Suite for pushing a political agenda.
Subject: Re: Clico/HCU inquiry Fri Jul 01, 2011 9:49 am
CLICO $20m PNM GIFT
How cash-squeezed insurance giant bankrolled 2007 elections
By Camini Marajh Investigative Desk
Lawrence Duprey's CL Financial Group provided scarcely imaginable largesse to the ruling People's National Movement (PNM) party in the last general election at a time when it was already on the ropes—short on cash and highly leveraged. The by-then cash-poor conglomerate bankrolled the 2007 election campaign of the Patrick Manning-led PNM party to the tune of some $20 million, according to sources, who spoke on condition of anonymity.
And while much of CL's money went through a somewhat circuitous route to sundry suppliers of goods and services: from the printing of fliers and tee shirts to tent and maxi-taxi rentals, the bulk of it was applied to direct billings from advertising agencies for media activity, said sources.
Some of it however, was paid directly into the party's coffers. One such payment was made directly to the People's National Movement from the group's insurance subsidiary, Clico, on June 28, 2007, for the generous sum of $5 million. The $5 million cheque, drawn from a Republic Bank-held account at Independence Square in Port of Spain, was endorsed less than a month before the November 5, 2007, vote by Rose Janierre, assistant party secretary and Linus Rogers, PNM elections officer.
The $5 million Clico payout to the PNM's war chest was made at a time when the country's No1 insurance company had already been red-flagged with solvency issues, a statutory fund deficit of close to a billion dollars and what financial observers warned were dangerously excessive levels of inter-party transactions within the group. If the Manning government had any concerns about the holding company using the country's largest insurer as a lucrative little money machine, it not only kept its own counsel but it lined up at the feeding trough.
In the middle of this interplay of politics and business stood Andre Monteil, the then group financial director of Duprey's $100 billion business behemoth, his No1 lieutenant, party treasurer of the incumbent PNM government and the PNM face of the corporate animal known as CL Financial. Entrepreneurial titan Duprey was the other public face of CL Financial and despite his protestations of being a-political, he was viewed by many as a United National Congress or Basdeo Panday sympathiser.
Some say the group's fortunes rose and fell on the political connections of these two public faces of CL Financial. Whatever the truth, Duprey's CL Financial group spread a lot of wealth around the PNM in the last decade. And the point man who distributed a lot of that CL money around the ruling party was Duprey's right hand man, Andre Monteil, who, until recently, was numbered among the party's most formidable power brokers. Monteil was also the corporate chieftain who operated within the context of loopholes that allowed the CL Group to conduct business as usual in the seemingly opaque world of deficient legislation and well outside the good governance expectations of the Central Bank. In his January 30, 2009, containment effort to rescue the floundering financial giant, Governor Ewart Williams complained that the Central Bank had been "stymied" by inadequate legislation from going after the rogue insurance company. Governor Williams said that for the last five years the Central Bank was forced to watch helplessly from the sidelines as the country's No1 insurer sailed ever closer to the edge. He cited several areas of concern, including:
• Excessive related-party transactions which carry significant contagion risks. • An aggressive high interest rate resource mobilisation strategy to finance equally high-risk investments, many of which are in illiquid assets (including real estate both here and abroad). • A very high leveraging of the Group's assets, which constrains the potential amount of cash that could be raised from asset sales.
The Governor said that the Central Bank had consistently "focused on these deficiencies" but was stymied by the "inadequacies in the legislative framework which do not give the Central Bank the authority to demand the necessary changes". He also noted that it was a matter of public record that all was not well at Clico and that the financial crisis which forced an initial $1 billion taxpayer bailout on January 30 was long in coming.
Clico's solvency problems have in fact been on the public radar for close to two decades. In 1997, a report from the then Supervisor of Insurance raised concern about Clico's inability to satisfy its statutory fund requirements for the years 1992, 1993 and 1995 and the insurer's insistence in the face of a deficit on paying dividends. The years under question were during the first Manning administration 1991-1995. In fact, Prime Minister Manning was the Finance Minister in 2007 when his party received huge sums of money from the CL Financial Group.
Sources say CL was the single largest financier to the PNM's 2007 re-election campaign. A former executive at the brokerage firm of CMMB, one of the distressed finance companies owned by the CL Financial Group, told the Sunday Express that in 2007 Monteil complained that CMMB was the only board he sat on that didn't give the PNM money.
EXCLUSIVE REPORT BY BARBADOS FREE PRESS: CL Financial Group Collapse – Insiders Took Bribes To Have Company Purchase Land For More Than Market Value! UPDATED: August 9, 2010
This article has spiked in the last day as hundreds of searchers are being directed to Barbados Free Press through a Google search for “Ramchand RAMNARINE“.
Mr. Ramnarine is one of the Directors of the Florida company “B. A. Management Services, Inc.” that is associated with the fraudulent Florida land deal described in this article.
We can find no recent news stories online that would explain the sudden interest in Mr. Ramnarine, but several hundred people apparently experienced the urge to Google his name in the last 24 hours.
Can any of our readers tell us why Mr. Ramnarine is generating such interest?
Original article…
Barbados Free Press Turns Up TWO NEW Companies - One Registered Feb 2009 – Possibly Involved & Not Yet Known To Fraud Investigators!
Court documents sent to Barbados Free Press reveal that a CL Financial Group company involved in a US$300 million dollar Florida land deal – paid more than market value for the land. This happened because the seller of the land provided “incentives” (read “secret commissions”, “bribes” or “gifts”) to company insiders in return for having CL Financial Group purchase the land for more than it was worth.
The court documents do not say how much extra CL Financial Group company paid for the Florida land over the true value, but even a 1% overpayment would be US$3 million dollars. Or… perhaps the overpayment was not one percent, but ten or twenty percent or more? In that case, the overpayment could be in the tens of millions US$.
Astounding Allegation Is Made By CL Financial Corporate Partner
What is absolutely astounding is that the allegation that company insiders took “incentives” is being made by a CL Financial Group corporate partner.
Both British American Insurance Company Limited and British American Isle of Venice (BVI) Ltd. are defendants in a civil suit launched on February 19, 2009 by the seller of the land, Green Island Holdings LLC. (Background article by T&T Guardian: British American Sued For US$38m)
Brian Branker is Chairman of British American Insurance Company Limited as well as a director of British American Isle of Venice (BVI) Ltd.. The allegation of “incentives” appears in a document filed by the lawyers for British American Isle of Venice (BVI) Ltd..
“… the Plaintiff fraudulently induced Isle of Venice to enter into the transaction through improprieties such as incentives paid to insiders that resulted in a purchase price in excess of market value.”
… from Document 15, paragraph 36, filed April 7, 2009: United States District Court, Southern District of Florida, Case No. 09-80207-CIV-Marra/Johnson
More Than One Insider Took “Incentives” To Have CL Financial Group Pay More Than The Land Was Worth
“Incentives paid to insiders…” is plural. Multiple incentives were given to multiple insiders to induce the suckered buyers (that would be CL Financial & friends) to pay way more for the land than it was worth.
A land deal worth a third of a billion US$ dollars and CL Financial never thought to maybe get a second or third independent opinion on the value of the land? Oh well… thanks to the Governments of Barbados, Trinidad & Tobago and perhaps a few others those Captains of the financial industry at CL Financial are now playing with your tax dollar bailouts. Just makes you feel secure, doesn’t it?
Court Documents Filed In US$38 Million Florida Land Fraud Case
Barbados Free Press Digs Deeper
We can’t even pretend to explain how every piece fits into the story, but we have a feeling that some of our readers might be able to come up with a few theories! Not to mention that our enquiries have turned up a newly-registered Florida company that (so far) has not appeared in any other news story.
First, let’s consider some of the known corporations, people and addresses that have appeared in the news stories…
British American sued for US$38m GAIL ALEXANDER Published: 28 Feb 2009
The US company which sold 6,000 acres of land in Florida to British American has sued the insurance company, a subsidiary of the beleaguered CL Financial group, to recover US$38.2 million in a move which could end with the lender owning British American Trinidad. British American bought the 6,000 acres of Florida land, described as rural, from Green Island Holdings LLC for US$300 million (TT$1.8 billion) in January 2008 with US$250 million of borrowed money. Green Island Holdings lent British American US$56.5 million to make the purchase.
Court documents filed with the United States District Court for the southern district of Florida on February 19 reveal that British American was obligated to make a payment of US$9.5 million by or before January 15, 2009, but allegedly failed to do so within ten days of the due date. On January 30, US attorneys for Green Island, which was both lender and seller, served notice on British American that it intended to exercise its option to demand full payment of the balance owing to it—US$38.3 million along with all interest at the default rate of 18 per cent.
January 30 was the same day that the Central Bank announced that it was taking control of Clico, Clico Investment Bank, CMMB and British American because of liquidity problems faced the local financial arm of Duprey’s CL Financial empire. Green Island Holdings local attorney, Hedwige Bereaux, wrote to Central Bank Governor Ewart Williams on February 11, stating that once the legal matter was taken to its conclusion, “British American will lose not only the US$120 million it has already put in the project but will also be responsible for the US$38.2 million exposure under the guarantee.”
In the letter to Williams, Bereaux stated: “Indeed, proceedings could well culminate with the lender (Green Island Holdings) owning British American and thereby 99 per cent of the shares in British American Trinidad.”
Bereaux is a former PNM MP. Bereaux’s letter stated that he had been instructed to explore whether there is a likelihood that the Central Bank and the new board and managers of British American would be amenable to “satisfying or reinstating” the loan as an alternative to having the matter descend into recovery proceedings.
He sought an urgent meeting with Williams or the new manager of British American Trinidad on the issue. Bereaux’s letter to Williams was copied to Finance Minister Karen Nunez-Tesheira. “But we have received no reply,” Bereaux said yesterday. Yesterday, there was no reply from Williams to calls from the T&T Guardian on this issue. Finance Minister Karen Nunez-Tesheira said she would be speaking with Bereaux on the matter. “It is not unsurprising that any organisation that has financial dealings with CL Financial would have concerns about that group’s current status,” Nunez-Tesheira said.
Bereaux served legal documents pertaining to the matter on British American in T&T yesterday morning. The writ was filed against British American Isle of Venice Limited in the Virgin Islands and British American Company Ltd of the Bahamas. According to the court documents, GIHL sold its membership interests in Green Island Ventures—a Florida limited liability company—to British American and according to GIHL’s legal representative, Florida-based Howard du Bosar yesterday, Green Island Ventures had owned a piece of undeveloped real estate in Central Florida which was involved in the sale.
Court documents stated that the transaction involved a promissory note in the sum of US$56.5 million. This was dated January 2008. This was executed by Robert Fullerton, Director of British American Insurance who “maintained a place of business” in Florida, documents stated. Contacted for comment last night, Fullerton said, “I have no authority to issue any comment on this matter.” Noting CL Financial’s majority ownership of British American, Bereaux’s letter had also stated: “It is clear that such exposure will impact negatively on matters addressed in the Memorandum of Understanding entered into by the Government of T&T on January 30, 2009, with CL Financial Ltd acting for itself and as agent for its affiliates Clico, Clico Investment Bank and British American Trinidad.”
FORMER finance minister Karen Nunez-Tesheira was a no-show at the commission of enquiry into the collapse of CL Financial and the Hindu Credit Union yesterday.
Nunez-Tesheira was Finance Minister when the Memorandum of Understanding (MOU) was brokered between the Central Bank and CLICO in January 2009.
She was expected to appear before former CL chairman Lawrence Duprey in the list of persons scheduled to deliver opening statements yesterday.
However, when commissioner Sir Anthony Colman called for Nunez-Tesheira or her representatives to appear, no-one replied.
Duprey was yesterday represented by lead counsel for his legal team, Queen's Counsel Andrew Mitchell.
Mitchell yesterday batted for the affected policyholders, calling on Government to sell the assets of CLICO and pay out the outstanding monies owed.
"The terms of the MOU and later the June agreement were the terms the Government were prepared to assist CLICO and the remaining part of the group. Of course we should note the MOU and later the agreement purported the sale of assets to realise liquidity. It is strange that we are now here half-way through 2011 and those principle assets have not been realised," Mitchell said.
"It is strange if I may add this observation at this juncture in the context of people who have not had significant payments out as policyholders but those who are in control seem to want to hang on to these valuable assets, which would have a significant value if sold, instead of paying the policyholders," she said
"Many people may ask questions about what has gone on before but it is people who are suffering today and yet it appears that effectively government owned entities are not prepared to sell assets that would get the policyholders some if not all of their money back.
"It is suggested that normal business practice and that if it remained in the control of private enterprise would have thought to alleviate the problems of the suffering," Mitchell said.
Subject: Re: Clico/HCU inquiry Sat Jul 02, 2011 12:37 pm
They didn't care how it go down!
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FORMER CL Financial (CLF) chairman Lawrence Duprey told former chairman of British American Insurance Company Limited (BAIC) Brian Branker that he would have “taken care of” him if Branker had backed a potentially lucrative share-purchase deal, which could have breached the conditions of an earlier transaction, the Commission of Inquiry into Clico/HCU has heard.
“This was the nature of the person,” Branker is heard saying in video evidence featuring a recording of a sit-down TV interview with a journalist which was played at the inquiry yesterday. Branker, dismissed from BAIC in 2008, is also heard saying that CLF acquired BAIC in order for Duprey “to cream off money”.
CLF, Branker says, also had no qualms dipping into reserves meant to cover policyholders in order to pay out a $12.6 million (US$2 million) bonus to former secretary Gita Sakal. At the same time, Branker says, CLF refused to comply with requests made by Bahamas regulators to inject $63 million (US$10 million) in the company as per requirements.
In the video, which formed a part of the opening statement made by the Clico Policyholders Group, in the proceedings at Winsure Building, Richmond Street, Port-of-Spain, Branker recalls an incident in 2007 whereby Duprey allegedly attempted to get him to sign-off on a deal for which Duprey stood to gain a benefit worth $157.5 million.
“There was an incident in the 2007 accounts,” Branker says. “A couple of years before, British American had acquired shares of ex-employees of Clico that had shares in CL Financial because Mr Duprey did not have the cash to purchase it. And at the point in time, (BAIC) would purchase the shares at market value on the understanding that whenever Mr Duprey re-acquired them it would be at market value.
The Minister of Finance believes that the collapse of the Hindu Credit Union (HCU) is likely to cause only a ripple effect in the credit union movement and the wider financial sector. This is a misguided view, especially for someone spearheading efforts to transform T&T into an international financial centre (IFC). The HCU debacle raises several critical questions that go to the heart of trust, confidence and financial stability.
1. Why did the Commissioner of Co-operatives and, by extension, the Minister of Finance take so long to intervene in the HCU?
Disquieting signs were evident as far back as 2001 when HCU members and employees corralled the Twin Towers to protest rumours of a government takeover of the institution. An examination of available annual reports of the HCU over the past few years showed that the credit union had not only grown dramatically but had also moved far beyond its core activities, without the necessary management capability to support such rapid asset growth.
The nail in the coffin came with the findings of the July 2007 inspection report into the affairs of the HCU that revealed imprudent and reckless business practices with several glaring violations of the HCU’s stipulated lending policy. If the authorities had intervened earlier into the operations of the HCU, perhaps there would have been room for manoeuvre and “nani and nana” would not be holding their heads and bawling at the loss of their hard-earned “paisa.”
Was the Commissioner of Co-operatives in breach of his fiduciary responsibility to protect HCU members? It is well known that the Office of the Commissioner of Co-operatives has been very weak in the supervisory arena. That is why new legislation will soon see the Central Bank assume supervisory control over credit unions.
2. Why, after delaying action, did the authorities choose the most extreme option—liquidation—as the only viable form of intervention?
Indeed, the Minister of Finance has admitted that acting on limited information the decision was made to freeze the assets of the HCU and to appoint a provisional liquidator pending the completion of the Ernst & Young audit, which would show a true financial picture of the credit union. This is flawed thinking. A more prudent approach would have been to remove the current HCU board and appoint a new board with a mandate to examine options for restructuring the credit union within a specified timeframe.
Armed with more comprehensive information detailing the severity of the financial situation in HCU, the new board could then examine the feasibility of various options ranging from liquidity support, to sale of non-core assets or to merger with another credit union. Only when all these avenues failed, should the authorities have then invoked the final option of liquidation.
So what happens tomorrow when another large credit union shows signs of distress? Would the commissioner move to close it down or would he be a bit more cautious and examine all options to help protect depositors?
3. In the aftermath of the HCU collapse, would deposit insurance now become mandatory for all credit unions?
Remember, it was only when the finance houses of the late 1980s—International Trust Ltd, MATT Securities, Summit Finance, SouthWestern Atlantic Investment Trust—belatedly came under the control of the Central Bank and widespread failure of the non-bank sector seemed imminent did the authorities move to set up deposit protection in the form of the Deposit Insurance Corporation (DIC). But such deposit protection is extended only to institutions licensed by the Central Bank.
The credit union movement, in one of its wiser moments, established the T&T Credit Union Stabilisation Fund to provide deposit protection up to $50,000 in shares and $50,000 in deposits. Membership in the fund is voluntary but clearly there is now a compelling case for mandatory membership. However, this would require policy co-ordination between the two towers since the Minister of Finance is in favour of credit unions obtaining deposit protection coverage but the Deputy Inspector of Financial Institutions is not.
4. What happens to the members of HCU who are waiting to get back their money?
In the pecking order of creditors, these members are last in line: after banks, preferred creditors, suppliers and members with High Court judgments. My advice is to properly formalise an HCU creditors’ committee, comprising a majority of the membership, supported by the legal and technical skills necessary to negotiate with the provisional liquidator and the Government for a settlement. Otherwise, HCU members will only be spitting in the wind if they go it alone or in separate groups.
Clearly, these are burning questions that cannot be ignored; they should not be ignored. The stability of our financial system can only be achieved when institutions and markets function on the basis of informed decisions.
Aspiring to become an IFC demands no lesser requirement.
Jwala Rambarran is a lecturer, economics,
Arthur Lok Jack Graduate
School of Business, UWI
A more prudent approach would have been to remove the current HCU board and appoint a new board with a mandate to examine options for restructuring the credit union within a specified timeframe. Armed with more comprehensive information detailing the severity of the financial situation in HCU, the new board could then examine the feasibility of various options ranging from liquidity support, to sale of non-core assets or to merger with another credit union.
A June 2007 report by an inspection team probing the Hindu Credit Union found evidence that the credit union violated most of its written policies, failed to adhere to the legislation which governed it and replaced its core business—the granting of loans—with the acquisition of properties.
The inspection team, from the office of the Commissioner of Cooperatives, found that acquisition of properties placed the HCU in an adverse cash flow position.
The inspection team found that the HCU had a “written, detailed and comprehensive loans manual” but that there were “violations of the loans policy.”
The team found:
• “People became members by purchasing $25 in shares and received huge loans in excess of $100,000 on the same day. There were little or no securities found for these loans.”
• The fact finding sheets in members’ files revealed that although members did not qualify for loans, the loans officer was instructed to grant these loans through telephone conversations from officers of the credit union.
The team even found that the HCU had granted a loan to a non-member who was described as a “Costa Rican employed at the Costa Rican Embassy” who received two loans totalling $269,000 on March 12, 2002, and June 5, 2003.
It was discovered that no repayment was made on either loan and that the interest outstanding on the loan was $234,556.10 as at September 15, 2006.
The report found that “this non-member was given an account after the first loan was disbursed.
Under the rubric officers’ loans, the inspection team observed the following:
• Officers with delinquent loans continue to serve on the board of directors of the HCU in contravention of the by-laws
• Loans were not granted in accordance with Section 43 (3) of the Co-operative Societies Act and By-Law 40 (f)
• There were cases where officers had more than one mortgage loan, which violated Bye Law 40 (f)
• Huge loans were granted (over $500,000) in excess of their shareholding (some officers holding shares of only $30);
• Delinquent loans were refinanced which contravened the loans policy;
• There were incomplete loan application forms but funds were disbursed
The inspection team found that an HCU director had $19,380.29 in shares with a total loan balance of $1.6 million to purchase property. The loan was classified as an ordinary loan and the interest rate charged was 0.5 per cent.
The inspection report gave another example of a member, employed with an HCU subsidiary, who had $25.33 in shares with a delinquent loan of $150,651 on which the outstanding interest was $58,754.
On February 6, 2005, the member sold a 1.5 tonne Isuzu truck to the credit union for $152,242.73. “This sum was used to clear off the loan principal. On August 18, 2005, interest in the sum of $58,754 was waived. No valuation for this vehicle was carried out. Member is a relative of (an official of HCU), as such a proper valuation of the vehicle should have been done in order to ensure transparency and accountability with respect to this transaction.”
On the issue of the land and buildings owned by the HCU, the inspection team found in some cases:
n There were no valuation reports for some properties;
n Proper and thorough searches were not conducted thus resulting in the loss of investment;
n Valuation and searches were completed in some cases after the transaction;
n Deeds of conveyance were not seen for some properties purchased;
n Deeds were not registered;
Properties were sometimes purchased for amounts in excess of that stated in the valuation report.
The team found that the HCU Convention Centre was valued at $1 million in November 2001. The property was purchased by an HCU member in March 2002 for $710,000 and sold seven months later to HCU for $2.5 million.
Another example was the so-called twin towers property located at Mulchan Seuchan Road in Chaguanas which HCU purchased for $16.9 million in June 2003.
“By January 2005, HCU still owed $7 million by way of mortgage on the property,” according to the report. An HCU director and the businessman from whom the property was purchased signed a Memorandum of Understanding dated January 22, 2005, in which they agreed to the formation of a limited liability company (World Select Gem Ltd) with a share capital of $16.9 million. The two signatories to the MOU therefore owned the property 50/50.
The report noted that the HCU toward the end of 2006 had a huge fixed deposit portfolio of $621.9 million, however, “members were unable to cash in their fixed deposits upon maturity.”
A glance at where the HCU today show that the organization is $153 million in the red. That's based on the following breakdown quoted by the Guardian:
Liabilities Total: $776 million including:
Members’ deposits/shares: $700 million Loan from Exim Bank, USA: $24 million Borrowing from Intercommercial Bank: $12 million Mortgage from Clico: $35 million.
Assets Total assets: $623 million comprising:
Fixed Assets: 181 million Investment properties: $185 million Loans to members: $164 million Available for investment: $33 million Investment in subsidiaries (litigation): $60 million
It warmed up, roared to full speed and then it sputtered to a stop. The Hindu Credit Union (HCU) wasn’t the little engine that could.
It could. It did. And now, at least by the estimation of its president Harry Harnarine, is...done.
The rise and fall of the HCU is the story of Harnarine’s ambitious dream to turn a little-known credit union—one of 121 operating in T&T—into a financial powerhouse.
A former sales agent at Colonial Life, he undoubtedly set out to copy the formula that turned CL Financial chairman, Lawrence Duprey, into a billionaire.
His aspirations were grand.
The reality is his regret.
The defeated president sat down with the Business Guardian this week to talk about the HCU, its high and low points and why the company failed when it should have been sustainable.
“I should have liquidated and closed the company in 2004 when the run began. But I tried to hold on and turn it around and look at it today,” said the controversial, glib, almost self-righteous president of an equally controversial institution.
Harnarine said the HCU—which at its peak boasted of 190,000-plus members and an asset base of $1.1 billion—has reached the end. About 900 employees are out of work, the HCU has $776 million in liabilities and a liquidator has been appointed by the High Court.
The High Court last Wednesday granted Commissioner of Co-operatives, Charles Mitchell, full control of the HCU, issuing an order freezing its assets and ordering the management to turn over all documents to accountants Ernst & Young, which is conducting an audit of the HCU’s books.
That was just the beginning of Harnarine’s headache.
After all, he did approach the Government for help.
It was allegations of misuse of company funds for personal gain, mismanagement of the organisation’s funds, violation of loans policy and the relentless media attention into his personal affairs that put him on the defensive.
He admitted that loans were easily given with lower interest rates than normally charged by credit unions.
For instance, two loans totalling $269,000 on March 12, 2002, and June 5, 2003, to a non-member described as a “Costa Rican employed at the Costa Rican Embassy.” Records show no repayment was made on either loan and that the interest outstanding on the loan was $234,556.10 as at September 15, 2006.
Harnarine said that this loan was to the former Costa Rican ambassador and was based on a recommendation by a PNM official (name called).
He said that he was the single largest depositor in the HCU, which meant that his money was held as security should he demand a loan for $3 to $4 million, which he did.
While he’s been knocked for squandering people’s money on unsecured loans, Harnarine said that in many instances there were guarantees via letters from members of the board of directors.
For example, he said that in 2000, the Sanatan Dharma Maha Sabha (Maha Sabha) approached the HCU for an $800,000 loan for the construction of two secondary schools. He said that loan was granted without any security but the HCU had a letter signed by Sat Maharaj, secretary general of the Maha Sabha. In 2001, the HCU cancelled the loan as “charity,” said Harnarine.
Inevitably, race and religion enter into the discussion.
“Why couldn’t we have been ambitious? Why couldn’t we have opened several companies?” asked Harnarine, who became known for organising frequent marches against crime and HCU detractors.
In November 2004, Harnarine and three of his bodyguards were arrested on a march against the Government.
Harnarine claims that during its period of active growth, the HCU was subjected to subtle and sometimes blatant attacks from Hindu leaders.
Religion and business should remain separate, he said.
HCU, while formed to serve the Hindu population in 1985, was not exclusive in terms of its membership. In 1997, Harnarine took over as president of an organisation of just 14,000 shareholders but, by 2001, membership had almost quadrupled.
HCU’s strength became its limitation: a large East Indian base and title. Harnarine was supported as an East Indian leader who was in touch with the “grassroots,” a financial revolutionary of sorts. But now, some people who have put their faith in Harnarine are poorer for it.
He was sharply criticised for supporting the People’s National Movement during the November 2007 elections. He reasoned that he had allowed both parties: the UNC and the PNM equal airplay on the HCU’s radio stations.
During the past three years, Harnarine said the company reserved funds, slowed lending on its loan portfolio and sold off properties to repay depositors. It also negotiated for time to pay some of them.
Harnarine said the company’s cash-in-hand was always one-tenth of its deposits. This was standard with most credit unions, he said, but demand for repayment exceeded the supply of cash.
“If a bank found itself in a similar situation like us, what would happen? The depositors fund would be handed over to a third party.
“This run was not caused by mismanagement, it was an institutional run. In our case, our run can be described as a public relations damaging run. There were statements that were made that was (sic) very damaging.”
He said this caused unrest among people who had invested in the credit union.
“I took over the credit union when it was not $2.5 billion share capital. In 1997, my challenge was to turn around the credit union. When I took over I had decided, along with my entire board, that we should look at a strategic plan to move away from being a traditional credit union to see ourselves as a key player within the financial sector and that is to say to level the playing field.”
But Harnarine had too many negatives against him.
“My view, and I hold on to this, is that the credit union is the safest financial institution. Why? Because all depositors are shareholders and they own the entire asset.”
His folly—if he chooses to acknowledge it—is that HCU accepted short-term deposits at higher-than-average interest rates, but the money was placed into long-term investments.
Harnarine disagrees.
“We did not spread ourselves too thin. We were making investments. All businesses carry some element of risk.”
His reasoning, of course, is simple.
“The shareholders of the HCU voted for these companies to be set up. The board of directors is guided by their shareholders. I came up with a business plan and I presented it to the shareholders at our annual general meeting and they voted for it.
“Then we went into real estate. We have done quite well. Our capital appreciation on real estate has skyrocketed to close to 40 to 60 per cent and, in some cases, 100 per cent.
“The evidence of spreading (ourselves) too thin was just people (who were) were making statements and they were not qualifying the statements with any proper evidence.”
THREE DAYS after he learnt for the first time that he faced the loss of his life’s savings at the hands of the Hindu Credit Union (HCU), 80-year-old Siew Kanhai suffered a stroke. Two days later, he was dead.
One of Kanhai’s 12 grandchildren, Shawn Khan, 35, gave the harrowing tale as he testified before the Commission of Inquiry into Clico/HCU at the Winsure Building Port-of-Spain, where the former president of HCU Harry Harnarine looked on.
“My grandfather died on August 20, 2008,” Khan said of Kanhai, who had been ailing prior to the events of that year. Khan said the death came about at a time when rumours of the demise of the HCU were circulating. But not wanting to trigger stress on his grandfather’s health, Khan withheld information from him. His efforts to shield his grandfather from the news, however, failed.
At the sitting, Deputy Chairman of the Clico Policyholders Group, Peter Permell, voiced his relief over the start of the Enquiry which is expected to last for as much as six months. He is however desperate to know the status of Clico and CL Financial's assets and liabilities to prevent what he calls another "rip off" of policy holders.
Clico policy holders may be hesitant to testify before the Commission of Enquiry because they fear it will be useless.
That's the view of the Chairman of the Clico Policyholders Group, Peter Permell, who said policyholders are worried that nothing substantial will come out of it.
As a result, he said they would not want to endure embarrassment if the Commission does not have the authority to hold anyone accountable.
Why did Commissioner of Co-operative Development Charles Mitchell and Finance Minister Karen Nunez-Tesheira take so long to act against the Hindu Credit Union?
That’s the question attorney Robin Montano wants answered.
“I charge the Minister of Finance and the Commissioner of Co-operatives with gross negligence. I am looking now into the question as to whether or not they can be made liable... The answer clearly ought to be yes.
“Why didn’t the Minister of Finance move before?” Montano asked during an interview at his Port-of-Spain office on Friday.
Montano is the attorney for one of the HCU’s depositors who has been trying to recover a substantial sum of money from the institution.
Though his client obtained a judgment against the HCU on April 14, he had been prevented from enforcing it because of an application made by an HCU attorney.
An upset Montano felt both Mitchell and Nunez-Tesheira should have acted sooner based on the litany of complaints that had been levied by depositors over the last three years.
“What was the Commissioner of Co-operatives and Minister of Finance doing? What is their responsibility?” Montano asked. “What took them so long to act?”
Montano said he found it difficult to understand why the situation was allowed to drag on for so long.
“ It doesn’t make sense. It makes sense if you don’t care or if you are incompetent... The Government has powers ordinary citizens don’t have. There were a number of buttons they could have pushed, but they just twiddled their thumbs.”
Montano called for HCU directors to be investigated and the accounts thoroughly scrutinised.
People may face bankruptcy
On Thursday, HCU president Harry Harnarine tried to ease the mind of the credit union’s 190,000 members, who had invested millions, telling them HCU’s assets stood at nearly $800 million and they would get back their money within a six-month period, following liquidation.
But Montano was concerned the assets may not be able to repay the depositors.
“That is open to serious inquiry because the assets could be written down in the books of the company at inflated value. It is quite possible that the actual value of the assets could be substantially less,” Montano contended. “If the real value of the assets is substantially less than what is written in the books, the truth is the depositors and shareholders will only get pennies on their dollar. I think people will face bankruptcy.”
Montano said this would trouble depositors to no end, some of whom might go to their graves prematurely.
‘Prove HCU is not at fault’
Though Harnarine has maintained the fall of the HCU was not as a result of bad management, Montano challenged him to “prove it.”
Montano said that for three years, cheques issued by the HCU to its members, including his client, kept bouncing, forcing many of them to seek legal redress.
Tue Oct 17, 2023 11:16 am by 
Subject: Clico/HCU inquiry 
