Dear Editor,

The recent comments of President Jagdeo suggesting indemnification of the policyholders of Clico (Guyana) translates to a bailout of around US$34 million dollars. Indeed, you heard it right. The government is contemplating taking US$34 from the coffers of an impoverished nation facing slumping export revenues and increased international debt borrowing due to a devastating worldwide recession and putting it towards bailing out a company that is already reeking of the strongly familiar scent that emanates from failed companies elsewhere. Why pump US$34 million into a company with 53% of its assets in limbo in an industry where such limbo equates to immediate corporate death? Moral hazard dictates that such action is unwarranted, particularly when financial hazard and commonsense suggest that the return on investment is likely to go missing or be evaporated by strangers in another land while the locals fiddle. There is no guarantee that a bailout of a company that has demonstrated financial and decision-making incompetence will save the pensions in peril of a nation. A better option may be to offer a direct bailout to the NIS to ensure it remains financially viable while offering a limited bailout to those remaining policyholders who may lose their investments. That direct bailout of NIS should be conditioned on a review of its financial management because it has also dropped the ball in failing to ask questions and take no prisoners with the public’s money.

Based on the article in SN of March 4, 2009 captioned ‘CLICO (Guy) policyholders protected,’ the President appeared to be fully cognizant of the woes of the CL Financial Group (CLICO’s parent company) since the end of January 2009. The President was also conscious of the actions of the Trinidad and Tobago government in the wake of the demise of CL Financial. This was all happening in an environment of a crushing global crash with financial turmoil an expected hazard. Despite these warning signals, nothing of significance appeared to have been done by the Guyana Commissioner of Insurance, the Ministry of Finance and the government in taking protective custody of Guyana’s foreign investments and the hard-earned savings of Guyanese roaming in these overseas facilities until it was too late. Active steps to file entitlements, notices and legal claims against these companies to protect the interests of Guyanese in the event they collapsed should have been taken ever since Clico’s parent company started wobbling. The first sign of impending demise at the end of January should have led to the cavalry charging out of the gate to ensure that the pensions of those who have toiled in hardscrabble service to a nation were not facing uncertainty. Given the President’s statements, it seems that Clico (Bahamas) was disinclined to inform Clico (Guyana) of its demise. Unfortunately, that is the reality of these fallouts. When there is barely enough to recompense the local population the government will usually act swiftly to liquidate thereby ensuring the local populace is the only party that gains from the limited funds. If a potential foreign claimant lapses it could lose everything because of its lack of due diligence and awareness.

I sincerely hope that the government has conducted sectoral risk assessment to gauge the difficulties facing the economy arising from the global recession. I hope there is an emergency preparedness strategy in place to know exactly how to deal with reasonably foreseeable external and internal shocks. I wonder whether a review of the operations of the remaining insurance companies has been undertaken to assess their exposure, foreign leveraging and investment patterns. Given that 6 billion dollars of the missing money belongs to NIS, has there been any review of NIS to determine whether there are other approaching shocks due to investment strategies that are in store for pensioners both present and future?

I was pleased to hear the President indicate that prosecution is fully on the table if the evidence supports prosecutorial action. Again, is this enough when the Prime Minister of Bahamas has publicly stated that there currently appears to be no record of CLICO (Guyana)’s investment in CLICO (Bahamas)? Whether Mr Ingraham’s statement refers to this time as opposed to any, all and every time(s), the fact remains that Clico (Bahamas) is liquidated and its assets have been and/or are being distributed while we contemplate the semantic implications of his statement. It is not like the sudden discovery by Mr Ingraham of Guyana’s investments tomorrow would change everything. The horse has already bolted the barn. Because of what appears to be its inaction, Guyana is probably unlikely to recover anything of substance from Clico (Bahamas) at this time. Even if Clico (Guyana) provides a paper trail showing transactions conducted with Clico (Bahamas) and it shows Clico (Guyana) innocently invested in Clico (Bahamas), it does nothing to assuage the harsh truth that Clico (Guyana) had US$34 million of hard earned blood-sweat-and-tears money of Guyanese invested in Clico (Bahamas) and was either duped or completely unaware of the risk facing the biggest source of its investments.

I hope there is a lesson learned from this fiasco. And I hope it does not take too long to learn it.

Yours faithfully,
Michael Maxwell