(Trinidad Express) The price for the state-funded rescue of the troubled CL Financial Group has just been ratcheted up to the seven-figure mark by separate lawsuits filed by two state-owned heavyweights against Clico Invest-ment Bank (CIB) which has been put into liquidation by the Central Bank.
The National Gas Com-pany and the National Insurance Board have both sued CIB and its Central Bank appointed manager Carl Hiralal and state-owned First Citizens Bank for the recovery of investments totalling some TT$1.8 billion.
The Sunday Express understands that the two state entities took legal action after Hiralal refused their demand for the return of substantive US and TT dollar deposits made to a CIB-structured financial product called Investment Note Certificate (INC).
The National Insurance Board has filed claims seeking to recover TT$46.5 million and US$102.5 million while the state gas company is seeking to get back its US$177.24 million.
The legal battle, already at case management level at the Port of Spain High Court, has pitted these substantive state entities against each other as they haggle over the legal technicalities of whether the CIB-issued INCs fall under the category of third party deposit liability under the government issued guarantee.
The Sunday Express understands that the INCs are not a liability the Central Bank is willing to accept on the ground that the INCs were dressed up to look like a fixed deposit in much the same way a loophole allowed CLICO to sell its Executive Flexible Premium Annuity (EFPAs) as an insurance product when in reality it was a high paying bank deposit.
Both the EFPAs and the INCs are short term deposits designed to give customers a safe place to park their money at above market rates. CLICO, which is also under Central Bank management, has been making good on the EFPAs, customers only worry being when they will get their money.
In the case of the INCs, Central Bank has taken the position that it was not an approved financial instrument and therefore is not eligible for payment of full principal amount of all third party deposits guaranteed by government following the collapse of CIB.
The real cliff-hanger in this unfolding high court drama, however, is why did the Central Bank as regulator allow CIB (a regulated financial institution) to sell INCs if it failed to measure up to the Bank’s acid test of a fixed deposit. It’s a battle that is likely to cost taxpayers more money.
