(Trinidad Express) The integrity of Angostura’s rum is under audit.
The local rum company has been buying bulk rum from Cuba and South America and simply repackaging it, without substantial changes, and selling it to export markets.
This action is in breach of the European Union’s rules of origin with regard to rum blending integrity, and raises questions about the company’s age claims for its rum blends, according to Board documents from Angostura.
Furthermore, Angostura has also benefited from preferential rates in Caricom markets.
Angostura, a publicly traded company on the Trinidad and Tobago Stock Exchange (TTSE) and owner of the world-famous Angostura Aromatic Bitters, as well as several rum brands which include its 1919 rum, could be fined for its breaches, board minutes have indicated.
Following the discovery by the board of directors, Angostura chief executive Robert Wong has been on administrative leave for two months.
Wong, who has been on leave from the company since September, was officially sent on leave last Thursday.
The Sunday Express was told that Angostura has informed the Securities and Exchange Commission (SEC) and has appointed Genevieve Johan, its executive manager of export and business development, as acting chief executive.
Contacted yesterday, Wong said: “I won’t comment just yet. I am not guilty of anything. It’s unfortunate. I am not sure what the motivation is. I understand the present board wanted a changing of the guard and we had discussed it, but that action didn’t go through.”
Chairman Dr Rolph Balgobin was e-mailed questions on the matter and did not respond.
When contacted by phone, he said he could not yet address those matters in the public domain.
Wong, who has worked at Angostura for over 20 years, took over from Wayne Yip Choy who was fired and later received a $28 million landmark judgment against the company.
Yip Choy was credited with turning Angostura’s performance around after the company posted a billion-dollar loss in 2009 because of money owed to it by its parent group, CL Financial.
Before he was appointed chief executive, Wong was executive manager of rum bulk sales.
According to documents received by the Sunday Express, Angostura imports heavy rum concentrate (HRC), which is the initial distillation from sugar cane molasses fermentation, and which has to be further processed and aged before being repackaged and sold.
The company has a rum import licence from the Ministry of Finance.
Integrity of products now in question
“Since the sugar industry was closed, the Government allows you to import rum, process, distil and add local value. The licence allows you to sell in the local market and once substantial value is added, it can be sold to the export market,” an informed source told the Sunday Express.
“What you have here is a Caricom product, labelled and branded as local, being sold when it doesn’t originate here,” another source explained.
The issue first came to the board of directors in August when it was asked to sign off on a $16.5 million purchase of heavy rum concentrate to meet its rum production quota for 2016 and early 2017.
The Sunday Express understands Angostura’s management could not guarantee the integrity of the products which had been exported over the past few years as it had not been sufficiently transformed during the distillation process.
Further, the management could not guarantee that it had not made false declarations in the export certificates of origins of exports using HRC in its rum blends.
‘An illegal act’
According to board minutes of a meeting held to discuss the topic, it was noted, “The board observed that the aforesaid practice amounted to an illegal act and indicated its strong disapproval that management would attempt to ask the board to approve the purchase of the HRC to produce rum intended for export, in breach of the law.”
“The board stated that the non- compliant practice risked an audit that would highlight the traceability challenges, expose the breach, resulting in fines, causing: embarrassment to the country; decline in brand value; decline in sales; decline in shareholder value and even courting litigation which would cause a further decline in shareholder value,” the document said.
According to the board minutes, if the rum concentrate was not purchased, it could impact negatively on the company, costing it $12.9 million in sales.
“The board noted that this dishonest act to preserve $12.9 million in revenues would have jeopardised far more in brand and shareholder value, and was fundamentally improper,” the minutes said.
The Sunday Express was told PricewaterhouseCoopers (PWC) has been retained to do an audit at the company in relation to these transactions.
Angostura is one of CL Financial’s more profitable companies.
According to Balgobin’s chairman’s statement for the third quarter dated November 4, the company’s $458.2 million in revenue for the year to date which was 5.6 per cent higher than 2015, and its sales for the third quarter were $26.6 million over that for the comparative period last year.
“Results from continuing operations of $138.9 million reflect improved performance of $10.4 million or 8.1 per cent over prior year. Profit after tax of $94.1 million was impacted by settlement of a judgment in relation to a non-recurring legal matter which was only partially offset by foreign exchange gains. As a result, the resulting earnings per share of $0.46 was $0.02 (4.2 per cent) below the comparative period last year,” Balgobin said.
Angostura was the jewel in Lawrence Duprey’s CLF empire for him to begin his rum dynasty.
That dream died when the two other CLF subsidiaries, CLICO and CLICO Investment Bank (CIB), went bust.
