(Trinidad Express) The Central Bank and CLICO are claiming that two former exec¬u¬tive directors of CL Financial (CLF) operated or procured the ope¬ration of two types of Ponzi schemes in the group, which collapsed in January 2009, posing a danger of disruption to the financial system of Trinidad and Tobago.
The claim is part of a civil lawsuit brought by the Central Bank and CLF’s subsidiary CLICO against CLF and its former executive directors—Lawrence Duprey and Andre Monteil and their respective companies, Dalco Capital and Stone Street Capital.
The case has been in the courts for 11 years, and the Sunday Express understands that the matter is scheduled for trial this year.
The Central Bank and CLICO, which is under the Bank’s management, initiated civil action against CLF and its directors in 2011.
The case is framed around “fraud against the public,” alluding to two Ponzi schemes within CLF, following investigations by forensic investigator Bob Lindquist.
The information in the statement of claim came from investigations conducted by Lindquist for the Central Bank.
In their statement of claim, the Central Bank and CLICO, who are the claimants in this matter, argue that there was no proper governance of CLICO (nor of CLF and CLICO Investment Bank).
The claimants make the following allegations against Duprey and Monteil:
• “Internal Ponzi scheme: Mr Duprey and Mr Monteil procured improper diversion and misappropriation of CLICO’s money, inclu¬ding policyholders’ money, in order to fund CIB and/or CLF and/or other group entities, often in return for worthless or wholly inadequate purported consideration and/or security. They did so in circumstances where they knew or should have known that there was no or little prospect of return. They knew or ought to have known that CLF and CIB were each (a) highly dependent upon CLICO not seeking repayment of principal and accumulated interest on existing indebtedness from them, as well as dependent upon CLICO for further funding, and (b) unable to pay its debts to CLICO as they fell due.”
• “External Ponzi scheme: Mr Duprey and Mr Monteil procured improper dealing with new money from policyholders and mutual fund investors (i.e. money from new policy-holders/investors and new money from existing policyholders/investors), including improperly funding redemptions and repayments to existing policyholders/investors, without sufficient or any proper regard to what was required to fund future liabilities to them.”
Statement of claim
Also in their statement of claim, the Central Bank and CLICO argue that the operation of the insurance company before its collapse in 2009 was grossly deficient and egregious in the following (and other) respects:
1. The interests of policyholders and mutual fund investors were subordinated to the interests (and demands) of others, in particular, the private interests of Mr Duprey and Mr Monteil;
2. Returns offered on products and related costs were excesses and unsustainable;
3. Money invested by policyholders and mutual fund investors were improperly disbursed, including:
(a) to fund Mr Duprey’s personal needs and lifestyle, as well as those of other members of his family and private companies
(b) to fund ventures by other companies which were not in the interest of CLICO but rather in the interest of Mr Duprey and Mr Monteil and companies related to them
(c) to fund CLF, notwithstanding its failure to repay previous indebtedness to CLICO
(d) to fund CIB by way of providing depo¬sits and a bond, notwithstanding its failure to repay previous indebtedness of CLICO.
4. CLICO’s assets were improperly dealt with;
5. CLICO was improperly exposed to liabilities unrelated to its interest;
6. CLICO was improperly caused to provide security for transactions unrelated to its interests;
7. CLICO was improperly caused to provide an interest-free current account facility to CLF;
8. Assets were not matched to liabilities, in particular, in order to generate the sums needed to pay the rates of return contractually due to policyholders and mutual fund investors.
Liquidators want to exit
In their ninth report to the court for the period June 18 to December 22, 2021, the liquidators indicate that they are trying to extricate the company from the litigation. They observed that the matter is ongoing.
“CLF’s involvement in this matter stems from alleged breaches of fiduciary duties by former directors, who were directors and officers of both CLF and CLICO,” the report said.
It noted that in 2014, CLF initiated ancillary proceedings against the joint directors to indemnify any liability CLF may have “on the basis that if CLF was found to be ultimately responsible or to have breached any duty CLF owed to CLICO, then the joint directors ought to be responsible for those breaches.”
However, in 2017, CLF was put into liqui¬dation by T&T’s High Court, following an application by the Government.
The liquidators noted, in their latest report, that a directions hearing was held on October 26, 2021.
It noted, “Numerous discussions were held with CLICO and the co-defendants in respect to discontinuing the company’s involvement in the proceedings.”
It said the liquidators are still considering whether this will be a viable closure to the proceedings.
“Witness statements have become due in this matter and an application was filed on December 15, 2021, by the claimants, who are seeking to extend the time for the filing of the witness statements to March 2022,” it said.
Court and costs
In response to questions from the Sunday Express, the Central Bank said, “The Central Bank of Trinidad and Tobago continues to be involved in the pursuit of the case. While we hope for an early resolution, the Central Bank does not have control over the speed of the judicial process.”
But the bank said that it could not disclose the legal and professional fees accrued over the 11 years since the case was first filed.
“Due to confidentiality restrictions, the bank is unable to specify the legal, accounting and other payments associated with such matters,” the Central Bank said.
In October 17, 2012, former attorney general Anand Ramlogan had revealed, in a statement to Parliament, a portion of the Central Bank’s legal costs with regard to CLF.
Ramlogan had said that total legal fees paid to local and foreign counsel by the Central Bank in relation to CLF during the period October 2008 to July 2012 was $103 million; a total of $82.8 million in fees was to Canadian forensic investigator Bob Lindquist. Legal fees paid to local and foreign counsel by the Central Bank in relation to the commission of enquiry into CLICO and the Hindu Credit Union (HCU) during the period October 2010 to July 2012 was $32.5 million.
On April 19, 2021 the Deposit Insurance Corporation-controlled CLICO Investment Bank won a judgment against two former executives of the company—Monteil and its former chief executive officer, Richard Trotman, after it sued the former executives to recover money from a loan transaction by Monteil in 2007.
They were ordered to pay back $78 million, plus $20 million in interest, by High Court Judge Avason Quinlan-Williams.
In September 2021, Justice Davindra Rampersad ordered Proman Holdings to return a 51 per cent stake in Process Energy, which it purchased in February 2009 when it was called CLICO Energy, to CLF and CLICO. Justice Rampersad also ordered Proman Holdings to pay CLF the dividends it collected from the shares since 2009 plus interest.
In his 87-page ruling, Justice Rampersad had said that former CLF executive chairman and CLICO director Lawrence Duprey acted oppressively, unfairly and with prejudice to the companies when he facilitated a deal to sell shares in CLICO Energy to Proman Holdings (Barbados) Ltd in February 2009.
CLF and CLICO together owned a 51 per cent stake in CLICO Energy, which was sold to Proman Holdings on February 3, 2009 for US$46.5 million.
Justice Rampersad said Duprey acted without due care and diligence, and even failed in his fiduciary duties under the Companies Act, as he failed to act honestly and in good faith with a view to the best interest of the companies.
The Ninth Liquidators report noted that Proman and Process Energy filed an appeal in November 2021.
“This matter is currently proceeding before the courts as the liquidators anticipate that it could take a number of years before an appeal judgment is handed down,” it said.
For now, they are in discussions to ensure appropriate safeguards until the matter is resolved.
“Separately pursuant to the judgment, the claimants are able to advance damages against Lawrence Duprey, with those dama¬ges needing to be submitted by January 2022,” it said.