Failed CL companies under forensic audit

The government of Trinidad & Tobago announced Thursday that forensic audits are being conducted into the operations of Colonial Life Insurance Company (CLICO) and the CLICO Investment Bank (CIB).

Finance Minister Karen Nunez-Tesheira told reporters she believes the firms of KPMG International and Ernst & Young and conducting the audits. She also announced that she and Central Bank Governor Ewart Williams are continuing to meet with CL Financial, the parent company of the two institutions.

The talks are in connection with government's initial $1 billion rescue of the the CL companies and British American, a CL subsidiary.

Nunez-Tesheira said there are many unanswered questions regarding CLICO's $5 billion deficit in the Statutory Fund and suggested that CL might have breached the Insurance Act when it registered a $5 billion deficit in the fund.

She said investigations have revealed the CIB assets were misrepresented. "The CIB assets which supposedly were worth $4 billion which, of course, we have since found out it is not worth $4 billion."

She also said that a bond called the CLF bond which "was supposedly worth $1.7 billion" was also proven to be worth less.

She said the audits will give the government a much better indication of "what caused CLICO Investment Bank to find itself in the situation that it found itself in as well as Colonial Life Insurance Company."

She said according to the terms of the January 30, Memorandum of Agreement (MOA) between the government and CL Financial CL must make its assets available to close "a Statutory Fund deficit". She said failure to do that is a breach of the insurance legislation.

She said under the Insurance Act the assets and liabilities must be equal. "Clearly for the fund to have reached in that situation it is more than worrisome that you could have a Statutory Fund which is really there to safeguard the investment of pensioners and policy holders to reach a deficit of $5 billion," Nunez-Tesheira said

She said the central bank governor as the regulator of the financial sector under the Financial Institutions Act would be the official to consider the result of the audit and determine if any action has to be taken against CLICO or CIB.

CL executive chairman Lawrence Duprey missed a meeting Thursday with Nunez-Tesheira and Williams because Duprey was ill and could not travel from Florida to Trinidad and Tobago on time. The Trinidad Express said at that meeting government intended to put in writing its demands for greater management control of the CL Financial conglomerate. The meeting has been rescheduled for next week.