Transparency International highlights Monteil scandal in 2009 report on T&T

(Originally published on Sept. 26, 2009)

Trinidad and Tobago is ranked at number 72 among 180 countries surveyed by Transparency International for the 2009 report, which has just been published.

In its report the organization highlights two areas that have contributed to the perception of corruption in the country - the lack of proper implementation under the anti-corruption laws and overlapping private-public directorships.

And it has offered suggestions on how the government might be able to deal with the problems. The organization noted that amendments to the country's anti-corruption laws that exempts judges and magistrates from filing declarations to the Integrity Commission presents opportunities for corruption.

"To the extent that financial disclosure is an important anti-corruption tool, the ruling could increase corruption in the Judiciary," the report warned.

Using the most up-to-date information, Transparency International said the country's integrity process suffers from under performance, noting that of the 726 declarations received in 2005, only 26 had been certified by December, 2006.

It noted that with the addition of members of all statutory bodies and state enterprises to the roster of people who must file declarations has grown.

In January 2008, it said, the list became even larger with the inclusion of members of boards of all private organizations incorporated under an act of Parliament, such as charitable organizations and clubs.

The report also noted, "With the capacity of the Integrity Commission already far from adequate, this larger reporting base will demand greater administrative resources to process declarations."

The report's second area of major concern was the problem of overlapping directorships.

"When not properly regulated, overlapping directorships leave state resources and private shareholder equity vulnerable to allegations of manipulation and insider dealings," the report stated.

It pointed to the March 2007 case of Stone Street Capital, which paid TT$110 million (US$17.8 million) for over 40 per cent of the shares of Home Mortgage Bank (HMB), which is partly owned by the state.

At the time of the purchase, Stone Street Capital co-owner André Monteil was chairman of both HMB and the privately owned Colonial Life Insurance Company (CLICO) Investment Bank, which sold the HMB shares to Stone Street Capital.

That became a national scandal when the matter was raised in Parliament in April 2007 by a member of the opposition who pointed out that Monteil’s leadership positions with all three companies involved created a conflict of interest or led to insider trading.

Monteil’s role as treasurer of the ruling People’s National Movement (PNM) also raised ethical issues about the purchase. The case was further complicated by suggestions that financing for the private purchase of HMB shares was supported by public funds.

"In 2007 a member of the opposition alleged that, in February of that year, CLICO Investment Bank accepted a deposit of TT$100 million (US$16.5 million) from the Housing Development Corporation (HDC)," the report said.

"Monteil was chairman of both institutions and because the deposit occurred a matter of weeks before CLICO sold HMB shares to Monteil’s Stone Street Capital, some speculated that the HDC deposit to CLICO Investment Bank gave the bank sufficient liquidity to be able to lend Monteil’s Stone Street Capital the money to pay for the HMB shares," the report stated.

It said a review conducted by The Ministry of Finance "discovered no evidence of wrongdoing in the sale of the HMB shares...Additionally, the central bank concluded that the trade met the conditions established by the revised Home Mortgage Bank Act."

It said, "The prime minister brushed off suggestions of impropriety surrounding the HDC deposit to CLICO Investment Bank, stating that it was a short-term deposit of TT$60 million (US$9.8 million) made only to earn interest."

Transparency International noted that in June 2008 police confirmed that the case remained under investigation by the Anti-corruption Investigations Bureau, "though no findings have been forthcoming".

It said, "Such treatment gives credibility to the suggestions of one parliamentarian that Monteil’s ranking among the ruling party effectively exempted him from government scrutiny."

The organization said, "The government’s failure to address the implications of highly overlapping directorships undermines public trust and threatens the integrity of the state."

It added, "If overlapping directorships continue to be a facet of Trinidad and Tobago’s public and private enterprises, the door remains open for conflicts of interest to tempt those in positions of power to abuse their status for personal gain."

It acknowledges that closing that door to overlapping directorships could put to rest some public suspicions of executive misconduct, but at the same time admits that such a move may not be possible in the small Trinidad and Tobago market.

"What is possible, however, is for the regulatory framework to be reformed to require enterprises with overlapping directorships to exercise much higher standards of transparency and accountability," it concluded.