CL Financial, through Angostura Holdings, acquired 86 per cent of Lascelle in a deal financed through several inter-company borrowings and two loans. HMB provided one, amounting to US$25 million, and the other was taken by Angosture from First Citizens Bank.
Lascelle was fully acquired in July 2008 at US$676 million and HMB earned the interest on its guarantee.
Carballo said the guarantee was signed by former HMB chairman and CL Group Finance Director Andre Monteil, CL Financial Chairman Lawrence Duprey, HMB’s chief financial officer Peter Johnson and attorney Geoffrey Leid.
However Carballo said he was left in the dark about it after he rejected the need for such a guarantee.
Carballo said no guarantee was needed because Lascelle's shareholders had already accepted an offer. Carballo said HMB’s letter of interest of guarantee came to his attention on December 14, 2007.
“They wanted me to sign a guarantee arrangement which was not needed,” he told the enquiry.
Carballo said he was “shocked” when Ernst & Young showed him a letter which indicated payment for a guarantee, which he did not approve.
He said there were other beneficiaries. In addition to HMB’s $27 million fee, Clico Investment Bank (CIB), which was chaired by Monteil, was paid $13.5 million.
Carballo said, "clearly we were not operating in an environment of full disclosure.” Carballo said, “I formally challenged HMB on the document because they could never justify earning that fee,” he said.
Carballo said the 1.25 per cent was split among certain parties and said Montei and Leid went through "a great deal" to ensure that certain individuals earned commissions.
Carballo also told the enquiry the CL Board asked Monteil to leave the CL Financial group because they were "uneasy" about the media attention the company attracted after Clico’s purchase of a 45 per cent shareholding in HMB.
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