CIB had been warned of liquidity challenges, risky practices: Lawyer

An attorney told the Clico/HCU probe Wednesday the firm Pricewaterhouse Coopers (PWC) warned the Clico Investment Bank (CIB) of its liquidity challenges and risky practices one year before CIB collapsed.

The lawyer for PWC, Russell Martineau, said the firm released a management letter to CIB's audit committee in 2008 under the cover of “confidentiality” about the matter.

Martineau introduced the letter as evidence as he addressed Maria Daniel, a manager and partner at the accounting firm of Ernst & Young. 

Martineau pointed out that PWC was concerned that CIB did not have a functioning investment committee, and the company did not have a formalised policy for assessing the company as a going concern. 

In addition, he said CIB had problems with the cheque registrar, credit quality reports, incorrect posting of interest expense and late reporting to the Central Bank.

Martineau said the management letter presented recommendations to management for monitoring and controls. However Martineau cited a number of reasons such as time, information and staffing issues for the delay in having audited accounts. 

Fyard Hosein, representing the Ministry of Finance, told the commission PWC should have done the auditing of the accounts with the knowledge that the Central Bank “might” have requested the accounts. 

Daniel said during her time at CIB compiling the statement of affairs for the Central Bank, she’d never come across the letter. But she said the letter's complaints are similar to the report she complied for CIB on behalf of her firm.

She admitted having access to PWC’s 2006 report which raised similar concerns. The auditors, she suggested, should have had a checklist with the company to ensure complianace with their concerns before signing off. 

Martineau made the point that PWC “was on the ball and talking to management about getting their house in order” and suggested that it was the job of Daniel's firm to work with the company to reduce the problem to an acceptable standard. 

He told Daniel there was nothing in her firm's report to suggest that at the end of 2007 the accounts were not in a satisfactory order.