Prosecution must be a pre-condition for any bailout

Apr 07, 2009 Features / Columnists, Peeping Tom

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The Commissioner of Insurance should be made to answer to the Guyanese people as why she has not yet appointed a Special Prosecutor to prosecute breaches of the Insurance Act committed by the CLICO (Guyana).
There is ample evidence that there has been a breach and these breaches need to be prosecuted so that we can discourage moral hazard.
If persons and companies feel that breaches of the law, which injure the financial standing of thousands of Guyanese, will not go unpunished, they are less likely to act recklessly and outside of the law.
Thus the provisions within the law that lay down penalties for breaches of the law serve to enforce good corporate governance providing that the authorities are prepared to prosecute those who have breached these laws.
Section 19 of the Insurance Act states that:
(1)    any person who contravenes-
a) any provision of this Act,
b) any regulations; or
c) any direction or requirement made by the Commissioner or a person authorized by the Commissioner, shall be guilty of an offence unless he proves that he did not knowingly commit such contravention of omission
and, in the case of a default in complying with any such provision, direction or requirement, the offence shall be deemed to be continued so long as the default continues.
There is no doubt that offences against the Insurance Act have been committed by CLICO (Guyana). Specifically, there are breaches concerning the limits, which can be invested outside of Guyana. CLICO (Guyana) was warned of this and was instructed to take steps to be in compliance with the law.
As such that company can be cited for a breach of the laws of the Insurance Act as well as for a failure to act in the directives of the Commissioner of Insurance to correct this default.
Section 19 (2) of the said Insurance Act of 1998, provides:
“Where an offence against this Act is committed by a company and the offence is proved to have been committed with the consent or connivance of, or to have been facilitated by any neglect on the part of any director, principal officer or other officer or an actuary or auditor of the company, he, as well as the company, shall be deemed to be guilty of an offence.”
The law therefore provides for both the companies, as well as those who would have aided or abetted the breaching of the laws, to be charged for such an offence.
There is however a three-year statute of limitations for such charges. Charges cannot be filed after three years.
It is important to note that the fact that CLICO (Guyana) has been placed under judicial management does not make it immune from prosecution.
Section 19 (5) of the Insurance Act notes that proceedings against a company are without prejudice to any proceedings for the judicial management or winding-up of the company.
The prosecution of the breaches of the Insurance Act should have been done a long time ago. In fact, before the move for judicial administration, the government should have acted.
While the government does not have any authority over the Judicial Manager, the Insurance Act does at Section 4 provide that the Commissioner of Insurance as Commissioner of Insurance is required to comply with any general or special instructions given by the Minister of Finance.
The government should therefore have ordered that the Commissioner of Insurance activate Section 20 of the Insurance Act. That section provides that the Commissioner shall appoint a Special Prosecutor to be responsible for prosecuting violations of the Insurance Act.
The penalties laid down by the law are not draconian.  In the case of a company, the maximum fine is $1million and a further $100,000 for every day for which the offence continues.
In the case of an individual, the maximum fine is $100,000 or (and this is the interesting part) three years’ imprisonment, and where the offence continues after conviction, by a fine not exceeding $10,000 per day.
While the penalties are not that frightening, it is important that charges be laid where necessary so as to signal the seriousness with which the authorities treat breaches of the law, and to ensure that these breaches do not occur again.
This column is therefore again calling for a Special Prosecutor to be appointed to prosecute the breaches of the Insurance Act. This column is also calling for this Prosecutor to aim for jail for any person who may have been responsible for any breaches of the law as it relates to the CLICO (Guyana) fiasco.
The people of Guyana should demand this; the Parliament of Guyana should insist. There should be no bailout of CLICO (Guyana) until charges are laid and answers provided as to just what went down with the monies of the NIS and the policyholders of CLICO (Guyana).

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