Globe Trust, Clico (Guyana) have something in common

Apr 25, 2009 Features / Columnists, Peeping Tom

There should be a commission of inquiry into CLICO (Guyana) and since the government supports an investigation, the onus is on the government and particularly the President of Guyana to use the powers vested in him under the Commission of Inquiry Act to have such an inquiry.
The collapse of CLICO (Guyana) represents the greatest financial scandal in the history of this country. There is not likely ever again to be such a meltdown in any financial institution.
It will be the first time that the treasury of Guyana will have to bail out a financial institution to the tune of billions of dollars.
We are told that the worst-case scenario is that there will be a mismatch between the company’s assets and liabilities to the tune of US $11M or G$2.2 billion. This is however a rather optimistic estimate. It is not likely that Guyana may succeed in receiving very much of the investments in the Bahamas, despite the claims by the President that policies of annuities were produced to cover those investments.
From what the Liquidator in the Bahamas is saying, that company is not authorized to sell insurance policies and what we may have is an inter-company transaction between CLICO (Guyana) and CLICO (Bahamas) if this is indeed the case — an enquiry would be the best way to authenticate the policies said to have been issued— then someone may end up facing jail time.
It is unfortunate that so many persons are now distressed about their monies and yet the Jagdeo administration, under which this country has seen so many tragedies has failed to order a probe into just what went wrong.
Instead, the matter is being clouded by the talk about a probe into Globe Trust. The opposition has indicated that it has no objection to such a probe and therefore the President of Guyana who says he supports an inquiry into CLICO (Guyana) has no excuse this time around for not investigating both failures.
The Globe Trust collapse needs, however, to be put in perspective since the President is taking blame for something for which he ought not to be blamed. When Globe Trust collapsed, the President made an offer to have the company liquidated by the Bank of Guyana to pay all those who had sums under $100,000.
This would have meant that a large number of small depositors would have been paid.
Instead, this proposed dissolution of the company was challenged in the courts with a reorganisation of the entity being put forward. The Courts ruled in favor of the reorganisation but this plan failed to take root because over the years no investor could be found.
Had there not been a legal challenge, and the Bank of Guyana had been allowed to dissolve the company, under the President’s proposal a large number of small depositors would have had their monies.
The problem here is that liquidation is not supposed to work like this. It was unfair to the large depositors for the small depositors to be favoured in this manner.
The interests of all stakeholders must be considered under the terms of liquidation and on this ground there was merit in the challenge to the liquidation, which was being proposed, since under this plan the small depositors would have benefited disproportionately.
The President, however, cannot now be asked to still pay those small depositors. The President’s original plan was annulled by a challenge to the Courts and it is for those who made that challenge, who proposed reorganisation, to explain to the small depositors why they cannot get their monies.
However well intentioned was the reorganization plan, it was doomed to fail. It failed in the end because an investor could not be found. Even if an investor was found, Globe Trust was dead and buried a long time ago.
Even if it had opened its doors under a new investor, there was such a loss of public confidence in the entity that it would have suffered and been forced into bankruptcy.
In this regard, Globe Trust and CLICO (Guyana) have something in common. Their reputations are permanently damaged.
The image of CLICO (Guyana) is tainted. Its brand is not likely to attract the confidence of the Guyanese people any more. It makes no sense to try to keep the firm alive.
Even if Trinidad decides to be generous and pump monies from its Petroleum Fund, into the local company, it will not make a difference. The brand is not likely to be revived and for all intents and purposes CLICO (Guyana) will be liquidated.
Before that is done though, the President must have a commission of inquiry.

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Globe Trust, Clico (Guyana) have something in common

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