Forensic Auditors call for deeper probe into CLICO (CIL)

by TIM SLINGER Fri, Mar 2. 2012

FORENSIC AUDITORS Deloitte Canada have called for another probe of CLICO International Life (CIL), in the face of numerous unanswered questions and missing documents to support CIL’s money trail.{{more}}

The SUNDAY SUN has obtained a copy of the 39-page audit report, dated December 5, that followed an eight-month-long investigation.

Apart from some shocking inter-company transactions, the report has revealed further details of former executive chairman Leroy Parris’ employment contract.

Another major disclosure is that a valuation of CIL’s assets does not give much hope to policyholders looking to recover their full investments in the insurance company. The report explicitly states that CIL was chronically short of the necessary assets required to cover its policyholder liabilities.

“As of May 31, 2011, the total amount due from related companies was $376 million. Under a forced liquidation scenario, the fair market value of amounts due from related companies was estimated at $171 million and under an orderly liquidation scenario it was estimated at $190 million,” it says.

The audit also confirmed that up to the end of March last year, CIL was owed $57.8 million by the Holdings Company in outstanding loans.

Of that figure, $33 million represents an outstanding balance owed by the group’s parent CL Financial of Trinidad and Tobago.

Other noteable loans include over $21.9 million for the purchase of Sam Lord’s Castle; $18 million for the purchase of Villa Nova in St John; a $15 million investment in Small Ridge, Christ Church; and Rayside Barbados is indebted to CIL to the tune of $19.5 million.

This has led the auditors to the view the insurance company was acting as “banker” for its related companies.

They are now seeking to get to the bottom of the inter-company transactions to see whether all of these transactions were above board.

“. . . We have outlined additional investigative work for consideration. This work may be undertaken under the authority of the court to address any remaining uncertainty regarding either the recoverability of the inter-company balances or the completeness and nature of the related party transactions identified,” the report states.

Specific reference is also made to the sum of $50.7 million “for which no breakdown has been provided to determine they were traceable to assets that may be recovered”.

The auditors, who were not able to interview the directors or certain executives such as Parris during last year’s audit, are hoping they would be given this opportunity the second time around.

They have also pointed to a need for identification and analysis of all fees paid to law firms in the period mentioned, including the nature and purpose of each payment, following its revelation that $3.3 million was funnelled through Thompson & Associates – the law firm of former Prime Minister David Thompson – to Parris.

With respect to Parris’ own contract, the audit shows that he was assured of an annual bonus of $300 000 per year from 2003 to 2007 which was doubled to $600 000 per year from 2008.

“CIL paid these bonuses on behalf of CHBL [CLICO Holdings Barbados Limited],” the report states.

Up until his departure from the company in 2011, Parris was also entitled to an annual “override commission” on new business.

In 2010 alone, it earned him a further $30 000 on top of his salary and had nothing to do with his $10 million gratuity.

Reacting to the audit report, two regional prime ministers have expressed strong concern for the plight of thousands of policyholders and investors affected across the region, while insisting that justice must be done.

In separate interviews with the SUNDAY SUN, Antigua and Barbada’s Prime Minister Baldwin Spencer and his Vincentian counterpart Dr Ralph Gonsalves also declared – unlike some of their other regional colleagues – that they had no personal relationship with Parris. (SUNDAY SUN)