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QC: Harnarine paid himself $85,000 a month
The extravagant spending of former CL Financial chairman Lawrence Duprey and that of Hindu Credit Union’s president Harry Harnarine at the expense of their policyholders and depositors was sharply criticised by Peter Carter QC, attorney for the CL Financial/HCU Commission. But regulators—the Central Bank, the Commissioner of Co-operatives, and auditors Pricewaterhouse Coopers—were also in the firing line as well as this country’s archaic legislation which prohibited timely intervention to avert the collapse to these two institutions. It resulted, in Clico’s case, with the Central Bank being held at “corporate gunpoint” to bail out an institution which controlled 51 per cent of assets in the insurance sector and 34 per cent of the banking sector.
Carter’s caveat, despite the objection voiced by the HCU president that his statement was biased, was that all parties would be entitled to share their story with the COE. Carter contended that the policyholders and depositors were the victims of men of “corporate vanity.” In Harnarine’s case, Carter observed, he attracted customers because his depositors could take the interest from their accounts into a monthly sum. Many, observed Carter, chose to live off this interest. But the paltry interest paled next to the money Harnarine paid himself. Carter stated that Harnarine would pay himself $60,000 a month for expenses and drew an additional $25,000 from general funds a month—$10,000 for gas and $15,000 for general maintenance.
In addition, the HCU paid for Harnarine’s travel and approved all expenses—a total of $1.3 million.
HCU, said Carter, was being used to allow Harnarine to have an extravagant lifestyle which contrasted with the people who were giving him that money. In Duprey’s case, Carter said, he used the money from his insurance companies, Clico and British American and the Clico Investment Banks to create a global empire without adequate collateral in the statutory fund. Dupery was criticised for using financial instruments such as the EFPA’s and Mutual Fund policies as a “hook” to attract cash. And while Harnarine’s management style was criticised as “domineering and autocratic” Duprey’s actions were more duplicitous.
He said Duprey chaired an AGM of January 23, 2009 in which he told shareholders that CLF had an asset base in excess of $100 million. “Such was the apparent affluence of CLF that a $3 dividend was declared for the year ending 31st December 2007. As there were 7.5 million fully paid shares that meant dividend payments of $22.5 million. Meanwhile, CIB, Clico and BAT could not pay their depositors and policyholders,” said Carter. Five days later, Duprey was cap-in-hand at the Central Bank’s door to bail out his cash-strapped insurance company, Clico. A series of reports by E&Y into Clico, BA and CIB were used to substantiate Carter’s claim about the organisation. These reports also form the basis of a civil claim being pursued by the Central Bank against Dupery and former CL executive Andre Monteil, who is not a party to the COE.
“The reports identified substantial failures of management. An organisation that was entrusted with the savings of its depositors and policyholders appears to have used those funds for corporate aggrandisement at the expense of proper fiduciary management. Both these important parts of the CLF empire were insolvent. The cross-financing of CIB, BAT, Clico and CLF meant that there was mutual dependency. The failure of one had a material effect on the others,” said Carter. “How did Pricewaterhouse Coopers, the auditors, fail to spot the inherent weaknesses which were to create the liquidity crisis? The inter-company transactions must have created considerable difficulties for those trying to identify the true state of the cash flow and assets of the Clico companies. It must have been like trying to count rabbits in a warren. And why was that so? Who was the architect of this corporate labyrinth? The founder of the Clico empire was Cyril Duprey. But the architect of the group that failed to pay its depositors and policyholders was Lawrence Duprey,” said Carter.
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