$206M FEE

While many had thought Monteil, Lawrence Duprey’s right-hand man, had fallen out with Duprey and did not exert the same influence on the group that he once did, the reality was, perhaps, almost the opposite.

Monteil would meet regularly with his successor, Michael Carballo, for morning coffees at the offices of Monteil’s private family firm, Stone Street Capital, to discuss the several issues relating to the group.

“I would meet with Mr Monteil on a very regular basis, have coffee and talk about the challenges facing the group,” Carballo told the Clico Commission of Inquiry yesterday. “And those meetings were normally three times a week, four times a week. At that time he was the past group CFO I had to some extent lean on some of his advice. There was always a fairly loose arrangement. He came to meetings. It was not unusual to be meeting with Mr Monteil.”

And when the time came to find a solution to the crippling liquidity problems facing the CL Financial group by January 2009, problems which stemmed from deals and practices that grew under the tenures of both Duprey and Monteil, Monteil had a plan of action to solve Clico’s woes.

The plan was this: he, or rather his company Stone Street Capital, would orchestrate a sale of Clico’s $12 billion worth of Republic Bank shares at a certain price and in exchange, CL Financial (CLF) would get cash to solve its liquidity flow problems and to pay Stone Street Capital a fee. The fee? A total of more than $206 million, made up of a US$2 million “consultancy fee” and a 1.75 percent commission–worth an estimated $194 million–for the sale.

Carballo, a man arguably caught in the middle of the real movers and shakers at CLF, objected to this proposal which Monteil put to him one morning in January 2009 at Stone Street Capital’s offices.

“Monteil suggested a sale of the 54 percent holdings in Republic Bank Limited (RBL),” Carballo said. “I indicated that given that a number of those shares were encumbered this was not going to be easy.” But he was dealing with a man of substantial influence.

“Mr Monteil further indicated to me that in quick order, he could arrange a sale of Republic Bank shares at $130 a share which would have resulted in CLF getting a significant amount of cash resources in hand, approximately $12 billion. He indicated to me that he would be a facilitator. He asked me to sign an agreement.”

Carballo stressed that the Republic Bank shares were prized, being regarded as a steady stream of dividend income because of the soundness of the institution. He rejected the proposal. But he was unaware that the top boss at CLF, Lawrence Duprey, seemed to have a very similar idea to the one Monteil had hatched.

“I was not sure if Mr Duprey was having discussions with Mr Monteil,” Carballo said. Duprey was already in talks to have the same shares swapped in a share agreement with a major international bank, he said.

But the Monteil offer would not disappear. Carballo said he later found a draft mandate letter stipulating several terms of the proposed arrangement with Stone Street Capital. Duprey advised Carballo that the only way to see if Monteil was being “serious” about the $130 per share price was to sign on.

“I immediately discussed it with Lawrence Duprey and he said he did not have any discussions with Andre Monteil,” Carballo said. But, “he felt he was not sure whether the proposal being put forward by Mr Monteil was real or not. He said the only way to see if he was serious or not was to sign the mandate.” Duprey said he wanted Monteil to handle talks with the State because Monteil had the “political connections” that would be needed. (Monteil was the treasurer of the PNM, the then ruling political party.)

The proposal made its way to the CLF board–through Duprey–at a meeting of January 27, 2009, 14 days after Duprey wrote Central Bank Governor Ewart Williams warning that the group faced liquidity problems.

“He (Duprey) informed the meeting of a plan to dispose of RBL shares and informed the meeting that Stone Street Capital, headed by former CLF group financial director Louis Andre Monteil and MG Daly–Stone Street’s recommended attorneys–was given the mandate to do this,” the board minute of that meeting notes.

“He informed the meeting that a letter to this effect was signed by himself and Michael Carballo, the present group financial director. However, when a copy was requested by the board it could not be produced.” At the meeting were: Duprey and directors: Anthony Fifi, Roger Duprey ( a cousin of Lawrence), Rampersad Motilal, Clinton Ramberansingh, Dr Bhoe Tewarie, Michael Carballo and Bosworth Monck (participating by phone.)

The board rejected the award of this mandate to Stone Street Capital.

“When this was presented to the board, the board was completely outraged that Stone Street Capital would seek to do this deal with CLF on the heels of seeking liquidity support with the Central Bank,” Carballo said yesterday.

“The board did not see the necessity of entering into any disposal of Republic Bank shares,” he said. “Board members were very concerned that perhaps a deal was already struck for the sale of the Republic Bank shares and they were concerned as to why Stone Street would have been involved in the sale of Republic Bank shares. The board was concerned that perhaps a deal was struck behind the scenes already somewhere.”

Carballo said, “CLF did not enter into any agreement with Stone Street Capital.” But he was mistaken.

On January 28, 2009, in defiance of the wishes and express objections of the CLF board, Duprey penned a letter to Central Bank Governor Ewart Williams.

“Further to our meeting with yourself and your team from both the Central Bank and Ministry of Finance held on January 25, 2009, we hereby confirm that Mr L A Monteil and Mr Peter Johsnson, representatives of Stone Street Capital are authorised to hold discussions and negotiate various proposals in relation to liquidity and statutory fund issues on behalf of the CL Financial Group,” Duprey said. He signed the letter alongside Mervyn Assam, of the Clico Investment Bank, and Karen Gardier, of Clico.

Two days later, CLF entered into a memorandum of understanding (MOU)involving the sale of all of its Republic Bank shares among other group assets.

Carballo also said the sale of certain Clico assets after the January 30 MOU, occurred without his or the board’s approval. One in particular was Clico Energy, an asset which was sold at a price which he said was far lower than its value, given its projected income streams.

The sale agreement was signed off by Duprey and former company secretary Gita Sakal.

“So I was very shocked when I heard about Clico Energy,” Carballo said. “The gross sale price was a paltry US$ 46.5 million.” The assets of the company, sold to Proman Holdings Barbados, were valued at US$212 million. “I was taken aback, I was shocked.”

“CLF continued to meet formally and informally and at these meetings I would present detailed analysis of all of our investments, including Clico Energy. I was shocked that Sakal, Mootilal and Lawrence Duprey would have me presenting details of this asset which had already been sold,” Carballo said. He later discovered that Sakal had a rich consultancy contract, earning US$35,000 a month, subject to a 15 percent annual increase, in addition to an annual bonus of US$2 million.

Of the Clico Energy sale he said, “I am not sure what kind of due diligence was done to ensure that our money was protected. And key members of the board were not disclosing this transaction.”


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