The joint liquidators of CL Financial (CLF) are blaming the group’s former auditors, PricewaterhouseCoopers (PwC), for delaying the liquidation process by not releasing internal company documents PwC has had in its possession for over ten years.
Now in their fifth year on the job, the joint liquidators, international accounting firm Grant Thornton, do not identify PwC by name as the auditor for CLF for the period up to the collapse of the group in January 2009. PwC is only referred as the former auditor. However, at the Commission of Enquiry into the failure of CLICO, PWC was identified as the auditor on record for CLF.
The joint liquidators’ report noted that CLF’s former auditors were engaged for the period 2000 to 2008.
“Accordingly, the former auditors would, and have confirmed that they have, in their care, conduct and control, certain documents pertaining to audits carried out by them and of the company’s financial status during the period 2000 to 2008.
“Whilst an audit was commenced in 2008, it was never finalised and the last set of completed audited financial statements are from 2007, ten years prior to the appointment of the joint liquidators,” the report said.
Since September 2017, CLF has been in liquidation with joint liquidators being mandated to report to the High Court every six months on the process of winding up the group, which was once T&T’s largest indigenous company.
In their eighth report, for the period December 16, 2020, to June 18, 2021, the Grant Thornton liquidators observed that in order to review the solvency of CLF and possible antecedent transactions, it required all available records of the company.
To date, claims are still being made against CLF, which was run by its executive chairman Lawrence Duprey until early 2009, when the group collapsed.
The report said that in the reporting period a claim was made to CLF of $1.7 billion.
“The joint liquidators initially requested documentation from the former auditors in 2019 and the former auditors have since failed and/or refused to produce the company’s audit documents and/or provide access to the same contrary to the April 12, 2018, order and s.388 of the Companies Act,” the report said.
The joint liquidators said the failure on the part of the former auditors to provide the requested documents, or at least to provide access to the audit documents, “has inhibited the joint liquidators in their ability to process certain claims from creditors and has caused undue delay in the liquidation process”.
“It is imperative to the joint liquidators that the auditor records be produced to the JLs to avoid further delay and increased costs. Accordingly, the joint liquidators have continued liaising and negotiating with the former auditors, but should the current round of negotiations fail, the joint liquidators may seek to apply to the Court to compel the former auditors to produce the records,” the report said.
In 2015, PwC was one of several entities that received Salmon letters issued by the sole Commissioner of the Commission of Enquiry, the late Sir Anthony Colman, while he was completing his report.
Among the other recipients of the letters were: the Central Bank, PwC, former chairman of CLF, Lawrence Duprey; former group financial director of CLF, Andre Monteil; former CLF group finance head Michael Carballo; and a director of Methanol Holdings and principal at Proman, Joseph Cassidy.
The Salmon letters informed the parties of potential criticism of their conduct in the management of CLF and gave them an opportunity to respond before the report was completed.
Their responses would have been included in Colman’s final report, which was submitted upon receipt by Prime Minister Dr Keith Rowley to the Director of Public Prosecutions, Roger Gaspard, SC. The DPP has refused to make Colman’s final report public, insisting that his department is continuing criminal enquiries into the collapse of the group.
In response to a query from the Sunday Express yesterday, Brian Hackett, territory leader, regional advisory leader, PwC Trinidad and Tobago said: “We have been in constant contact with JLs with regard to the information which they require. We have been working with them. The last communication with them would have been last month. We respect the privacy of clients.”
In September 2021, the Office of the Attorney General initiated an appeal of a decision by High Court Judge Kevin Ramcharan to approve the fees claimed by the joint liquidators, Hugh Dickson and David Holukoff, for their work in 2019.
The eighth report by Dickson and Holukoff noted that while they hold a significant repository of information in relation to CLF, they are aware of further records held by external parties such as the Trinidad and Tobago Police Service (TTPS) as well as PwC.
With regard to the TTPS, the report noted that the records of CLF were seized pursuant to an order of the Chief Magistrate of Trinidad and Tobago dated May 17, 2013, and were stored by the TTPS.
“Previously the joint liquidators have had to make specific requests for records held by the TTPS based upon a document listing, which the TTPS have then delivered to the joint liquidators. However, the TTPS have recently finalised the scanning of all seized material and the joint liquidators have requested a copy of the complete scanned database in order to advance their investigations,” the report said.
The joint liquidators said they requested and have been performing interviews with certain key former staff members of the company to obtain further information on certain transactions, creditor claims and issues of corporate governance.
The report, which is dated June 18, 2021, said Dickson and Holukoff have also obtained access to CLF’s e-mail server and “have commenced the downloading and review of certain key employee e-mail accounts to assist with investigations into a variety of matters”.
“There are an estimated 250,000 documents in the possession of the joint liquidators which will take time to properly review. The joint liquidators are in the process of setting up a document review platform to ensure this review is undertaken as efficiently as possible. The joint liquidators anticipate the e-mails will be helpful for creditor claims and other investigations,” it said.
It noted that significant progress has been made with respect to several creditors and their claims in the estate.
“However, some creditors are struggling to properly prove their claims or are slow in providing the joint liquidators with responses to information requests,” it said.
“During the period, the joint liquidators have admitted creditor claims with a total value of TT$1.3 billion and rejected claims of $590.7 million,” the report said.
CLF’s financial standing
For the first six months of 2021, three subsidiaries of CL Financial (which is in liquidation) paid $165 million in dividends to the parent.
The balance on CLF’s accounts as at April 2021 was $353.7 million.
The report said the joint liquidators continue to work with subsidiaries across the CLF group “to identify recoveries of cash available to the estate for the ultimate benefit of its creditors”.
As they divest CLF of insurance company Colfire, Caribbean Petrochemical Manufacturing Limited (CPML), Safeguard Services and lands from Home Construction Limited (HCL), they have had to wind up companies owned by CLF—they have identified 140 within the group—and provide management and audit support for others.
“The ability to identify and release value in this manner has been enabled by the appointment of the joint liquidators and their staff as representative directors and subcommittee members to key subsidiaries within the Group,” the report said.
The release of $165 million
to CLF came from:
1. US$15 million ($101.9 million) and $40 million distributed by CL World Brands (CLWB). “As a continuation of the efforts in the prior period, the share capital reduction and distribution programme developed by the joint liquidators and their staff allowed a further release of cash which had been trapped in CLWB and Rumpro Company Ltd for several years. Due to the ongoing review of the alleged trusts, a portion of dividends received from CLWB has been ringfenced by CLF and will be released to the alleged beneficiaries of the Trust Deeds should they be found valid by the Court,” the report said.
2. US$1.2 million ($8 million) distributed by CPML. “In preparation of the planned sale of CPML, a further dividend of US$1.2 million was distributed by CPML to the company. It is anticipated there will be one further and final dividend prior to the sale of CPML,” the report said.
3. $15.7 million distributed by Angostura Holdings Ltd (AHL). The report said: “On November 16, 2020, a dividend of $15.7 million was received by AHL, represented by a dividend of $0.17 per share. AHL is a company listed on the Trinidad and Tobago Stock Exchange of which the Company via CLWB branch of subsidiaries, is a significant owner. Approximately 62 per cent of these monies are ring fenced subject to legal proceedings.”
The JLs noted they are “unable to pay a dividend from the CLF estate until a point where the claims of creditors have been substantially adjudicated.”
The JLs work ran concurrent to two court matters in which it was involved in:
1. In September, the Office of the Attorney General challenged a judge’s decision to approve the fees claimed by the JLs in 2019. According to the eighth report, from September 15, 2017 to April 2021- the JLs has earned $66,773,673 million. These include provisional liquidator fees of $2,494,513, liquidator fees of $56,441,635 for the period September 15, 2017 to October 2020 and fees of $7,837,525 for the period November 1, 2020 to April 30, 2021. The liquidators also serve on several of the conglomerate’s boards.
2. After a lengthy court battle, last month, Justice Davindra Rampersad ordered Proman Holdings to return a 51 per cent stake in Process Energy, which it purchased in February 2009 when it was called Clico Energy, to CL Financial and CLICO. Justice Rampersad also ordered Proman Holdings to pay CLF the dividends it collected from the shares since 2009 plus interest. In his 87-page ruling, Justice Rampersad had said that former CLF executive chairman and CLICO director Lawrence Duprey acted oppressively, unfairly and with prejudice to the companies when he facilitated a deal to sell shares in what was then called CLICO Energy to Proman Holdings (Barbados) Ltd in February 2009.CL Financial and CLICO together owned majority 51 per cent stake in CLICO Energy, which was sold to Proman Holdings on February 3, 2009 for US$46.5 million.Justice Rampersad said Duprey acted without due care and diligence and even failed in his fiduciary duties under the Companies Act as he failed to act honestly and in good faith with a view to the best interest of the companies.In response to questions by the Sunday Express, Proman had said that: “We strongly disagree with Thursday’s decision and our legal team will be pursuing our grounds to appeal. As such, it would be inappropriate to comment on the case.”