David Walker: Counting the cost – CLICO

David Walker

SCARBOROUGH, Tobago, Tuesday July 1, 2014 - Throughout this sorry CLICO / CLF saga, we have had great difficulty in extracting any meaningful financial information from those in charge, and who spend billions of our dollars without oversight. We must therefore be grateful for the treasure trove of information disclosed within the recent judgment at the Court of Appeal. Indeed, this is not the first time that very important financial information has been gleaned as a result of depositions in court.

In this instance, we have been presented with long coveted information about the data upon which the decision was made to implement the “Dookeran Plan”. The following is an extract from the judgment.

“The first option involved no additional government funding, and the liquidation of CLICO, which would have resulted in a payment to policy holders of an estimated 70 cents on the dollar.

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The second option involved the full funding of the asset shortfall and repayment based on contractual terms. This would have resulted in no loss to policy holders, but would have required the injection of a further 7.2 billion (TT), about 18% of the national budget. This assumed the short-term monetization of CLICO and BA assets, since 10.8 billion of EFPA and mutual fund liabilities would fall due over the ensuing twenty seven months.

Option 3, the Dookeran Plan, would require an investment by the government of 4.2 billion (TT), which represented 8.6% of the national budget.”

In 2010 and already under severe financial duress, policy holders were being told by ministers and members of government that if they pressed for full contractual payment, they would be lucky to receive 10 cents on the dollar. No minister sought to correct the misinformation. Further, had the authorities acceded to any of the many requests for supporting data, policy holders would have been able to see for themselves that a liquidation would yield a return of 70%.

The difference between 10% and 70% is stark. I have no doubt that it would have had a significant impact on the decisions reached by a large number of policy holders. It was also always likely that an orderly disposal of assets over say, two years would have returned an addition 20% or more given that we all knew that the world was emerging from a severe financial crisis. In other words, the data in the hands of the government, and now openly acknowledged, says that policy holders could have been paid close to 100% of their contractual obligations without any further taxpayer injections, a remarkable admission indeed.

Next we are told that they calculated that to fully fund contractual obligations would cost a further 7.2 billion. That simply makes no sense. If the shortfall without government input was 30%, then funding that shortfall would cost 30% of 12.6 billion, would it not? That gives us a cost of just short of 4 billion, not 7.2 billion. Did they make the most significant economic decision of our times based on flawed calculations? If they got this simple one wrong, we can have no confidence in any of their figures.

Finally, their claim is that in order to save the taxpayer the burden of option two, they decided to implement option three at a cost of 4.2 billion. The only justification for punishing EFPA holders and defying our constitution was that option three would result in less cost than option two. That was wrong even then.

You have seen that the cost of option 2 was miscalculated, it should have been about 4 billion. The other aspect of option 2 that we must highlight is that it was certain, and carried no risk to the taxpayer of unforeseen escalation. In fact, rising asset values held the prospect of a lower actual cost. Despite their claims of reduced cost, option 3 is now estimated to have cost over 20 billion, with the final figure yet to be established. The cost that, according to them, we could not afford has now been spectacularly exceeded while policy holders have been unnecessarily disadvantaged.

Acceptance of contractual obligations was always the least risky option for the taxpayer, and we said so. We also put forward a plan that would have paid policy holders while rewarding those who chose to rollover their policies. Here is the bottom line, as disclosed by their deposition:-

Option 2, full contractual payment of policy holders was known to be less costly that the Dookeran Plan. Option 2 carried no risk of escalation while option 3 the Dookeran Plan did, and should have been known so to do. The result is a bill of more than 20 billion, and the sequestration of personal assets without just cause.

You will note that I have avoided comment on the legal basis of the judgment. That is for Ramesh Lawrence Maharaj in the first instance. He is better placed and infinitely more qualified in that regard. After hearing his comments I shall consider whether I can usefully add anything further.

David Walker is a corporate finance consultant. He is adviser to several CLICO clients. He also writes regularly on matters of the economy in the local media. He can be reached at d.walker@alcindorwalker.com. His blog is at www.alcindorwalker.com.

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David Walker: Counting the cost – CLICO

David Panton builds wealth, relationships

This story is reproduced with the kind permission of the Atlanta Business Chronicle

DAVID Panton is no stranger to trailblazing.He was the youngest member of his undergraduate class at Princeton University at the age of 20. Then, at Harvard Law School, he was one of two black presidents in the history of the prestigious Harvard Law Review. The other was President Barack Obama.He is also among the youngest PhD holders from Oxford University.Now, the 41-year-old is one of the select handful of minority leaders at a private equity firm, a field that rarely shows much diversity. But Panton remains humble about his accomplishments, citing hard work as the reason for his success.“I believe success is defined by what you have overcome to accomplish what you accomplish,” he said, emphasising his respect for people who achieve great things without a support system.“The people I am most impressed by are those who have done more than I’ve done, with less support than I had,” he said, in a lyrical Jamaican lilt.For Panton, that journey began by flying to Princeton, NJ, from Jamaica at the age of 16, to convince admission officers he deserved a spot, even though he hadn’t completed high school — a requirement for all applicants to Princeton University.“I was very determined to get in,” he said, simply.A lot of that determination came from the Rev Keith Panton, his father. Born in Mandeville, Jamaica, Panton found an inspiring role model in his father, who worked his way “from growing up poor” to becoming the first black chief executive of a Jamaican company. The senior Panton later became a priest, but the allure of business had been embedded in his son.“Seeing my father made me realise I wanted to run a business, be an entrepreneur,” he said. Panton got his first taste of running a “multimillion-dollar business” in his 20s, as president of the Harvard Law Review. Since then, running companies has been very much part of his career.Panton maintains a close relationship with his family in Jamaica. He said he speaks to his parents every day. In fact, he moved to Atlanta in 2004 to be closer to his sister who lives here.He joined Mellon Ventures that year, and within three years, became part of the team that brought over the portfolio of investments from Mellon Bank to form Navigation Capital Partners. The company has deployed more than $1.5 billion to invest in notable companies including SecureWorks Inc (SecureWorks eventually was bought by Dell Inc).Despite living an affluent lifestyle, which includes taking private jets and a reserved table at Buckhead restaurant Chops, Panton said “wealth in life is about health, family and satisfaction. Monetary wealth is a good way of keeping score, but without the first three, it means nothing.”Panton talks candidly about his failures too. As a senior at Princeton, he applied for a prestigious Rhodes Scholarship, where selected foreign students get a full scholarship to attend Oxford University in the United Kingdom.“I was fairly confident I would win. And when they announced the winner, I was about to step forward, but then I lost,” he said. “It was difficult. I reapplied the next year and I won. But it was a tough year for me.”So motivated is he by his belief “in the passionate pursuit of perfection” (carmaker Lexus’ motto) that Panton spends much of his spare time mentoring.Larry Mock, managing partner of Navigation Capital Partners, explains that Panton’s personal and professional strengths converge around his desire to help others.“The way I describe David to people that don’t know him is that he’s the ‘consummate deal guy’. Most people leave a cocktail party having said hello to five old friends. David will walk out of a party with five new friends and offer to help them with either introductions to others, or to look at their business. It’s not unusual for David to schedule two to three lunches in a day.”In turn, Panton said Mock is one of his greatest mentors, who he would “have never got into private equity without.”Panton also teaches a private equity course once a year at Emory University’s Goizueta Business School, where his “magic touch with students makes him very popular,” said Klaas Baaks, executive director at the Emory Center for Alternative Investments, who co-teaches the class. “He inspires students and genuinely has an interest in them, which is so hard to find.”Upon meeting Panton, what immediately strikes people is his breadth of knowledge on — what feels like — everything.During the interview, he discussed governments, leadership techniques and international business with relative ease. In fact, he was an accomplished debate champion at Princeton, and his former roommate and debate partner, Ted Cruz, recently won election to the US Senate from Texas.Even now, Panton’s thirst for knowledge, along with a hectic work schedule, keeps him constantly travelling. But his favourite place in the world will always be “Jamaica, where I’m from”, he said.Panton’s other love? Jamaican cuisine. In Atlanta, he frequents Chef Rob’s on Roswell Road, for its authentic food. And anyone visiting Jamaica can’t leave without trying the jerk chicken or jerk pork at Scotchies, according to him. He divides his time between homes in Atlanta, Jamaica and Trinidad, but said he can’t see himself moving out of Atlanta any time soon.“I love Atlanta,” he said.While Panton continues to build Navigation’s multibillion-dollar portfolio, he said he also aspires to “leave the world in a better place than I saw it”. He is “very committed” to inspiring change in his home country through capable leadership.“To me, a good leader has a vision of what they want to accomplish, an ability to communicate their vision,” he said, “and the ability to persuade others to work with them in accomplishing that vision.”

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David Panton builds wealth, relationships