Trinidad senator slams State-owned bank's transactions with Barita parent CornerstoneWednesday, October 20, 2021
Barita Investments' parent company, Cornerstone Financial Holdings (CFHL), has promised to respond “in a matter of days” to damaging allegations made in the Trinidad and Tobago (TT) Senate about certain transactions made between the Port-of-Spain-based State-owned First Citizens Bank (FCB) and Cornerstone.
The allegations were made by TT Senate Minority Leader Wade Mark on Monday in the Upper House. Mark, in his presentation, called for “an immediate internal forensic audit” into FCB's relationship with Barita Investments and Cornerstone Financial Holdings before any further investments are made. This comes against the backdrop of the Government divesting 10.87 million of FCB's shares to raise TT$550 million (US$80.97 million) to fund its 2022 budget.
A Trinidad Express article on October 4 noted that FCB's investment subsidiary, First Citizens Investment Services Limited (FCIS), purchased an additional 24.52 million shares for TT$1.96 billion (US$13.32 million) in Barita Investments 2021 additional public offer (APO). Cornerstone Financial Holdings owned 75.68 per cent of Barita Investments at the end of August.
“Madame President [Paula-Mae Weekes], we are saying in the interest of transparency, accountability, and good governance, we are calling on the Minister of Finance [Colm Imbert] to conduct an internal forensic audit into this recent bizarre transaction and opaque arrangement and to direct FCB not to invest one more dollar of depositors' money....,” stated Wade, who is a member of the Opposition United National Congress (UNC). Wade, who is an economist, was Speaker of the House between June 2010 and September 2015.
“The people of Trinidad and Tobago demand answers, Madame President and we're calling on the minister to deal with this. This is not a time to be silent or to take an oath of silence. In the event that they fail to do so, we are calling for the immediate resignation or removal of the CEO of FCB and the entire board of directors if they do not take steps to stop this..., Madame President,” Wade elaborated.
The Jamaica Observer reached out to deputy chairman of Cornerstone Financial Holdings Paul Simpson for a response to the allegations. However, a director of Barita Investments, who requested not to be identified, responded asking for a few days to formulate a response.
FCB made its first investment in Barita Investments in September 2020 through wholly owned subsidiary First Citizens Investment Services Limited for a five per cent stake valued at $2.82 billion (US $19.86 million). The company then purchased an additional 1.1 million shares valued at $1.08 billion (US $7.45 million).
FCB was reorganised into a financial group recently with FCB now being a wholly owned subsidiary of First Citizens Group Financial Holdings Limited (FCGFH). The FCGFH shares were listed on the Trinidad and Tobago Stock Exchange on Monday, with the owners of FCB gaining equivalent ownership in FCGFH prior to the amalgamation. The previous FCB shares were delisted.
The T&T economy has been on a downward trend over the last seven years, with only two years showing positive gross domestic product (GDP) growth. This has been due to an increase in the volatility of oil prices, which came from a historic high of US$99 per barrel in April 2014 to lows of US$33 per barrel in October 2020. This was coupled with a decrease in exports from the energy and non-energy sectors. Renowned Caribbean economist Marla Dukharan even noted in her September Caribbean Monthly Economic Report that the twin-island republic's foreign reserves would stand at US$1.85 billion if it were not for the USD loans, Heritage and Stabilisation Fund (HSF) drawdowns, and International Monetary Fund (IMF) Special Drawing Rights. T&T's net official reserves stand around US$7 billion.
As a result of these issues, foreign exchange is scarce in T&T. Nasdaq listed company PriceSmart Inc has had to restrict its imports to the country, freight forwarders have requested USD-only settlements, and banks such as JMMB Bank (T&T) are restricting clients to only US$250 per month through their debit cards. The country's fiscal deficit for 2022 is expected to be TT$9.096 billion (US$1.34 billion).
Wade argued that the US$25-million loan made by FCB to CFHL, along with investments by First Citizens Investment Services in Barita are very questionable. Although Wade mentioned that CFHL is based in St Lucia as an offshore entity, CFHL redomiciled itself to Barbados in February 2020 as per the Corporate Affairs and Intellectual Property Office.
“Just recently, this same State-owned bank was able to invest some US$39.2 million or TT$269 million in shares in a small brokerage firm and give that firm, called Cornerstone Financial Holdings Limited, a loan of US$25 million or the equivalent of TT$170 million. It would appear that the shares of Cornerstone Financial Holdings Limited, currently held in Barita Investments Limited, may have been used as collateral to secure the US$25 million. Can the minister explain why FCB made such an investment in a company called Barita Investments Limited? Why did FCB choose to lend some US$25 million to an offshore company? The owners are not known,” said Wade.
FCB's investment at $52 in the 2020 APO netted the financial company a 98 per cent gain on investment at the end of its 2020 financial year (September 30). Barita Investments' stock price also went to an all-time high of $108 last month which would have meant FCIS's total investment would have been 64 per cent higher in USD terms since purchase. Though the price remains down 11 per cent since the end of the quarter, FCIS collected $200.76 million last Thursday from Barita's highest dividend payment to date.
Opposition leader and head of the UNC Kamla Persad Bissessar, asked for an inquiry into the “mystery” of Barita last month in Trinidad and Tobago's Parliament. The UNC won two seats in the 2020 election while the People's National Movement led by Dr Keith Rowley lost one seat.
Imbert made recent comments that FCB would have not needed to seek his approval to invest in Barita, especially since there is some flexibility related to banks. He stated that they do not micromanage State banks which follow the protocols outlined by the Ministry of Finance. CEO of FCB Karen Darbasie stated at the company's recent annual general meeting that it made a very good gain from Barita and that the transaction was done in the normal course of business.
Wade closed out his presentation by speaking on the intention of the UNC to create 50,000 jobs over the next five years and rebuild the country's economy during that time frame. He also elaborated on a stabilisation framework of fiscal and exchange rate actions.
“We therefore call on the minister to shine a light in the dark corners of this transaction because Barita Investments Limited and Cornerstone Financial Holdings Limited appear to be one and the same company. Our money at FCB, depositors, I am a depositor at FCB. That money I have there, and other depositors, face great exposure in the event of a crash of this company. Who will protect our deposits in FCB?” the senator stated.
Just last month, Barita Investments raised $10.78 billion in an additional public offering.