The purpose of insurance is to mitigate against any loss. However, an ongoing Trinidadian Commission of Enquiry into the management of the collapsed Colonial Life Insurance Company (CLICO) has revealed that the group lost hundreds of millions of dollars in failed investments, and executives paid themselves hefty salaries to the detriment of policy holders and investors.
The fold-up of the insurance giant and its sister company, CLICO Bahamas, in 2009 has affected a multitude of individuals.
Former CL Financial chief financial officer Michael Carballo, in his testimony before the Commission in September, told how CL Financial made a series of risky investments to expand its portfolio after acquiring the majority stake in liquor company Angostura.
According to Carballo's testimony, CLICO's major source of financing was its Executive Flexible Premium Annuity.
Carballo told the Commission, which is chaired by Sir Anthony Colman, "That is where it started, for example, the purchase of companies like Hine Cognac and Chateau Online and all these acquisitions were done via funding directly from CLICO.
"Obviously, acquisitions like that, it might be difficult to put 100 percent of that into your statutory fund. So those acquisitions were coming directly from CLICO into those entities in Europe. So there was a bit of concern.
"Although I was not part of that process within CLF and CLICO at the time, but at Angostura there was a bit of concern in terms of the manner in which funds quite loosely were given out by CLICO to fund both the acquisition, but in addition to the acquisition was really the working capital requirements of a number of these entities in Europe. And many of these entities had loose governance standards, virtually little or no accountability."
Carballo said CLF subsidiaries were making deals without the approval of the parent company.  He cited the US$300 million purchase of Green Island by British American as an example.
Of the purchase, he told the Commission, "I got very worried that British American could make a US$300 million purchase of Green Island, which is a property, a land investment in Florida just about 22 miles south of Orlando, of US$300 million and the chairman of CL Financial doesn't know anything about it, and the group finance director doesn't know anything about it.
"So I'm here now worried that, listen... you have two problems. In CLICO, a subsidiary has a fixed and floating charge over the parent, and then you have another situation at British American whereby a US$300 million-purchase takes place and the chairman doesn't know about it and the group finance director doesn't know about it.
"So I'm really worried now that, you know, what is the state of corporate governance and approvals and practice and standards within the group."
Carballo said he was worried because he did not think that British American had the capacity to withstand a $300 million asset and liability on its books.
According to Carballo, executives L. Andre Monteil, former CL Financial group chief, sought a US$2 million consultancy fee and $14 million in commissions to help CL Financial out of financial problems.
He said that Gita Sakal, the former corporate secretary of CL Financial, was paid a US$35,000 monthly salary and was entitled to a US$2 million annual bonus. Carballo said a debit of US$5 million was made from CL Financial's US dollar account at Royal Bank to pay Sakal's consultancy firm, Corporate Consultants Ltd.
Sakal signed both the invoice and the bank instructions to have the funds debited, he said.
CLF Chairman Lawrence Duprey was unaware of the US$5 million (TT$32.5m) payment to Sakal and ordered that the money be "immediately returned", Carballo said.
The inquiry which began in March continues.

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