TNT’s John Jeremie criticises PNM’s Clico bailout plan

SINCE at least November 2009, former PNM Attorney General John Jeremie was aware of flaws in two agreements signed by his own PNM administration with CL Financial governing the State’s 2009 bailout.

 

In particular, Jeremie, who assumed the post of Attorney General in May 2009, criticised the three-year expiry date contained in the June 2009 shareholders’ agreement, which the State signed with CLF after signing a January 2009 Memorandum of Understanding.

 

Last week, CLF majority shareholders told Newsday they would be willing to entertain extending, for a second time, the deadline for the expiry of the June 2009 agreement. The shareholders are due to hold talks with the Government this week.

 

But, Jeremie, in a letter dated November 4, 2009, which was addressed to former Finance Minister Karen Nunez-Tesheira, queried why the three-year deadline (which expired in June 2012 and was extended to December 12, 2012) was in the agreement in the first place.

 

“I have only now had an opportunity to study in detail all of the materials that have been presented to me in connection with this matter,” Jeremie said.

 

“I am significantly concerned about the fact that the shareholders’ agreement terminates in three years, whether or not the situation is fully stabilised or government has been repaid.”

 

He continued, “Upon the determination of that agreement, under the current facts, shareholders will regain control and will therefore be in a position to control the appointment to the board. 

 

“I note that there is no reference in any other materials as to the reason for the three-year limitation. I would be grateful for further information on this point. It is important to recognise that this limitation emphasises the need to develop and implement plans to secure GORTT’s position and to obtain repayment as quickly as possible.”

 

The June 12, 2009 agreement was signed some two weeks into Jeremie’s tenure, after he was sworn in on May 29, 2009.

 

The January 2009 MoU would have been signed when his predecessor, former Attorney General Bridgid Annisette-George, was in office.

 

In his letter, which has been obtained by Sunday Newsday, Jeremie further recorded, “In the circumstances, it is possible that GORTT will be at risk if its advances are repaid prior to the repayment of creditors. It is unlikely that GORTT will seek repayment in advance of secured creditors, or in circumstances in which to do so would result in instability. “This quandary highlights the prejudicial effect of the three-year limitation on the duration of the SH Agreement. It would therefore be useful to ensure that the recitals in security instruments which are drafted in favour of GORTT are carefully worded to clarify this point.”

 

Jeremie also complained that the agreements were not specific enough.

 

“It is not possible to ascertain from the documents provided whether or not full control over the entire CLF group has been obtained by the Government,” he said.

 

“For instance, it is not possible to ascertain the status of the boards or directors of the shareholders which are not totally controlled by CLF.

 

“It is unusual that the shareholders’ agreement does not speak specifically to the authority to sell assets in any member of the CLF group. In my view, this creates a potential opportunity for the majority shareholders to argue that the Government, through its nominated board members, has breached the agreement.”

 

Jeremie also expressed concerns over the structuring of security interests in the CLF group. Despite all these flaws, Jeremie did not recommend a new agreement.

 

“Government would perhaps be prudent to avoid opening up any re-negotiation at a time when the hand of the majority shareholders is stronger,” he said.

 

Of the three-year expiry clause, Peter Permell, spokesperson of the Clico Policyholders’ Group, yesterday said, “We are certain many will agree that at first blush this clause does not seem to make sense, and upon further reflection could be seen by a reasonable person to be a case of gross incompetence, negligence or even worse. In fact, it does not seem remotely reasonable for anyone who has the best interest of the taxpayers at heart to have signed off on such a clause, given the billions of dollars involved.”