Forensic and investigative accountants must write a report with the assumption it will appear on the front page of a major newspaper. Strict adherence to and reliance upon phraseology such as ‘attorney work product’ or ‘privileged’ or ‘confidential information’ is most insufficient. At the same time we counsel them to be aware of their greatest enemy: personal bias. Objectivity is the key word from beginning to end. Otherwise when one’s findings are leaked into the public forum, it could prove most uncomfortable.

“Lindquist investigation reveals”

While insurance firm CLICO was caught up in a liquidity crisis in 2008, a top official at CL Financial (CLF) allegedly defrauded the insurance giant of prime assets for personal benefit.
The individual was aided by another executive from a Barbados-registered company. And even after the Government intervened and bailed out CLICO, another deal was made which cost CLICO millions.

These were some of the details unravelled in the forensic work done by forensic accountant Bob Lindquist commissioned by the Central Bank following the collapse of CLICO in January 2009.
The individuals and the multiple million-dollar transactions which they orchestrated are now the subject of a police probe which was launched last week. They are among three top officials from the CL Financial Group who the Sunday Express understands form the police investigations.

The criminal investigation against former CLICO officials and several corporate entities aligned to the collapsed insurance company was announced last week by Director of Public Prosecutions (DPP) Roger Gaspard.

While Lindquist’s forensic work exists, no official report was prepared from it and his work is not admissible evidence in a court of law. However, the Sunday Express learnt that Lindquist’s work, apart from having information to pursue civil proceedings, also has enough information to substantiate a criminal probe.

The Sunday Express has obtained a copy of Lindquist’s work, which centres around three specific transactions as at June 30, 2010. The work is primarily a chronology of events which were knitted together from documents and e-mails from CL Financial and CLICO. The Sunday Express understands that the Central Bank had commissioned Lindquist’s work into the affairs of CLICO and the documents are subject to professional privilege and public immunity.

Witness statements from several individuals — former corporate secretary Gita Sakal, former Group Financial Head Michael Carballo, former CLICO chief executive Karen Gardier and Methanol Holdings chief executive Rampersad Motilal — are cross-referenced throughout the Lindquist document, which posits a timeline of events leading up to the CLICO collapse and the transactions undertaken.

While the statements of both Motilal and Sakal bear “public immunity” in Lindquist’s work, both individuals have appeared before Colman’s Commission to address some of the issues. The financial statements and declarations of dividends are also used as exhibits.

At one point, Lindquist illustrates the complex corporate structure of CLF with a line graph.
Lindquist’s work focuses on four transactions, conducted from November 2008 to February 2009, which builds a case of fraud.

The transactions show how one top CLF official, aware of the financial constraints faced by CLICO, fraudulently obtained assets from the company and was ably abetted. It shows a contrived effort on the part of individuals, aided by their attorneys, in the setting up of Swiss companies in November 2008, before the bailout by the Government, to loot CLICO’s assets.

In one instance, US$2,800,000 from a CLICO subsidiary was paid to a Swiss company and not CLICO itself. That payment was used to acquire 337,800 shares from another CLICO subsidiary company without disclosure by CLICO and CLF. When a CLF executive questioned the transaction, the individual was told by a lawyer to “treat this with all of the required sensitivity”.

In another instance, an official claimed ownership of a subsidiary, with an estimated value of US$100 million, which was only held in his company’s beneficial interest “for tax efficiency” so subsequent dividends were paid to his Cayman registered-company.

In that instance, it resulted in a heated e-mail exchange between two CLF officials at the time — one argued that the shares were owned by CLF while the other insisted they belonged to him.
The e-mail trail of that incident, which was reproduced by Lindquist, incriminates the CLF official and surmised it as “theft”. Both officials exited the company before the issue of ownership was resolved.

Lindquist’s work also detailed the circumstances leading up to the undervalued sale of a prime CLICO energy asset in February 2009, which was described as being done “with indecent haste” and with no proper reason and in breach of the Memorandum of Understanding signed with the Government of Trinidad and Tobago.

Lindquist’s documents were used by the Central Bank in June 2011 to initiate a civil case against two former CLF executives. The Central Bank’s civil case centers on the mismanagement of CLICO, and misapplication and misappropriation of its income and assets to the detriment of its policyholders and mutual fund investors.

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Forensic and investigative accountants must study human conduct. In an honest environment, behavior is for the most part predictable, but in a questionable business environment subject of a live investigation, the forensic accountant must be most focused on the nuances of conduct, whether business or personal that is not in the normal course. The nuances tend to reflect sensitivity to a subject that must be investigated as a solid lead.

Roger was Too Busy to Chat!

Hi-tech products have a relatively short shelf life and this requires procedures to properly dismantle parts that are used, discontinued or deemed to be surplus. However, the risk is that the dismantled parts could be diverted for sale on grey markets.

A department in this Hi-tech company had selected various vendors through the bid process to contract the necessary services. All the agreements required the vendors to share their sale proceeds from recycled parts and to not sell parts scheduled for scrap. However, field investigators had confirmed the movement of the company’s scrap in the grey market and our mandate was to determine if any person or group of persons within this department was involved.

There was also one other factor. General Counsel advised that their Internal Audit group had concluded their review of this department just two weeks earlier with all findings satisfactory…and he wanted them to work with us. That was fine and to his credit, the Director of Internal Audit was most positive and very helpful and especially anxious to learn, if their findings were incorrect, how they went wrong.

At the start of the investigation, the General Counsel met with department management and staff to introduce us and to advise of our joint investigation with the Director of Internal Audit. He sought their cooperation and as expected the employees expressed many concerns with such questions as ‘Does management believe someone in this department has engaged in any misconduct or criminal activity?’ and ‘Assuming I cooperate, will I be guaranteed employment?’

It was time to start work and after the introduction it made most sense for the Director and me to meet with the head of the department, Roger. After the usual preliminaries, the interview started, but within a few minutes Roger focused the conversation onto the stress from his sick wife, and then he had to excuse himself to attend a meeting. Now think about this, if Roger had been honest he would have given us all the time we required. After all, these allegations were not new; they had been ‘dogging’ his department for some time. We could have provided Roger with instant relief.

In the normal course, that is, an honest environment, Roger would have fully engaged us until we had had enough for the day. But point is, Roger’s conduct was not in the normal course of business. Our suspicions were only intensified, now we just had to establish the trail of evidence. That story is for another day.

The Director of Internal Audit also discovered the answer to his question: a lack of professional skepticism, a skill often difficult to practice when working as an employee within any organization.

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For young professionals: Work hard because you never know who might take an interest in your career.

Lindquist starts his 41st year and recalls his move into Forensic Accounting

It was January 1972, and the audit season was in play at Touche Ross Bailey & Smart (now Deloitte Touche) in Toronto when the audit partner called me into his office. He was not pleased with me. I had just won the 1971 Rally Championship in a Datsun (now Nissan) and his statement to me was to decide whether I wanted to drive rally cars or be a professional auditor. This meeting followed several evenings and weekends working on one of his audits. I vividly remember this meeting, as if it was yesterday, I kept my cool.

It was a wonderful opportunity because earlier Brian McLaughin who was in charge of the insolvency group had told me that if the day arrived when an audit partner didn’t like me, to come see him. I did, in the first week of February 1972 and at the time I had no idea that forensic accounting would become my career.

Brian had previously been retained to assist Commission Counsel for the Honorable S.H.S Hughes with the public inquiry into the collapse of a major finance company. My first assignment was to proofread the draft report entitled ‘Report of The Royal Commission Appointed to Inquire into the Failure of Atlantic Acceptance Corporation Limited’.

By way of background, in June 1965 ‘Atlantic’, a major Canadian finance company with Powell Morgan as President failed to meet a $5 million matured secured note and three days later it was placed into receivership. Its collapse shook Canada’s financial community and a $20 stock became .65 cents.

I found the findings to be most fascinating. Subjects in the report like “The Five Wheels Transaction and its Reversal” made references to names such as Commodore Business Machines, Allen Manus a Toronto stock promoter, Jack Tramiel and the Grand Lucayan Beach Hotel in the Bahamas. In one day, one amount of $750,000 was processed through six transactions called “A Financial Merry-Go-Round.” The Report stated the collapse represented a loss of some $70 million and labeled Morgan as inventive, ingenious, incompetent, corrupt and a swindler. This sure beat auditing!!

The intrigue captured my interest and my passion; I had been rescued from the audit world and the rest is history, thankfully still unfolding over 40 years later.

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In Lessons Learned #1 we stated ‘Objectivity is the key word from beginning to end’. We should have added that this includes your conduct during the entire legal process as it progresses over the years.

ASOT MICHAEL WITNESS STATEMENT LEAKED: ATTORNEY ANGRY

ST JOHN’S, Antigua – Attorney John Fuller said the publication of Asot Michael’s witness
statement in the IHI debt settlement probe could jeopardise the future of the investigation. He condemned the report on Caribarena’s online news portal, calling it “the most outrageous abuse of information” particularly since it could have a negative effect on potential witnesses in other cases, who may now decide not to come forward out of fear their statements could be leaked.

There have been numerous instances in which prosecutors had to edit witness statements for national security reasons and also to prevent prejudicial statements against an accused being made before a jury. Fuller said, regardless the means of obtaining the document, the entity ought to have exercised caution given the potential ramifications.

The lawyer added he believes the publication is a part of a “personal vendetta” against opposition Antigua Labour Party MP Michael, who is one of the individuals being investigated in the IHI matter. The MP has several civil lawsuits pending against the news site in which he accuses its operators of libel and defamation of his character through several articles. He is seeking aggravated and exemplary damages.

While the police communications office has declined to comment, Commissioner Vere Browne said he must first apprise himself of the contents of the latest publication before making a statement. Meantime, head of the Criminal Investigation Department Superintendent Nuffield Burnette also declined to comment yesterday but had earlier said, the file would be reconstituted and police would continue the investigation.

Apart from MP Michael, former prime minister Lester Bird, Bellwood Services SA, Patrick A Michael Co Ltd and Debt Settlement Administrators LLC of Florida are all targets of the IHI probe. The investigation, which was the subject of a forensic investigation by Robert Lindquist, relates to the repayment of the US$33 million loan from IHI Japan to fund the construction of a desalination plant and power plant.

Several civil matters were filed and later withdrawn, while a Commission of Inquiry was scrapped following legal challenges. In 2011, the investigators said they shifted focus to building a criminal case into the alleged misappropriation of about US$14 million. The late Swiss investor Bruce Rappaport and his IHI debt settlement company are no longer under investigation since Rappaport repaid US$12 million to the government.

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