Bank shareholders asked to give back ‘people’s cash’

| 08/10/2018 | 48 Comments
Cayman News Service

Cayman National, Grand Cayman

(CNS): The opposition is appealing for the shareholders of Cayman National, who are about to enjoy a cash windfall if its sale to Republic Bank Trinidad and Tobago (Barbados) goes ahead as expected, to give up some of their financial gain to the public purse, arguing that government lost out in a poor deal to save the bank’s insurance company following Hurricane Ivan in 2004.

MLA Chris Saunders (BTW), the opposition spokesperson on finance, said he was appealing to shareholders because it will take around 95 years under the current arrangement for the people of Cayman to get recoup funds used to save Cayman General, the insurance arm of the bank that was later sold to Cayman First at a massive loss for government.

Government invested $20 million in the corporation after the devastating storm to prop up the insurance arm to ensure that locals would be paid their claims and that government would recoup some of its insurance claims. Part of the deal saw government take a chunk of shares rather than a payout for some of its claim, but that has turned out to be a poor deal for the public purse.

The agreement was negotiated by the leader of government business at the time, McKeeva Bush, and was criticised in a later review by the Office of the Auditor General.

The board of directors of Cayman National Corporation (CNC), the parent company of Cayman National Bank, the country’s last Caymanian-owned bank, have recommended the sale but the opposition believes that if this sale is permitted to go ahead, the shareholders should be first asked to repay the government investment.

“Regrettably, rather than accepting shares in Cayman National Corporation, the government foolishly chose to accept shares in the failing insurance subsidiary,” the opposition said in a statement about the pending sale. “Two further shares issued by the insurance company have devalued the government’s investment to a paltry CI$6.3 million.”

So far government has received only CI$1 million in dividends on those shares exchanged for the bad debt.

Opposition Leader Ezzard Miller described the deal as “another short-sighted decision made by McKeeva Bush” which, given the lack of action, appears to be supported by the current premier, Alden McLaughlin, and the PPM-led Government of National Unity. “The opposition would like to see [Bush] use the same amount of energy he is using to push for the port into getting the remainder of our CI$20 million investment back,” Miller said.

But in a statement responding to the opposition, the premier refuted the claim that he supported the settlement because he was in opposition at the time, stating that the allegation was “a deliberate untruth”.

However, whether or not the premier does or ever did support the settlement, Saunders pointed out how long it will take to recoup the $20 million through the current shareholding.

He said, “At the rate dividends are being repaid it will take approximately 95 years for the people of the Cayman Islands to recoup all of the initial CI$20 million investment. Our grandchildren’s children won’t even see or benefit for a penny of that money. For too long, people in positions of trust and leadership have used and abused the people’s money to hide their bad decisions and have lost sight of fact that it was earned from the sweat and sacrifices of hard-working Caymanians, residents and businesses.”

Saunders, a former finance executive, said the lost cash could have been used to improve the lives of the Caymanian people and their families, and that he and his colleagues on the opposition benches contend that since CNC’s board believes that the offer from Republic is a good opportunity for Cayman National shareholders to realise the value of their investment, they should do the right thing and ensure that the Caymanian people also realise their investment in their subsidiary at the time, Cayman General Insurance.

“We want and demand that our investment is repaid once Cayman National Bank is swallowed up and is no longer Caymanian owned,” Saunders said. “The people of the Cayman Islands made that investment because Cayman National Corporation and its subsidiaries were majority owned and operated by the people of the Cayman Islands. This will no longer be the case once a majority of its shares are sold,” he added.

While the issue may resonate with the public, there is no legal obligation on the part of the bank or its shareholders to made good on the loss. The Cayman Islands Government negotiated the deal with Cayman General, not only because of its own huge insurance claim after the devastating hurricane, but to keep the firm in business and ensure that Caymanians insured with the company could also be paid.

The deal was considered to be a poor one in the end for the public purse, but once Cayman General was sold to Cayman First, the government’s shares went with it.

The premier accused the opposition of implying that a loan was made to Cayman General as part of the negotiated agreement, which was misleading, but he said government still owns the shares.

“Regardless of whether or not the opposition, or others, consider this a good commercial deal, the reality is the agreement was a legally binding contract in full and final settlement of all claims which the government had against Cayman General arising from Hurricane Ivan. There is no outstanding loan and no money owed to the Cayman Islands Government by Cayman General, or its successor Cayman First Insurance or Cayman National Corporation,” the premier stated.

He added, “75% of the shareholders in Cayman National Corporation are Caymanians and it is both reckless and callous in the extreme, for the opposition to seek to damage the company’s reputation and further to insist that its Caymanian shareholders should pay government CI$20 million which is not owed, given the final agreed settlement.”

McLaughlin said the “disingenuous statements” were “part of a growing pattern of false accusations” made by Miller and his colleagues. “In this instance they appear to be aimed at derailing the sale of the majority of shares in Cayman National Corporation, which will principally benefit Caymanians.”

Meanwhile, Cayman National also stated that there is “no kind of loan or receivable” outstanding and that the insurance agreement was a full and final settlement comprising an immediate cash payment and the ownership stake.

Stuart Dack, President and CEO of Cayman National, said that there never was any kind of loan payable to the government.

“The Cayman Islands Government property claim arising from Hurricane Ivan was settled on normal commercial terms by CGI. Neither Cayman National nor any of its shareholders have any liability to the Cayman Islands Government in relation to CGI or any claim arising out of Hurricane Ivan,” he added.

See full audit of the deal with Cayman General in the CNS Library

Press release from opposition on sale of CNB, October 2018

Press release from premier on Cayman General Settlement, October 2018

Related articles: FS defends insurance deal, 2009

Gov’t to sell insurance shares, 2011

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Category: Local News

Comments (48)

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  1. Anonymous says:

    Is this a joke? They are basically saying please write a cheque to CIG even though you don’t have to, because Mac made another “bad” deal (bad for the country, not necessarily bad for Mac…)

    Anyone remember Mac’s duty waiver deal for the Ritz? Never investigated but I recall he made the same oversight- he forgot to get security over the actual asset and the govt lost out. Except that time he suspiciously ended up with a penthouse and an ongoing no-work commission arrangement for his wife’s property company.

    At least that was the rumour. I wish these things were investigated so we could know the truth.

  2. Anonymous says:

    CNS. Does CIG have any seats on the board of the Insurance Company?

    CNS: Here’s the list of board directors on the CINICO website. I think it’s up to date but cannot guarantee that.

    • Anonymous says:

      CNS. The link is for CINICO. Given stake of CIG in Cayman First insurance (relating to this article) who is the CIG appointed director?

      CNS: Sorry, I forgot which thread I was on! The Cayman First board is equally easy to find – it’s on their website here.

  3. Anonymous says:

    Another brilliant deal by Mac Mac / CIG….we could never quantify the overall damage, financial and otherwise that Mac has cost Cayman Islands…and getting away with it too.

    • Ron Ebanks says:

      I think that after the next election we the people have to make every elected members hold the bible in one hand and raise the other hand to the Lord Jesus Christ and swear that he or she wouldn’t be involved in no corruption or do anything crooked for the four years .

    • Anonymous says:

      You know it’s really sad when there is so much talk about a local institution without a keen look at whether it has been managed by knowledgeable people at the very top and whether it has been as profitable as it should have been given the high level of resources available. Yes indeed many mortgages were given during the past 40 years and yes they have hired a large number of Caymanians, however, have they provided real value to the shareholders. Look at the price theDirectors are willing to sell at, peanuts for a bank it’s size and the cash it holds. A bank that makes trite profits only during rising interest rates only is not a well managed Bank., a lot of mortgage offerings and to hell with interest paid to the depositors.

      Observers of the local Banking industry privately comment On the top management neither of which have actually earned their keep during a 15 year period of proving that they are not capable, and a Board who continually let them reap the fruit of the farm with increased raises for doing what ? running the profitability margins into the ground save rising rates. They have accomplished nothing of worth, rather they have created failed ventures at a great cost, and paid substantial fines for lack of proper governance in some instances. One comment that sticks out is that of the flying Czar I wonder what they really mean by this.

      All in all there are some serious questions as to whether the Bank could potentially grow its profitability with its present top management and their lack of vision and adequate skills in today’s market place. Who knows maybe the Board finally woke up and saw the “Light”., perhaps the CNB many have grown to love does need a shake up, to provide a higher intrinsic value to the shareholders and to its customers. It is hoped that whatever obtains in the end, it will be of a great benefit to all concerned.

    • Anonymous says:

      Whoa bank of potential, long lost
      Where staff will surely pay the cost
      An era of uncertainty is about to begin
      And no one knows what will happen
      Whoa willingly misled directors
      Who, with love of their colonial fathers
      Appointed an unproven Englishman
      Who doesn’t even live in Cayman

    • Anonymous says:

      The opposition members need some 101 Business Training .

  4. Anonymous says:

    They are lucky they didn’t go the way of Caledonian.

  5. Anonymous says:

    If Cayman General Insurance was a subsidiary, the money received in the cnb bank buyout would have nothing to do with it. Completely different companies and shows Saunders lack of understanding of the total situation.

  6. Anonymous says:

    DO. NOT.

    SELL. OUT.



  7. MM says:

    Although it is more than obvious that this request is not possible; we should take Saunders and Miller’s stepping out about the topic more as a warning of the numerous bad deals, bargains and negotiations that our Government leaders continue to make “on the behalf of the Cayman Islands”. Have they found any of the missing $1 billion dollars yet? Because that missing amount is enough to fund the Government budget for a while.

    Cayman First just got a beautiful, multi-million dollar building; so I am hoping that the value of the Government’s shares have risen in accordance with the company’s apparent financial success.

    It feels at times that “both” of our Governments are simply in place so that the people can have a side to take (which I dare say is accurate) – having a “Government” and “Opposing Government” is a simplified way of ensuring that the entire population has a team to cheer for on whatever issue or proposal is taking place at any given time. If we are all working together for the betterment of these islands I think it would be less expensive and time-consuming if we all could find some common ground and eliminate these silly political competitions.

  8. Anonymous says:

    This is the same as asking people who got insurance money from the claims to give money if they sell their house later on. Pure foolishness!
    Statements like this make you realize most of their other arguments and positions are full of baloney too!

    • Anonymous says:

      Mr. Saunders you are saying some foolish things, we thought better of you, we think you won’t get back in 2021 if you continue talking this foolishness

  9. Anonymous says:

    I have to ask again, what kind of Certified Pubic Accountant is Chris Sunders? Does he not understand business? I also see he has scrutinized the statistics for the port and claims the Government is using incorrect figures.Ummmmhhh. How would he really know?

    • Anonymous says:

      One more effort by the Opposition to try to make a name for themselves. This is like their inaccurate statements about the Port — just political games.

  10. Anonymous says:

    Government wastes money everyday. They need to pay attention to what they can change in the here and now and move on. For this reason I do not think they are genuinely trying to help the people. They are just misleading the public.

  11. Anonymous says:

    Mr. Saunders discussed this topic on Radio Cayman last Friday morning. In my opinion his presentation of this idea was incoherent and illogical and I suspect Mr. Saunders problem with the possible sale is driven by an emotion that has nothing to do with the good of the Caymanian people.

  12. Cayguy says:

    Does the opposition think that shareholders live in a communist regime? Why would capitalists owe the govt of day anything that was not part of payables owed? smfh

  13. Anonymous says:

    Look Chris and Ezzard, stop playing small time politricks. Which court do you think would support such a ridiculous notion. The government made a bad deal – too bad. Learn from it and have qualified persons negotiating on Cayman’s behalf the next time.

  14. Anonymous says:

    This is why Big Mac has no business negotiating ANYTHING! And why we can’t have anything nice..

    • Anonymous says:

      “Government invested $20 million in the corporation after the devastating storm to prop up the insurance arm to ensure that locals would be paid their claims and that government would recoup some of its insurance claims” – I wonder if you were around in 2004 praying insurance companies would payout to put a roof back on your house… If this move wasn’t done, pretty sure Cayman General wouldn’t have been able to settle claims and some Caymanians would still be praying to pay back for a new roof up to today.

      • Anonymous says:

        Yes, I have been here since 1991.
        And BM (Big Mac) wasn’t a good negotiator back then either. It’s called NEGOTIATION… Not give ’em everything.
        Not then, not in 2004 and not now.
        Answer your question?

      • Mike says:

        Yes 1.10 pm, BUT, a very poorly transacted piece of business, and a contract should have been written whereby CIG could recover their $20m. That’s only common sense!

        • Anonymous says:

          We owned shares in the Insurance co. and CNC, when the Insurance was getting ready to be sold we was contacted and offered the value of the insurance shares for shares in the CNC and we took the deal, so we don’t own any shares in the insurance, but if we didn’t then we would have less shares in CNC and still have shares in the Insurance co. which was sold 2 times and Nothing to do CNC now. If it was a bad deal it was too late from the time the Insurance was sold and the Govt. of the day didn’t take the offer for shares in CNC. Its pure foolishness to talk about the CNC shares owners owes Govt. money

  15. Anonymous says:

    Just another bad deal made by our wonderful leaders. That money is gone never to be seen again.

  16. Anonymous says:

    Saunders and Miller try to outdo each other as to who can say the most stupid thing. They are both experts at it.

  17. Anonymous says:

    Well they have a very valid point here! Was there any documentation pertaining to the govt investment (FOI?). Why should government give money to a privately held entity and not expect to get it back from the shareholders who will do well on the sale.

    • Anonymous says:

      There is ample documentation that show that money was not “given”. Money was invested and shares were issued in return. You can argue about the decision made but you can’t argue about the current position. Chris’ and the oppositions goal here is to only confuse the people with their wishes rather than clarify with facts.

      • Anonymous says:

        Thank you! Politicians are seriously awful people!

      • Chris Johnson says:

        In doing any audit the auditors would have confirmed the loan with CIG. There is no loan on the balance sheet so I guess management’s accounts were approved by the auditors.
        The fact that the Bush government made such a bad decision is irrelevant. They made many more let’s face up to it and we know who was in charge.

    • Anonymous says:

      Lol. No they just gave them 20m. No paperwork, no receipt.

      What do you think?

  18. Anonymous says:

    If these are the comments from the opposition spokesperson on finance, you really shouldn’t wonder why he was the first person to blow up the chances for the independents to form a government.

  19. t says:

    This is so stupid.

  20. Anonymous says:

    horrible news

  21. Anonymous says:

    nay….aint gonna happen…the wealth of the rich/lodge is at stake….


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