The Colman Commission was established about a year ago as a Public Enquiry into the failure of the CL Financial group, some of its subsidiaries, and the Hindu Credit Union. The Commission is also mandated to report on the causes of these costly failures, so that it can make recommendations for possible prosecutions and the regulatory or systemic changes needed to avoid further collapses.
There has been a lot of fresh information revealed at the Commission and that is good, since the public now has a much better view of the various episodes behind the scenes. The sole Commissioner, Sir Anthony Colman, has now made a statement which outlines his progress in this huge and complex matter. Colman expects to take at least one more year and will be continuing his examination of the HCU matter when the CL Financial stage is completed.
Despite all the evidence about staggering sums of money and the heated public discussion that has sparked, I am perturbed by the way the essential information is being handled.
Since it is a Public Enquiry into a huge financial collapse, the financial information has to be front and centre if we are to get at the facts.
It is common knowledge that the link between performance and pay is essential in obtaining quality results in any competitive situation. That basic fact, with which most people would agree, is now seriously challenged by some of the key events in the global financial meltdown. It is beyond the scope of this article to delve into the new learning emerging from this global crisis, suffice to say that the old learning has literally been ‘tested to destruction’.
An unhealthy relationship between pay and performance would be a problem for any company, but in a financial company the issue is worse. That is because the investors expect those companies to endure and prosper, so that they can collect the expected returns.
The Colman Commission will be unable to fulfill its mandate if it does not uncover the relationship between pay and performance in the failed companies. Colman will also need to consider the motives and behaviour of the investors, who must also form a significant part of the story. Without their participation and investments, the failed companies would have had no money to lose.
There is a strong interest in keeping the real figures and circumstances out of the news and some of the main items are –
- The Accounts
- The true levels of salaries, fees, dividends and bonuses
- The identities and sums of money returned to those who have benefited from the bailout
- The delinquent borrowers who owe the failed companies huge sums of money
- The extent to which the failed companies and their chiefs complied with our tax laws
In ‘The Colman Commission – Cloudy Concessions’, published here on 1 September, 2011, I pointed out the danger of allowing the HCU claimants to testify without stating the amounts invested for the public record. It was my view that those concessions represented the ‘thin edge of the wedge’ in terms of the entire exercise being a Public Enquiry into a series of financial collapses.
In this recent, third session of evidence Hearings, we have had three examples of the ‘widening wedge’ in respect of financial information.
- The first example is the recent imbroglio on the testimony of the CEO of Methanol Holdings (MHTL), in which significant financial information was excluded, apparently by agreement between the various parties and the Commission. This is exactly the kind of danger I had been warning about, since MHTL is a significant, supposedly healthy, part of the failed CL Financial group and there is bound to be considerable public interest in its financial performance. Yet, the Colman Commission agreed to exclude that financial information, so the public is none the wiser as to the overall health of the CLF group, despite paying for a public Enquiry. This issue was highlighted in the Guardian editorial of Tuesday 15 November, 2011, which ended by emphasizing the public’s right to know.
- The second example was the decision on Directors’ monies – as reported in the Business page of this newspaper on 16 November, 2011 “…Commission Colman has ruled that the means of remuneration for CL Financial officials should be disclosed to the Commission but not the actual quantification of them…”. That bizarre concession removed any possibility of reporting on the real state of affairs at these failed companies. If the Commission continued with that arrangement, it would have been impossible for any real understanding of the crisis and its causes to be derived from their work.
- The third, most notable, example was even more noteworthy, being the reversal of that decision and the grounds for that reversal, as reported in the Express of 16 November, 2011
…The board appearance fee was revealed yesterday on the same day that Sir Anthony Colman, the lone commissioner in the Commission of Enquiry, ruled that the remuneration packages of those involved with the conglomerates collapse could be made public….
Colman yesterday reversed a decision he made on Tuesday…
“My attention has been drawn to the fact that in fact some evidence has already been circulated in regard to Mr (Michael) Carballo’s remuneration package and also Mr (Lawrence) Duprey’s remuneration,” Colman said.
“I have come to the conclusion that it would be grossly unfair if there were a general bar on further evidence as to remuneration of participants so I reverse the ruling which I made yesterday and the result would be that the remuneration of participants can be put into evidence,” he said.
“I do not accept that if the remuneration emanated from any of the companies involved there could be any question of confidentiality,” Colman said”
It is remarkable to me that an appeal restricted to the principle of fair-play seemed to have caused this reversal, in a situation where the initial concession was toxic to the fundamental enquiry which is being conducted at public expense, supposedly for our benefit.
This is an Enquiry into a colossal financial collapse, so therefore the money must be front and centre at all times. We must have scrutiny as to its origin, rationale/contract for payment and its disposition for tax purposes.
Sir Anthony Colman needs to be watchful of the wily attorneys, who may seek again to tempt him to agree to conceal some more financial information which might be awkward for their clients. The fact is that all those companies are now being funded by the Treasury and we have a right to know what caused this huge mess.
It is not a concession, we now own the mess, so we must be allowed to see all of its parts. No sacred cows.
Sidebar: Colman’s Challenge
Colman’s statement as to the difficulty of running the Enquiry was most instructive, with a total of 49 lawyers appearing for various parties and a further 5 for the Commission.
Colman has had to maneuvre between 18 parties to the Enquiry, three non-parties and over 800,000 documents.
Which only makes it all the more important that the Colman Commission be given the necessary administrative/legal support and multi-media resources so that it can better serve the purposes for which it was established.
We have the resources in this country to give each SEA student a new laptop, so it should be no challenge to provide those resources to the Colman Commission.