The Group of Financial Services Regulators (GFSR) has brought in auditors from KPMG out of Canada to conduct an investigation to determine whether the Colina Financial Group is adhering to all of the 21 conditions the government attached to Colina’s approval of Imperial Life Financial last year.
Hillary Deveaux, acting executive director of the Securities Commission, told The Bahama Journal that the GFSR also wants to ensure that all of Colina’s regulated companies are in compliance with the legislation governing them.
But he explained that there was not much else he could say given that the review is now taking place.
The GFSR consists of the Securities Commission, which is lead regulator; the Central Bank; the Registrar of Insurance Companies and the Ministry of Finance.
When he announced in the House of Assembly in January 2005 that the Government of The Bahamas had approved Colina’s purchase of Imperial Life, Prime Minister and Minister of Finance Perry Christie had outlined the various conditions saying that there would be sanctions if Colina failed to adhere to them.
Now government officials fear that the Colina fiasco could become a major political embarrassment if it is not resolved properly.
In a press release delivered to the Bahama Journal on Sunday, Colina said it has now met over 80 percent of the 21 conditions attached to government approval of its Imperial Life acquisition.
Colina also claimed in the statement that it has also adopted numerous new International Financial Reporting Standards (IFRS) in order to improve its quality of financial reporting. No other insurance company in The Bahamas has done this yet, it claimed.
But sources said that while the government continues to face criticisms over its controversial decision, it made what it thought was the best decision at the time given the information that was available.
One of the conditions attached to the approval required Colina to consent, by way of a written agreement, to ongoing consolidated supervision by the GFSR and to abide by a set of corporate governance standards to be developed by the regulators.
Both those regulators are reportedly concerned that Colina so far has not been abiding by certain standards.
The Colina Financial Group also agreed to the separation of its investment management business and financing activities immediately with any existing conflicts to be addressed over a period in consultation with the Securities Commission.
The group also consented to the removal of at least one of the three principal owners of the CFG from the Board of Directors of Colina Financial Advisors, Colina Holdings Bahamas, and Colina Insurance Company, to be replaced by independent non-executive directors to be approved by the relevant regulators within 90 days from the date of acceptance of the conditions.
The Bahama Journal has learnt that the regulators are concerned that the recent fallout between former Colina executive James Campbell and the other principals – Emmanuel Alexiou and Anthony Ferguson could have a negative impact on Colina’s shareholders and policyholders.
It’s apparently why the regulators are anxious to receive the auditors’ report.
Following the rift, the company reached a settlement to pay Mr. Campbell an initial amount of $3.5 million.
On Friday, in a letter to the editor of The Bahama Journal, Colina confirmed that Mr. Campbell was paid the $3.5 million on August 3.
This was in correction to an article in The Journal that stated that “the company was unable to pay due to a cash flow problem.”
Attorney Collin Callender, writing on behalf of Colina, said “The company has no cash flow problems, and it has $54 million in cash, $74 million in government bonds, $160 million invested in mortgages, $299 million of reserves for policyholders, and $400 million in assets.
“Your article makes reference to the appointment of three officials to assess the fair market value of the company’s shares, which was a part of the court order made on the 25th day of July, 2005.
“As you are aware, one of the companies in the group, Colina Holdings Bahamas Limited, is a publicly held company, and unfounded articles such as this would have a detrimental effect on the interests of all shareholders in the companies which would, in turn, prevent the three court appointed assessors arriving at a fair market value for the shares in the company.”
The attorney, however, did not account for Colina’s liabilities or pension funds which it holds in trust. It is known that Colina holds the pension funds of the Bahamas Telecommunications Company and the Bahamas Electricity Corporation which are valued at nearly $200 million.
According to the latest financial statements, the combined net worth of Colina and Imperial is $42 million.
Mr. Callender said an analysis of Colina’s financial statements which is being circulated throughout the insurance industry is not an analysis carried out by an independent body or accounting firm, but was prepared by a competitor of the Colina group.
That analysis claims that the Colina Financial Group collected a total of $2,329,500 in management fees for 2003/2004 and the first half of 2005.
“CFG is a holding company that is owned by Messrs Alexiou (chairman of Colina), James Cambell (the former CEO of Colina) and Anthony Ferguson who is both a director of Colina and CEO of (Colina Financial Advisors), the company’s financial advisor,” the analysis said.
“It has no infrastructure and the fees charged are supposedly related to services provided by these individuals outside their formal roles as directors and CEO as appropriate. These individuals are collecting fees as directors (Alexiou/Ferguson/Campbell), employee (Campbell) or service providers (Alexiou/Campbell Ferguson) through Alexiou & Knowles (the legal counsel) or CFA (the investment manager wholly owned by these gentlemen through CFG).
“How can they justify (and have the board approve) these absolutely ridiculous fees for services that they were duly bound to provide in their formal capacities?”
The analysis also claimed that “amazingly, the chairman and CEO thought it appropriate to bill Colina, through their holding company CFG, an amount of $1,361,450 as a ‘brokerage fee’ for working on the acquisitions of Canada Life, IRM and Imperial.”
It also claimed that Mr. Alexiou appears to have benefited hugely with his firm collecting $1,072,971 in legal fees from a captive client in 2003/2004.
From The Bahama Journal
