Dodgy Peru Gold Mine Connected with NZ Insurance Company

The Reserve Bank of New Zealand, a potential money-laundering scheme and an unusual gold mine in Peru. Lots of juicy details regarding the recent liquidation of insurance company CBL.

But first, two titbits worth mentioning: a KiwiBuild applicant shortage and the new rent-a-mopeds.

On KiwiBuild, it’s recently been discovered that no one is applying for the houses. Realise that we’re talking about 100,000 houses over 10 years. There have only been 338 pre-qualified KiwiBuild applicants thus far…while over 3,300 homes are currently under contract to be constructed for the scheme.

I bet poor Phil Twyford didn’t see that one coming. Build a bunch of houses during a housing shortage…and no one wants one? The likely reason is that the homes are available to applicants in a very narrow income tier…along with several other draconian requirements.

It’ll be interesting to see how the programme is modified to deal with this issue. Lower deposit requirements? Raised income ceiling? Lower price?

Let’s see if the folks in the Beehive get any closer the next time around…

The other morsel you should know about is the latest evolution in the ride-sharing fad — mopeds.

First, we had Onzo’s yellow bikes; then Lime’s green scooters; now we have Kwikli’s white mopeds.

To use the mopeds, you pay a $2 unlocking fee, then 35 cents per minute. That’s a touch more expensive than Lime scooters, but you do get a better bang for your buck.

Think 50 km/h versus 24 km/h.

Though, this time, you’ll need to be 18 to ride…and hold a valid driver’s licence.

Hopefully, we’ll see fewer sidewalk sideswipes and kerbside crashes than we did with Lime…

Speaking of crashes, let’s get back to one of this year’s most spectacular crash-and-burn stories in the world of business.

 

The death of CBL

International insurer CBL Insurance has been ordered into immediate liquidation by the Reserve Bank of New Zealand (RBNZ).

If you didn’t know — or are unfamiliar with the RBNZ — here in New Zealand, the Reserve Bank is tasked with regulating and supervising the insurance sector…thanks to the Insurance (Prudential Supervision) Act of 2010.

So CBL, which is listed on the NZX under the ticker symbol of the same name, has been under the RBNZ’s scrutiny for several years. And in that time, it’s been a real rebel.

It’s failed to meet solvency conditions.

It’s breached directives from the RBNZ.

It’s lied to regulators on an ongoing basis.

And now, with the Auckland High Court involved, some of the skeletons in the closet have been cast out into the spotlight.

Reserve Bank’s counsel, Nathan Gedye QC, unveiled one transaction that piqued the judge’s interest.

At one point, CBL deposited €12.5 million into an itsy-bitsy bank in Samoa called the National Bank of Samoa. The director of said bank? None other than CBL deputy chairman Alistair Hutchison.

From there, the money was rerouted to a company in Singapore called Federal Pacific Group…also associated with Mr Hutchinson.

Then it was lent to an insurance company in Denmark called AlphaGroup…which, fun fact, is CBL’s second-largest creditor.

Note that this was not a loan repayment, but rather a bizarre shuffling that ended up with the cash in AlphaGroup’s hands. (In the world of money laundering, that shuffling is called ‘layering’.) [openx slug=inpost]

 

AlphaGroup an accomplice?

It’s not completely apparent why they did this…or what AlphaGroup’s involvement in the off-books side of things is…but for Gedye, all he needed was proof that the money was not in CBL’s hands and was therefore incorrectly reported under its solvency claims.

To come full circle, the RBNZ consulted with CBL’s two main creditors — Elite and AlphaGroup — on whether CBL should liquidate or restructure…and neither firm supported the restructuring option.

Why would AlphaGroup let CBL go under? I have no idea…The move even surprised CBL’s administration. They went as far as to claim that the RBNZ wooed the creditors into allowing the liquidation to take place. CBL Insurance director, Peter Harris states (emphasis mine):

Questions will be asked why a New Zealand model regulator would stoop to lobbying and incentivising major overseas creditors and getting the regulators of those insurers to support RBNZ’s predetermined plan to liquidate CBLI at the cost of the New Zealand policyholders.

It is small wonder Alpha would support a RBNZ-driven liquidation where the RBNZ’s lawyer writes in an open letter to counsel for these insurers suggesting that the liquidator might refrain from trying to claw back the €25 million paid a week before interim liquidation if Alpha were to support RBNZ’s liquidation proposal.

If that’s true…and the RBNZ offered to let AlphaGroup keep the €25 million (which would be highly irregular)…then there might be some foul play on both sides of the courtroom.

But wait — if potential money laundering and RBNZ bribery wasn’t enough, it gets even weirder…

 

Sifting through the bull

CBL Insurance apparently owned shares in a gold mine in Peru called El Toro (The Bull).

El Toro’s owner, Fidel Sanchez Alayo, has been connected with alleged claims of drug trafficking and money-laundering.

Now, get this — El Toro has paid CBL dividends of US$600,000.

Why is an insurance company investing in a gold mine in the Andes?

And why is the mine paying out abnormally high dividends back to CBL?

For the sake of the RBNZ investigation, Gedye basically stopped at the point where he could prove that this wasn’t a valuable asset for creditors. That’s all he needed. Whether the investigation digs deeper down the road is yet to be seen.

But, as part of his audit, Gedye also uncovered three remarkable facts.

One — that CBL dished out $57 million to overseas entities just before it was shut down.

Two — that CBL has actually been balance-sheet insolvent since 2013.

Three — three large bonds totalling $200 million have been concealed from regulators.

It all paints a picture that more closely resembles a Pollock than Rembrandt. You’ve got strange, potentially criminal details splattered across the timeline…with no clear thread to connect them.

But one thing is clear — that there’s been dirty play here at home…right under the RBNZ’s nose.

Will CBL’s liquidation be the end of the story? Or is there more to be revealed?

We’ll have to wait and see…

Best,

Taylor Kee
Editor, Money Morning New Zealand


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


One response to “Dodgy Peru Gold Mine Connected with NZ Insurance Company

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