Alba Luz Hoyos was uncomfortable at Interbolsa

Rodrigo Jaramillo did not greet Alba Luz Hoyos. He didn't give her any information either. But Alba Luz Hoyos confronted her on the Interbolsa board of directors, telling her that she was endangering the company's assets.

This and other details are part of a detailed and substantial case study of the Inalde business school, prepared by Professor Rolando Roncancio Rachid, vice-rector of the Universidad de la Sabana, together with international business administration student Paula Andrea Lara Grief.

Entitled “An uncomfortable board member: the case of Interbolsa Holding”, the study presents hitherto unknown details about the functioning of the Interbolsa board of directors in its last 8 months of life.

Based on interviews with Alba Luz Hoyos Naranjo, who represented GEA (Grupo Empresarial Antioqueño) on the board, the analysis shows that an independent board member is always uncomfortable for a company's managers.

Alba Luz Hoyos studied business administration at Eafit and has a postgraduate degree in financial institutions from the same university. She has been principal and alternate member of the boards of more than 10 companies since 1996. She was manager of new businesses in brokers Bolsa y Banca and Serfinco, corporate finance manager at ISA and international and financial vice president of Corfinsura.

In the meetings of the board Rodrigo Jaramillo, the president of Interbolsa, cordially greeted everyone in the room, except Alba Luz Hoyos. When she arrived ahead of her, they made her wait in a room next to where Jaramillo was, who never greeted her.

One of the strongest confrontations occurred at the meeting held on September 27, 2012. Alba Luz Hoyos had been insisting on the repos for months and she did so again on that date. Jaramillo replied that she had no idea where she was sitting or what a stock company was that by its nature was destined to take risks. Hoyos replied, according to Professor Roncancio's study: "I do know what it means to take risks, but they also taught me to control and manage them, or have you forgotten that and are you risking the company's assets?" Hoyos said that while Rodrigo Jaramillo's face was transformed by her anger, she slammed the palm of her hand on the table demanding respect.

The GEA had 10% of the shares of Interbolsa due to the acquisition of that package of shares made by the ING pension fund, which was later acquired by the Sura Group. Thanks to that 10%, the GEA could name a member on the Interbolsa board.

In March 2012, Alba Luz Hoyos was out of the country on a trip to celebrate her 20th anniversary when she received a call from Mauricio Toro Bridge, president of the Protección pension fund, belonging to Grupo Sura. Toro proposed that she be a member of the board of Interbolsa SA, the holding company of the Interbolsa group.

She holes hesitated to accept "because she had never liked Interbolsa," says Professor Roncancio's study. «She On several occasions she had known suspicious behavior in this company, because she knew that, for example, decisions were made that made her think that they knew the values ​​of inflation in advance of its publication; she always considered that in that market she was constantly walking on the edge of the abyss and that in Interbolsa they did it, moreover, on the edge of immorality».

She didn't give an answer to Toro, who called her the next day to tell her that she was the only option for the job. She ended up accepting the appointment, against her intuition, only because it was the Sura Group who requested it: «Only and exclusively because you are you I will accept you but I will leave you once said... it terrifies me!». According to Hoyos: «she weighed more gratitude than instinct».

The first meeting attended by Alba Luz Hoyos in the meeting room on the sixth floor of the Interbolsa building on Av. 82 with Carrera 12 in Bogotá, was on April 29. In that first meeting there was another new member on the board, Eduardo Pizano, who was Minister of Economic Development in the government of Andrés Pastrana.

In the first months of belonging to the board, said Alba Luz Hoyos, "the PowerPoints that the administration did were beautiful." They were told about the growth and success of Interbolsa in Colombia, the United States, Panama and Brazil and about the new businesses. Jorge Arabia, financial vice president, emphasized on that occasion that Interbolsa periodically carried out high-level reviews to reduce operational, liquidity, credit, market and money laundering risk, highlighting a conservative risk, Hoyos said.

In the April 2012 session, Hoyos was elected president of the audit committee that was in charge of corporate practices control, risk management, money laundering prevention and internal audit. That meeting was basically an induction meeting for the new members of the board and the creation of committees.

At the April 29 meeting, Alba Luz Hoyos requested the last three minutes of the meeting, but was told that they were confidential and that she did not have access. "That same day I should have resigned," Hoyos said in an interview with Professor Rolando Roncancio Rachid.

After the first meeting of the board, Hoyos was told that they would send her the minutes in PDF for her approval. She asked that it be sent to her in Word so that she could make changes, but she realized that it was customary to send it in PDF, that is, that the members had to approve it as it was written.

At the first meeting of the audit committee on May 24, 2012, Hoyos raised some concerns that arose when she visited the websites of Grupo Interbolsa and its related companies. She asked about the contract with the Premium Fund, about the clients' knowledge about the investments, about how it was guaranteed that the funds were not diverted, who managed them. Rodrigo Jaramillo replied that all due diligence on legal, counterparty and investment risks had been carried out and that clients knew and understood the risks of their investments.

On May 24, the board met. There, the administration presented 49 slides and board members were told that Interbolsa had the most advanced practices in risk control in the Colombian stock market. It was also reported that passive repos totaled $600 billion since April.

In June 2012, management continued to present positive financial statements. 86 slides were presented and it was said that with the control of Finabank, a commission agent with which Interbolsa operated in Brazil, Interbolsa occupied the first position in participation and market above the main banks in Brazil. The opening of offices in Santa Marta, Cúcuta, Ibagué and Villavicencio was also proposed. It was decided to dismantle the broker in the United States, Interbolsa Securities, and seek a strategic ally in Brazil, since both subsidiaries produced millionaire losses. Alvaro Tirado, president of the broker Interbolsa, said that Interbolsa was taken as a point of reference throughout the financial sector.

Alba Luz Hoyos did not attend the July meeting, in which she spoke about the repos on shares of Fabricato and Interbolsa.

In August the topic that dominated the meeting was that of repos. "At this meeting I am aware for the first time of the enormous concentration of repos in Fabricato," said Alba Luz Hoyos. In addition, Interbolsa had kept 20% of the shares of BMC (Colombian Mercantile Exchange) when the Stock Exchange closed the repos on BMC. It was decided to make a plan to dismantle the repos on BMC and Interbolsa. In that meeting Eduardo Pizano asked what a repo was. Alba Luz Hoyos replied: "Very simple, like a pledge with shares."

Board members asked management if Interbolsa's high exposure to Fabricato's business was a strategic decision or the product of isolated decisions that led to that level of exposure. "Like washing a fish, they always evaded the answer to our questions," said Alba Luz Hoyos, according to Professor Roncancio's report. Finally, the risk manager reported that assuming the risk of the Fabricato operation had been a strategic decision of the Group from the beginning and that he bet on the business. Hoyos highlighted the contradiction because first the administration said that "they started small and slowly."

Hoyos asked the general secretary of the Interbolsa Group who was in charge of the repos. She was told that it was not her place to know that information. According to the Good Governance Code of Interbolsa, the members of the board had the right to request from the administration the information or clarifications they deemed necessary or convenient in relation to the matters discussed in the session. But Rodrigo Jaramillo rejected Hoyos' request.

Rodrigo Jaramillo affirmed that Interbolsa was characterized by diversifying risks and that the administration had approved Fabricato's business prior to an appropriate risk analysis. Jaramillo "was stoned that Alba Luz represented the GEA," said the journalist from Semana Gloria Valencia, quoted in the case study.

At the meeting held on September 27, the members requested a table with the data of each shareholder against the repos on Interbolsa shares to monitor them monthly. "Jaramillo, however, added that the names of the clients were confidential and that they could not be displayed in the painting they requested," says the study by Professor Rolando Roncancio. Regarding Fabricato Interbolsa's repos, it reported that clients were in the process of complying with the stripping by seeking liquidity and that Grupo Interbolsa had not had to use its resources for the process.

At the September 27 meeting, Hoyos insisted on asking for information because she was still uneasy with the repos. At her insistence, Jaramillo replied that she had no idea where she was sitting or what a brokerage company was, that by nature it was meant to take risks. «Alba Luz, raising her tone of voice, added 'I do know what it means to take risks, but they also taught me to control and manage them, or have you forgotten that and are you risking the company's assets?' Then she with a blow with the palm of her hand on the table, while Jaramillo's face was transformed by her anger, she demanded that he respect her ".

Alba Luz Hoyos communicated that same afternoon with Mauricio Toro of the GEA to tell him that she "smelled very bad" about what was happening in the Interbolsa Group and that she did not agree with the treatment that Jaramillo was giving her. Hoyos thought that afternoon of giving up.

Meanwhile, Rodrigo Jaramillo gave press interviews where he stated that the value of the Interbolsa Group was around 430 million dollars and that he had no capital problems.

Leaving the meeting on September 27 and on the way to El Dorado airport to take the flight to Medellín in the company of Leonardo Uribe, Interbolsa's regulatory comptroller, Alba Luz Hoyos asked Uribe if the meetings had always been so difficult and conflictive. in the past. Uribe replied, according to Professor Roncancio's study, that they had become complicated since she and Eduardo Pizano entered the meeting, due to the continuous questioning of both, since Jaramillo did not like being questioned. "Well, he's going to mess with me, because they didn't hire me to drink red wine," Hoyos told Uribe.

Professor Rolando Roncancio Rachid points out: "And of course things were that way, the board members who preceded him were never alarmed by the growth that repos were presenting, figures that began to be used since 2009." Roncancio adds: "The participation and intervention of the members was almost nil, since they limited themselves to assenting to what was presented to them at each meeting," referring to the meetings prior to the entry of Hoyos and Pizano.

Alba Luz Hoyos spoke with Pizano after September 27 to mention that she planned to resign. Mauricio Toro gave him the endorsement to do it. But Hoyos worried that her resignation might cause an economic panic when she announced the reasons for her resignation.

The next meeting was on October 25, 2012. Previously, at the audit committee meeting, Hoyos, Pizano and Daniel Feged raised in writing the doubts they had about Interbolsa's management. They asked about the beneficiaries of the repos, the description of the Premium Fund, where the resources were invested and how to make decisions about the clients' investments. They wanted to put on record the risks that were not being shown to the board. "Both the board and the committee didn't tell us anything," Hoyos recalled, quoted by Professor Roncancio. Every time she entered the sixth floor of the Interbolsa building, where the executives wore very exclusive brands of clothing, she did so reluctantly.

In the audit committee on that date Jaramillo stated that everything was going well, although by that date Interbolsa monopolized 100 x 100 of the Fabricato, BMC and Interbolsa repos that were traded on the market.

In the meeting of that same October 25, Jaramillo did not include in the agenda the subject of the repos that worried the members of the board since August. The members asked for a change in the agenda to talk about the Fabricato repos.

Rodrigo Jaramillo then spoke of the Interbolsa repos but without individualizing them, he only referred to them as Client A, Client B, etc. But Víctor Jaramillo, owner of 30% of Interbolsa's shares, attended the meeting as a special guest and said that he was Client A. He added that they were working with the administration to liquidate investments that would allow them to meet the plan to reduce repo operations by $25,000 million. Alba Luz Hoyos recalled that at the August meeting the repos on Interbolsa shares had been prohibited. "In practice, they were talking about self-loans," said Hoyos, who considered the fact inadmissible, "since he found it absurd that a person who is a partner in a company that captures resources from clients, decides to carry out repo operations with them on behalf of the company. business".

Jaramillo commented that the situation had become critical because the market had severely punished Fabricato's repos and Interbolsa was practically the only one that was funding that action, compromising the liquidity of the holding company's commission agent. He stated that they were looking for buyers who could meet the cost of the dismantling and there was talk of taking out a loan for $100,000 million with one of the three banks with which they were seeking liquidity. Jaramillo assumed responsibility for increasing the risks of the Interbolsa repos and reporting that the Superfinanciera was aware and that help had been requested from the government.

Alba Luz Hoyos affirmed that it was inadmissible that the board did not know the level of risk taken in the operations. The board stated that it was unable to monitor the issue of risks due to lack of information.

At the end of the meeting and after hearing "that information bomb, the world fell on me," Hoyos said. "I knew that there was no way to deal with a liquidity problem since it was a financial institution and when a financial institution goes bankrupt, people also go bankrupt."

Almost a week later a board meeting was called to discuss the repos. Eduardo Pizano did not attend because he had already resigned. Neither did Rodrigo Jaramillo because he was looking for a buyer for Interbolsa. Alvaro Tirado, president of Interbolsa commission agent, intervened in his place: «The commission agent had a quota of repos on Interbolsa between 60,000 and 100,000 million pesos, then by decision of the legal representative of the holding company, an additional 100,000 million pesos are received that originate in an operation of the SAI (Investment Administrator) that the Superintendence (Financial) ordered to dismantle, leading to an operation of 200,000 million and then, in September 2012, the other brokerage firms stopped leveraging the Fabricato share and for avoid a mass default, the additional 100,000 million pesos that the market has are received ».

The board asked where the control areas were and why the risk committee did not notice this situation. Tirado said that the board of directors of the commission agent was aware of the situation with the repos and that this board made the decision to increase the repos. He stated that the resources had to be obtained to cover the maturities of the repos, otherwise they would have to inactivate the commission agent to avoid a default.

On November 1st, the board of Interbolsa holding listened to Rodrigo Jaramillo. He said that he spoke with Banco Davivienda that he was very close to buying Interbolsa commission agent but in the end nothing materialized because Davivienda considered that he was not capable of managing Interbolsa commission agent due to its enormous size. Consequently, the commission agent was notified that she would be intervened by the Financial Superintendent for administrative purposes for not being able to operate due to a quota problem. Alba Luz Hoyos commented at that meeting: «I am very sorry that I would have been right when two months ago at the meeting on August 29 where the board of directors of the commission agent's repos was informed for the first time, I emphatically drew attention to the excessive risk that had been taken with the Fabricato repos, at which time the administration argued that there were no risks, that Fabricato was an excellent business and that the worst scenario was that the stock fell to 52 pesos, at which time and thanks to the guarantees that were had, there would be no place for losses».

Board members stated that they were unable to help solve the problem because they were uninformed and because management downplayed the risk. "The Board of Directors has among its functions to preserve the shareholders' equity, but for this it needs to be duly informed, which in this case did not happen." The board members went on the record and resigned. Five hours later, Interbolsa publicly confirmed that it had liquidity problems.

On Friday, November 2, 2012, at 3 in the morning, the Financial Superintendency ordered the takeover of Interbolsa commission agent for failing to pay a $20,000 credit granted by BBVA.

Grupo Empresarial Antioqueño lost all the investment it had in Interbolsa, 10% of the shares. That package of shares, which was not bought by the GEA but by ING when it was the owner of the Protección pension fund, had cost $55,000 million.