Political Patronage, Regulatory Capture, and the Collapse of a Grenadian Bank
Capital Bank International Limited represents one of the Caribbean's most egregious examples of regulatory capture, political patronage, and financial fraud. Licensed in 1996 by Grenada's Minister of Finance Keith Mitchell despite not meeting regulatory criteria, the bank operated for over a decade with inadequate oversight before collapsing in 2008. The bank's founder, Finton De Bourgâa major political donor and NNP party supporterâwas convicted in 2016 on six counts of fraud and sentenced to 23 years in prison, with restitution ordered for EC$166.3 million.
The Capital Bank case reveals a systematic pattern of regulatory failure spanning multiple administrations. Despite repeated warnings from the Eastern Caribbean Central Bank (ECCB) about structural deficiencies and compliance failures, the government continued to renew the bank's license for political reasons. When the ECCB excluded Capital Bank from the regional clearing house facility in the early 2000s, the government facilitated alternative arrangements rather than enforce corrective measures. The bank's eventual collapse left thousands of Grenadian depositors with losses, triggering a protracted receivership that continues to this dayâmore than 12 years after the initial appointment.
Capital Bank's founder Finton De Bourg was a major supporter and funder of the ruling New National Party (NNP) led by Keith Mitchell. This political relationship created a protective shield that allowed the bank to operate despite regulatory deficiencies:
Capital Bank International Limited was established with a focus on international banking transactions. Finton De Bourg, the founder, cultivated close relationships with the New National Party (NNP) and became a major party funder.
October 13, 1992: Capital Bank requested to join ECCB clearing facilities
October 16, 1992: ECCB responded with criteria and clearing house rules
1996: Keith Mitchell (Finance Minister) issued banking license under new Banking Act 1993, claiming bank already had pre-existing license
Critical Issue: Opposition politicians later claimed the bank "did not meet the criteria for functioning" when licensed
The Eastern Caribbean Central Bank (ECCB), led by Governor Dwight Venner, made numerous complaints about Capital Bank's operations and recommended license revocation. Mitchell refused to act.
Early 2000s: ECCB refused Capital Bank entry to regional cheque clearing facility
July 23, 2001: Capital Bank filed lawsuit against ECCB for exclusion from clearing house
March 10, 2003: Court of Appeal judgment (Chief Justice Byron): "The issue of the validity of the banking license conceals a dispute between the ECCB and the Minister of Finance (Keith Mitchell)"
2003-2008: During clearing house exclusion, alternative arrangements provided by law offices of Reynold Benjamin and Danny Williams (who was Governor General)
Political Shift: De Bourg, originally part of NNP's "A Team," had falling out with Mitchell. Government protection began to erode.
After De Bourg refused to allow Mitchell's associates from Trinidad to take over Capital Bank, the government moved swiftly to impose receivership.
Late January 2008: Clearing house lawsuit set for trial; ECCB requested adjournment for overseas witnesses
February 14, 2008: Keith Mitchell appointed David Holukoff as receiver (approximately 2 weeks after ECCB's adjournment request)
May 2008: High Court ruled Mitchell's appointment of receiver was unlawful
September 2008: New NDC government (Minister Nazim Burke) revoked banking license and re-appointed same receiver (David Holukoff)
May 21, 2008: De Bourg charged with four counts of fraudulent breach of trust; released on EC$1 million bail
March 2009: Additional charges filed (total: 2 counts fraud, 4 counts falsifying documents)
Ongoing: Receiver has remained in place for over 12 years (as of 2020), paid "large sums" from treasury
In December 2016, Finton De Bourg was convicted on six counts of fraud related to his management of Capital Bank. The prosecution alleged he changed directors' minutes and misappropriated EC$16 million of bank funds.
Additional Penalties: Failure to pay restitution results in additional 3 years imprisonment; prohibited from engaging in any financial operations
Former Attorney General Cajeton Hood (who served under Mitchell 2013-2018) later claimed that auditor Lauriston Wilson Jr. testified in court that "not a cent of the EC$16 million was missing." Hood argued the money was accounted for through transfers to Native Hut, a company owning South City Plaza in Grand Anse, and that the receiver could not show actual benefit De Bourg derived from the transactions.
The collapse of Capital Bank affected thousands of depositors across Grenada, Carriacou, and Petite Martinique. The government's response was limited and politically motivated.
Announced: May 2014 | Deadline: July 31, 2014
Eligibility: Depositors with savings accounts of EC$500 or less, inclusive of accrued interest to February 15, 2008, less any outstanding loans or indebtedness to Capital Bank
Distribution: Cheques collected at District Revenue Offices and Treasury locations across all islands
Critics argued this program was designed for "cheap political mileage" rather than genuine depositor protection, as it excluded the vast majority of depositors with larger account balances.
Depositors with accounts exceeding EC$500 received no government compensation and were left to wait for the receivership process to conclude. As of 2020, the receivership remained unresolved after 12+ years.
Opposition Leader Tillman Thomas (April 2008): "People all over Grenada, Carriacou and Petite Martinique who have deposited their monies in Capbank are crying all over the place, now that the bank has collapsed."
Thomas warned that money earmarked for agriculture, health, and education might need to be redirected to compensate depositors.
The Capital Bank case reveals multiple layers of regulatory failure that enabled the bank to operate for over a decade despite known deficiencies:
The Capital Bank collapse triggered multiple legal proceedings that remain partially unresolved:
Bank sued ECCB for exclusion from clearing house. Court of Appeal found both parties at fault but sent matter back to High Court to determine if bank was properly licensed. Case never resolvedâreceivership imposed before trial.
High Court ruled Mitchell's appointment of receiver was unlawful (May 2008). Court of Appeal confirmed. Yet same receiver was re-appointed by new government and remains in place.
Bank has claim against Government of Grenada and ECCB for EC$60.3 million in damages from clearing house exclusion. Independent auditors attributed bank losses directly to exclusion from facility.
OECS Court of Appeal ruled government must compensate Capital Bank owners for "improper application" of receivership. Government required to prove damages before compensation provided.
Capital Bank's failure occurred against the backdrop of Grenada's broader offshore banking crisis. In the late 1990s, Grenada licensed more than 40 offshore banks, virtually all of which were overtly fraudulent. Capital Bank was differentâit was a domestic bank with a local license, not an offshore shell. However, the same regulatory weaknesses that allowed the offshore banking fraud also enabled Capital Bank's prolonged operation despite deficiencies.
The Capital Bank case offers critical lessons for Caribbean financial regulation:
Banking regulators must be structurally independent from political influence. When a Finance Minister can override regulatory recommendations for political reasons, the entire prudential framework collapses. Grenada should consider establishing an independent financial services commission with statutory autonomy.
The provision of clearing services by the Governor General's law office created an obvious conflict of interest. All financial sector participantsâincluding senior government officialsâmust be subject to strict conflict of interest rules with meaningful enforcement.
The ECCB's exclusion of Capital Bank from the clearing house was appropriate, but individual member governments must support regional regulatory decisions. The ECCB should have statutory authority to revoke licenses of banks that fail to meet regional standards, without requiring individual government consent.
Grenada had no deposit insurance scheme when Capital Bank collapsed, leaving depositors entirely dependent on the receivership process. The ECCU-wide deposit insurance scheme established in 2021 addresses this gap, but coverage limits (EC$125,000) may be insufficient for many depositors.
A receivership lasting 12+ years is unacceptable. Protracted insolvency proceedings destroy value and deny depositors timely access to their funds. Caribbean jurisdictions need modern insolvency frameworks with strict timelines and independent oversight.
The close financial relationship between De Bourg and the NNP created a protective shield for Capital Bank. Campaign finance laws requiring disclosure of political donationsâand prohibiting donations from regulated financial institutionsâwould reduce this risk.
As of 2024, the Capital Bank receivership remains unresolved. Finton De Bourg is serving his 23-year sentence, now in his mid-70s. Most depositors have received little or no recovery. The receiver, David Holukoff, continues to be paid from public funds while the matter drags on.
The case serves as a stark reminder of the costs of regulatory capture and political interference in financial supervision. The EC$166 million restitution order against De Bourg is largely symbolicâhe is unlikely to ever pay it. The real cost is borne by ordinary Grenadians who trusted their savings to a bank that should never have been licensed, and a regulatory system that failed to protect them.
"The central figure in this unfortunate saga of Cap Bank is Dr. Keith Mitchell... He is the one who gave the banking license to Cap Bank; he is the one who continued to renew the license despite complaints and recommendations from the experts; he is the one who profited politically and otherwise from the Cap Bank transactions for several years; he is the one who refused to provide any temporary support to Cap Bank in its time of crisis to protect the interests of the poor depositors... hoping that the matter will just disappear until he leaves office."
â Cajeton Hood, Former Attorney General of Grenada (2013-2018), July 2020
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