By Zayyan Umar Sanda
The illegal suspension of the Director-General of Securities and Exchange Commission (SEC), Mounir Gwarzo, by the minister of Finance, Kemi Adeosun, did not only expose the minister’s complicity in shielding Oando from SEC’s regulatory axe but also opened the pandora’s box that will lead to crash of the oil giants.
Nothing justifies the Economist’s November 2015 scathing verdict that Adeosun is “poorly qualified for the job” than her meddling in SEC’s regulatory activities and by extension eroding investor confidence and lowering the estimation of Nigeria’s capital market in the eyes of the world.
What Adeosun wanted Gwarzo to do was to circumvent regulatory principles and adopt “administrative” ways to dress up what may pass as a ponzi affair in the garb of a blue chip company. What manner of a minister of finance!
Gwarzo’s crime is ordering for the forensic audit of Oando after receiving two petitions from two shareholders, Ansbury Incorporated and Dahiru Mangal, over alleged distortion of its shareholding structure and mismanagement of the company’s financial affairs.
Following the petition, SEC conducted a comprehensive review, which revealed massive breaches of the provisions of the Investments & Securities Act and the SEC Code of Corporate Governance for Public Companies.
It still beats me that a minister who coordinates Nigerian economy wanted SEC to ignore, to the detriment of the 274,400 shareholders of the company and Nigerian economy, the “going concern” of the company. Going concern in Oando, as discovered by its auditors, means the company will not be able to continue operating for a period of time to carry out its commitments, obligations, objectives, among others.
No one with national (not regional) interest at heart would want insider dealings such as the sale of 1.21billion shares amounting to N21.5billion to be swept under the carpet. With access to confidential information to its advantage, Oando traded 1.21billion shares even before the release of the 2014 accounts.
This represented 20.29% of the total volume sold and 55.35% of the total value sold within the period under review.
It is instructive to note that all the six (6) deals executed by OODP (owned and controlled by directors of Oando Plc) in 2015 were executed before the result for 2014 (which revealed a loss in excess of N180 Billion) was released to the market.
The manner with which the transactions were structured and executed would suggest that either the Directors of Oando Plc deliberately delayed or took advantage of the delay in release of the company’s 2014 results to dispose of some of their shareholdings, by virtue of the fact that, they were insiders and in possession of material price sensitive non-public information.
Every market feeler knows that there is a cause for alarm over a labyrinth of related party transactions mostly involving the CEO of Oando Wale Tinubu in which company paid between 2012 and 2016 for 7 out of the 27 the sum of over N200billion. A related-party transaction is a business deal or arrangement between two parties who are joined by a special relationship prior to the deal. It involves a transfer or resources, services, or obligations between related parties regardless of whether a price is charged.
While these types of transactions could be legal, the special relationship inherent between the involved parties creates potential conflicts of interest, which must be regulated because they can result in actions that benefit the people involved as opposed to the shareholders. If not executed at arm length
To prove that Oando’s paw is deeply trapped in related-party transaction jar, the instances are not far-fetched. For example, on 29th November 2012, Oando Plc acquired 100% of the share capital of Churchill Finance Limited (a company incorporated in Bermuda). Churchill’s sole shareholder was the GMD of Oando Plc, Mr. Adewale Tinubu and its main asset was a Bombardier Challenger 300 aircraft. Oando Plc recognized goodwill from acquisition in the sum of N2.34 billion from this transaction, on the date of acquisition (29 November 2012).
The “goodwill” from the acquisition represented the excess of the “purchase consideration” over the total value of the assets and liabilities of Churchill Finance Limited and 32 days after the acquisition (as at year ended December 31, 2012), Oando Plc recognized an impairment loss of N1.23 billion on the capitalized goodwill on acquisition of Churchill.
The act of acquiring an asset (the aircraft) from the GMD of the Company (Mr. Adewale Tinubu) and 32 days later recognizing a loss in value of the asset raises serious conflict of interest issues and points to a failure of governance structures and internal control. As it would appear that the asset may not have been worth the value attached to it ab initio.
Further impairment losses of N838 million and N493 million on goodwill from acquisition of Churchill were recognized in Oando’s accounts for the years 2013 and 2014 respectively. Impairment normally occurs when there is a sudden and large decline in the fair value of an asset below its carrying amount and the impairment write-down carried out by the company from 2012 to 2016 amounted to approximately N202.7 Billion.
Payments to Triton Aviation Ltd a company incorporated in Nigeria whose sole shareholder was Mr. Adewale Tinubu was paid the sums of N921.8 million, N409 million, N656 million and N8.3 million respectively for 5 years between the years 2012 to 2016 amounting to a total of N2.83 billion.
Brol Properties Ltd owned by Mr. Adewale Tinubu provided facility management services to Oando Plc at a total cost of about N572.1 million within a period of five (5) years.
TSL Logistics Ltd controlled by the same Mr. Adewale Tinubu was engaged by Oando Plc to supply products and services and was paid the sum of N67.03 Billion within a period of five (5) years.
Noxie Ltd controlled by Mr. Adewale Tinubu also supplied various office equipment at a total cost of N10.2 Billion between 2012 and 2016. Lagoon Waters Ltd owned by Mr. Adewale Tinubu supplied petroleum products to the company worth N9.6 Billion within a period of five years. While all the related party transactions and impairment was on the Oando plc had to sell its asset to pay dividend to its shareholders.
SEC’s findings also show discrepancies in the shareholding structure and breach of several SEC law (ISA) and rules by Oando.
As the regulator and watchdog, the commission, sequel to this damning discovery, placed the company’s shares on technical suspension in the Nigerian Stock Exchange (NSE) and appointed a team of experts, consisting of auditors, lawyers, stockbrokers and registrars, to conduct the forensic audit.
Against the claims by the minister and the acting DG of SEC that the forensic audit would kick off in ernest, the fact of the matter is that no forensic audit is taking place or about to take place in the SEC. Inside sources revealed that they are toying with the matter for it to be overtaken by events.
The claims that a court had stopped SEC from conducting forensic audit is far from the truth. On October 24, 2017 Oando sought an interim injunction to restrain SEC and NSE from conducting forensic audit and implementing the technical suspension but on November 23rd, 2017, the Federal High Court struck out the application for lack of jurisdiction to hear the matter and directed Oando to seek redress from Investments and Securities Tribunal.
Oando did not take heed to the court’s directive that the matter be tabled before Investments and Securities Tribunal. Evasive and cunningly dodgy, the embattled company applied to the same Federal High Court on December 13, 2017 for an interim injunction pending the hearing of the application at the Court of Appeal. Still unlucky, the court struck out the case for lack of merit on December 15, 2017.
Now the question is: where does the purported court order emanate from? The bitter truth is that the case is yet to be even heard, let alone granting order restraining SEC from conducting the forensic audit.
Another pretext the minister and the acting SEC latch on is the alleged non-release of funds by the Capital Market Development Fund (CMDF). The fund was set up by SEC to assist in achieving its dual mandate of investor protection and development of the market. It was incorporated as a limited liability and the composition of the board was approved by the minister of finance with the following representation: DG of SEC as chairman; Executive Commissioner (Operations) SEC as member; a Non-Executive Commissioner; two representatives from shareholders associations; two representatives from trade groups; a representative of the Ministry of Finance and representatives of securities exchanges. This market-wide composition shows that all the key stakeholders were involved in the decision.
At its meeting on Monday October 30th, 2017, the Board of the CMDF approved the conduct of the forensic audit, engagement of the consortium and payment of N160million as their fees. In attendance at the meeting were DG of SEC Mounir Gwarzo; Director of Home Finance, Federal Ministry of Finance, Mrs Olubunmi Siyanbola; representatives of the shareholders association in persons of Dr Farouk Umar and Sir Sunny Nnamdi Nwosu; representative of the Institute of Capital Market Registrars, Dr David Ogogo; representative of Association of Stockbrokers, Ms Ify Ejezie; and representative of Association of Securities Exchanges, Mr Ayodeji Balogun.
The aforementioned attendees are still alive to testify that they met on Monday October 30th, 2017 and due process was followed in approving the engagement of the consortium, conduct of the forensic audit and payment of N160million for the audit.
In expressing viewpoints, one credo every reasonable person should hold dear to heart is removing the cataract of ethnic and religious sentiments to look at issues dispassionately. Much as one detaches himself from giving the crisis an ethnic coloration, Adeosun’s actions and inactions as supervisory minister of the commission are clear pointer to her culpability in the matter.
Periscoping the Kemi Adeosun/Mounir Gwarzo saga from unprejudiced position, one draws inference that the minister is clearly shielding her kinsmen from probe, against national interest.
A cursory look at the at ethnic background of the minister of Finance Mrs Kemi Adeosun, the Chairman of Oando (Oba A. Gbadebo), GMD (Adewale Tinubu) and the acting DG she imposed on SEC (Abdul Kemi Zubair) speaks volume of the minister’s spirited efforts to save the company from regulatory gallows. Their actions or inactions clearly vindicate Mounir Gwarzo who was suspended to ensure administrative patch rather than the forensic audit which remain in the cooler three months thereof.
*Mr. Sanda is Abuja-based financial analyst