BILLIONAIRE GLOBAL INVESTMENT MANAGERS TURN PAUPERS

Investors of all hues and economic standing across the world have continued to count their losses in the aftermath of the sudden turn of booming and upward trending stock markets activities to snarling bearish enclaves of continuous falling stock prices across the world. Small to medium size investors, in Nigeria, especially, have been so scared that some, in frustration had sworn not to have anything to do with the stock market again.

However, the emerging scenario, when a comparative analysis is done, of losses recorded by investors across economic standing reveals that the global stock market crash would seems to have made mince meat of the very high priests of stock market investment. The men that have made billions of dollars playing the stock market have by recent calculations of their wealth positions have been reduced to near paupers. Some of these are reviewed here.

E STANLEY O’NEAL is the former Chief Executive Officer of Merril Lynch, one of the loudest investment banking firm on Wall Street, before it was consumed by the five months old global market meltdown, Merril Lynch was celebrated across national economic capitals for its outstanding investment maneuvers. The swan song has, however, been rendered for Merril Lynch, it has gone under, so had the wealth of its former CEO O’Neal who net worth in January 2007 was $127.7 million. As of two weeks ago, the wealth rating of O’Neal had been reduced to an abysmal $40.2 million.

RICHARD S FULD went down with Lehman Brothers an investment banking institution in the United States of America that captured the imagination of Wall Street and the investment communities of Europe with its exotic investment packages. When the market was up and running, Lehman Brothers was in the top five bracket of players just as when the market took a plunge, it was one of the first four to capitulate and so did Fuld’s net worth which raced down from $827.1 million in January last year to a bankrupt $2.3 million

MAURICE R. GREENBERG had retired from the American International Group, the expansive all purpose United States of America’s insurance behemoth that was mainly responsible for providing the insurance arm of the sub-prime investment corridor. Greenberg was worth $1.25 billion in January 2007 but with the cascading of the sub-prime reversed pyramid, Greenberg as of Friday 24 October, 2008 was worth a meager $49.6 million 

CHARLES O PRINCE III was Chief Executive Officer of the much respected Citigroup. Though Citiigroup still thrives during this tumultuous financial market period, Prince III’s net worth standing is, indeed, in turmoil. Rated to be worth $89 million in January 2007, his investment position is calculated to have been slashed by more than 60 per cent to $33.2 million.

 MARTIN J SULLIVAN had also administered the American International Group as its Chief Executive Officer and was worth $3.2 million in January 2007. The financial market meltdown has removed Sullivan from the list of millionaires to the large rank of “thousandnaires” with a calculated net worth of $173 thousand

HENRY M. PAULSON JR is the current United States of America’s Treasury Secretary, the equivalent of a finance minister. He was at a time the Chief Executive Officer of Goldman Sachs an investment and financial firm respected for its strategic investment capabilities based on incisive and what experts call pinpoint research and analytical competence. Despite all these attributions, Paulson lost $286 million dollars to the melt down. With net worth ranking at $809.5 million in January 2007, by 24 October, 2008, Paulson is calculated to be worth $523.5 million.

JAMES E CAYNE was, some years ago, in various investment and financial markets publication described as the postal boy of investment in America. Bear Stern, the investment bank where he was Chief Executive was known for its daring and ambition in the investment world. During the days when Bear Stearn bided and acquired companies just to straighten them out to resell at gain in a short period, Cayne’s financial standing was rated at $1.06 billion but now, his net worth had broken all the downside barriers to stand $61.2 million.     

LLOYD C BLANKFEIN is the Chief Executive Officer of Goldman Sachs, the investment bank, in fact, first raised the first alarm over the precarious state of the Nigerian stock exchange. Goldman Sachs had predicted earlier in the year that the Nigerian stock market would have to take an inevitable plunge to correct itself because Goldman Sachs research returned the verdict that the market was over valued. It would, however, seem that Goldman Sachs was only preoccupied with the Nigerian market to the detriment of the American markets. Blankfein’s investment portfolio is calculated to be worth $291 million down from $405.6 million in January 2007. 

VIKRAN S PANDIT is the Chief Executive Officer of Citigroup, in December 2007 he was calculated be worth $31.7 million but by October 24 2008, his net worth had plummeted to $22.6million

KENNETH D LEWIS is the Chief Executive Officer of the Bank of America and is rated as one of the savviest investors on Wall Street, yet his portfolio changed value from $153.7 million in January 2007 to $111.6 million in October 2008.

RICHARD F SYRON had much of his investment tied to the Freddie Mac one of the two biggest mortgage operators in the United States of America. Freddie Mac is now history, swept away by the whirlwind of the tempestuous financial storm. So also has the fortune of Syron which is calculated at a lowly $130,000 in October 2008 from it January 2007 standing of $10.6 million.

JOHN J. MAC is the Chief Executive of Morgan Stanley another storied investment banking institution with influence across the global investment sector. Mac’s net worth has plunged by more than 50 percent from $224.6 million in January 2007 to $80.4 million in October 2008.

JOHN A. THAIN Chief Executive Officer of Merril Lynch is calculated to have lost $12.5 million between December 2007 and October 2008 when the value of his investment portfolio fell from $28.5 million to $16 million.

DANIEL H. MUDD former CEO of Fannie Mae’s fall in investment portfolio symbolizes the extent of the global melt down and its impact on individual investment portfolio. Mudd’s investment stands at a pauper’s $476,000 in October 2008 compared to his $26.5million in January 2007.

SANFORD I. WEILL, former Chief Executive Officer of Citigroup’s investment worth is down from $914.9 million to $342 million.

INVESTOR SENDS POLICE AFTER STOCKBROKER

Personnel of Integrated Capital Services Limited (ICSL), a financial solution company which also provides stock broking services, have been engaged in a running battle with an investor who is determined to collect promised returns on a N50million investment the company had persuaded him to invest in the stock market. 

ICSL had persuaded the Chief Executive Officer of Tamstel Nigeria Limited to invest the N50million in its stock market focused product, aptly named I-QUITY RANGE INVESTMENT in July 2007. ICSL had given the investor the assurance of a minimum guaranteed return of 100 percent which would amount to a return of N100million at the end of a 12-month period, the agreed tenor of the investment.

Apparently emboldened by the general optimism of that period when the Nigerian stock market was unabashedly bullish, ICSL further offered to a N50million margin line facility to Tamstel with a guaranteed minimum return of 75 percent (net of interest charge). This would amount N37.5million profit to Tamstel at the 12 months maturity of the tenor of the investment.

 

The expectations of the total N137.5million (inclusive of initial investment) return to Tamstel by ICSL could not effected when at the expiration of the investment tenor in September 2008, ICSL could only give excuses for its inability to pay up on schedule.

  

Tamstel insisted, through a letter or payment demand to ICSL, that it could not accept the excuses offered for its refusal to pay its N50million equity participation and the documented returns promised it since the management of the investment portfolio was at its (ICSL) sole discretion without recourse in any way or manner to Tamstel. The client investor, according to the letter of payment demand, alleged that it believed that ICSL made huge and stupendous returns from investing the money in the stock market and specifically accused ICSL of scamming it in what looks like a 419 scheme.  

 

After several disappointing responses to its call for payment, the client investor invited the Police Special anti-fraud Unit (SFU) into the matter. After several stakeouts, the men of the SFU arrested and detained senior management staff of the firm. A schedule of repayment was agreed with the police at SFU.

 

Mr. Adeniyi Elumaro, Managing Director of ICSL confirmed that Tamstel, indeed, invested in ICSL with the promise of returns on the investment but this could not be realized because the stock market witnessed price slides for the most part of this year.

 

“It’s true that Tamstel invested N50million in the stock market through us and we also provided the company a margin line facility, but at maturity of the tenor we could not live up to the promise of returns we made to Tamstel because the stock market turned bearish dashing all our expectations. Though we explained the reasons we could not pay the promised return they refused to understand and thereafter brought in the police who arrested my staff. But we have been able to resolve the matter at the police station.” Mr. Elumaro said.

ELUMELU NAMED AN “EMERGING TITAN”

Coming on the heels of the recent conferment of the African Banker of the Year Award on the Group Managing Director/ CEO, United Bank for Africa (UBA) Plc, Mr. Tony Elumelu, he has added another laurel to his kitty again. This time, he has been conferred with the award of “Emerging Titans” in Nigeria by Vivante Media Enterprises Limited; promoted by the Dr. Pat Utomi.

Elumelu was honored alongside other notable Nigerian including the Chairman of The National Communications Commission, Mr. Ernest Ndukwe and former Nigerian High Commissioner to The United Kingdom, Dr. Christopher Kolade, at the Expo Center, Eko Hotel, Lagos .

Professor Pat Utomi, Chairman of Vivante, said Elumelu was chosen in recognition of his immense contribution to economic development as he epitomizes the face of a the new Nigerian.   According to him, “the likes of Tony Elumelu are champions of nation building. It is our duty to recognize and celebrate them.”

Deputy Director of Marketing and Corporate Relations, UBA Plc, Mr. Martins Anyanwu received the award on behalf of Mr. Elumelu describing the UBA helmsman as not only nationalist but afro-centric in outlook. Under the leadership of Mr. Elumelu he said UBA has consolidated its leadership status in the Nigerian Banking Industry and is sure footed in its regional expansion drive.  With presence in 11 African countries, UBA plans to extend to another eight before the end of the next financial year he said.

Tony Elumelu has been gaining increasing recognition as one of the leading and widely influential corporate leaders in Africa since he conceived and managed the merger of legacy Standard Trust Bank Plc and UBA Plc in 2005, a union that has grown to the largest financial services group in West, Central and East Africa .

Sterling Bank’s share reconstruction dust yet to settle

The dust raised as a result of the recent share reconstruction done by Sterling Bank Plc is yet to settle.

 

This is coming on the heels of investors’ reactions that trailed the banks letter to Proshare NI defending the action.

 

As published on Proshare’s website on October 30 2008, Sterling Bank explained in summary the whole process of the share reconstruction;

 

Here are the reactions of investors, some of whom are shareholders of Sterling Bank, in respect of the share reconstruction.

 

Morris Hill in his reaction expressed doubt on the rational behind the Sterling Bank share reconstruction and has called on regulatory authorities to look into the activities of the bank. While Bello Ahmad Abdulmalik is of the opinion that where such share reconstructions occur, the Nation’s Capital Market is not expected to grow. “How would you expect foreign investors” Abdulmalik said. He further affirmed that there are no regulators in our Capital Market.

 

Ade Adeoye, a shareholder of the bank in his reaction wished to know those investors that benefited from the additional shares issued.  “How about those who bought the shares after the merger and a day before the closure of register for the reconstruction?” he queried. Adeoye suggested that perhaps, the Directors of the bank sold their shares during the period of the reconstruction.

 

“This is the more reason information should be made available to the investing public on a timely basis” Adeoye said.

 

He further affirmed of the need for the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) to clarify the Sterling Bank share reconstruction saga.

 

“Anyway, it is a known fact that the Nigerian market is a BUYERS BEWARE Market. How else will such things happen?” he wondered.

 

As earlier reported Sterling Bank had a recent post merger share reconstruction that resulted in the allotment and issuance of additional 13,317,026,285 ordinary shares of 50kobo each ranking pari-passu with existing shares and bringing the Bank’s total issued shares to 23,869,873,936 ordinary shares and thereafter reduced its outstanding shares through reconstruction.

 

This investors of the bank were not happy with this, but Sterling Bank claimed that the Bank’s shareholders at its 45^th Annual General Meeting (AGM) approved the resolution for the reconstruction of the Bank’s shares which was eventually carried out on the ratio of 10 new shares for every 19 existing shares held.

Most investors of the bank became suspicious that despite the shares reconstruction, the impact did not reflect in the price of the Sterling Bank’s stock which, rather than move upward, as expected the stock price hit the dirt.

REAL ESTATE INVESTMENT MAY BE IN TROUBLE SOON – EXPERTS WARN

Many investors have taken a flight to the safety of real estate in the aftermath of the worrisome protracted correction that had turned the Nigerian stock market into the grazing ground of the bears with stock prices continuously hitting new bottoms by the day.

Analyzing the prospects of a downturn in the real estate sector, a second tier bank managing director explained that the frenzy of investors’ movement to the real estate sector would end up in creating artificial value for property which, as result, will lead to a correction in the sector.

“Everybody is now rushing to the real estate sector because the stock market is no longer providing the kind of capital appreciation we witnessed up to March this year.” The bank’s MD observed.

“But the problem I see is that not many people are giving consideration to proper valuation of property. Like it happened in the stock market, the herd mentality is being enacted in the real estate sector, especially those that are rushing to take position in highbrow areas. For instance, in the Lagos area, most investors think that properties in the Lekki-Ajah corridor would continue to appreciate forever. This is a wrong notion because the price of these properties is high at this moment for reasons of high demand pressure.

“What I believe will eventually happen is that properties would soon be priced out of reach of usage. When you get to that point, people that had bought into these properties with intent at trading them off may not be able to free their investment because there would be nobody to buy, even letting may no longer be feasible because of over pricing. When we get to this scenario, the only plausible response would be another desperate bid to get out of the sector; the consequence would be too many properties asking to be bought by too few buyers. This leads to price crash” The MD argued.

“I will counsel that anybody who wants to go into property should consider newly developing areas that are just growing so that they can buy cheap and tend the properties with a medium to long term view.” He advised.

Mr. Ori Adeyemo, a forensic accountant, however, reviewed his consideration of the fate of the real estate sector from the background of the banking credit relationships with their customers.

“The logic is simple enough. The two most reliable forms of collateral for Nigerian banks are stocks and properties. Now with the protracted fall in the stock prices, stocks that have been pledged as collateral to banks have become more or less worthless such that stocks are no longer popular with banks as collateral.

“But there is a tie-in somewhere in the credit transaction between banks and their credit customer. Most customers had pledged their properties as collateral to secure credit to finance their stock market transactions, some had gone ahead to use the money from the credit transactions from their banks as margin participation funds with their stockbrokers and in some cases, their banks.

“Of course, I had always warned that the stock market was headed for a crash, but not many people heeded my call. Now that we found ourselves in this situation of price falling endlessly, it translates to mean that banks cannot redeem their funds from selling pledged stocks, so the next would be to start offering the properties pledged as securities in the open market in the desperate bid to recover their money from their credit customers. You will expect that so many properties would be in the market at the same time competing with those other properties investors had taken position in. The result is a saturation of the properties market on the supply side. What I see is properties prices falling drastically.

“At this point in time, I advise the average investor to remain calm and proper evaluation of whatever is his or her next investment step because situations tend to change drastically at time like this.” Adeyemo suggested.

STANBIC IBTC BANK AFFIRMS BANKING INDUSTRY’s HIDDEN CHARGES

Have you watched the recent couple eating out at a restaurant television commercial of Stanbic IBTC? The television commercial is quite entertaining what with the embarrassment the couple had to endure at the restaurant. But, in fact, the message of the television commercial is succinct enough; it tells of the hidden charges to services rendered at the restaurant. You only need to translate the message to what obtains in the banking industry and you get the intention and direction of the message. While confirming the pervasiveness of hidden charges in banks credit and services offered to their customers, the StanbicIBTC television commercial message affirms that the bank does not engage in the unsavoury conduct of padding up customers’ charges with undefined hidden charges.  

WESTERN UNION MONEY TRANSFER: CBN TO PENALISE BANKS FOR WRONG PAYMENTS

In response to the torrent of complaints and petitions against commercial banks that had wrongfully or by default paid money transferred to beneficiaries through the international fund transfer platform of the Western Union Money Transfer, the Central Bank of Nigeria has issued to commercial banks, additional information requirements and directive on Western Union Money Transfer operations in Nigeria.

The banking industry’s regulatory authority in a circular forwarded to commercial banks in the country acknowledged the absence of a fool-proof means of personal identification of beneficiaries of money transfer, to safeguard against the many incidences of payments of money transferred to identity thieves, the apex bank directed that bank should put in place additional safeguards that will ensure that payments are only made to the correct beneficiaries:

 

One of the additional requirements is that funds transferred shall only be collected in the designated town for payment and nowhere else. In addition, commercial banks are now required to investigate customers’ complaint within one week before referring the beneficiary to the sender for onward complaint to Western Union Money Transfer International.

 

The circular signed by the apex bank’s director of banking supervision, Mr. OI Imala, also requires that the copy of beneficiary’s photograph forwarded by Western Union Money Transfer to the banks should be personally produced by the beneficiary at the point of collection before payment is made.

 

The CBN warns that in cases where these safeguards are not strictly applied, banks will be held liable and shall be made to refund any amount paid to wrong beneficiaries.

 

A Central Bank source explained that the circular was meant to find a lasting solution to the continuous complain of banks customers that petition the CBN over the wrongful payment of money sent to them but wrongfully paid to some other people.

 

“Some of these customers actually alleged that the mistaken payments were made in connivance with some bank staff and identity thieves.” FORTUNE & CLASS source said. “The CBN had to insist in that circular that banks investigate claims of customers before referring the customers back to the senders from whom the fund emanated so as to ensure that the wrongful payments were not deliberately contrived within the bank.

 

“The basis of the proof of identity is the new requirement that the sender must provide a copy of the passport photograph of the beneficiary here in Nigeria to Western Union Money Transfer which will now forward the photograph to the paying bank. Now, before payment is made to anybody, the person laying claim to the transferred money must provide a copy of the photograph at the point of collection before payment is made.”

 

The CBN source added that with this requirement, it will be easy to identify who the true beneficiary of fund transferred is and if a bank refused to adhere to this guideline strictly it would show that it breached the process, so rather than make excuses and refer the customer-beneficiary to the sender, the CBN will deem the bank culpable and shall be made to make refund to the true beneficiary.

BETWEEN THE CBN AND COMMERCIAL BANKS

So, why would the Central Bank of Nigeria refuse to trust figures presented to it by Nigerian banks? We reported in the last week edition of this magazine that the management of the Central Bank of Nigeria virtually established a template of distrust for banking audit that there is an unwritten standing rule to slash 30 percent any figure presented to the CBN by commercial banks in the value of their assets claims.

 

What this mean is that the CBN without question first slash off 30 percent of the value of the assets claims of the banks and thereafter, direct the bank to rework its assets value within the figure arrived at after the slashing.

 

A source at the CBN has informed that the CBN had to resort to this measure after several encounters with some commercial banks assets value claims that were proved wrong. One of this was quite outstanding. The source informed that a commercial bank had reported in the breakdown of its assets value to have 150 built up branches. An official of the CBN had found reasons to be suspicious after conducting an examination on the bank’s assets class and decided to conduct an onsite count of the branches.

 

At the end, he found out that 30 of the branches claimed to have been built or acquired by the bank were not in existence. “This corroborated other findings of the CBN so the CBN decided to opt for a general standard of reducing assets value claims since it could not conduct on site review of assets claims of all operating banks. Though some highly respected banks are treated differently.” The source said.

STANBIC IBTC BANK AFFIRMS BANKING INDUSTRY’s HIDDEN CHARGES

Have you watched the recent couple eating out at a restaurant television commercial of Stanbic IBTC? The television commercial is quite entertaining what with the embarrassment the couple had to endure at the restaurant. But, in fact, the message of the television commercial is succinct enough; it tells of the hidden charges to services rendered at the restaurant. You only need to translate the message to what obtains in the banking industry and you get the intention and direction of the message. While confirming the pervasiveness of hidden charges in banks credit and services offered to their customers, the StanbicIBTC television commercial message affirms that the bank does not engage in the unsavoury conduct of padding up customers’ charges with undefined hidden charges.  

LAWYERS SAY LAGOS STATE’s JUSTICE DISPENSATION PROCESS FLIPS BACK TO OLD DAYS OF GO-SLOW

Some years ago when the Lagos State Government embarked on a reform process to transform the judicial processes in the State from slow pace of justice dispensation especially in civil and business matters by introducing the fast track route to the dispensation of justice, many across the nation applauded the initiative. The Lagos State new model of judicial process became the standard to be copied. And in truth, we got it on good source that the government of Osun State, indeed, copied the model to the last letters.

 

However, a recent review of the judicial process in Lagos State by some legal experts indicated that there has been recidivism to the go-slow days when legal issues took years to be concluded by the State’s judiciary.

 

 This reversion to the tradition of the old days, according to stakeholders in the legal profession in Lagos State, is not unconnected to the large scale employment of judges in the State judiciary whose only claim to judicial excellence is their connection to influential politicians and office holders in the State.

 

A source confided in FORTUNE & CLASS Weekly that all manners of individuals with a claim to a degree in law are finding their ways on to the bench, yet these lacked the prerequisite of distinguished legal practice and commitment to the nuances of the bench.

 

The story is said of the daughter of a political big wig in the State who was appointed a judge and assigned a court to administer but only ended up supervising the information technology department even though she is not a qualified ICT professional.

 

It is also said of another that had long been engaged in business as cloth seller but was employed to the bench on account of her connection to another political big wig.

 

These and many other misaligned employments to the bench had turned the State’s judiciary to a snarling, labourous justice dispensation platform. Even now, some lawyers are saying that Osun State government that borrowed the nimble fast track model from Lagos State has greatly enhanced its justice dispensation process compared to what obtains in Lagos State.