ZAIN dragged before NCC for Exploitation and Cheating

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EFCC compels Sterling Bank to admit cheating customer of N10.5m

Banking relationship did certainly went awry between Sterling Bank and Great Bakis Limited, its customer that had taken several loan and overdraft facilities from the bank. This banking relationship should, under normal circumstance, have ended on a happy note had the bank shown some conscientiousness in its figure adds up.

The figures did not add […] here

Investors should not pay Interest on Stock Broker’s Margin Account-Forensic Accountant

Not a few investors have come under the hammer of their stockbrokers after they were availed the opportunity of the now burdensome margin account facilities with all the overlays of a banking credit transaction. Now, a forensic accountant, Ori Adeyemo of Forensic Consulting, has taken issue against what he describes as the illegality of […]

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FINBANK VS AQUITANE

Ori Adeyemo

Finbank and Aquitane have taken their battle over excess bank charges to the court of law. Aquitane which conducted a private placement last year was reported to have had some of its transactions funded by Finbank especially as the oil company endeavoured to look good in the public space during its private placement exercise.

Months after the conclusion of the private placement, Finbank informed the management of Aquitane of the need to pay the sum of N7billion being debt owed to the bank. Aquitane, we were informed took issue with the bank. It invited a forensic accountant, Ori Adeyemo, to audit its transactions with Finbank. At the end of the review and auditing, Aquitane demanded a claim of N2.5billion being refund of excess charges to Aquitane.

The two parties wait patiently for the court to adjudicate on the matter.

Expert Decries Bank Charges On Returned Cheques As Illegal

As published in the Oct 13, Issue 38. ULD by ol’Victor Ojelabi

Mr. Ori Adeyemo, a forensic accountant and crusader for streamlined bank charges, has decried bank charges on returned cheques and described the fee deducted from accounts in consequence of returned cheques as illegal.

“It is trite that by virtue of Section 10, subsection of the defunct Central Bank of Nigeria (CBN) Bankers’ Tariff, a bank is allowed to charge N1,000 for a returned corporate cheque whilst debiting N300 for a returned individual cheque (to be borne by the drawer),” Adeyemo said.

“It is also true that by the provision of Section 11, subsection 6 of the subsisting CBN Guide To Bank Charges effective January 01, 2004, a returned cheque attracts 0.5 per cent of amount, maximum N5,000 (to be borne by the drawer).

“In both cases,” Adeyemo argued, “the CBN guidelines stipulate that only the drawer of a cheque should be penalised for a returned cheque and not the supposed beneficiary (who never took value for consideration anyway.) Unfortunately, we all know that this situation is not true in Nigeria as banks whimsically charge both the drawer and drawee for a returned cheque, thereby amounting to double-jeopardy especially for the drawee who never took any benefit.”

Affirming the contradiction in the statutes relating to fees sanctions as a result of returned chques, Adeyemo said: “I must emphasise that the CBN is wrong to have inserted returned cheque fee into the defunct Bankers’ Tariff as well as the subsisting CBN Guide To Bank Charges being in crass breach of the Dishonoured Cheque (Offences) Act of May 20, 1977, which makes it a nullity for the following reasons:

a. That a returned cheque is a criminal offence and not a civil offence.

b. That only the injured party (that is, the supposed beneficiary) has a right to complain about a returned cheque to the Nigeria Police or better still, the Economic & Financial Crimes Commission (EFCC) and definitely not a bank.

c. Returned Cheque Fee is a penalty which only a court of competent jurisdiction can impose on a citizen of the country.

d. No party to a contract can impose any form of penalty/fine on other parties to a contract as doing so is repugnant to natural justice.

e. That a bank has no special or pecuniary interest in a returned cheque being just a clearing vehicle for a deposited cheque.

f. That Section 9 of the subsisting CBN Guide to Bank Charges, clearing of cheque or draft in Nigeria is free. Moreover, no bank can charge any fee for collecting any deposit in Nigeria.

g. That according to the Dishonoured Cheque (Offences) Act of May 20, 1977, upon conviction; an individual is liable to two-year jail term without an option of fine while for a body corporate a penalty/fine of not less than N5,000.

h. Only the Attorney-General of a state (without excluding the Attorney-General of the Federation) has a right of criminal prosecution of a defaulter and definitely not a bank.

i. That Section 25 of the Interpretation Act (which provides that a person shall not be punished twice when guilty of an offence under more than one enactment) shall apply in respect of offences under this act.

j. Since this Section 11.6 of the subsisting CBN Guide to Bank Charges as it relates to a bank charging its customer Returned Cheque Fee is in breach of the Dishonoured Cheques (Offences) Act being a legislation of the National Assembly, the Dishonoured Cheques (Offences) Act will prevail.

“In simple language, I am saying that since a bank is not a party to a returned cheque, then such bank cannot lay claim to it. We should cast our mind to the law of privities of contract wherein it is clearly stated that only parties to a contract can sue for the enforcement of a contract and not even those in whose interest the contract was made,” Adeyemo insisted.

“You will agree with me that the initial beneficiary of a clearing cheque is the bank that went to clear the cheque that should have taken custody value for the drawee but that alone does not give room for the bank to lay any claim on the money since the bank is not the real beneficiary of the fund but just a mere custodian.

“Therefore, I cannot but submit that the present CBN Guide to Bank Charges, is fraught with illegalities to the crass detriment of bank customers thereby allowing banks to smile away at all times, leaving the customers short-changed. In fact, this was one of the issues I had wanted to address in May 2008 at the House of Representatives’ probe of the banking industry until it was fraudulently compromised by the banking cabal working in concert with the then leadership of the House Committee on Banking & Currency.”

Adeyemo argued that on account of the subsisting convention of fee sanctioning for returned cheques, he had been demanding a review of the CBN Guide to Bank Charges: “I cannot but request for a thorough review of the CBN Guide to Bank Charges wherein the opinion of every stakeholder in the industry will be accommodated as against the present one which was drafted by Mr. Jim Ovia, the Zenith Bank Plc Managing Director and so wholesomely adopted by the CBN without any input from the bank customers, thereby skewing the graph in favour of the banking industry.

“In simple words, I submit that it is totally illegal for any Nigerian bank to penalize a customer for a returned cheque, as doing so will translate to the fact that the banks have become laws unto themselves, having illegitimately taken over the job of the judiciary,” Adeyemo submitted.

UNSPENT FUND: FED. MINISTRIES ON LAST MINUTE SPENDING SPREE TO BEAT YAR’ADUA’s DEADLINE

Nigeria’s president, Umar Musa Yar’Adua may have placed excessive premium on the integrity of the federal ministries, government departmental and agencies to feel secured enough to inform the national assembly of part financing its budget deficit in 2009 through unspent funds taken back from federal ministries, departments and agencies.

FORTUNE&CLASS Weekly discreet investigations in Abuja, have, however, shown that the president and very senior officials in federal government ministries and agencies may be working at cross purposes.

“Even before the coming of the Yar’Adua’s administration, it has been made mandatory during the Obasanjo’s presidency for federal ministries and departmental agencies to rule off their accounts by the 15^th of December.” A source in the federal ministry of finance informed. “The idea is that after the rule off, no expenditure aside salaries and allowances are allowed until the succeeding budgetary allocation are effected.” The finance ministry source added.

This year end account rule off had turned a mere paper directive until the assumption of office of President Yar’Adua who seemed to decide to make capital of the directive he had inherited from the Obasanjo administration, the seriousness of the administration in this regard was orchestrated when the erstwhile ministers in the federal ministry of health were forced to resign and prosecuted in court on account of an alleged N300million unspent fund in 2007.

FORTUNE&CLASS Weekly cross checks in Abuja, however, revealed that the frontal measures taken against the sacked ministers of health might have hardened the resolve of strategically placed civil servants that had become annual beneficiaries of unspent funds already in the kitty of the ministries.

An insider in the federal ministry of information and communication told this magazine last week that the officials in the account and audit units of the ministry have been busy over the last three weeks as they feverishly dish out contracts and supplies notes so as to eat up a large percentage of what is left of the unspent fund.

“The president thinks he can beat us to the game but we are better at it,” the source boasted. “Civil servants are smarter in these matters, is it not about filling out the appropriate vouchers and back dating them where necessary? In fact, we know how to settle the officials from the ministry of finance that usually come to supervise the account rule off.”

Another source, in an aside with this magazine explained that the cornering of unspent fund in federal ministries and parastatals is limited to very senior officials and staff members in the account and audit department. In the light of the seriousness of the present administration and the oversight function of members of the National Assembly, the source confided that these senior officials agree among themselves on a predetermined amount of unspent fund they will return to the government as unspent fund and also find the appropriate way to dispense with the percentage of unspent fund they have decided to corner.

Several civil servants also spoke of the federal government renewed efforts at ensuring accountability in service like directing that henceforth, any civil servant that was to proceed on a conference; seminar or any form of out station official duty would have the conference or seminar fee paid directly to the accounts of the facilitating body. This is contrary to the tradition where participant (s) from the ministry is/are given conference or seminar participating in cash. A curious angle to seminar or conference participation in the traditional sense is that some conference or seminar fees are inflated that after cash payment to the participating civil servant, such would just cream off the difference an pocket it while another may collect the participating fee and out of station allowance and altogether abandon the conference or seminar.

Beside, overnight and out of station allowances are now paid direct to the account of recipient civil servant than collection by cash as part of the new accountability regime.

Some of the civil servants FORTUNE&CLASS Weekly interacted with said these measures have been eroded with the opening of multiple accounts. Asserting the fact that it may be near impossible for the federal government to arrest the trend of frantically spending off unspent fund in a ministry within a short period, Mr. Nathaniel Cole, a forensic accounting expert and anti fraud specialist said that the model of conventional auditing that the government depends on to stop the diversion of unspent fund into private pockets shows that government is not serious about tracking unspent fund:

“I don’t think government is serious about this. It is obvious that the officials that are going to audit the ministries are interested parties so there is no way they can objectively audit the account to ascertain how unspent fund would have been tampered with. What government needs at such time like this is the service of forensic accountants, because, in truth, a certain aspect of civil servants efforts to corner the unspent fund has to do with some criminality in the area of filling vouchers and back dating them. Only forensic accountants can handle such case. For forensic accountant, it is easy to pinpoint the exact culprits in the account manipulation.” Cole said.

How to become a forensic accountant

NATHANIEL COLE COME HIGHLY RECOMMENDED WITH 30 YEARS POST QUALIFICATION EXPERIENCE IN FORENSIC ACCOUNTING, HIS ARRAY OF FRAUD DETECTION CERTIFICATIONS IN THE UNITED STATES OF AMERICA PLUS HIS FELLOW STATUS WITH NIGERIA’S ICAN TELLS OF PRACTITIONER THAT HAS MOVED THE ACCOUNTING BEYOND THE BASICS AS OBTAINED IN NIGERIA.

IN THIS INTERVIEW WITH NIYI AKINSIJU, GOKE OLUWOLE AND SEGUN BANJO, NATHANIEL COLE EXPLORES THE OPPORTUNITIES INHERENT IN THE PRACTICE OF FORENSIC ACCOUNTING AND PROSPECTS OF ELEVATING THE NIGERIAN JUDICIAL SYSTEM TO A HIGHER LEVEL WITH THE ADOPTION OF EXPERT WITNESSES. PHOTO: OL’VICTOR OJELABI

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It would appear that forensic accounting has more to do with excess bank charges, what other roles has forensic accounting in corporate governance?

Actually forensic accounting has no direct link with excess bank charges by definition of what forensic accounting is all about. According to the Black Law Dictionary, forensic is defined as what is used in or suitable to court of law or public debate, so how do bank charges come into that?

When you now marry forensic with accounting you now get forensic accounting, this will not still mean bank charges; it only shows how poor our knowledge of forensic is all about, it is because we are not sophisticated here in Nigeria. Bank charges is only a minute area which forensic covers, not the totality of its operation. Anybody can review excess bank charges but the person must put in mind that the evidences can be used in a court of law and the chain of command must be put into consideration in terms of how the evidences are being handled, explaining how the evidences are being obtained and how they are being kept, since the day they were obtained and before they are tendered in court that day.

It is suitable to be used but when it is not properly handled it can be objected to, for the mere fact that it was not properly handled, losing the legal value in the same sense.

This is also the reason we emphasize training for forensic accountants on how to handle evidences from obtaining to presentation in court of law even if it is a share certificate. For instance if you want top use the share certificate as evidence in a court of law it must not be defaced. You have to treat it with reverence from the time you are picking it up and if you must make a note on it you must put it in a nylon package and then paste a paper on the nylon and write the details on it. You also note in the detail the history of the document and it has been preserved. This is why I always say that if Nigerians really know their right, it is very easy to reject many evidence presented in our courts.

Let’s come back to forensic accounting?

Since you already know what forensic is and what accounting is, forensic accounting simply means accounting that could be used in a court of law and not accounting just for the purpose of auditing; this is because you can be the best auditor and yet be the worst forensic accountant. Let me demonstrate with a simple analogy: when you go for an audit and you ask for an invoice and they give it to you, an auditor will not ask further question, but a forensic accounting expert would ask further questions like; did the invoice sent by mail or delivered by hand? Now, if I was the one conducting the investigation, I can tell the source of the invoice the moment I am handed the invoice, so if I ask if the invoice was posted by mail and you gave me a crisp unfolded invoice, I already know it is not posted. Invoices are mostly folded, must show creases, or have stapler’s sign on them. Now if that invoice became evidence in a matter in the court I can controvert its origin if the other party in the matter claims that it was sent by mail I can affirm that the invoice was not delivered by mail. It is all about forensic style of gathering evidence; on the other hand, auditors are not required by law to go beyond what is asked.

Does that mean that an audited report cannot be used in a court of law?

It can be used in a court of law, but it will not carry the weight of a forensic report, it cannot stand; unfortunately, we don’t even have many forensic experts in Nigeria. Auditors are by law not empowered to uncover fraud because in auditing they are guided by the concept of materiality, while forensic experts don’t have the limitation of materiality; you know what I mean by materiality?

When an auditor is auditing for a multi-national or conglomerate, $1million may not matter to such large companies but in auditing a small company like an Ajanleobo and Sons, N50,000 will be important. Therefore, for an auditor, if he can’t track $1million in the auditing process it may not matter but to a forensic accountant who is on the look out for fraud, there is nothing like materiality, everything matters. It is a relative thing, that is where fraud and forensic crossed each other’s part.

Fraud doesn’t necessarily end up in court, but forensic accountant has to make evidence suitable for admission in court. The way both are handled differ, like the mail example I just demonstrated, which one will you believe: the folded invoice or the crisp one? Whenever I train auditors this invoice example always amazed them; it tells them how gullible they’ve been over the years, this is not limited to auditors in Nigeria but even in the USA. It is a stereotype thing, as long as auditors are concerned, audit report is supposed to be a mere true and fair view of an account, but when if you are to prove or disprove an allegation of fraud, there must be a forensic accounting investigation and report.

You’ve been practising as forensic expert for a very long period, how would you describe the practice in Nigeria?

We don’t have forensic accountants in the real sense of it, so to speak, in Nigeria. Now, how many times have you heard of a chartered accountant testifying in a fraud case? That is why I tell people, though I love the way EFCC is prosecuting all theses corrupt people but if they are smart enough they will come looking for forensic experts like us, because that same document that the EFCC is brandishing as evidence will be used against EFCC in court by re-interpreting it to the judge in different dimensions, challenging the handling of the documents being used as evidence. It might have been tampered with, ours is not to determine whether the suspect is guilty or not, but to give a better interpretation to the evidences.

It is an open challenge to any government agencies that present any forensic document, which I will equally examine, to check its authenticity. There are lots of procedures in forensic that you cannot violate like that chain of command, you have to know how the evidences were taken and preserved to avoid cases of tampering with evidence in our court.

One major weapon accountants have is the use of questions in conducting auditing jobs; there is no way you can start working without questioning, that is the most critical thing, but not many accountants know its utmost usage, in forensic, we call this embedded incompetence. Before you go for forensic training, you must thoroughly understand the interview techniques. What actually determines the success of the forensic report is the interview technique.

Does that mean that the national accounting bodies have not embraced forensic as an integral part of our accounting system due to a lack of expertise to even start?

I know ICAN, which I am a member, has embraced it; I am sure others will have to; recently, the current ICAN President began pushing very strongly on the issue of forensic; they’ve even gotten a forensic faculty in ICAN. Mind you, the American Institute of Certified Public Accountants [ICPA] only started giving certifications to forensic accountants in May, 2008. I led the ICAN team to visit them in September, 2008. I was also surprised to learn from the ICPA that I was among the only 1,400 certified forensic accountants in the whole of the United States of America where there are over 300,000 ICPAs.

That made me proud as a Nigerian and it humbled the ICAN team but that showed that even in America, forensic accounting is just evolving too.

Does it also mean that every forensic expert must also be an accountant?

No, you are already moving into wider areas because we are only talking about forensic accountants, but in my own case, I am a certified forensic consultant, that means I can testify in any case like a case involving engineering, like the post election tribunal forensic experts were involved in the defence of some aspirants; in that case, it is not about forensic accountants but forensic experts which you have in other fields like fingerprint experts. I was certified by the body overseeing forensic practice in the USA as a certified forensic consultant because I was already an anti-fraud examiner and a certified fraud specialist, which exposed me to forensic techniques.

How does the forensic accounting impact on the society?

It impacts on the financial sector of the economy, like I read in the newspaper that the new EFCC chairman was quoted as saying that EFCC will soon be going after anybody in Nigeria that lives flamboyant lifestyle. To me that is a joke, it really shows how ignorant we are in Nigeria in matters relating to investigating corruption cases. This EFCC approach is not correct and I was also concerned that such an utterance was coming from the Chairman of EFCC.

As a forensic accountant we have what we call ‘net worth’ analysis; this was what she needed to say, not flamboyant lifestyle. She only needs to go back to a date like December 2002 and review what that person was at that time and track it to he is worth in December 2008. Look at what the person was worth in the first year of that period and subtract it from the current worth, this will give you his net worth. In doing this, you look at the legal income; if he can account for it, good, but if not, he would be investigated as to where the money came from. The fact is that you can be flamboyant and still do legitimate business under the law.

You see, if I look at your income and you are worth N5m today and by one year from now, you are worth over N50m, and the only legal income we can trace to you is only about N5m, where the rest of the money comes from will be the question she should be asking those people. And these are jobs of forensic accountants and these are what the EFCC chairman was supposed to say.

It is so easy to investigate illegal incomes. Like the story of Al Capon, the Mafia boss in the US, he was so smart and so sure of himself that nothing could be traced to him, but he forgot the issue of networth; they just asked him that this was how much you were worth at so so time, how then are you this worth at this time? That was how he was nailed and he died in jail. I think that was what Madam Waziri was trying to say; perhaps she was quoted out of context.

We had on good source that EFCC has forensic accountants among their staff?

Though, I may not be able to confirm this, what I can tell you is that many of their staffers have attended some of my forensic trainings and workshops like the one I conducted for staff of the Federal Inland Revenue Services [FIRS]

How do you positioin forensic accounting in the fight against corruption?

Actually, forensic accountants play key roles like what I was just explaining. They enable us to check on the net worth of some individuals who are on salaries but with lifestyle that exceed their legal income. A forensic accountant that is investigating such a person can accost him with questions like: ‘We know you and your net worth, since your father didn’t leave a huge inheritance for you, how do you come about this wealth? I should note here that people can run other businesses beside where they earn their salaries provided they are legal and they pay their taxes regularly.

Generally, with forensic accounting, it is easier to fight corruption, I had said it many times and I am challenging the EFCC on this. Now there are certain principles to investigate money laundering all over the world. There is placement which we refer to in forensic as the placement of stolen loots in financial institutions. In Nigeria’s case, placement is as given because the loots are already within the banking system. This is so because a lot of corruption in Nigeria is committed in the public sector and the money involved is already in the banking system, it is not as if the beneficiaries of the corrupt act are just moving the funds into the banking system.

The other principles of investigating money laundering through forensic accounting techniques are Layering and integration.

The first like I said is Placement which involves the process of lodging the loots in the banks. Let’s use the money laundering effort of drug barons. After making dirty monies they’ll like to keep it in a bank because they cannot be going out with it in Ghana-must-go-bags. So, they pay the dirty money into a bank account, when they do this they have done placement. This is the best stage to pin-down money launderers; launderers will be looking for space to place the money in the financial sector of the economy.

That is what prompted the warning notice to depositors in banking halls with warnings that the bank is under bound to report lodgment of more thyan a million naira by an individual and more than five million naira by a corporate body to the National Financial and Intelligence Unit.

Placement is a big problem in the western world but is seen as a minor issue in Nigeria. Government monies stolen are already in the banking system, all corrupt officials need to do is to transfer it to their own account.

Layering is the systematic transfer of looted funds from one account to the other without economic purpose, but to make it difficult and to disconnect it from being traced to the same account, layer by layer. Integration is when the looters feel the time is safe to bring it back into the system, this is how the term money laundering emerged, literarily meaning – dirty money – being laundered and washed clean and brought back to the system.

In Nigeria there is a different system that is why you see the EFCC doing what they are doing, because the banks are supposed to report all transactions above certain thresholds to the NFIU, who now sends their recommendations to the EFCC for arrest and final prosecution. What I just want to sound out here is that there is too much power concentrated in the hand of EFCC as I object to them arresting suspects, investigating them, confiscating their assets, and eventually selling them off, that is, disposing by way of auctioning the properties.

The power to confiscate and auction should be concentrated in a separate body. How can an agency be empowered to seize assets and even sell? This is wrong, it is easy for them to corrupt themselves with the assets, our assemblymen, the lawmakers, should be sensible in letting an independent agency oversee the keeping and auctioning of confiscated assets, be it from police, immigration, customs and others; it has not happened anywhere and the legislature must not let this happen. With the review of the EFCC Act there must be room for checks and balances, but in the USA where I consulted for the banks, they don’t at times wait for the threshold before they report, because there is something they call Look-back. What this means is that the banks can just look back at the volume of a customer’s past deposits and transactions to compare with his transaction right now; the discrepancies may attract the bank’s attention.

We’ve been talking about EFCC, what about ICPC?

I was privileged to talk to one of their Ogas (heads) and I found out they are doing very well. It is only that they are quiet and they are not always on the pages of the newspapers celebrating their arrests, may be without the publicity you might think they are not doing well. In the US and other advanced countries, it is when they nail one big gun that you read about them in the newspapers.

Some of us just started hearing about forensic experts coming to revalidate the result of elections, what role did the forensic experts play at the various election tribunals, are they also forensic accountants?

Though, I didn’t follow that much, I was not around, the only one that caught my attention was a Nigerian professor of computer science, who could not operate a lap-top; if that is true, I felt sad for the future of this country when an expert witness on such an issue failed, it showed how backward we are in Nigeria. And seeing the enormous jobs on ground to be done, that is why people like us have set up the forensic and compliance training institute to train people on forensic, risk management, money laundering, and gradually moving them in into forensic experts, giving them only the skill they’ll need. Even our judges need to be well trained in forensic matters.

Let’s look at tax collection, it has become a major issue of controversy on what corporate bodies and individual should pay as tax.

I can speak on the Federal Inland Revenue Services as I’ve been opportune to train their staff and delivered papers at some of their conferences. I am a bit pleased with their model of operation. Before the current Chairman was appointed, you’ll remember that you hardly hear about FIRS arresting or going to seal up or confiscate defaulters’ property. The agenda she came with is what we are seeing; after the first training I did for them, some of them got exposed to their rights, we started hearing them breaking non-compliant tax evading companies’ gates, making arrest and even prosecuting. I never recall seeing them involved in the fight against evaders before the 2007, but with the new leadership of FIRS, training and retraining have changed the perception of the organization.

Let me also correct a suggestion credited to me by your magazine that I was ready to conduct forensic investigation on multinational oil companies on behalf of FIRS free of charge. No, I don’t think that would be proper, the expertise I will be deploying is of high value and it is only appropriate that the FIRS pay for such service

How relevant is forensic accounting to the private sector in Nigeria?

You know the relevance had made some private companies in Nigeria to now set up forensic department. To check excess fraud, I can tell you that one of the biggest telecommunication companies in Nigeria set up a forensic department to reduce frauds on recharge cards. In corporate environment because of fraud, every company will need the services of a forensic accountant. In the US, it is predicted that in the next ten years forensic accounting will be among the best ten paying jobs.

What is your take on excess bank charges, can it be curtailed?

Excess bank charges is a good starting point for forensic accountants in Nigeria, even in US, forensic accountants advertise for customer to come with their bank statement, the forensic accountant will be paid a certain commission on the recovered excess bank charges.

It is really an issue in Nigeria, I’ve experienced it with my bank here. I just found out that they just started charging me COT on wrongful lodgment, but when they corrected it they refused to remove the COT, they even charged me COT on capitalized interest on my account, I had to fight them to reverse the system, but I am not only fighting for myself but thousands who don’t know. I say it is a good way to start and have fun by identifying illegal bank charges, there is an opportunity in the area and being an experienced forensic expert, I’ve been around to do training for companies even their staffers on how to do some forensic accounting and compliance works, including excess bank charges. Real Accountants must key in to that, there is a job opportunity which excess bank charges can provide. We already have a website http://www.forensicandcompliance.com, but as a member of ICAN I still prefer working with them, we are also working with other corporate organizations in areas of fraud detection, forensic and compliance because of my vast knowledge having worked with a lot of organizations abroad for almost 30 years as a Certified Public Accountant [CPA] You know, there is always this humming in any gathering where I am introduced as a Fellow of ICAN, Certified Public Accountant [CPA] Certified Fraud Examiner, Certified Fraud Specialist, Certified Anti-Money Laundery Specialist, Certified Forensic Consultant, Certified Forensic Expert by the AICPA. I always tell them that that is what made me to be an expert witness, so when I am witnessing, the attorney will know that I know what I am saying because of my background.

Does our constitution have a place for an expert witness, and what is your view on this?

In the paper I presented at ICAN AGM I suggested it, that is why you’ve not been hearing about them in trials. Forensic accountant is an expert witness and he is defined as AICPA defines it – as anybody qualified by knowledge, experience, training, education, to provide a technical or scientific, specialized knowledge, opinion about the evidence or a fact, that will assist the trial of fact – the role is that of a practitioner who renders an expert testimony before a court of law, tribunal, by providing an impartial, objective and rational evidence that will help the case.

Testimony of an expert witness is supposed to be rational, and you cannot advocate for either side, you can tell the tribunal what your findings are and base on that you can tell the tribunal or judge your opinion about the case without taking side, at times you are to disprove the evidence, at time there is what we call reverse proof in fraud.

In America, again, we have what we call Rule 702 Testimonial of Expert and Rule 703 basis of opinion of the expert, which is the standard expected from an expert and the other one is the fact and the data and facts are based on your opinion or reference to it .The future is great, it will be more relevant if a law can be made for us to be more visible in law courts and I enjoin accountants to brace up for the challenges because the justice system will be more sophisticated like the jury examination I was once invited as forensic accountant in the US, I lectured the jury on what credit will do in revenue and what debit will do in revenue, at the end of the day the whole diversified members were impressed and they told my prosecutor how much they were impressed in me. Now that we are fighting more financial crimes because EFCC will soon find out they need more of forensic experts more than they need attorneys, we use chains of command and these enable us to get to the fact straight and direct., remember that you must be versed in using data-mining tools.

That is why I frown at our indigenous companies and even government parastatals engaging the services of too many foreign forensic experts to track fraud because we are training many Nigerians. When they even call some of this whites to come and train or audit, they will be alleging why a company gives bribe to Mopol [Mobile Police]; they will not know that it is this same police that gives them security, protects them throughout their stay with siren, but because they lack the local knowledge, we are superior to them.

As published in Issue 48 and submitted on http://www.fnc0486.wordpress.com

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.

ANOTHER BANKING CRISIS IMMINENT!: MOVE YOUR MONEY TO STRONG BANKS…EXPERT ADVISES

Mr. Ori Adeyemo, a Forensic Accountant and crusader for best practices in the banking industry, has warned that the Nigerian banking industry is facing an imminent collapse unless urgent and reasonable measures are taken by the Federal Government to curtail the slide into what he described as anarchy and chaos. 

“By the nature of my job, I am privy to the fact that the books of most Nigerian banks have been in very bad shape over a long time, not minding the spurious financial returns that they post to deceive gullible Nigerians from time to time.

“I am aware that anytime the year end of a bank is months away some banks stop all lending activities to embark on aggressive mobilization for deposits and engage vigorously in short-term inter-bank placements in order to jerk up their balance sheets.  I am aware that it is at this point in time that spurious bank charges unashamedly suddenly appear in the account of the customers if only for the purpose of declaring huge profits to the shareholders at the next Annual General Meeting (AGM).”

Questioning the survival strategy of the affected banks at declaring huge profit while yet not engaged in lending activities which is supposed to be the primary activity of a commercial bank, Adeyemo said: “I reliably gathered that some banks no longer lend money to their customers, this is a palpable sign of distress just as some do not lend beyond three months maturity period.  Now, with their stupendous overhead to defray on a monthly basis, how are they supposed to cope? Most banks have lost huge sums to the stock market while actively engaged in trading their shares. That was when most Nigerians wrongfully thought that the stock market was a ready treasure till.”  

In a review of how banking activities had impacted on the downturn in the capital market and had also thrown banking industry into worries of losses of huge sum, Adeyemo explained: “Over the past few months when the obvious slide in the stock market started, investors have lost not less than N3.5 trillion as a result of the depression in the market.  I understand that the loss came about from the maturity of the credit facilities which were taken by investors to buy FirstBank Plc public offer from other banks for which various collateral security such as share certificates, landed properties, etc; were deployed.  It must also be stated that FirstBank Plc returned over N600 billion of unallotted shares after holding the funds for over eight months at a paltry five per cent  per annum interest rate.  Meanwhile, the aggregate of charges which customers would have borrowed the returned funds from other banks cannot be less than 25 per cent  per annum.  The effect is that at the expiration of a credit facility, a demand is made on the investor to pay up or sell off the shares by the exposed bank thereby leading to a supply glut in the market as desperate investors simultaneously besiege the market looking for how to dispose various shares.  The net effect is a continuous loss of value on a daily basis.

“The investors who operate margin account with these banks are worse off since the exposed banks would have been mandated to dispose of the collaterised shares once the price drops to a threshold usually set at about 130 per cent of purchase price not minding the initial equity contribution made by the customer.

“It is a hidden truth that the hitherto astronomical rise in the price of the shares in the Nigeria Stock Exchange is as a result of price manipulations by banks.  These banks I understand give money to stockbrokers who they mandate to transact in the shares of the sponsoring banks thereby jerking up the price sequel to the bank entering into the market to source for fresh funds.  For example, a bank may give say N1 billion each to five stockbrokers to be trading in its shares.  These stockbrokers are given a target to meet within a specified period of time, say six months prior to a public offer.  The brokers then set out to buy and trade in the bank’s shares in the market in order to create an artificial scarcity thereof leading to a continuous upscale in market price.  After say six months, when the price would have risen to the desired height, the bank would then announce its entry into the market with fanfare whilst discounting the new offer price after the shares would have been put on technical suspension.  There and then, you will see gullible Nigerians rushing over themselves to buy these over-priced shares with huge funds secured from the banks.

“Now, with the loss of value of shares at the Nigerian Stock Exchange, banks have lost a lot of money but they are keeping quiet about it.  Also, the money which they lent to customers for the purpose of margin account has been wiped away having drastically dropped to a dismal level of say 20 per cent of initial purchase price.  In other words, these banks cannot even sell the collaterised shares as doing so will erode whatever security that they can rely upon since the share certificates have become worthless papers.  The banks too cannot bully the margin account customers to defray their debt whilst charging interest at an illegal default rate.  If the total loss of value in the stock exchange is N3.5 trillion, then the contribution of the banks alone cannot be less than N2 trillion being the most active players

“Is it not curious that at this point in time no bank can tell their percentage of risk exposure? This helps the banking public to know which banks are in good standing and which ones are not.”

Last week, after a period of assuring Nigerians that all was well with their banks, chief executives of banks decided to formally request the Federal Government to intervene in the nation’s financial sector to forestal the effect of the ongoing global financial crisis on the system.

Meeting under the aegis of the Committee of Banks’ Chief Executives, the bankers agreed to request the Federal Government to intervene in the nation’s financial market through a package of measures similar to those introduced in developed countries and that the Central Bank (CBN) should continue to support the interbank money market.

In response to the request for bail-out from government by the banks chief executives, Adeyemo observed: “I am not against bail-out of the banks that we have in Nigeria. My worries border on the unethical conducts of the banks that rather than focus on dispensing professional banking service would rather be engaged in all sorts of things like printing, security guards, stock-broking, estate developing, recharge card sale, telephone handset vending, etc; while neglecting its core functions of banking.  The bail-out will certainly salvage the economy while at the same time reinforce citizens’ confidence.  However, I am against allowing some of the present day fat-cat cocky executives from benefiting from their fraud and corrupt malpractices after ruining their so-called vast empires.

“I can tell you that things have become so bad that some ranking officials of some banks have started moving their own deposits away from their own  banks to some of the first generation banks. On the whole I see that just about six banks of the 24 operating banks would cross the healthy mark if a thorough examination of their books is conducted today. So, I need to warn Nigerian depositors to start conducting their own due diligence on their  banks.

“Depositors should start asking questions, they have to interact with other customers to know how the bank is attending to them. Do they have issues with facilities, are their issues with immediate payment of withdrawals and others.”

Adeyemo said in the light of saving depositors’ fund, he subscribes to a Federal Government initiated bail-out of the banks, but has his own suggestion on how it should be applied: “I subscribe to the Federal Government buying preference shares of maximum 30 per cent into the banks on a temporary basis of say a five-year period. The FG must not, however, attain majority shareholding in the banks.  This way, the board of the affected bank would be restructured with the Federal Government’s representatives on the board on a minority scale.  The Government may then sell off their investment as situation improves.”

Adeyemo noted with regrets that if the National Assembly had heeded his warnings when he petitioned it to probe banks, perhaps the present time reality would have been avoided: “It is a sorry case that the chicken is coming home to roost so shortly.  I candidly recall that it was in November 2007 that I forwarded two petitions to both the Senate and House of Representatives warning that with the present bad and precarious financial state of health of these banks, there was a need to institute a probe into their activities, otherwise the Federal Government may be required to bail them out in due course.  This petition led to the probe of the banking industry in May/June 2008 until the probe process was compromised.  I believe that if the probe had been conscientiously and painstakingly executed, maybe we would not find ourselves in this mess.”

EXPERT DECRIES BANK CHARGES ON RETURNED CHEQUES AS ILLEGAL

Mr. Ori Adeyemo, a forensic accountant and crusader for streamlined bank charges, has decried bank charges on returned cheques and described the fee deducted from accounts in consequence of returned cheques as illegal.

“It is trite that by virtue of Section 10, subsection of the defunct Central Bank of Nigeria (CBN) Bankers’ Tariff, a bank is allowed to charge N1,000 for a returned corporate cheque whilst debiting N300 for a returned individual cheque (to be borne by the drawer),” Adeyemo said.

“It is also true that by the provision of Section 11, subsection 6 of the subsisting CBN Guide To Bank Charges effective January 01, 2004, a returned cheque attracts 0.5 per cent of amount, maximum N5,000 (to be borne by the drawer).

“In both cases,” Adeyemo argued, “the CBN guidelines stipulate that only the drawer of a cheque should be penalised for a returned cheque and not the supposed beneficiary (who never took value for consideration anyway.)  Unfortunately, we all know that this situation is not true in Nigeria as banks whimsically charge both the drawer and drawee for a returned cheque, thereby amounting to double-jeopardy especially for the drawee who never took any benefit.”

 Affirming the contradiction in the statutes relating to fees sanctions as a result of returned chques, Adeyemo said: “I must emphasise that the CBN is wrong to have inserted returned cheque fee into the defunct Bankers’ Tariff as well as the subsisting CBN Guide To Bank Charges being in crass breach of the Dishonoured Cheque (Offences) Act of May 20, 1977, which makes it a nullity for the following reasons:

a.     That a returned cheque is a criminal offence and not a civil offence.

b.    That only the injured party (that is, the supposed beneficiary) has a right to complain about a returned cheque to the Nigeria Police or better still, the Economic & Financial Crimes Commission (EFCC) and definitely not a bank.

c.     Returned Cheque Fee is a penalty which only a court of competent jurisdiction can impose on a citizen of the country. 

d.    No party to a contract can impose any form of penalty/fine on other parties to a contract as doing so is repugnant to natural justice.  

e.     That a bank has no special or pecuniary interest in a returned cheque being just a clearing vehicle for a deposited cheque.

f.     That Section 9 of the subsisting CBN Guide to Bank Charges, clearing of cheque or draft in Nigeria is free.  Moreover, no bank can charge any fee for collecting any deposit in Nigeria.

g.    That according to the Dishonoured Cheque (Offences) Act of May 20, 1977, upon conviction; an individual is liable to two-year jail term without an option of fine while for a body corporate a penalty/fine of not less than N5,000.

h.     Only the Attorney-General of a state (without excluding the Attorney-General of the Federation) has a right of criminal prosecution of a defaulter and definitely not a bank.

i.      That Section 25 of the Interpretation Act (which provides that a person shall not be punished twice when guilty of an offence under more than one enactment) shall apply in respect of offences under this act.

j.      Since this Section 11.6 of the subsisting CBN Guide to Bank Charges as it relates to a bank charging its customer Returned Cheque Fee is in breach of the Dishonoured Cheques (Offences) Act being a legislation of the National Assembly, the Dishonoured Cheques (Offences) Act will prevail.

“In simple language, I am saying that since a bank is not a party to a returned cheque, then such bank cannot lay claim to it.  We should cast our mind to the law of privities of contract wherein it is clearly stated that only parties to a contract can sue for the enforcement of a contract and not even those in whose interest the contract was made,” Adeyemo insisted.

“You will agree with me that the initial beneficiary of a clearing cheque is the bank that went to clear the cheque that should have taken custody value for the drawee but that alone does not give room for the bank to lay any claim on the money since the bank is not the real beneficiary of the fund but just a mere custodian.

“Therefore, I cannot but submit that the present CBN Guide to Bank Charges, is fraught with illegalities to the crass detriment of bank customers thereby allowing banks to smile away at all times, leaving the customers short-changed.  In fact, this was one of the issues I had wanted to address in May 2008 at the House of Representatives’ probe of the banking industry until it was fraudulently compromised by the banking cabal working in concert with the then leadership of the House Committee on Banking & Currency.”

Adeyemo argued that on account of the subsisting convention of fee sanctioning for returned cheques, he had been demanding a review of the CBN Guide to Bank Charges: “I cannot but request for a thorough review of the CBN Guide to Bank Charges wherein the opinion of every stakeholder in the industry will be accommodated as against the present one which was drafted by Mr. Jim Ovia, the Zenith Bank Plc Managing Director and so wholesomely adopted by the CBN without any input from the bank customers, thereby skewing the graph in favour of the banking industry.

“In simple words, I submit that it is totally illegal for any Nigerian bank to penalize a customer for a returned cheque, as doing so will translate to the fact that the banks have become laws unto themselves, having illegitimately taken over the job of the judiciary,” Adeyemo submitted.