BankPHB EMBROILED IN N17BILLION FRAUD SCANDAL …EFCC ARRESTS THREE DIRECTORS, IAA VICE-CHAIR

MD, BankPHB

In the past three weeks, a whirlwind had swept through the gilded offices of BankPHB. At the last count, three executive directors had been sacked in tow with an unspecified number of other management staff. At the heart of the sweeping sack in the bank is perhaps, one of Nigeria’s most sophisticated white collar fraud, involving a whopping 17 billion naira, and said to have been engineered by Mr. Funmi Ademosun, the Vice-Chairman of Investment and Allied Assurance Company (IAA).

A source at the bank confided that various sums of money totaling 17 billion naira had been parcelled through the accounts of Home Trust Savings and Loans Limited, another company where Ademosun is the chief executive.

“The sums were given out in the form of margin account targeted at shares purchase, particularly for the mopping up of the shares of IAA in the stock market,” The BankPHB insider said. “But it turned out that rather than focus on the IAA shares, Ademosun decided to diversify his investment portfolio by playing on other stocks.”

While observing that there was nothing patently wrong in the bank lending to customer for margin trading, the source observed that 17 billion naira was given out to Ademosun without appropriate management decision.

“The management of the bank as a body was not in the know of the whole thing; those involved exploited their high offices to approve facilities within the threshold of their approving authorities as executive directors for Ademosun’s scheme.”

Stock market operators that are now aware of the sums siphoned from the vault of the bank to Ademosun to target the shares of IAA reasoned that Ademosun, by virtue of his official standing in IAA was engaged in criminal manipulation of the share price of the IAA stock with the money availed him by BankPHB.

“Of course, we all suspected that something was not correct with the IAA shares. This is an insurance company with no branch except its head office branch with various analyses pointing to the fact that the whole business and administrative structure of the company were underpinned by financial engineering. Right from its private placement to its listing by introduction its 28billion units of shares on the floor of the exchange it was clear that some undercurrents were pushing the direction of the shares. It was not until we got to hear of the 17 billion naira funding of Ademosun by BankPHB that I personally understand the whole reason for the movement of the shares of IAA. The money was used to simply mop up the shares at a particular point in time and, thereafter, dump the mopped shares when the price is right,” a stock broker explained.

Troubles, however, burst on to the scene when the market decidedly headed downward, meaning that the shares of IAA would not respond to any form of manipulative manoeuvres even where billions of naira is involved. The BankPHB source said this limited the capacity of Ademosun to pay back and the scandal broke out. In clearing the mess at the preliminary stage, the management of the bank reported the case to the Securities and Exchange Commission who in turn invited the Economic and financial Crimes Commission into the matter.

“As of this week, Messrs. Solomon Omoregieva, Ahmed Kuru and Emma Abugu, all executive directors, had been quizzed by the EFCC and they had been sacked in company with some other members of the middle cadre management who were said to be involved in the scandal. It is believed that these officials compromised and fell short of their responsibility by collectively exposing the bank to a facility of that magnitude. The general belief in the bank is that these officials must have soiled their hands in the transaction,” the source added.

Investors Accuse Stanbic-IBTC, Chapel Hill Of Fraud In Starcom Private Placement

A row is in the brew in the community of investors, especially, among those that bought into the private placement of Starcomms Plc last year. At the centre of the uproar are two issuing houses to the shares of Starcomms Plc, Chapel Hill Denham and Stanbic-IBTC.

Mr. Adebayo, one of the investors that bought the private placement of Starcomms Plc observed in a fit of frustration that it is very evident that “Starcomms Plc Private Placement” has become the epitome of “fraud.”

“The Placement of 4.95 billion shares, which opened and closed on 3rd June 2008 at a price of N13:00 appeared so attractive to investors at that time as it was over-subscribed,” Adebayo recalled.

Apparently angered at the down-turn of the investment, Adebayo explained that: “The projection in the placement memorandum says that the company will declare a loss of N197 million at the end of 2008 financial year end. Unfortunately, the company declared a loss after tax of N1.014 billion in the second quarter and N2.149 billion in the just released third quarter result.”

Starcomms Plc was listed at N13.56 on Monday, 14th July, 2008, between then and now, the price of the share had slid to a low of N3.86.

“In fact, the price dropped consistently to N7.46 less than two months after listing,” Adebayo opined. “The question to ask now is during that period, who was selling since most investors that bought shares during the private placement still had certificates that were unverified. Could it have been the original owners dumping on new investors? Can someone please explain why the variance between the forecast and the actual result declared is so staggering? Was money being laundered? What happened to the proceeds of the placement? How much expansion has the company embarked upon since the placement?” Adebayo queried.

Another investor frontally accused the two issuing houses to Starcomms placement, StanbicIBTC and Chapel Hill Denham, a capital market operator that was recently selected as one of the market makers for the Nigerian Stock Exchange. Concerned investors argued that the two issuing houses lent their brand names to be exploited by Starcomms to defraud them.

“The placement was actually successful because Starcomms Plc leveraged on the good name and credibility of Stanbic IBTC Bank Plc and Chapel Hill Advisory Partners. But looking at the whole situation closely, it seems there is more to what we can see. It’s so obvious that Starcomms’ goal from the word go was to defraud the public,” an investor submitted.

“Another question begging for an answer is the role of the two issuing houses in this? Or did Lababidi/Starcomms Plc (Chief Maan Labadidi is the Chairman of the board of Starcomms Plc) act alone?” Adebayo asked. While trying to establish a connection and possible connivance to defraud investors, Adebayo questioned the appointment of Mr. Wale Edun, Chairman of the board of Chapel Hill as a non-Executive Director of Starcommc Plc.

“I want to question the connection between the sudden appointment of the Chairman of Chapel Hill Advisory (Mr. Wale Edun) as a non-Executive Director of Starcomms Plc? Have the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) been asking any questions? How have the professional parties to the placement been able to comply with post-listing compliance requirements? Why are the regulatory bodies keeping mute about this great injustice to investors?” Adebayo queried.

Giving further revelations of the intentions of the Chairman of Starcomms to approach the capital market to raise funds for another company that he has interest in, Adebayo said:

“We hear that the same Lababidi now wants to bring another company to the market (Supreme Flourmill Ltd); this only shows that this individual thinks we are all fools in Nigeria. Please beware of this offer,” Adebayo warned other investors.

Commenting on what investment in Starcomms had turned to, Mr. Ajisafe, another investor opined:

“This is a serious matter and I have decided to sensitise everyone on my list thereto. This is, no doubt, a huge fraud and I am of the opinion that the SEC and NSE should stand indicted in the whole affair! Also, the two issuing houses, I believe, have an explanation to make to unsuspecting investors because investors relied on the strength of their analyses to buy the Starcomms offer. This is shameful and I submit that the matter be investigated and all those found to be culpable be treated in line with the IST sanctions. They are no better than Madoff! Moreover, investors should be wary of issues by the concerned issuing houses (Chapel Hill and StanbicIBTC),” Ajisafe submitted.

Another investor said of the suspicion of collaboration to rip investors on the Starcomms’ private placement.

“It is amazing what our corporate gurus are doing to stay on top of the ladder, gone were the days when our industrialists gave to charity, now our so called industrialists have board meetings and make strategies on how to use their companies to defraud the masses. We are all talking about Madoff but oblivious to the presence of individuals perpetrating worse atrocities right here in Nigeria. We all know that hedge funds are not regulated, and that probably explains why they are able to get away with all they do. How do we justify or indeed explain the flagrant act of fraud against the public in a regulated market? Starcomms came into the market to raise capital, many unsuspecting investors rushed at it, expecting high returns on their investments; it is a pity that it is now a different story entirely. It is obvious that being a politician is not the only way to “rush” up the ladder of wealth; the capital market is an untapped goldmine to fraudulently enrich people who are influential in the business and financial sectors, thanks to our Indian “friend.”

In a statement made available to Fortune&Class Weekly by officials of Chapel Hill Denham, one of the issuing houses to the Starcomms private placement, the issuing house noted that “several investors never read the PPM or all the documentation made available at the time of the placement and many bought through brokers and friends, who were among those invited and never actually saw any documentation and never understood that it was sold as a growth stock, which would make a loss in 2008 (albeit, a smaller loss than we expect to see for 2008), a profit in 2009 and pay dividend in 2010.”

Chapel Hill Denham further asserted in the statement that, “What essentially has happened is that a completely unforeseen heavy subsidy led competition by Visafone and Telkom Multilinks, has meant Starcomms spending about N2 billion more on subsidies than was projected. Essentially, a line with a handset costs about $45 each and it was being sold at N10 each. Starcomms board and management felt that it did not yet have the scale from a subscriber perspective at 1.2million gross subscribers, to stay out of this battle for subscribers.”

The statement further explained that Starcomms had over the years to over 2.5 million gross subscribers, higher than the business plan but at a hefty cost.

“This subscriber’s base will be beneficial this year and beyond, as you can imagine that over two million subscribers spending about $15 per month should generate revenue of about $350 million in 2009. This is not a business in distress by any circumstances,” the Chapel Hill Denham statement observed.

The management of Chapel Hill Denham also explained that contrary to the rumour being spread, the founders, the Lababidis actually increased their holding during the private placement, spending about $17million directly and indirectly, through their other businesses.

“The only shareholders who sold during the placement were the two private equity firms, Actis and ECP, for whom the funds they invested from had come to the end of their life and had to return the money to their investors and partners. All of these were disclosed to investors in the private placement,” the statement noted.

No official of Stanbic-IBTC was available for comment.

Customer Protests e-Banking Fraud at GTBank

 When Mr. Friday Musa, made the extra effort to track sums of money allegedly illegally transferred from his account with GTBank to two accounts with the same bank, he thought he had resolved his banking woes that had made him about N1million poorer. The resolution of his tiff with the bank over the illegally transferred fund was no near resolution even as he presented argument that since there were evidence that the money fraudulently transferred from his account can be tracked to accounts within the bank should have made it easier for the bank to investigate the fraud and refund him his money accordingly.

Musa’s one million naira travail commenced this past Sunday, 6 July, 2008 when he noticed that his email password was not functional. According to Musa, he had rushed to the Opebi-Ikeja branch of the bank where he usually conducted his banking services, on Monday 7 July, 2008, to inform the appropriate official of his fears and suspicion over the non functionality of his email password.

“I was directed to an officer in the bank branch who took my complaint after which he gave me an update form for a new email password.” Musa said. “I had sincerely thought that the email password malfunction was just a mere glitch so I thought nothing of it after I had filled the update and was rest assured the password would have changed.”

“But three days there after, I was at the bank to make some withdrawals from my account only to be told I could not make withdrawal of the sum I required. I was told that four transactions involving withdrawals had been illegally conducted on my account via the internet banking platform of the bank, even as I was informed that the email password change that I had earlier requested had not been effected.”

The simple explanation of the banking troubles of Musa is that he had fallen victim of e-banking. e-banking is supposed to be a convenient banking platform that enables a bank customer to transfer funds at anytime of the day from his account to another accounts or other accounts.

Musa said he did not make such transaction and was even more bewildered when no SMS Alert of the transactions was sent to his mobile phone as it is the practice with GTBank.

Musa’s account was systematically raided between Friday 4 July, 2008 and Sunday 6 July 2008. Naturally, Musa took issue with the bank through a letter dated 10 July 2007. In the letter, he insisted that he did not conduct any form of e-banking transaction during this period and pleaded with the bank to HELP him out of the trouble.

GTBank, through a letter dated 14 July, 2008 gave a terse response to Musa’s pleas. Enyinna Mbagwu and Lanre Kasim, signatories to the letter informed Musa that after conducting an investigation occasioned by Musa’s letter, they were able to ascertain that the sum of N250,000 was debited to the account on 4 July, while on 7 July, three debits were made on the account: N249,000, N250,000, and another N250,000 totaling N999,000. They explained that online transactions done on weekends and other non-working days usually have a value date of the next working day. This addendum might have been highlighted in the letter to explain the fact that the notification of the need to change password made by Musa on the made he reported the malfunction of his email password to the Opebi branch of the bank was belated.

The authors of the bank’s letter to Musa further submitted that the internet transfers were made using his profile.

“To this end, we believe your details must have been compromised…In view of the above, we regret to inform you that the bank cannot accede to your request of a refund of N999,000…Please accept our sympathy on your loss.” The letter concluded just before sarcastically thanking Musa for his continuous patronage of the bank.

But then, Musa won’t be assuaged. “See, I suspected something suspicious was going on because I had always refused the e-banking platform just as I detested using even the ATM, I like to be conservative about my banking transactions because of my fears of fraudulent issue like this.” Musa opined

“Now knowing that I may not be able to make any headway with the bank this way, I demanded that they should track the transfers. At least, that should be simple enough, this is different from a cash withdrawal where the fraudulent person would have taken the money and walked out of the bank into thin air. In this case, the bank can easily track which account the money was transferred to and identify the owner(s) of the account. But GTbank refused to budge in this regard. To effect this, I asked my lawyer to write them resulting in the lawyer’s dispatch to the bank on 22 July, 2008 only for them to reply by a letter of 7 August, 2008 that merely asserted their earlier position on the matter.

“My worry now is that I am sure the money was transferred from my account to other accounts domiciled in GTBank and all I expect them to do is to investigate these accounts and come up with conclusion. If they are reluctant to do these they should simply refund my money so I can concentrate on my business. The distraction is affecting me negatively.” Musa said.

When Fortune and Class Weekly sought to check the allegation with the corporate affairs department of the bank, the front office officials insisted that was no need to see anybody at the corporate affairs department because the matter was a private issue between the bank and its customer, and it is our believe that Mr. Tayo Aderinokun, GTBank’s MD, will not be all pleased about this.