AP Share Price Manipulation: NSE, SEC, House of Reps side Dangote

“He should be in prison,” Otedola said.

Not a few investors in the shares of Africa Petroleum Plc and other mainstream investors were scandalised with the sanctions considered appropriate by the Council of the Nigerian Stock Exchange in chastising the individuals and organisations that were involved in Nigeria’s most publicly denounced case of share price manipulations.

Continues here.

FRUSTRATION SETS IN FOR COMMANDCLEM INVESTMENT SCHEME’s INVESTORS

For expectant investors that had invested sums ranging between N20,000 and N1million before June 19 2008 in the Commandclem Social Security Scheme, it seems the promise of the wind fall from their investment in the scheme is taking too long to materialize. Those that spoke with FORTUNE&CLASS WEEKLY said the wait for the conclusion of the court process that will enable the operators of the scheme start paying them is becoming frustrating.

The story behind the wealth making potentials of the Commandclem scheme is quite interesting. Protagonists of the scheme market it to intending investors as the ultimate path to escaping poverty through registering to become a patentee of a special paint product invented by a Nigerian way back in the 1980s or 1990s, in truth, non of the marketers can be specific about the date of the invention. By registering in the scheme, the investor is said to become a co-patentee to the supposed inventor of the product, a man named King Clement Uwemediimo.

Registered patentees, according to the scheme’s marketers, would be positioned to earn a life time monthly allowance of N30,000. Even after the death of the patentee, his or her offspring would be entitled to the monthly payment. There are other categories in the scheme differentiated by registration fee. The highest possible class in the patentee category is the Knight. A patentee qualifies to this category on paying a registration fee of N4,000,000. The promised benefits to a patentee in this category can’t all be listed, but it include lifetime monthly earning of N300,000, constant contract jobs and holidays in exotic places around the world.

The promises are quite impressive. But the downside is that benefitting from the impressive promises of the scheme is tied to the success of a court case. According to the marketers, King Uwemediimo had sued Mobil Nigeria Unlimited to court for patent right infringement. Is said that Uwemediimo had sold the right of the product, a special paint with which crude oil tanks in the ocean are painted so as to preserve the tanks from corrosion by the salty ocean water. The demand of Uwemediimo, the marketers said is a sum of $39.3billion. However, perhaps to make the offer more juicer, some marketers quote some more humongous figures like $67 billion or $8.7 trillion depending on the marketer selling pitch.

Suddenly, an industry seemed to spring up around the Commandclem scheme at about November 2007 when it was made public that the an Akwa Ibom High Court was going to sit in the Nigerian Consulate in New York to hear witnesses from Mobil on the patent right infringement.

A group of young men must have smelt the opportunity in the Commandclem court case. An organized campaign was initiated to market conclusion of the scheme as an investment.

The first sales line of the marketer is that an interested investor must be registered with the scheme before the court’s final ruling on the matter on June 19 2008. The second sales line is that Commandclem is favoured to win the case no matter the odd. The third pitch is that the court will order the all oil producing companies in Nigeria to calculate two dollars on each barrel of crude oil produced in Nigeria since the invention was allegedly sold to Mobil, and that, the market added up would amount to trillions of dollars. It is from this judgment sanction that participants would be paid their life entitlements.

The marketing pitch, apparently worked. Advertisement jingles were placed on radio programmes, while alleged representatives of the scheme even went around television stations for awareness campaign. Newspapers advertisement spaces were also bought to announce the scheme that would turn Nigerian poors into overnight rich people that would share in the humongous back log of patent fee that would be paid to Uwemediimo. Even on the internet, blogs and sites were dedicated to invite investors to register before the final judgment of June 19. Offices were opened nationwide for people to register.

Not a few Nigerians were taken in by the pitch. FORTUNE&CLASS OBSERVED a high traffic of people in offices of the scheme in Lagos State. In fact, one Okaiwele Austin requested on his blog site that interested investors should pay N5000 into his account before he would post contact details of the scheme operators to them. The officials of the scheme warned that no registration would be allowed after the June 19 2008 final judgment, this further fueled the high traffic.

But now, the cold reality of some of the unreal expectations of the scheme may be dawning on the investors. In the first place, the decision of the court can not be contemplated by any party to the suit. While it has been confirmed that there is truly, indeed, a court matter pending on the subject of a patent, the ruling of the court case is that of no other person than the judge. And the ruling can favour either Commandclem or Mobil. Besides, even if it is assumed that Commandclem wins the case, the cost sanction against Mobil may not be as huge as expected. In fact, if the court sanctioned Mobil in the cost expected by the Commandclem marketers, it would be the first of such in the world.

Anyway, the situation report at the moment is that expectant investors in the scheme back in 2007 are becoming frustrated over waiting for so long and to make it even bad, nobody can assure them of how much longer they are going to wait. The court that was expected to sit and make its ruling on the matter on June 19 did not sit because the judge was absent. The case was said to be adjourned to July 22. Again, on the adjourned date nothing was heard of the suit. Now, in November, not even the marketers of the scheme can provide updates on the court process and when it would be disposed of.

For a scheme that is tied to the judgment of the court, investors have started grumbling aloud that they were cheated into believing that the case was near conclusion before they registered but now that some of them have their money tied down to the scheme for more than a year, they are saying it seems they were hoodwinked.

PS: It has been brought to our notice that an aggressive advertisement of  Commandclem Social Security Scheme is ongoing in popular media houses in Ogun State, Nigeria, therefore, we believe it is our duty to advise the investing public to look before they leap. Thank you.

CHURCHES, MOSQUES, NGOs TO START PAYING TAXES FROM NEXT YEAR

The tax exemption status of religion based organizations and non government organisations are to be reviewed to align with international standards. This, according to a source in the Presidency, is to appropriately integrate otherwise tax exempt organizations into the taxable entities mainstream so as to drive the new impetus to fund the growth of the national economy from non oil revenue.

In line with this new thinking, the source informed that the Presidency has given its backing to the Nigeria Accounting Standard Board to evolve accounting standards that will serve as framework for tax exempt organizations to file their accounts and to be able to delineate which of their income is taxable from next year.

“The government does not intend to tax the income of churches, mosques or non-governmental organization or any other organization that naturally enjoys tax exemption status. The law is clear on the exemption status of such organizations. What the government has decided to do is to streamline income made in the furtherance of charitable activities of the tax exempt organizations and remove it from income made from what is known universally as unrelated business income,” the source said   

“So many religious organizations have, in fact, transformed into profit earning business enterprises and it is just proper that they are properly assessed for the purpose of taxation under the unrelated business income tax (UBIT),” the source argued. “These organizations are involved in various types of commercial activities, such as operating publishing houses, hotels, factories, radio and TV stations, parking lots, newspapers, bakeries, and restaurants. The Tax Reform will make income derived by churches from unrelated trade or business subject to tax.”

Another source at the Nigeria Accounting Standard Board argued the justification for taxing the unrelated business income of tax exempt organisations

The problem at which the tax on unrelated business income is directed is primarily that of unfair competition. The tax-free status of religion based organizations and NGOs enables them to use their profits tax-free to expand operations, while their competitors can expand only with the profits remaining after taxes. Also, a number of examples have arisen where these organizations have, in effect, used their tax exemptions to buy an ordinary business. That is, they have acquired the business with little or no investment on their own part and paid for it in instalments out of subsequent earnings – a procedure which usually could not be followed if the business were taxable. The idea is to impose the same tax on income derived from an unrelated trade or business as is borne by their competitors. It is, however, not intended that the tax imposed on unrelated business income will have any effect on the tax-exempt status of any organization,” the source explained.

The United States of America’s Internal Revenue Service Code, the template, which the NASB, is likely to adapt in its accounting standard to effect taxation of unrelated business income of affected organizations from next year, explains that churches and religious organizations, like other tax-exempt organizations, may engage in income-producing activities unrelated to their tax-exempt purposes, as long as the unrelated activities are not a substantial part of the organization’s activities. However, the net income from such activities will be subject to the UBIT if the following three conditions are met:

•                      the activity constitutes a trade or business,

•                      the trade or business is regularly carried on, and

•                      the trade or business is not substantially related to the organization’s exempt purpose. (The fact that the organization uses the income to further its charitable or religious purposes does not make the activity substantially related to its exempt purposes.)

 

Exceptions to Unrelated Business Income Tax

Even if an activity meets the above three criteria, the income may not be subject to tax if it meets one of the following exceptions: (a) substantially all of the work in operating the trade or business is performed by volunteers; (b) the activity is conducted by the organization primarily for the convenience of its members; or (c) the trade or business involves the selling of merchandise substantially all of which was donated.

In general, rents from real property, royalties, capital gains, and interest and dividends are not subject to the unrelated business income tax unless financed with borrowed money.

 

The code also provides examples of Unrelated Trade or Business Activities:  Unrelated trade or business activities vary depending on types of activities, as shown below.

Advertising

Many tax-exempt organizations sell advertising in their publications or other forms of public communication. Generally, income from the sale of advertising is unrelated trade or business income. This may include the sale of advertising space in weekly bulletins, magazines or journals, or on church or religious organization Web sites.

 

Sale of merchandise and publications

The sale of merchandise and publications (including the actual publication of materials) can be considered the conduct of an unrelated trade or business if the items involved do not have a substantial relationship to the exempt purposes of the organization.

 

 Rental income

Generally, income derived from the rental of real property and incidental personal property is excluded from unrelated business income. However, there are certain situations in which rental income may be unrelated business taxable income:

•                      if a church rents out property on which there is debt outstanding (for example, a mortgage note), the rental income may constitute unrelated debt-financed income subject to UBIT. (However, if a church or convention or association of churches acquires debt-financed land for use in its exempt purposes within 15 years of the time of acquisition, then income from the rental of the land may not constitute unrelated business income.),

•                      if personal services are rendered in connection with the rental, then the income may be unrelated business taxable income, or

•                      if a church charges for the use of the parking lot, the income may be unrelated business taxable income.

 

Parking lots

If a church owns a parking lot that is used by church members and visitors while attending church services, any parking fee paid to the church would not be subject to UBIT. However, if a church operates a parking lot that is used by members of the general public, parking fees would be taxable, as this activity would not be substantially related to the church’s exempt purpose, and parking fees are not treated as rent from real property. If the church enters into a lease with a third party who operates the church’s parking lot and pays rent to the church, such payments would not be subject to tax, as they would constitute rent from real property.

Whether an income-producing activity is an unrelated trade or business activity depends on all the facts and circumstances.