Of Wema Bank, due process and fair play

By Lanre Oyetade Group Business Editor - 16.03.2008

Latest developments in the Wema Bank im-passe point to fact that the parties involved in the financial institution’s palava need to ensure that they follow due process and fair play.

A brief recap of developments that have precipitated the imbroglio will definitely not be out of place.

Allegations of financial mismanagement and wilful disregard of relevant banking laws were levelled against the erstwhile Group Managing Director, Adebisi Omoyeni, and as a result, examiners from the Nigeria Deposit Insurance Corporation (NDIC) were sent to inspect the books and financial position of the bank.

The examiners, however, said Omoyeni was not allowing them unfettered access to the books and records of the bank in a manner that was tantamount to obstructing their duty, so Omoyeni was directed by the Central Bank to proceed on leave pending, the conclusion of the special examination.

Since this event occurred, a lot of allegations and counter-allegations have flown around from both ‘camps’ .

Soon after this, Omoyeni wrote to President Musa Yar’Adua on January 21, 2008– the second sitting president, he would be writing to on the same issue – chronicling what he believed was the evidence of three key regulators’ collusion in the plot to kill Wema Bank.

Citing what he regarded as copious evidence, Omoyeni called the attention of the president to the activities of Tunde Lemo, Deputy Governor at the Central Bank and Chairman of the Conference of Bank Examiners; Ganiyu Ogunleye, Managing Director at NDIC and Vice-Chairman of the Conference of Bank Examiners and O.M. Sulaimon, Director, Field Examinations Department, NDIC, in “colluding in the plot to kill Wema Bank”.

Parts of the collusion plan, as alleged by Omoyeni, are the “attempt by NDIC to reduce the bank’s shareholders funds below the required N25 billion by using unreasonably high loan loss provision figures and thereby have its licence withdrawn by the Central Bank.”

The ‘hostile’ stance of NDIC on Wema Bank. in the Omoyeni years, according to the latter, was exclusively applied to Wema and no other bank.

The letter Omoyeni wrote to the president equally carried details of other activities by some of the regulators in the industry which he believed are prejudiced and inimical to the interest of Wema Bank.

He equally protested the composition of the team of examiners from NDIC, insisting that they are indeed “part of the league with Tunde Lemo to kill and buy over the bank at a ridiculously cheap price,” and requested that ‘neutral’ examiners be sent from NDIC.

In response to Omoyeni’s petition to the President, the Presidency, in a letter written on February 28, 2008 and signed by the Secretary to the Government of the Federation (SGF), Ambassador Baba Gana Kingibe, and addressed to Professor Chukwuma Soludo, Governor of the Central Bank, directed that an independent panel of investigators be set up to be headed by a retired banker, with membership drawn from the Economic and Financial Crimes Commission (EFCC), office of the Accountant-General, the Securities and Exchange Commission (SEC), the Central Bank, NDIC and a reputable audit accounting firm practising in Nigeria.

Of particular note also is the federal government’s decision and directive to the apex bank that the compulsory leave slammed on Omoyeni should be lifted in light of the previous court injunction asking for the maintenance of the status quo in the management of the bank, and this was reinforced by the directive of the Attorney-General of the Federation.

The government also conveyed its concern over Omoyeni’s’ allegations against Tunde Lemo, which “are now in the public domain and which until otherwise proved, raise issues about the appropriateness of the Deputy Governor of the CBN in discharging his role as a fair manager of banking surveillance.”

It therefore requested that Lemo be asked to respond to the allegations levelled against him “to enable the panel of independent investigators consider it alongside allegations against Omoyeni, including from the perspective of a possible insider’s abuse,” and especially in light of the NDIC Routine Examination Report that “all officers responsible for other malfeasance have no business being in the financial system.”

Accordingly, the SGF requested that, among others, Omoyeni; Tunde Lemo; Chief S.I. Adegbite, a former CEO of the bank; Ogunleye; Sulaimon; Henry MacPepple, the owner of two companies heavily indebted to Wema Bank and Otunba Subomi Balogun, retired chairman of First City Monument Bank Plc, alleged by Omoyeni to be in league with Lemo over a plan to take over Wema Bank, be all invited by the independent panel of investigators.

The letter was copied to the Chief of Staff to the President, the Chief Economic Adviser to the President, the Minister of Finance and the Attorney-General of the Federation and Minister of Justice.

A letter written on the same day (February 28, 2008) by Professor Soludo, and addressed to Omoyeni, went through some highlights of the interim report of the NDIC examiners.

Soludo, in the letter, resounded some of the allegations levelled against the embattled GMD, including that Wema Bank, under his leadership, maintained two sets of accounts - one for internal use and the other to present to and deceive regulatory authorities as to the actual condition of the bank.

Omoyeni was also accused of manipulating the liquidity position of the bank; of collecting an upfront housing allowance of N450 million from the bank and misrepresenting this as a loan; of gross violation of approval limits both in assets acquisitions as well as in the granting of credits, and of surreptitiously engaging the services of relations for the purchase of properties on behalf of Wema Bank, while bypassing the bank’s subsidiary set up for this purpose.

Omoyeni was also accused of outrageously exposing Wema Bank to five of its subsidiaries, while using the same subsidiary companies to mop up the bank’s shares, apparently in a bid to create artificial scarcity for the stock and manipulate its price prior to its approaching the market for additional funds.

The panel also alleged that Omoyeni failed to obtain the approval of the apex bank on many occasions before he went ahead and took certain steps, which required the former’s approval.

Finally, Soludo’s letter to Omoyeni stated, “consequent upon the mismanagement of the bank by you and your management team, the capital adequacy ratio dropped to an unacceptable negative ratio of 3.67% thus requiring capital injection of N23.06 billion and the liquidity ratio was also below the required minimum of 40%.”

Soludo requested that Omoyeni furnish him with a response within fourteen days of the letter.

Ten days later, Omoyeni responded cataloguing what he believed to be the root causes of the problem, adding that his present compulsory leave has “denied me the required access to respond to the report containing the allegations of the joint CBN/NDIC Special Examiners.”

He wondered why the CBN governor showed a remarkable determination to deal with allegations relating to his stewardship in Wema Bank, while “nothing has been done to address the grave financial impropriety (allegedly) perpetrated by Tunde Lemo during his tenure as Managing Director at Wema.”

Omoyeni himself has expressed concern over why he has not been recalled from leave since the conclusion of the NDIC examination, and some industry watchers have equally wondered why the Central Bank has not constituted the independent panel to probe the several grave allegations emanating from both sides of the impasse.

It is important that the processes, which have commenced in the Wema Bank imbroglio, be seen to a fair and conclusive end in the spirit of fair play, due process and best international corporate practices, if the nation’s financial industry, which is expected to play the role of a hub of the African continent in line with the Vision 2020 strategy is to be regarded with any seriousness of purpose.