By Omoh Gabriel, Business Editor
Cracks has started to emerge from the one year old policy induced consolidation/merger of banks in the country. The consolidation of banks in Nigeria which was taken as one of the success story of the Obasanjo administration has started to show sign of weakness as one of the truly merged bank during the consolidation exercise has shown that the exercise was ill executed. During the exercise the CBN verified the shareholders fund of Spring Bank and gave it a certificate of clean bill of having met the minimum capital requirement of twenty five billion naira and surpassing it. The apex bank said that the bank had verified shareholders fund of N31billion. But when Nigerians were just about building confidence in the industry and believing they can put their money in any of the consolidated banks and go to sleep as promised by CBN the apex bank declared SpringBank insolvent. Spring Bank emerged from the merger of six banks namely, Citizen International Bank, Guardian Express Bank, Omega Bank, Fountain Trust, Trans International Bank and ACB International Bank.
The bank directors since the forced marriage of some incompatible elements in a bid to stay afloat were unable to resolve their differences. The boards have been at each others neck and became highly factionalised along tribal line. It has become a battle field between the Yoruba members of the board where in control of three of the merged banks and the Ibos who also had control of three of the banks on which fashion should gain supremacy or control of the bank.
As a result some shareholders of the bank are alleging connivance of the Ibo fashion in the bank‚Äô board to trade off Spring Bank to Access Bank for a particular shareholder to consolidate his shares in the two banks. These shareholders are questioning the rationale of CBN rush to dissolve the board and reconstitute a new one when the shareholders representatives who will determine the shareholders value of the six banks are yet to complete their job? They quarried why did the CBN dissolve the board including the Executive Directors but left Mike Chukwu the Managing Director?
‚ÄòThe answer according to them is that the CBN has a hidden agenda. Having discovered that the outcome of the post merger adjustment will favour the Bank One Group (Yoruba fashion of the board ) and this would lead to change in board composition in favour of this group and this group will not allow CBN to execute its agenda in respect of the bank, the best option was to prevent them from taking over the management of the bank even though they have the higher shareholders fund.
The argue that it had been their suspicion all along that the agenda of the M. O Mike Chukwu and one of the directors of Spring bank is to sell the bank for peanuts to another bank where this director also has an interest in order to consolidate his hold on the two banks. If the Executive Management of Spring Bank was allowed to emerge from the outcome of the post merger adjustment, the new leadership rather than selling the bank and throwing thousands of the employees into the employment market would recapitalise and ensure the survival of the bank.
Consequently they say, some interests in CBN working in conjunction with some directors of Spring Bank came up with a position that Spring Bank was insolvent and in a grave situation. According to them the CBN Governor therefore acting on this false report dissolved the entire board on 5th June, 2007 but left the Managing Director apparently to accomplish their objective of making the bank unviable with a view to selling it.
Another question being asked is what moral justification does the CBN have if the bank which had CBN approved Shareholders funds of N33b in 2006 and has been made insolvent within 18 months to still allow the MD to continue as managing director while other director were sacked?
The Spring Bank board squabble came to head when the Central Bank of Nigeria on the last week ordered the removal of 13 directors from Spring Bank in what the CBN attributed to the precarious financial situation of the bank.
The CBN in a letter dated June 5, 2007 addressed to Rev. Canon Segun Agbetuyi referenced OGD/GOV/DGFSS/GEN/Vol.3/41 Signed by Professor Charles Soludo titled Removal as Director of a bank said ‚ÄúWhereas the Central Bank of Nigeria is satisfied that Spring Bank Plc is in a grave situation having become insolvent with negative shareholders‚Äô fund contrary to prudential requirements stipulated by the Central Bank of Nigeria pursuant to the provisions of the Banks and Other Financial Institutions Act, 1991, and the Central Bank of Nigeria Act, 1991, as amended.
Now therefore, I, Professor Chukuma C. Soludo, Governor of the Central Bank of Nigeria, in exercise of the powers conferred on me by Section 33 of the Banks and Other Financial Institutions Act, 1991, as amended, hereby remove as directors of Spring Bank Plc, the persons whose names are specified in the schedule hereto with effect from the 5th day of June, 2007″.
The affected directors include the Chairman of the Board Dr. Rev Canon Segun Agbetuyi, Dr Canon Cosmos Maduka, Professor Anya O. Anya, Chief Tony I. Ezenna, Chief Dr. Adebayo Adelunji, Chief Anthony A. Adeniyi and Mazi Okechukwu C. K. Unegbu. Others also affected are Sir Edwin Mmuoemenam, Barrister Mohamed Ibrahim Sani, Dr. O. A. A. Kola Daisi, Mr Ifeatu C. Onejeme, Mr. Olabisi I. Afolabi and Tolulope Fadahunsi.
But in a swift reaction, the Group Executive Brand Management Spring Bank Mr Onuora Ifeanyi said that the bank is sound and is in the process of completing its evaluation of the holdings of the various legacy banks that merged into Spring Bank. He said it is the process that led to the technical suspension placed on the bank shares at the Nigerian Stock Exchange. He admitted that the bank board was being reconstituted. but denied any wrong doings by any member of the board of the saying that the bank learnt money to them in the ordinary cause of business not to finance purchase of shares as being alleged.
Sources at the office of the Anthony General of the Federation however disclosed that the former Attorney General Mr. Bayo Ojo had personally written to the Chairman of the Bank asking for the dissolution of the board following mounting petitions alleging fraudulent manipulation of the consolidation process by three directors of Spring Bank The source said that he had given a deadline of 26th May 2007, for the bank to act or he will have no choice but to ask the police to arrest the affected directors.
The Attorney General‚Äôs letter dated May 24th 2007 addressed to the Chairman Spring Bank referenced HAGF/SpringBank/2007/vol.1 titled Financial fraud in the capitalisation of Spring Bank reads ‚ÄúI am in receipt of a petition against some directors of Spring Bank Plc bordering on financial fraud committed during the banking recapitalisation programme of 2005.
‚ÄúI understand from the petition and attached evidence that following complaints made to the Central Bank of Nigeria (CBN) regarding the existence of fraud in the recapitasation process of Guardian Express Bank Plc, a team of CBN and NDIC officials were sent to the Bank. The team has now established that a fraud was indeed committed by some Directors of the Bank who currently sit on the Board of Spring Bank Plc.
‚ÄúSpecifically, the interim report of the CBN/NDIC team (extract attached) established that the under-listed volume of shares being held by the listed Directors were funded directly by their Bank (legacy Guardian Express Bank Plc), through forgeries and manipulation of bank records thereby contravening the law.
‚ÄúI also understand that copies of the interim report of the CBN/NDIC team were circulated to Shareholders Representatives representing the interests of each of the legacy banks as part of activities in the on-going post-merger adjustment exercise.
Name of Director SharesFunding by the
1. Dr. Cosrnas Maduka 2 billion 2,400
2. Chief Tony Ezenn 834 million 1,001
3. Mr. Edwin Mmuomenam 240 million 0.410
‚ÄúBased on the foregoing and the need to undertake a proper investigation of the offences allegedly committed, I am requesting by this letter that the effected non-executive Directors, Dr. Cosmas Maduka, Chief Tony Ezenna and Mr. Edwin Mmuomenam be directed to step down immediately from the Board of Spring Bank Plc. In addition, Mr. Mike Chukwu and Mr. lfeatu Onejeme, Executive Directors at Guardian Express Bank Plc when the irregularities were committed should equally step down from the current Board of Spring Bank PLC as Directors.
‚ÄúThis action is crucial for creating the required atmosphere in the Bank that would make for preservation of factual information necessary for our effective prosecution of the said Directors which will soon commence in earnest, after detailed police investigation.
‚ÄúPlease note that if by Monday, May 28, 2007 your bank does not comply with the above directive, I shall have no other alternative than to order the arrest of the said directors by the police to enable the investigation proceed unhindered.
‚ÄúI count on your prompt action in our quest to rid the industry of such crimes and also preserve the interests of key stakeholders in all our Banks. Please accept the assurances of my highest consideration and esteem‚Äù.
CBN sources revealed that trouble started for the bank when it was discovered that three directors in the defunct Guardian Express Bank were found to have purchased shares worth N3.6billion using the bank‚Äôs depositors fund. The combine CBN/NDIC report which exposed the bank said ‚ÄúWe have reviewed the Guardian Express Bank schedule of shareholders and took a sample of three namely. Coscharis Motors Ltd with 2billion shares; Ezenna Anthony Ifeanyichukwu 634,000,000 shares and Edics Chemicals and Allied Distribution Ltd with 200,000,000 units.
‚ÄúOur review of the accounts of the investors showed that two accounts were maintained for each of them as customers of the bank, one in perpetual debit and the other in perpetual credit. Further review showed that the cheques presented by Ezenna Anthony Ifeanyichukwu(Orange Drug Ltd) and Coscharis Motors were given post value dates of 24/08/2005 and 30/06/2005 respectively, that is after the closure of the IPO exercise thereby suspending the debits.
‚ÄúA consolidation of the two accounts maintained by each of the investors/customers showed that they did not have enough funds to accommodate the value of the cheques‚Äù
The team of examiners as a result of the findings recommended that ‚Äúeffectively the investment were funded by the credit facilities from legacy Guardian Express Bank. The investments for the three shareholders totaling N3.64billion is recommended for backing out from the shareholders fund of legacy Guardian Express Bank
Dissenting board members alleged that recently, the Managing Director backed by Mr Maduka took the decision to place the shares of Spring Bank on full suspension at the Nigerian Stock Exchange. This is an extreme measure meaning that no trading on the Bank‚Äôs shares can occur. This has caused shareholders severe losses and caused the Bank embarrassment. When asked by Board members why this step was taken, the Managing Director, backed by Mr Maduka retorted that no explanation was owed to the Board on the matter
They alleged that it is common knowledge amongst staff of Spring Bank generally that their management have special agents in the Banking Supervision Dept of the CBN who aid and abet their irregularities and frauds.
The stakeholders of five of the six legacy banks are said to be united in their strongly held view that because of insider issues and corporate governance problems which have already become embedded in the Spring Bank system in a very short period since existence, it may be difficult to work together with the Guardian Express legacy team.
Board members of the bank admits that the current position of Spring Bank is dismal.
The fear is that there are many of the consolidated banks that are grumbling but have no document to back their claims. Some it is said have gone to EFCC but could not substantiate their claims. The crack in the banking reform has just open up who knows how wide and deep is the crack in the financial system. The next few weeks will tell.
File: Spring Bank 11/06/07