Amid growing list of questions trailing the release of the result of the forensic audit into Oando plc and the attendant sanctions levelled against the company, BusinessDay has gained insight, through a letter to the chairman of Oando plc, Oba Michael Adedotun Gbadebo, into why the Securities and Exchange Commission (SEC) moved against directors of the company.
The SEC had engaged Deloitte & Touche in 2017 to conduct a forensic audit of Oando plc following the receipt of two petitions from Alhaji Mangal Dahiru and Ansbury Incorporated. Excerpt from the result of the forensic audit was released on Friday, May 31, 2019 on the website of the SEC.
In the letter to the chairman of Oando plc, seen by BusinessDay, SEC alleged that it observed certain infractions of securities laws by some members of the Board of Oando plc, adding that the findings of the Commission were communicated to Jubril Adewale Tinubu, the group chief executive officer of Oando plc, by a letter dated July 10, 2017.
SEC claimed that findings from the forensic audit revealed corporate governance lapses, failure of internal controls, incidental issues arising from the sale of a subsidiary, suspected market abuse, related party transactions, payment of interim dividend despite liquidity constraints, false disclosure, non-disclosure of beneficial ownership, and tax-related issues.
The SEC, consequently, directed Oando plc to pay N8.45 million to the Commission for publishing what it termed untrue statements in its 2012 financial statement, in violation of rule 3(4) of the SEC rules and regulations, made pursuant to the Investment and Securities Act (ISA) 2007.
The SEC also directed Oando plc to pay N7.85 million to the Commission for publishing what it called untrue statement in the 2013 financial statements, in violation of same rule stated above. Oando plc is also to pay to SEC the sum of N42.75 million for non-disclosure of related party transactions in its 2012 financial statements, in violation of Rule 39 (1&7) of the SEC rules and regulations, 2013 made pursuant to the ISA 2007.
Furthermore, Oando plc is to pay N30.62 million to the Commission for alleged non-disclosure of related party transaction in its 2014 financial statements, in violation of Rule 39 (1&7) of the SEC rules and regulations, 2013 made pursuant to the ISA 2007.
SEC named eight directors of Oando plc that it expects to collectively pay N145.76 million. They are Akinrele Ademola (N24.35 million), Ammuna Alli (N11.95 million), Yusuf Njie (N3.11 million), Ike Osakwe (N24.35 million), Oghogho Akpata (N28.97 million), Tanimu Yakubu (N24 million), Sena Anthony (N11.25 million), and Oba Adedotun Gbadebo (N20 million).
SEC asked Oando plc to convene an Extra-Ordinary General Meeting (EGM) on or before July 1, 2019 to appoint new directors and articulate remedial measures for the observed corporate governance lapses.
“For certificate of untrue statements of material facts in the 2013, 2014, and 2015 financial statements of Oando plc in violation of Section 60 (2 (b) (ii) of the ISA 2007, Mr Jubril Adewale Tinubu (Group Chief Executive Officer) and Olufemi Adeyemo (Chief Finance Officer) are ordered to pay the sum of N91.125 million each to the Commission,” SEC further said in the letter.
All monetary penalties referred to above by SEC are expected to be paid to the commission immediately, it said.
SEC barred Tinubu and his deputy Boyo from being directors of public companies for a period of five years “for improper conducts in managing the affairs of Oando plc to wit: market abuse, related party transactions not conducted at arm’s length, misstatements in financial statements and inaccurate disclosures in the financial statements of Oando plc”.
On Sunday night, the SEC informed the public of the constitution of an Interim Management Team to be headed by Mutiu Olaniyi Adio Sunmonu.
SEC said the interim management is to oversee the affairs of Oando plc and conduct an Extra Ordinary General Meeting on or before July 1, 2019. It said the team is to appoint new directors to the Board of the company, who would subsequently select a management team for Oando plc.
But on Monday, the Federal High Court sitting in Lagos restrained the SEC from removing Wale Tinubu and Omamofe Boyo as group chief executive officer (GCEO) and deputy group chief executive officer (DGCEO) of Oando plc, respectively.
The Justice Mojisola Olatoregun court granted an interim injunction following an application by the GCEO and DGCEO. The duo had applied for enforcement of their fundamental rights.
The court also restrained SEC, its servants or agents from taking any step concerning the commission’s letter dated May 31, 2019 in which it barred Tinubu and Boyo from being directors of a public company for five years pending the hearing and determination of the applicants’ motion for interlocutory injunction.
Also, the court granted Oando interim injunction restraining the 2nd respondent (Mutiu Olaniyi Adio Sunmonu) from acting as the head of the interim management of Oando plc pending the hearing and determination of the applicants’ motion for interlocutory injunction.
Meanwhile, stock investors at the Nigerian Stock Exchange (NSE) on Monday priced in possible risks to the company’s future following the development.
The share price of Oando plc was down 9.52 percent in early trading on the Nigerian bourse after the SEC unveiled its findings from an investigative report on the company.
The stock, which opened at N4.20 on Monday, lost 40 kobo to N3.80 at the close of trading by 2:30pm Nigerian time, bringing the company’s share value to its lowest level since November 30, 2016.
According to the letter to the Oando plc chairman, seen by BusinessDay, the findings from the investigations include: corporate governance lapses – SEC said there were several corporate governance lapses stemming from poor Board oversight. These include irregular approval of directors’ remuneration, directors’ participation in matters in which they had declared interest, unjustified disbursements to directors and management of the company, failure of the Audit Committee to hold meetings with management, internal auditors and external auditors.
Also on failure of internal controls, SEC said Oando plc failed to establish an effective system of internal controls as required under section 61 of the ISA 2007 over its financial reporting, thereby compromising the integrity of the company’s financial controls and reporting as revealed by the misstatements in the financial statements, high number of related party transactions and unjustified disbursements to directors.
On incidental issues arising from the sale of a subsidiary, SEC noted that in 2013, Oando plc reported the sale of its subsidiary, Oando Exploration and Production Limited (OEPL), to Green Park Management Limited without obtaining the approval of the Commission, “(in violation of the provisions of the Investment and Securities Act (ISA) 2007) and the consent of the Minister of Petroleum (as required under the Petroleum Act, 1969)”.
“The purported sale of OEPL enabled Oando plc to report a profit instead of a loss, thereby misstating its Financial Statements in 2013 and 2014 and consequently misleading investors. This ‘fictitious’ profit reported in 2013, enabled Oando plc to declare dividends,” the letter to the chairman read.
It noted that “the 2013 misstated accounts and quarterly reports of Oando plc were included in the 2014 rights circular, thereby misrepresenting the financial status of the company to the public in violation of Section 86 of the provisions of the ISA 2007”.
On suspected market abuse, the SEC said, “In 2012, 2013, 2014 and 2015, certain insiders of Oando plc sold shares of the company during ‘closed periods’ despite having knowledge of active closed periods by the company and contrary to the Rules of the NSE. The insiders include Ocean and Oil Investment Limited (OOIL – represented by Jubril Adewale Tinubu and Godwin Omamofe Boyo), Ocean and Oil Development Partners (OODP – represented by Jubril Adewale Tinubu, Godwin Omamofe Boyo, Francesco Cuzzocreal, and ECP African Fund II PC (a company in which Nana Appiah-Korang was director).” SEC said “the violation is being referred to the Nigerian Stock Exchange”.
According to SEC, “OODP, the major shareholder in Oando plc represented by Jubril Adewale Tinubu, Godwin Omamofe Boyo and Francesco Cuzzocrea authorised the sale of 1.210 billion units of OODP shares in Oando plc valued at N21.455 billion.
“The trades took place between January and October 21, 2015 preceding the release of the 2014 audited financial statements on October 23, 2015, in which Oando plc declared an unprecedented loss of N183 billion.
“During this period, these representatives of OODP were insiders of Oando plc and had access to material non-public information regarding the poor financial status of the company commencing December 2014, in violation of the provisions of the ISA 2007 regarding insider dealing. This violation is being referred to the appropriate law enforcement agency,” SEC stated.
Iheanyi Nwachukwu
