The long-awaited results from the forensic audit into Oando plc was finally released on Friday, May 31, 2019 on the website of the Securities and Exchange Commission (SEC) indicating weighty infractions with attendant sanctions levelled against the company.
In a response to the SEC’s report, Oando plc said it “is of the view that these alleged infractions and penalties are unsubstantiated, ultra vires, invalid and calculated to prejudice the business of the company”.
“The company has not been given the opportunity to see, review and respond to the forensic audit report and so is unable to ascertain what findings (if any) were made in relation to the alleged infractions and defend itself accordingly before the SEC. The company reserves its rights to take all legal steps to protect its business and assets whilst remaining committed to act in the best interests of all its shareholders,” Oando said in a press statement issued on its website.
The severity of the penalties and the timing of the release of the report have roused public curiosityas to the motive and the basis for the penalties.
Ainojie ‘Alex’ Irune, chief operating officer, Oando Energy Resource, at a press conference at the company’s head office, said Oando was “not given a chance to review and respond to the outcome of the report”.
“You do not sentence a person to death without giving him or her a chance to defend him or herself. In this instance, we have been sentenced to death without knowing what our crime is or being given a chance to defend ourselves. At the barest minimum, best practice requires that you give the person a chance of a fair hearing. We have not been accorded this opportunity,” he said.
Irune explained that when the company made the decision to drop its court case challenging the SEC’s decision to carry out a forensic audit, it was assured that they could trust the system for an independent investigation that would be fair and follow due process. He reiterated that it was in the spirit of transparency, cooperation and full disclosure that they agreed to the forensic audit.
Echoes of Oando’s sentiments are resounding across the country with everyone, including business personalities, wanting to know what exactly the Oando management team did to warrant such steep penalties.
On social media, Atedo Peterside, founder, Stanbic IBTC Bank, asked the SEC why it would not share the findings of the forensic audit with Oando and offer the company an opportunity to defend itself. He challenged the SEC to share the forensic audit findings and Oando’s response with the general public so that everyone can judge for themselves.
According to a media source at the Oando press briefing, the forensic audit report was ready and submitted by Deloitte and Touche as far back as December 2018. Why the SEC then decided to sit on the report for six months without engaging Oando where necessary remains a mystery.
“Regulatory authorities in this age, as we have seen with the Debt Management Office (DMO) under Dr. Abraham Nwankwo and sustained under a new leadership, understand that their ultimate responsibility is to build businesses to be viable entities, stronger and not destroy value. Sanctions arising from regulatory action therefore must be in accordance with extant rules and regulations, severe relative to infractions, precise and satisfy the deterrence principle,” according to an article by Proshare titled ‘Memo to the Market: The Oando Corporate Journey – At the Regulator’s Gate’.
According to the SEC guidelines, Mary Uduk, as acting DG of the SEC, was meant to submit her findings to the Board of the SEC which has been non-existent since Mounir Gwarzo was appointed DG of the Commission. In the absence of a Board, a sign-off from the Minister of Finance is required. Observers are wondering whether this was the case with the Oando Forensic Audit Report.
The consensus following the press conference was that the publishing of the report which cost would be borne by Oando without informing Oando was contrary to best practice and shows the regulator may not be working in the best interests of the market, specifically minority shareholders. These actions are also damaging to the Nigerian capital market and will further discourage foreign direct investment (FDI) into the country, analysts believe.
Foreign direct investment inflows into the country in 2013 totalled $5.6 billion, most of it in the telecom and energy sectors. In 2018, however, Nigeria’s FDI flattened to $2 billion.
In a recent article ‘Nigeria has Become Africa’s Money-losing Machine’, Forbes contributor Kenneth Rapoza said if you want to lose money in one of Africa’s biggest markets, put it in Nigeria. Despite sitting on nearly 40 billion barrels of proven oil reserves and $48 billion worth of investment opportunities in the oil and gas sector, Africa’s largest economy is mired in problems.
“It’s Nigeria’s abundant commodity resources that make it so big. But its Nigeria’s government that keeps it from getting bigger and richer,” Rapoza said.
Olufemi Adeyemo, chief finance officer, Oando plc, said the damage done to the brand since the inception of the investigation cannot be quantified.
“We require credit to run our business and this has come at an extra cost, one that we would ordinarily not have incurred. Despite these challenges, we’ve kept making milestones and running the business as usual,” Adeyemo said.
The damage, financial and reputational, caused by the SEC fiasco is worth significantly more than the alleged infractions levelled against the company and its management team, Oando plc said. It added that making a public spectacle of the company, its management team and eroding shareholder value are not acceptable by any standards – especially because some of the damage is irreversible and affects the general public who are shareholders.
“If the SEC thinks removing Wale and Mofe is the solution, then they don’t understand the tie between the company and its founders. Removing them equates to taking the company down and our money with it,” said a social media user.
Iheanyi Nwachukwu
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