FRCN's Lawyer Chucks Regulator over Stanbic IBTC Sanction

According to sources close to Ajogwu’s law firm, Kenna & Associates, Ajogwu was particularly concerned that immediately FRCN announced the suspension of the bank’s directors’ Financial Report Numbers on its website on Monday, on the same day, the council penalised Stanbic IBTC to the tune of N1 billion, in flagrant disregard of the Act setting it up and laid down procedures. A copy of the letter containing the penalty, dated October 26 and which was made available to nensmen, read in part: “Your Bank is to pay a penalty of One Billion Naira only to our Council, being the total of penalties applicable to the withdrawal of financial statements leading to restatement for the two years under reference; in accordance with Regulation 18 of the Financial Reporting Council of Nigeria Act No. 6, 2011 and Regulation 18 of the Financial Reporting Council of Nigeria – Guideline/Regulations for Inspection and Monitoring of Entities, 2014.” The letter was signed by the Executive Secretary/Chief Executive Officer of FRCN, Mr. Jim Osayande Obazee. FRCN had sanctioned Stanbic IBTC over its audited accounts for 2013 and 2014 and suspended the Financial Reporting Numbers of the bank’s chairman, Mr. Atedo Peterside, and its chief executive, Mrs. Sola David-Borha, and also barred them forthwith from vouching for the integrity of any financial statements in Nigeria. The FRCN also suspended two other directors – Mr. Arthur Oginga and Dr. Daru Owei – for attesting to what it termed the “misleading” 2013 and 2014 financial accounts of Stanbic IBTC, as well as Ayodele Othihiwa of KPMG Professional Services for his firm’s alleged complicity in the infractions highlighted in the financial reports for the two-year period. It based its sanctions on issues raised by the bank’s minority shareholders led by the Mahtani brothers who own the Churchgate conglomerate, to some other regulatory agencies such as the National Office for Technology Acquisition and Promotion (NOTAP), Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), among others. The council stated that it met with NOTAP on September 1, 2015 and also exchanged several correspondences on the matter thereafter. It also invited the CBN, Economic and Financial Crimes Commission (EFCC) and the Federal Inland Revenue Service (FIRS) to investigate Stanbic IBTC. But a few hours after the news of the sanctions broke, the bank issued a detailed statement pointing out that FRCN’s allegations were “inaccurate and unfortunate”, adding that the manner in which it chose to make them was “procedurally defective”. “Whilst FRCN takes refuge in Regulation 21 of the Directorate of Inspection and Monitoring Guidelines Regulations 2014 for the wide publicity that it has given to its regulatory decision, Regulation 21 only applies ‘where the panel and the entity agree that accounts are to be rectified by way of revision or restatement’. “That is not the case here, because Stanbic IBTC does not agree that its accounts are defective or require rectification. Moreover, Regulation 27 makes clear that where a reporting entity does not accept FRCN’s position, FRCN ‘shall institute a legal action against the entity’. FRCN has ignored this laid down process in preference for self-help and media publicity,” Stanbic IBTC stated on Monday. Stanbic IBTC further indicated that the matter between itself and FRCN was already in court, insisting that “the matters that FRCN alleges to be wrong are not wrong in any material respect and many are in any event not matters of financial reporting at all, but matters of business decision and judgment for Stanbic IBTC and its board of directors”. “For example, the decision whether to enter into a sale and lease back, whether in relation to intellectual property or any other asset, is a business decision and entirely a matter for the board of directors of Stanbic IBTC and certainly not a matter for FRCN. “In the same vein, NOTAP’s refusal to register a franchise agreement does not render the agreement null or void, or indeed relieve Stanbic IBTC of its liability. It merely means that any foreign currency payment due to the foreign counterparty under the unregistered agreement cannot be remitted. “Stanbic IBTC has not and will not make any remittance which is subject to NOTAP approval without obtaining such approval,” the bank added. Investigations by our reporter revealed that it was because of the hasty decision of FRCN to sanction the bank that compelled its lawyer, Professor Ajogwu, to withdraw his firm’s services to the council. Ajogwu, it was gathered, had advised the council to tread cautiously on the issue by calling the bank for talks only to discover that the council had imposed a litany of sanctions on the bank. The lawyer had also advised that it would be against the principle of fair hearing and natural justice if the council went ahead to sanction the bank. Particularly bothersome was the fact that the council’s Act makes it clear that sanctions could only be imposed after the law courts may have found the reporting entity liable. But this was not followed, said a source close to the law firm. Efforts to get Kenna & Associates and Ajogwu to confirm the decision not to provide legal advisory service to FRCN any longer hit a brick wall. When contacted, an associate of the firm, who preferred not to be named, informed THISDAY that he was not aware that his firm had ceased to advise FRCN. “Besides, the issue cannot be discussed due to lawyer-client confidentiality,” he added.]]>