How Oando’s Forensic Audit May Have Cost Gwarzo His Job

Goddy Egene  and Obinna Chima    

The suspension of the Director-General (DG) of the Securities and Exchange Commission (SEC), Mr. Mounir H. Gwarzo by the Minister of Finance, Mrs Kemi Adeosun last week has been linked to the forensic audit into the financial affairs of Oando Plc, which SEC under Gwarzo commenced two months ago.

A letter exclusively obtained by THISDAY confirming this, showed that Adeosun had in a meeting with the SEC boss on Monday, November 27, 2017, verbally instructed Gwarzo to discontinue the Oando probe, which he apparently objected to.

To buttress his objection, he wrote a letter to Adeosun the next day (Tuesday, November 28, 2017) where he highlighted the implications of discontinuing with the probe not just to the Nigerian economy, but the signal it would send to foreign investors.

Oando Plc, a Nigerian energy firm with interests in the electricity and oil and gas sectors, has a dual listing on the Nigerian and Johannesburg Stock Exchanges.

In the said letter, Gwarzo while counselling against the discontinuation of the audit, appealed to the minister to put her instruction in writing in her capacity as chairman of the board of SEC.

He said this was necessary for documentation purpose and for ease of implementing her directive.

But instead of putting her instructions in writing, the finance minister who must have been incensed by Gwarzo’s letter, instead suspended him the nex day – exactly 48 hours after their meeting and 24 hours after being in receipt of his letter.

In the statement from the finance ministry last Wednesday, the ministry had stated that Gwarzo was suspended over allegations of financial impropriety bordering on the payment of N104 million to himself when he retired as an executive commissioner of SEC in 2015, against the counsel of the former acting head of the commission’s legal department, Mr. Chukwuogor Frana.

The ministry added that his suspension was to enable an administrative panel of inquiry (API) investigate and determine the culpability of the DG.

Gwarzo, in his capacity as SEC DG, was also accused of awarding contracts to his company Medusa Investment Company and to companies linked to his wife and cronies.

Also suspended were two management staff of the commission – Mr. Abdulsalam Naif Habu, Head of Media Division and Mrs. Anastasia Omozele Braimoh, Head of Legal Department – who were alleged to have engaged in financial impropriety in the commission.

But in reaction to the suspicion that Adeosun had suspended Gwarzo over the Oando probe, while using the allegation of financial impropriety against him as a cover for her action, the Ministry of Finance yesterday dismissed the notion that the suspension had anything to do with his meeting with Adeosun when she instructed him to discontinue the Oando forensic audit, despite the letter pointing to the contrary.

A source in the ministry who preferred not to be named said the allegations of financial impropriety against Gwarzo had been pending since October and that he should have been suspended since November 7, adding that he was also asked to step aside because there were allegations that he was carting away documents from SEC to cover up the allegations against him.

In the letter titled, “Investigation of Oando Plc” which was received by the Office of the Minister of Finance on Novermber 28 at 1.27 p.m. (as indicted by the ackowledgement stamp) Gwarzo had said: “Pursuant to our meeting on the above subject held on Monday, November 27, 2017, I am compelled to advice you ma, on the implication of the verbal directive issued to me in which you stated that the SEC should discontinue the forensic audit on Oando Plc and hold a tripartite meeting with Legal Officers of the Commission, Oando Plc and the Federal Ministry of Finance, with the purpose of coming up with penalties which would be issued to top officials of Oando Plc in their personal capacity for payment.

“Honourable Minister, it is important to stress that an action such as that proposed above would definitely put to question the independence and integrity of the Commission, while also completely eroding the confidence of both local and international investors in the Nigerian capital market.

“Furthermore, as you may be aware, the activities around the investigation of Oando Plc are being closely monitored by the local and global investment community and they eagerly expect the outcome of the exercise.

“It is therefore not in the best interest of our recovering economy that the forensic audit is not seen to be conducted in an independent and transparent manner proposed by the Commission.”

Furthermore, he stated: “It would interest you to note ma, that the Commission has in the last three years embarked on firm enforcement actions against some so called ‘top capital market stakeholders’ in the Nigerian capital market.

“Remarkably, these actions have sent strong signals to the entire capital market community and have led to an 87 per cent reduction of infractions in the market within the period.

“One major infraction alleged against Oando Plc is financial mismanagement. Honourable Minister, given that the consequent effect of such allegation is being borne by the over 274,000 shareholders of Oando, it is only proper that a process which would reveal the status of this allegation to ascertain its veracity or otherwise be embarked upon in a transparent manner.

“This in my opinion would put to rest the question of how the shareholders’ funds of the company have been managed by the persons appointed to do so for the shareholders.”

Continuing, he added: “The Commission therefore as the apex regulator of the Nigerian capital market, has the responsibility to ensure that a thorough, independent and transparent process is put in place to unravel the true financial status of the company.”

“Honourable Minister ma, may I restate that it is in the best interest of the Nigerian capital market and our recovering economy for the forensic audit of Oando Plc to be carried out, as reneging on same at this time would result in the following:

• Ridicule the regulators and project it to the global investment community as inefficient and lacking of integrity.

• Completely erode investors’ confidence in the market

• Send the wrong signal to all market participants both locally and globally.

• Discourage foreign investors from investing in our jurisdiction, and

• Portray the absence of independence of the regulators.

“The Commission in Section 13 (cc) of the Investments and Securities Act 2007, is mandated to advise the Honourable Minister of Finance on all matters relating to the securities industry.

“Thus, this advice proffered is as a result of our obligation to properly guide you on the best approach to take on capital market issues and it is strongly our recommendation that it should be adopted.

“Honourable Minister, my request to seek for a written directive is not in any way meant to disrespect your person, but stems from the basis that every decision or directive of the Board to the management of the Commission are always documented to enable ease of implementing such directive.

“Given your current capacity as the Board of the Commission. It is only proper that you be guided on the necessary procedure to adopt.”

A source conversant with the meeting last Monday between Adeosun and Gwarzo, which had the permanent secretary of the ministry, Dr. Mahmud Isa Dutse in attendance and was later joined by the director in charge of the legal department in the ministry Mr. Gariel, also informed THISDAY that after the SEC DG asked the minister to put her instruction in writing on the discontinuation of the audit things turned nasty.

“The minister then without mincing words reminded him that there were petitions bordering on financial impropriety and that he should have been suspended a long time ago.

“She also insisted that a committee be set up comprising the legal officers of the ministry, SEC and Oando to agree on the penalties to imposed on the officials of the company.

“Gwarzo, however, refused, telling her that there were implications of doing so and that the commission does not take decisions based on recommendations of committees but is guided by its Investment and Securities Act (ISA) and capital market regulations formulated by SEC.

“He also reminded her that the reason the forensice audit had to go ahead stemmed from the fact that the court had vacated the interim injunction stopping the audit and ordering SEC and the NSE to lift the technical suspension placed on Oando’s shares,” the source revealed.

He also disclosed that the allegations of financial impropriety against Gwarzo first came to light in January and he had responded to all of them accordingly, adding that officials of SEC had repeatedly visited the Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and Other Related Offences Commission (ICPC) to respond to the allegations.

The source said Gwarzo had even sent a memo to the Minister of Finanace in October, absolving himself of financial impropriety and award of contracts to his company but got no response from Adeosun on the issue until his sudden suspension last Wednesday.

He maintained that Gwarzo had issued clarifications on the severance pay because it was backed by the provisions of ISA.

“Gwarzo was appointed an executive commissioner on January 2, 2013 and his letter of appointment made it expressly clear that his appointment was for four years.

“To assume the position, he was duly screened and confirmed by the Senate. So, by the time he was again appointed the comission’s DG on May 20, 2015 by former President Goodluck Jonathan, he again had to go through the same Senate confirmation for the new apointment.

“His letter of appointment as SEC DG stated that his position was for five years, which means it was a fresh appointment and by extension signified his retirement as an executive commissioner or SEC.

“So, when he was paid the N104 million as severance package, it was in compliance of the provisions of ISA, as he had retired as an executive commissioner and was appointed in a new role as the SEC DG.

“This situation does not just apply in SEC but also the Central Bank of Nigeria, where a director was appointed as deputy governor but was paid her severance package after she was appointed deputy governor, because the second appointment was political, tenured and requires Senate confirmation as opposed to that of a director who only retires upon attaining the age of 60 years or must have spent 35 years in the service,” the source explained.

When contacted on the issue, Adeosun did not respond to calls or text messages from THISDAY, however, an official of the ministry said Gwarzo’s suspension had nothing to do with his counsel that the Oando forensic audit must go ahead.

He explained that the minister took the action to suspend him purely due to the allegations of financial impropriety levelled against Gwarzo and mounting concerns that he was using the Oando issue as a smokescreen to prevent a probe into his stewardship as the DG of SEC.

The official also revealed that the reason Adeosun had instructed Gwarzo to discontinue the Oando audit had more to do with the fact that the management of the oil company had admitted wrongdoing in the charges against them, so she felt there was no need to continue the audit and had recommended that they be penalised.

He went on to suggest that Gwarzo had written the memo to Adesoun on the Oando meeting after his suspension.

But when he was reminded that it was written before his suspension and a stamp from the Office of the Minister of Finace showed that it was received on November 28 while Gwarzo was suspended the next day, he changed tune stating that Adeosun was not in Abuja on November 28 and might not have seen the memo.

“That Gwarzo was suspended because of the Oando matter is not true. The minister that day informed him that Oando had made an approach and had pleaded guity to the charges against its management. They wanted to settle, they wanted a plea bargain of sorts.

“So, she instructed that since the management of Oando had admitted that it was guilty of the charges, she saw no reason for the audit to continue and instructed that a committee be set up to recommend penalties that will be imposed on the managers of the company in their personal capacities.

“But Gwarzo refused and insisted that the audit must go ahead, to which she informed him that he was using Oando as a ruse to divert attention from the allegations of financial impropriety against him.

“Admittedly, the meeting was not pleasant but there were also concerns that Gwarzo had started to remove incriminating documents against him from the commission, which was what prompted the minister to suspend him and set up the administrative panel of inquiry to probe his culpability,” the official volunteered.

Surprisingly, the official added that despite Adeosun’s objection to the forensic audit on Oando, it will now go ahead as planned, saying that the SEC will address all the issues on Gwarzo and the Oando audit at a press briefing today in Abuja.

Following Gwarzo’s suspension, the finance ministry official also said his ministry has received more petitions alleging abuse of office by Gwarzo.

When THISDAY read the petition addressed to Adeosun, which was written by a firm of lawyers on behalf their client, it made reference to a court case that was instituted against Gwarzo and SEC over a N30 billion bond issued by the Gombe State Government when Ms. Aruma Oteh was the DG of SEC.

In the petition by Legal Option Solicitors dated November 30, 2017 and signed by Benneth Eke, the firm had in a petition on behalf of its client, Gombe  Good Governance Group, said it was seeking to stop the approval of the second tranche of the N10 billion from the N30 billion bond by the Gombe State Government.

Legal Options Solicitors alleged that the approval of the  debt raising programme by Gwarzo despite a lawsuit,  was not only serious assault on the integrity of the court, but also fettered the rights of a citizen to access the court.

It stated: “There was also a pending application for interlocutory injunction seeking to restrain SEC (the second defendant in the said suit) from approving the bond pending the determination of the substantive suit and same was fixed for hearing before the court on the 24th of March, 2015.

“The originating process in the suit and the pending motion of notice for interlocutory injunction were served on all the defendants on the 20th of October 2014. After the service of the court processes on the defendants, we heard of surreptitious moves by the immediate past Director General of SEC (Aruma Oteh) to fasten and conclude the process of approval before the date fixed by the court so as to foist a state of helplessness on the court.

“The then DG of SEC (Aruma Oteh) mindful of the illegality of the intended administrative action taken on the matter vis-à-vis the pendency motion in court, refrained from granting the approval deciding (rightly) to await the determination of the matter by the court.

“Sadly sir, Mr. Munir Gwarzo upon assumption of office as acting DG of SEC proceeded to grant the said approval to the Gombe State Government in flagrant disregard to the pending suit in court and in abuse of his office.

“This act of Mr. Munir Gwarzo, who had only acted then for less than one month foisted a state of helplessness on the court as it rendered the outcome of the motion on notice nugatory thereby ridiculing the courts.

“His action was clearly contemptuous of the court and an assault on the rule of law. The grave effect of this action of Mr. Munir Gwarzo is that it portrayed the SEC as an irresponsible government agency including in lawlessness with no regard for judicial process.

“The perception is antithetical to the tenets and spirit of democracy and not acceptable in the comity of nations as it sends a wrong signal to the international community and foreign investors.

“The granting of the said approval by Mr. Munir Gwarzo was not only a serious assault on the integrity of the court, but also fetters the rights of a citizen to access the court which is not acceptable in a civilised society as ours.

“It is needless stating that the approval was illegal, null and has no validity in law as it created a situation of anarchy and lawlessness.

“This act clearly fertilises corruption as it was used to stultify due process and accountability in governance, thereby denying the populace the right to know how the finances of their state are expended.

“We therefore urge you to institute a detailed investigation to mete out appropriate sanctions so as to restore the dignity as well as investors’ confidence in the system.”

Meanwhile, the federal government yesterday announced the appointment of Dr. Abdul Zubair as the acting DG of the SEC with immediate effect.  

Zubair’s appointment followed the suspension of Gwarzo to allow for an unhindered investigation of several allegations of financial impropriety levelled against him. 

Before the appointment, the acting DG was the director in charge of external relations in the commission.

The commission, in   a statement assured   the investing public and all stakeholders, local and international, of its commitment to ensuring an uninterrupted and orderly operation of the market and the regulation thereof.

“Accordingly, the commission is poised to continue to ensure the stability of the Nigerian capital market and sustain the all-time high level of investor confidence, as recent developments will not be allowed to disrupt the regulatory effectiveness and efficiency of the commission as the statutory regulator of the capital market and by extension, the smooth running of the market.

“While the commission patiently awaits the outcome of the assignment of the Administrative Panel of Inquiry set up by the Honourable Minister of Finance, at no point will management allow the operational independence of the commission to be compromised.

“This is strictly in line with the objectives and principles of securities regulations as set out by the International Organisation of Securities Commissions (IOSCO), to which Nigeria is a signatory,” SEC said in the statement. 

The acting DG is an alumnus of Ahmadu Bello University (ABU), Zaria where he obtained a B.Sc. Economics, MBA, M.Sc. and PhD Business Administration degrees.

He also holds a PGD (Mathematics & Computer Science) and PGD (Education) from other universities.

He has over 25 years cognate experience in the financial industry and the academia. His career transverses the private and public sector and the academia. 

Prior to joining SEC Nigeria, Zubair served on the board of Intercity Bank Plc and Nigeria and Minna Pharmaceutical and Surgical Company Ltd.

He was also the Group Managing Director, Niger State Trust Fund and NST Finance Ltd. 

He is a fellow of the Institute of Corporate Administrators and Marketing Academy of Nigeria, a member of the Institute of Management Consultants, a certified commodity broker and a certified member of Pension Institute of Nigeria.

He has attended several local and international courses at middle, executive and top management levels. He is married with children and has been contributing to academic journals worldwide.