Court Clears Obigwe of Wrongdoing in Union Bank’s Capital Market Infractions

By Davidson Iriekpen

The Court of Appeal in Lagos has cleared a former Executive Director of Union Bank of Nigeria, Mr. Austen Obigwe, of any wrongdoing in the transaction between the bank, Union Trustees Limited and Falcon Securities’ capital market infractions.

The Investment and Securities  Tribunal (IST) had in 2012 found all the board members of the bank guilty of oversight weakness and liable for the infraction in share buy-back, for which the former Managing Director of Union Bank, Mr. Bart Ebong and another director of the bank, Mr. Samuel Idowu Aiyininuola were charged at the Federal High Court in 2009.

 They were accused of buying back Union Bank’s shares on the equity market, thereby creating artificial price increase that gave wrong impression about the stock market growth.

The IST, in its ruling, said the five former directors engaged in an improper conduct by participating in a scheme that saw union bank buying back its own shares directly or indirectly against the provisions of the Investments and Securities Act, 2007.

IST said the act undermined the fair and orderly conduct of the securities market and breached the integrity of the market.

But dissatisfied with the IST ruling, Obigwe approached the Court of Appeal where he stated that he was not part of the decision to use the $250 million loans sourced from Merrill Lynch ($150m) and HSBC ($100m), which he raised for the bank to purchase UBN shares.

He argued that the issue was never discussed at any management or board meetings, neither was it brought to his knowledge in any way.

Moreover, Obigwe said he was out of the country when the decision to buy UBN shares was made, adding that in the statements to the Economic and Financial Crime Commission (EFCC), Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC), both Ebong, and former Executive Directive, Risk Management and Control, Aiyininuola, confirmed that it was never  presented or discussed at any board meeting.

He stated that while both men and two Managing Directors of UBN subsidiaries were arraigned at the Federal High Court in Lagos, the CBN gave him and other executive directors letter of clearance.  

However, in its judgment, the Court of Appeal in a unanimous decision, set aside the judgment of the IST. It also dismissed the IST case as it relates to him.

In absolving Obigwe of any wrongdoing in the transaction, Justice Jummai Hannatu Sankey who read the lead judgment, resolved issues one and two in his favour, and found the appeal meritorious.

He said the tribunal was in error when it held the appellant  liable for a corporate wrong for which didn’t participate in.

Justice Sankey further held that the tribunal erred when it found the appellant responsible for the infraction of failing to object or to act as a ‘whistle-blower’ by reporting when he was entirely oblivious of the transaction between Union Bank, Union Trustees Limited and Falcon Securities.

He said where a director is not aware of or has no knowledge of the conduct or action of the bank or some of the bank’s directors by reason of the fact that no board meeting was convened and information was not presented to a board meeting for deliberation or ratification, constructive knowledge cannot be imputed to him and he cannot be held liable for the malfeasance of the bank.

The judgment read: “I am therefore bound to find that the tribunal was in error when it held the appellant liable for a corporate wrong for which he was not shown to have participated. By the same token, the tribunal erred when it found him responsible for the infraction of failing to object or to act as a ‘whistle-blower by reporting when he was entirely oblivious of the transaction between Union Bank, Union Trustees Limited and Falcon Securities at all material times.

“Having however resolved the issues 1 and 2 in favour of the appellant, I find merit in the appeal. It succeeds and is allowed.

“Accordingly, the judgment of the Investment and Securities Tribunal in the case number IST/OA/20/2010 delivered on November 26, 2012, only so far as it relates to the appellant herein Austen Obigwe (4th respondent before the tribunal), is set aside.

“In its place, I dismiss the case against the appellant Austen Obigwe (as 4th respondent before the tribunal).”