The crisis rocking Stanbic IBTC over alleged payment of billions of naira as Management/Franchise and IT fees to its controlling/majority shareholder without regulatory approvals is not over yet. Chairman, Trusted Shareholders Association, Alhaji (Otunba) Mukhtar Mukhtar says the Chairman of the lender, Atedo Peterside should resign while regulatory authorities should sanction the bank. He speaks with Assistant Editor, Nduka Chiejina.
What was your reason for petitioning the FRCN, NOTAP, SEC and CBN?
It is my duty as an indigenous minority shareholder and Chairman, Trusted Shareholders Association, to inform the relevant regulators to take decisive action against infraction and misleading of minority shareholders. Why don’t you use the monies you are keeping aside to shore up your capital rather than going to do Rights Issue?
What is the genesis of the crisis between Stanbic IBTC and its shareholders?
This is not a new development. These illegal deductions have been going on since 2011. That was when they started applying to the National Office for Technology Acquisition and Promotion (NOTAP) for approval of the management franchise agreement and NOTAP from 2011 has consistently refused to give them approval because they maintained that we don’t need foreigners to come and teach Nigerians how to run a bank. In the last two decades, Nigerians have mastered the art of banking so how can a bank from South Africa come to Nigeria connive with some Nigerians to say that they want to be charging management and franchise fees at fees running into tens of billions of naira.
How much has so far been repatriated to South Africa from the alleged illegal deductions?
In 2013, N3.129 billion was debited, this is from the gross revenue earning of the bank. It was not even seen by the government. They deducted it from the gross revenue before bringing it to government for taxation. That means they are even short changing the country. In 2013, it was N3.38 billion, that is N6.5 billion in just two years. This can give some insight into what they have been doing. They said they will charge management, franchise fees of five per cent of the gross earnings of the bank from 2011 to 2013 in 2014 they revised to three per cent this is day light robbery.
How do you react to comments of Stanbic IBTC chairman that NOTAP disallowed certain arranegements of banking subsidiaries because of a sharp drop in oil prices?
Mr. Atedo Peterside offered a false and ridiculous story as a red herring that NOTAP’s refusal to give approval to the Management/Franchise Agreement to enable Stanbic IBTC pay the tens of billions of naira it has illegally accrued for the sole benefit of its controlling/majority shareholder – Standard Bank of South Africa – since 2011, as related to oil prices and JP Morgan’s emerging market bond index is outlandish. NOTAP has steadfastly not given approval to the Management/Franchise Agreement since 2011. The management of Stanbic IBTC has been applying to NOTAP for approval of its Management/Franchise Agreement since 2011; as at that time, the average global price of oil was $111.26. In year 2012, it went slightly higher to $111.67. Yet, NOTAP did not approve the Management/Franchise Agreement in year 2011 and 2012 when the average global price of oil was at its peak. The issue has nothing to do with the global price of oil, but with the guidelines for registration of these agreements and the forex manual from CBN. NOTAP cannot be said to be changing the rules in 2015 because of a sharp drop in oil prices, when it did not approve the same Management/Franchise Agreement in 2011, 2012 & 2013 when oil sold for an average of $100 per barrel.
Peterside insisted that the bank is not making any payment without NOTAP approval. What is your reaction to this?
That is the position by half. Stanbic IBTC has since 2011 been debiting and accruing tens of billions of naira, from gross revenue earned, in a suspense account, as payment of Management/Franchise and IT fees to its controlling/majority shareholder without the approval of NOTAP. In other words, in year 2011, Stanbic IBTC debited and accrued billions of naira from gross revenue earned as payment of Management/Franchise and IT fees without NOTAP’s approval; in 2012 it debited and accrued billions of naira from gross revenue earned as payment of Management/Franchise and IT fees; in 2013, 2014 and 2015, Stanbic IBTC also did the same thing without NOTAP’s approval. It is this infraction, wrongdoing and misleading of indigenous minority shareholders that necessitated our petitions to regulatory authorities.
Did the shareholders or NOTAP ever approve of these deductions?
Never! If NOTAP had approved these deductions, they would have given them the approval to repatriate the money.
What infraction, wrongdoing and misleading of indigenous minority shareholders by Stanbic IBTC do you refer to?
Stanbic IBTC has for the last five years been debiting and accruing tens of billions of naira from gross revenue earned for the payment of Management/Franchise fees to its controlling/majority shareholder – Standard Bank of South Africa without due approval from NOTAP. This is against the law. The NOTAP Act clearly provides that such agreement for transfer of technology must be registered and approved before any payment can be made to the credit of any person outside Nigeria. The Chairman, Mr. Atedo Peterside, is being economical with the truth. Stanbic IBTC has since 2011 been debiting tens of billions of naira from gross revenue earned for payment of Management fees to Standard Bank of South Africa without NOTAP’s approval. Mr. Peterside did not mention in his interview that tens of billions of naira have been debited from the gross revenue earned by the bank and this monies were never seen by the Federal Inland Revenue Service (FIRS), so was never taxed.
Does the absence of these billions of naira affect the true position of the company’s balance sheet?
Most certainly! The illegal yearly debit and accrual of of billions of naira from the gross revenue earned by the bank for payment as Management/Franchise fees to its controlling/majority shareholder has adversely affected the position of the bank’s balance sheet from the year 2011 to date. The balance sheet, as it is, cannot be said to be a true a fair position of the state of account of the company.
What was the role of the Audit Committee of Stanbic IBTIC in all these? Were they not representing the interests of minority shareholders?
The functions of the Audit Committee, whatever they did, was based on what the management presented to them. There are a lot of things that management does not bring to the knowledge of the members of the Audit Committee. Management does some under hand dealings which they don’t bring to the knowledge of the Audit Committee or to some regulators or other bodies, so all their decisions will be based on what the company brought to the members of the Audit Committee. So we cannot suspect the Audit Committee as not doing their job it may that all these information were not clearly stated to them. Nobody knew of this until we made our due diligence secretly; until we arrived at this concrete information that it has been going on for years and nobody is talking, nobody stopped them.
How about the auditors of the bank?
That’s another problem which appears to show that the auditors have compromised their position. All these years, they certified the accounts of the bank to be alright. We even heard from within the bank that the auditors allegedly took auditing fees and some other consultancy fees amounting to over N1 billion in one single year.
Was this payment approved by the shareholders?
The shareholders give the board a general approval, they didn’t bring the amount to the shareholders; they just tell the board to fix the remuneration. So the auditors took almost N1billion in audit and other consulting fees. Is it because they are helping them to make these illegal deductions or what are they paying them for?.
How much does the biggest bank in Nigeria pays its auditors? Stanbic IBTC that is a small bank is paying over N1 billion to auditors. So that means the auditors have compromised their position which I think the regulatory authorities should look into and possibly sanction them. They should immediately start the process of paying the audit fine. Peterside should be made to resign for being the chairman of Stanbic IBTC when all these illegal deductions were made.
In 2013, a huge sum of N3,129,000,000.00 was debited and accrued in a suspense account as payment of Management and IT fees to the controlling/majority shareholder. In 2014, another huge sum of N3,338,000,000.00 was debited and accrued as payment of Management and IT fees to the controlling majority shareholder. So for the years 2013 and 2014 alone, N6,467,000,000.00 was accrued for payment as Management/Franchise fees. How is it justifiable that such a huge amount is required for part-time recruitment of experts and advertising for just two years? How is it justified that such a huge amount, enough to pay the entire civil service of a state, is debited and accrued solely for payment of part-time recruitment of experts and advertising? How is it justified that the management of Stanbic IBTC prefers to pay billions of naira yearly for these foreign experts instead of training and investing in Nigerian professionals so that technology is transferred? This is in actual sense is the spirit and primary aim of the registration of these types of agreements by NOTAP. How is it justified that the management of Stanbic IBTC prefers to perpetually pay billions of naira for the part-time recruitment of these foreign experts for the business of banking which has been successfully undertaken in Nigeria since 1894? How is it justified that the strongest banks in Nigeria are all indigenously run and managed, but instead of taking a cue from these banks, Stanbic IBTC preferred to perpetually debit and accrue billions of naira each year for the part-time use of experts and technology from the controlling/majority shareholder – Standard Bank of South Africa?
NOTAP has consistently maintained that it abides by its guidelines for registration of agreements and it is also guided by the forex manual from the CBN. Consequently, whatever is not covered within the forex manual for banking operation will not be approved. This is not to mention that there is no end in sight to the Management/Franchise Agreement, and therefore there will be no transfer of technology from the foreign expert to qualified Nigerians. That is why the management had, at the recent extra ordinary general meeting shamefully sought the passing of a resolution for General Mandate for related party transactions, to shroud the full details of these transactions. However the matter had to be stepped down because it was subjudice.
Is this why you put out several publications in newspapers instead of joining either suits filed Prof A.B. Kasunmu (SAN) and Foco International Investments Limited, who are minority shareholders of Stanbic IBTC?
I am not a party to any suit and I have refused to join either suit because of the underhand tactics being used by Stanbic IBTC in the defense of the suits. Mr. Peterside has said the bank knows its rights under the law, and if I may add, Stanbic IBTC knows its wrongs under the law, which is why in one of the suits, Stanbic IBTC is challenging jurisdiction and impeding the suit from being heard and determined on its merit. In that suit, the jurisdiction of the court has been challenged to delay proceedings and negate the suit from being decided on merit. In the other suit, Stanbic IBTC is asking the court to strike out the matter as it is an abuse of court process. How can a responsible body refer to the challenge of a resolution to approve General Mandate, which is against the Nigeria Stock Exchange Rules, as an abuse of court process?
This is why I have chosen not to join the suits but to call on relevant regulators to rise up to the challenges of their duties and put a stop to this illegal act.
Do you see your position scaring prospective foreign investors and discouraging the implementation of international business operating models?
I sincerely do not think so. Any foreign investor is required to conduct necessary due diligence to prevent it from entering into agreements which are, ab initio, voidable and unenforceable. Please note that Citigroup USA and Standard Chartered Bank (both foreign banks) do not charge their Nigerian subsidiaries Management fees. It is immoral to pay Management/Franchise fees when Stanbic IBTC Holdings Plc is a subsidiary of Standard Bank of Africa. The FRCN, NOTAP and SEC should be commended for rising up to the challenges of their duties, despite undue pressure from certain quarters. It goes without saying that where an international business model stifles the growth of local expertise and discourages the transfer of technology, then it must be wholly rejected by regulators.
Mr. Peterside’s statement that our regulatory bodies will be assessed on this issue by the international investment community clearly speaks against him. No regulatory body in the world will approve an agreement which encourages the perpetual part-time recruitment of experts for billions of naira at the detriment of its own citizens. In the same vein, the CBN recently put out a statement explaining that its decision not to accede to the demand of JP Morgan, which led to the removal of Nigeria from its index, was because it would have been against the economic growth of Nigeria.
Are you not worried that this FRC investigation might affect the operations of Stanbic IBTC?
It will not. Do you know why? This is all about rules and regulations. Whatever it will mean, you can’t allow a bank to be sidelining the rules and regulations the Federal Republic of Nigeria and citing certain International Accounting Standards (IAS-37) as their reason which is very bad. IAS-37 cannot take precedence over the laws of the Federal Republic of Nigeria.
any agreement can be effected, be it management, IT or any form of franchise the National Office for Technology Transfer and Acquisition must give approval and it must register those agreements before deductions can start.
So what Stanbic IBTC did was that they started deducting in anticipation of approval which is illegal the law clearly states that you cannot do that and if you deducted in 2011 and no approval was given its decent for you to return the money to the precocious and loss account then you make another provision for 2012 if if the approval is not given you return the money and declare it in the profit and loss account.
It is even illegal to make the deductions in the first instance without the approval from NOTAP. The NPTAP Act clearly states that you cannot remit any money to the credit of any party outside Nigeria without the explicit approval of and registration from NOTAP.
If they don’t register the agreement or give the approval you cannot start deducting but what Stabic IBTC did was to deduct in 2011, which NOTAP rejected, they repeated the same thing in 2012, 2013, 2014 and 2015 and on all occasions NOTAP rejected their request and they didn’t have the common sense to return the money we have been talking to them secretly to return the money.
Had the monies not been remitted to the parent company?
No!! They kept the money in a suspense account since 2011 and it must have yielded interest and nobody knows what they are doing with the money, they warehoused the money and we don’t what they’re using the money for. Perhaps they are using the money to buy up all the stock everywhere in all the companies, who knows?
This deduction is making a tremendous amount of money available at the disposal of the majority shareholder Standard bank of South Africa to continue to buy up the shares of the company and at ridiculously lower prices because if these tens of billions of Naira are returned to the profit an loss account it will immediately make the tier one capital to go up and the share price will double to the benefit of the shareholders, but they don’t want minority Nigerian shareholders to enjoy that so they are giving the South African the opportunity with these tens of billions of Naira and then with the suppressing of the share price they are giving them the chance to buy more and more shares of the bank thereby short changing the minority shareholders in Nigeria.
The aim of regulatory bodies in Nigeria is to stop stock manipulations in the capital market and to protect the indigenous minority shareholders in Nigeria. You can’t say that because you are in the capital market therefore you just allow foreigners to come, can you go to other continents or even South Africa to do this kind of thing and not go to jail.
It was mentioned that the Management/Franchise Agreement covers advertisement in foreign media and sponsorship of pan-african event. Does that not partly justify the agreement?
The advertisement in foreign media and sponsorship of pan-african events does not justify a perpetual Management/Franchise Agreement. Pan-african events like the African Nations Cup and All Africa Games do not even hold yearly, so why will Stanbic IBTC enter into a yearly agreement for the sponsorship of such events .Then again, Stanbic IBTC, Standard Bank of South Africa and other subsidiaries can easily enter into a separate agreement for the joint sponsorship of such events whenever they are held. Concerning adverts, it is expected that an organisation like Stanbic IBTC sets aside a certain amount each year for advertising; it does not have to enter into Management/Franchise Agreement with its controlling/majority shareholder for this. Zenith Bank not only advertises in foreign media but sponsors a program on CNN, yet it is indigenously run and managed.
Now that NOTAP has refused to approve the Management/Franchise Agreement since 2011, what do you think about the management’s position that appropriate action will be taken on the monies accrued in line with relevant accounting treatment?
The management has yet again sidestepped its obligation and has relied on strange accounting treatment methods and the international accounting standard 37. Is it not amusing how none of these methods prescribe for the return of monies accrued at the end of the financial year, where there is no approval from the regulatory body and therefore no liability to pay? Since 2011 NOTAP has refused to approve and register the Management/Franchise Agreement, yet Stanbic has continued to debit and accrue tens of billions of Naira from gross revenue earned as payment for Management and IT fees. At what point will the yearly applications to NOTAP come to an end? Is it the plan of the management of Stanbic IBTC to perpetually apply to NOTAP for approval of its infinite Management/Franchise Agreement, while debiting and accruing billions of Naira every year, from gross revenue earned, as payment of Management and IT fees? It is a no-brainer that the return of the tens of billions of Naira illegally debited and accrued in a suspense account for payment as Management and IT fees to the sole benefit of the controlling/majority shareholder, would immediately raise the Tier 1 capital of the Bank and the share price will almost double, instantly. This will make Stanbic IBTC one of the strongest banks in Nigeria. Therefore, the tens of billions of Naira illegally debited and accrued in a suspense account for the sole benefit of Standard Bank of South Africa without the approval of NOTAP, MUST be returned to the profit and loss account of the Bank.
The Chairman of Stanbic IBTC Holdings Plc has come out to say that he is neither on the side of Standard Bank of South Africa or on the side of dissenting minority shareholders. What is your reaction to this?
How can it be said that Mr. Atedo Peterside is neutral when he has allowed the debiting and accrual of tens of billions of Naira from gross revenue earned as payment of Management and IT fees to Standard Bank of South Africa without NOTAP approval. Since NOTAP did not approve in 2011 and 2012 thereon, why wasn’t the billions accrued in a suspense account as payment of Management and IT fees returned to the profit and loss account of the Bank? Why will Mr. Peterside subscribe to the use of accounting models that support the continued debiting of billions of Naira as payment of Management and IT fees without NOTAP approval, and not returning the billions of Naira at the end of the financial year since there is no liability to pay? It is clear on whose side Mr. Atedo peterside heavily leans in favour of.
What is needed to be done by Stanbic IBTC for it to be compliant with the relevant laws in Nigeria?
First, the management of Stanbic IBTC has to return the tens of billions of Naira illegally debited from gross revenue earned and accrued in a suspense account, for the sole benefit of its controlling/majority shareholder – Standard Bank of South Africa – to the profit and loss account of the Bank. This, as earlier stated, will increase the Tier 1 capital of the Bank and will almost double the share price. This will make Stanbic IBTC one of the strongest banks in Nigeria.
Secondly, the obnoxious Management/Franchise and IT Agreement has to be terminated for the following reasons: i. it will NOT be approved by NOTAP because it is not in conformity with NOTAP guidelines and the CBN foreign exchange manual; ii. It does not allow for the transfer of technology and instead encourages the perpetual part-time recruitment of foreign experts to the detriment of Nigerian professionals; and iii. The illegal debit of billions of Naira from gross revenue earned for payment of Management/Franchise and IT fees deprives the FIRS and the Nigerian Government of taxable income, and must be stopped immediately.
As soon as these steps are taken by the management of Stanbic IBTC, it will be in compliance with relevant laws of Nigeria and there will be a noticeable appreciation to the liquidity of the Bank and the share price. I am happy that the present administration is very much interested in the outcome of this matter. It will serve as a litmus test for the eagerly awaited Nigeria of our dreams.
What punishment do you recommend for Nigerians involved in this illegal transactions?
Well what we are fighting for now is for the franchise management agreement to be cancelled, because NOTAP has already told them that they will not give approval for that because Nigerians have mastered the art of banking there are Nigerian banks doing very well in foreign countries, ultimately we don’t need any management franchise or agreement because Nigerians are capable even all the management staff of Stanbic IBTC are all Nigerians so why should Standard Bank of South Africa come and charge management fees. Secondly since NOTAP has told them that this cannot go through why should they continue to apply every year an making deductions from the gross revenue which is illegal this is denying the federal government of the much needed taxes, because even the federal government is not aware of the money because it is from the gross revenue earnings before taxation so they are taxed after the deduction which is illegal.
Also the bank should be sanctioned, because if you are taking away money from the gross revenue of the bank and you gave a balance sheet for that year, that means the balance sheet has been mis-stated; therefore it is no longer accurate therefore what we want is for the bank’s balance sheet to be restated the monies have to be returned to the profit and loss and then the accounts from 2011 up to 2015 have to be restated because that means if you are deducting some monies illegally the government does not know about the money, you are keeping them in a suspense account, that means your account is inaccurate and it has been misstated because of the absence of the billions of Naira that have been stashed away, so in essence what we are saying is that those monies must be returned and the accounts restated to reflect a fair and accurate statement of account of the bank.
The management that has done this must be sanctioned because you cannot just come and trample upon the laws of Nigeria because business in Nigeria is business as usual it should not continue to be business as usual because people think they have money they can trample their way and trample upon the minority shareholders; trample people who don’t have money; trample on minority rights because they have billions of Naira at their disposal it cannot continue to be business as usual we will never take this so these are fundamentally the things we are asking.
These allegations that you are raising appears to be criminal in nature, have you thought it necessary to contact the EFCC by way of petition to look into these allegations?
Actually we have not done that and why we have not done that is is because we are giving the regulatory authorities the chance to do their own part for example you can see that the Executive Secretary of the Financial Reporting Council has said that they have heard from both the minority shareholders and Stanbic IBTC and have come to the conclusion that the minority shareholders have a good case (this deductions over the years are giving me sleepless nights. It’s only in Nigeria that you can find this rubbish) so essentially we have not reported to the EFCC or ICPC or any anti-corruption body because we are giving the regulatory authorities the opportunities to do their own part and you can see that they have done a good job the Executive Secretary of the Financial Reporting council is questioning the accounts and he has advised SEC to stop the Rights Issue and NOTAP has come clearly to write to SEC that they should stop the Rights Issue CBN has also written to SEC to stop the Rights Issue. The regulators are trying to get to the root of the matter.
What is your position on the scrip issuance?
At the last EGM Stanbic IBTC brought a proposal meant to satisfy the or help Standard bank of South Africa to acquire more shares of the Stanbic IBTC they brought a resolution at the meeting for the conversion of dividends to Rights Issue in whatever portion you just fill the forms and give the instructions in writing that is what the scrip dividend is all about.
So interestingly, Standard Bank of South Africa took almost 95% of the scrip dividend issue, it’s all part of the manipulation to give Standard bank of South Africa the upper hand to continue to acquire the bank and do whatever they like and muscle out indigenous Nigerian shareholders which is very very bad.
Are we looking at the issue connivance with the top management of Stanbic IBTC? Well that could be because if the management does not support them how can South African come to Nigeria and do this kind of thing to trample upon our laws and incidentally, or by coincidence Mr Atedo Peterside the chairman of Stanbic IBTC also doubles as a director of Standard bank of South Africa so you can see the conflict of interest and Standard bank of South Africa owns 53% of Stanbic IBTC so you can see clearly what is happening so these are the kind of things that have continued to pain us because that in America, Europe or even South Africa you cannot do this kind of thing and get away with it.
What we are suspecting is that maybe Peterside has been an old friend and ally of the former president Goodluck Jonathan maybe he has been using that contact to trample upon what the regulators might want to do. You know that in Nigeria if am close to the president of minister, I can make you to be afraid as the regulator because you can use your closeness to the president or minister to remove a regulator that wants to his job which is not proper. We should establish a system that punishes whoever flouts the law.
If your view that he was close to the former president is anything to by then perhaps why was not able to use that connection to get NOTAP to give approval for these requests?
We are just giving instances that maybe that was what happened and that he could feel that he is too powerful and as such he cannot be made to conform to the law, you know how our people think but NOTAP is guided by the approval guidelines and the forex manual from the CBN states that any agreement or item that is not covered in forex manual NOTAP cannot just unilaterally give you an approval that is the secret they could have gotten the approval since but because there is a guideline but what continues to pain us is why should you keep these billions of Naira in a suspense account using the money for whatever purpose you like. Even if you keep it to be yielding interest can you imagine the amount of interest these monies would have generated over the years.
If they fail to return this money what will be you next line of action?
I don’t think and hope the Financial Reporting Council of Nigeria will allow them not to return the money because Jim Obaze is a very articulate man who k it’s what he is doing and he is all out to establish due process and rule of law. I don’t foresee the possibility of the Financial Reporting Council allowing Stanbic IBTC not to return the money to the profit and loss account. I don’t even foresee that, it’s not possible because the money is closed to taxation. The Federal Inland Revenue Service if they get to hear of this also I don’t think they’re going to let the matter rest they must sanction the bank they have to sanction the bank and am even calling on them to even sanction the bank.
