According to FRCN, they were suspended alongside two other directors – Mr. Arthur Oginga and Dr. Daru Owei – for attesting to the “misleading” 2013 and 2014 financial accounts of the financial holding company (Holdco).
Also suspended was Ayodele Othihiwa of KPMG Progessional Services for his firm’s alleged complicity in the infractions highlighted in the financial reports for the two-year period.
The suspension is expected to be in place “until the investigation as to the extent of their negligence in the concealment, accounting irregularities and poor disclosures in the said financial statements is completed in accordance with Section 62 of the Financial Reporting Council of Nigeria Act”.
But in a swift reaction to the suspension of their FRC numbers, Stanbic IBTC, in a statement issued by David-Borha and its company secretary Chidi Okezie, said although the matter was in court, it decided to respond to certain aspects of the report for the benefit of its stakeholders and the general public.
Stanbic IBTC termed FRCN’s allegations “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’,” Stanbic IBTC said.
Holco maintained that this was not the case, “because Stanbic IBTC does not agree that its accounts are defective or require rectification”.
The financial institution further reminded FRCN that Regulation 27 makes it clear that where a reporting entity does not accept FRCN’s position, “the council shall institute legal action against the entity”.
Accordingly, Stanbic IBTC accused FRCN of ignoring this laid down process in preference for “self-help and media publicity”.
It added: “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 (National Office for Technology Acquisition and Promotion) 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 Holdco maintained that it is a very responsible organisation that fully complies with all extant laws and regulations in Nigeria and international best practices applicable to the conduct of its business.
“It is the only Nigerian bank that is AAA rated by Fitch. It has met the disclosure requirements of Nigerian law and international financial reporting standards applicable in Nigeria,” it added.
It said that its books had been fully disclosed and provided a true and fair view of its assets and liabilities, profits and losses, and its overall financial position.
Stanbic IBTC further clarified that its directors were not ousted. “The directors, who are from Nigeria and elsewhere, are reputable individuals who uphold the best corporate governance practices and whose credibility, integrity and proven track record are impeccable,” it said.
It also reiterated its commitment to continue to conduct its business in compliance with extant Nigerian laws and international best practices.
The FRCN’s hammer on the Holdco’s directors and the KPMG auditor followed preliminary investigations from the review of its financial statements and major subsidiaries for the years ended December 31, 2013 and 2014, wherein material irregularities of the entities were also brought to the attention of the council by some minority shareholders of Stanbic IBTC – the Mahtani brothers of the Churchgate Group fame – relating to its financial statements for 2011, 2012, 2013 and 2014.
The FRCN further ordered the directors of Stanbic IBTC to withdraw the financial statements of the holding company for 2013 and 2014 and restate them in accordance with the provisions of Section 64 (2) of the Financial Reporting Council of Nigeria Act and Regulation 21 of the Financial Reporting Council of Nigeria.
The latest action taken by the FRCN followed a petition by some of the Holdco’s shareholders, the Trusted Shareholders’ Association who were egged on by the Mahtanis, to the Securities and Exchange Commission (SEC), FRC, NOTAP, Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC).
The petition bordered on Stanbic IBTC Holdings and Stanbic IBTC Bank’s alleged illegal accrual of tens of billions of naira into a suspense account for the sole benefit of its controlling/majority shareholder – Standard Bank of South Africa – in the last five years.
It was alleged that the Holdco had since 2011 been transferring monies from earned profits into a suspense account for the purpose of crediting the Standard Bank of South Africa for franchise/management fees, even though NOTAP had severally disapproved of the agreement with the foreign technical partner.
In this regard, the council requested evidence of a second partner review and audit approach that the external auditors of Stanbic IBTC (KPMG Professional Services) adopted on quality control on the said financial statements that could not reveal the alleged infractions.
But the report on the preliminary investigations on Stanbic IBTC which was posted on the FRC website, further revealed non-audit service payments of N62 million (2011 to 2014) by the bank to KPMG Professional Services.
As a result, the council said it was interested in knowing the nature of these non-audit services, the fees actually earned and the possible impact on auditor independence and objectivity.
According to the Executive Secretary, Financial Reporting Council of Nigeria (FRC), Mr. Jim Obazee, “The schedule submitted to our council by Stanbic IBTC revealed that professional fees which was simply a line in the financial statements contained several expenses that are unrelated to professional fees and which required separate disclosures on their own to give users of the financial statements a good understanding of the transactions and events of the bank."
The franchise fee, which according to FRCN, included in professional fees for 2014 and 2013 were franchise fees of N2.3 billion and N1.9 billion respectively, which were provisions made for franchise fee to be paid to Standard Bank of South Africa.
Also, a tax advisory fee and provision for tax liability assessment were included in the 2014 professional fees figure which attracted a fee of N711 million for tax advisory and provision for tax liability assessment.
The council said it was concerned that provisions for tax liability were included in the professional fee.
It also noted that a provision for litigation was included in 2014, being the sum of N752 million which the schedule revealed included “provision for litigations” that also included professional fees “when there is a financial reporting standard which requires separate disclosures of issues relating to litigations”.
FRCN also alleged that Stanbic IBTC contravened the presentation requirements of taxes under the International Financail Reporting Standard (IFRS), which require that current and deferred tax assets and liabilities be presented separately in the statement of financial position since they are not of the same substance.
“However current and deferred tax assets and liabilities were lumped together and presented as a single line item in the statement of financial position,” the council said.
Noting that Stanbic IBTC may have defaulted in its tax obligations to the federal government among other regulatory subversions, it asked the CBN to assist by “taking regulatory disciplinary actions against those whom the CBN expects to guarantee the integrity of the aforementioned financial statements in order to safeguard the interest of stakeholders of Stanbic IBTC”.
FRCN further charged the Federal Inland Revenue Service (FIRS) to ensure that related taxes are paid and the government is not unduly short changed, and called on the Economic and Financial Crimes Commission (EFCC) to question those involved in the concealment and sale of the banking application software that was developed in Nigeria which, other than the financial implication, had also robbed Nigerians of national pride.
FRCN, in the report, also contended that Stanbic IBTC had regularly flouted CBN regulations.
“In 2014, for instance, a total penalty of N28,000,000 was imposed on the group,” it stated.
Among the contraventions, FRCN said, was the improper disclosure of public sector deposits in 2014.
“Stanbic IBTC seems to have a penchant for poor disclosures, which further corroborates the findings in this report. Several donations were concealed in ‘others’. The group disclosed its donations in the annual report in compliance with the requirement of CAMA CAP C20 LFN.
“However, just one line item of donations in ‘Others’, N275,000,000, far exceeded the aggregate donations disclosed in the annual report (N162,468,098).
“They also could not confirm the entity that this amount was donated to when questioned further at the meeting of 16th October 2015.
“Also concealed within ‘others’ were directors’ fees and expenses of N223,000,000 (2013: N218,000,000). This is aside the directors’ fees and emoluments disclosed in a separate note in the financial statements.
“All fees, remuneration and emoluments of directors should have been disclosed as part of related party disclosures in the group’s financial statements,” FRCN added
Tags
Business