Ibori’s Oando Deal: The Untold Story!

The Jite Okoloko & Henry Imasekha Connection Revealed

Though the management of Oando has denied allegations that the convicted former Governor of Delta State, Chief James Ibori owns at least 30% shares in the company, very little has changed in the belief that the company was one of those used to launder funds allegedly looted from Delta State.

Street Journal’s findings also revealed that the CDC (Commonwealth Development Corporation), an arm of the United Kingdom’s Department for Internation Development (DfID) came under intense criticisms and investigation for its investments in companies linked with James Ibori and his associates. In a memorandum submitted to the British Secretary of State for International Development by a Non Governmental organisation, Jubilee Debt Campiagn before Ibori was convicted, Oando and four other companies were named as fronts through which the former Delta State Governor laundered funds.  The British agency was chided for not carrying out proper investigations before putting tax payers money into companies smeared in corrupt deals.

Below is a text of the Memorandum:

Summary

The corrosive impacts of corruption on development and on democratic accountability have been widely documented. It would be wholly inaccurate, however, to characterise corruption as a problem solely of the South. Corruption flourishes wherever the powerful are able to undermine the rule of law for personal gain. It is as common in the North as it is in the South. Moreover, much of the corruption that takes place in developing countries is possible only with the complicity – active or passive – of Northern financial institutions, which enable bribes and other forms of corrupt wealth to be laundered through “legitimate” investments.

The former Labour Government recognised the role played by Northern companies and financial institutions in facilitating corruption, and thus made promoting good governance and combating corruption the “centrepiece” of its policy on international development. Nonetheless, the UK has been widely criticised for failing to clamp down on “home grown” corruption overseas. In addition, despite the adoption of anti-corruption procedures by government departments that directly and indirectly support UK business overseas, there is continuing evidence of the Government failing to act where credible evidence of corruption is presented to it.

This Memorandum from concerned Non-Governmental Organisations (NGOs) raises several questions over the due diligence conducted by the CDC Group, a company wholly owned by the UK Government, in its dealings with two private equity firms – Emerging Capital Partners (ECP) and Ethos – that CDC has supported in Nigeria. Both firms have invested in Nigerian companies reported to be “fronts”6 for the alleged laundering of money said to have been obtained corruptly by the former Governor of Nigeria’s oil rich Delta State, James Ibori. Ibori is currently under investigation by Nigeria’s Economic and Financial Crimes Commission (EFCC) for alleged corruption.

The CDC Group (formerly the Commonwealth Development Corporation) is a public limited company that is wholly owned by the UK’s Department for International Development (DfID) Created in 1948 to promote private sector development in the UK’s former colonies, CDC was substantially restructured in 2004: instead of investing directly in companies, it now primarily does so indirectly, providing capital to “private equity funds that in turn invest in companies in the poor countries of the world”. CDC now describes itself as a “fund of funds”. At the end of 2009, CDC had assets of 2.5 billion (US$4.0 billion)13 and investments in 65 funds, which in turn invest in 794 companies in 71 countries, notably in Asia and sub-Saharan Africa.

CDC states that “responsible investment practices have always been core to CDC’s mandate”. The funds in which CDC invests are selected because of their managers’ specialist knowledge and understanding of the countries in which they operate. Moreover, they are expected to invest only in accordance with CDC’s Investment Code, which requires, inter alia, that all businesses in which CDC’s capital is invested comply with all applicable laws and international standards intended to prevent bribery and financial crime.

The aim is “to ensure that portfolio companies improve upon their business practices from the environmental, social and governance perspectives during their investment period.”

As detailed in this Memorandum, serious concerns have emerged over whether or not two CDC-backed private equity funds – Emerging Capital Partners Africa Fund II PCC (ECP Africa Fund II) and Ethos Fund V – complied with CDC’s Investment Code. Both funds have invested in Nigerian companies reported to be “fronts” for the alleged laundering of money said to have been obtained corruptly by the former Governor of Nigeria’s oil rich Delta State, James Ibori. Nigeria’s Economic and Financial Crimes Commission (EFCC) and law enforcement agencies in the UK have alleged links between these ECP-or Ethos-backed companies and Ibori and/or his associates. Specifically:

In October 2007, the Economic and Financial Crimes Commission (EFCC), Nigeria’s prime anti-corruption enforcement agency, named four companies – Notore, OandO, Celtel and Oceanic Bank – in a sworn affidavit as companies through which funds are alleged to have been corruptly moved on behalf of James Ibori, the former Governor of Nigeria’s Delta State. Emerging Capital Partners (ECP) or Ethos has invested in these companies. The affidavit also referred to a fifth ECP-backed company, Intercontinental Bank, as party to an alleged illegal payment.

Ibori has a criminal record in the United Kingdom and is currently under investigation on money laundering charges by London’s Metropolitan Police. In 2007, a UK court froze assets allegedly belonging to him worth $35 million. .Ibori fled Nigeria in April 2010, following charges brought against him by the EFCC for allegedly selling off Delta State assets illegally to pay off a private loan from Intercontinental Bank while he was still Governor. He is accused of stealing $290 million (£196 million) from Delta State. Ibori’s dealing with both Oceanic Bank (on which Ethos had board representation) and Intercontinental Bank

(on which ECP had board representation)are central to the charges. On 13 May 2010, he was arrested in Dubai at the request of the London Metropolitan Police.

• Two directors of ECP-backed companies – Henry Imasekha and Michael Orugbo were also named by the EFCC as part of its 2007 investigations into Ibori’s alleged “corruption, diversion and misappropriation of public funds, stealing and money laundering”. In EFCC’s October 2007 affidavit, Imasekha was described as “the character moving funds in Celtel, OandO and Notore Chemical Industries.”

Imasekha has also been charged as a co-conspirator in the money-laundering case against Ibori and several of his associates that is currently being heard before the UK. In May 2010, Imasekha was reported to have fled to Ghana, following fresh corruption charges against Ibori.

• The current director of the Ethos-backed Oceanic Bank, Oboden Ibru, and the Bank’s former CEO and director, Cecilia Ibru, are currently facing money-laundering charges in Nigeria.  The assets of Cecilia Ibru have been frozen, and Oboden Ibru has been named as her associate. Oboden Ibru is also currently listed as a non-executive director of ECP-backed OandO.

• Intercontinental Bank and Oceanic Bank, in which ECP and Ethos have invested respectively, collapsed in 2009 and had to be bailed out by the Central Bank of Nigeria (CBN) – in effect, by Nigerian citizens to the detriment of the country’s development. CBN sacked the banks’ executive directors and ordered an investigation into a number of non-performing loan portfolios, including unsecured loans to Ibori’s associates. Thomas Gibian, ECP’s current Executive Chair, has reportedly been a board member of Intercontinental since 2007. Ethos similarly has board representation on Oceanic Bank.

The links that Nigeria’s Economic and Financial Crimes Commission (EFCC) and other law enforcement agencies have alleged between ECP-or Ethos-backed companies in Nigeria and associates of James Ibori raise many questions about the due diligence performed by ECP and Ethos and by CDC:

• Did ECP seek advice from the EFCC as to its planned investments in Notore and other companies in Nigeria? If so, when? If so, what was the EFCC’s response? If it did not, why did it not do so?

• Why did ECP chose to invest in OandO some two months after the company had been named by the EFCC in connection with Ibori’s alleged money laundering?

• Why did ECP increase its stake in Notore after the EFCC had similarly named the company?

• Did the companies whose directors were named by the EFCC in its 2007 affidavit concerning money laundering and illegal payment inform their board members, including those representing the CDC-backed investment funds, about these widely publicised allegations and legal actions? If so, what did the board members representing the private equity funds do with this information? If not, how effective are these private equity funds, and the board members representing them, in ensuring good corporate governance, a key goal of CDC?

• What action did ECP and Ethos take to address the governance failures that ultimately led to the 2009 collapse of Intercontinental Bank and Oceanic Bank?

• Was Ethos aware of the size and extent of unsecured loans made by Oceanic Bank to companies associated with Henry Imasekha, despite the EFCC having named him in 2007 as a business associate of Ibori?  Did Ethos – which had board representation on Oceanic Bank – question the purpose of such loans?

• Similarly, did ECP’s nominated board member on Intercontinental Bank – ECP’s current Executive Chair Thomas Gibian – know that the bank was making unsecured loans to companies associated with Henry Imasekha,despite the EFCC having named him in 2007 as a business associate of Ibori? If so, what steps did he take to stop the practice?

•When did ECP and Ethos learn of the alleged links between their investee companies in Nigeria and James Ibori?

• If they were unaware of such links, which were widely publicised in Nigeria and elsewhere, what is the extent and relevance of their knowledge of the country in which they invested?

• What steps did ECP or Ethos take to alert the UK or Nigerian authorities of any concerns that such links might have raised?

• Did ECP and Ethos disclose to CDC that companies in which they were investing had been named by the EFCC in its investigations?

• When did CDC become aware of the alleged links between these five companies and Ibori?

• If CDC did not flag up such links, what does this indicate about the quality of its anti-corruption due diligence procedures?

• What losses has CDC incurred in relation to the five cited companies?

• What warranties did the two private equity firms, ECP and Ethos, make to CDC concerning the due diligence they had undertaken relating to the five investee companies and the anti-corruption procedures they had in place? Were these warranties broken? If so, what action is CDC taking?

• CDC conducted its own board level investigation into the alleged links between Ibori and the five investee companies? If it deemed the allegations sufficiently credible to merit such an investigation, why did CDC not inform the Serious Fraud Office of them immediately?

• DfID’s support for CDC is premised on private sector-led economic growth being the way out of poverty. How was this objective realised through CDC’s support for investments in Intercontinental Bank and Oceanic Bank on which CDC-backed funds had board representation? What are the development consequences for poorer Nigerians who are now effectively bailing out these banks after their failure helped to bring the Nigerian economy to the brink of collapse?

Introduction:

Corruption and Northern financial institutions

Corruption – broadly defined as “the abuse of public or private office for personal gain” takes many forms, from petty extortion to the amassing of personal wealth through embezzlement or other dishonest means. Its corrosive impacts on development and on democratic accountability have been widely documented.

Moreover, corruption is not a victimless crime. As former Secretary of State for International Development, Hilary Benn, bluntly stated in 2006:

“In poor countries [corruption] can kill. Money meant for drugs for a sick child, or to build a hospital, can be siphoned off into overseas bank accounts or to build a luxury house.”

Worldwide, bribery and embezzlement have permitted billions of dollars to be amassed by corrupt politicians. Nigeria’s former President Abacha is estimated to have embezzled between $2 billion and $5 billion; Zaire’s President Mobutu, an estimated $5 billion. Kenya lost $600 million in one scandal alone in the early 1990s, while in Angola an estimated $4 billion went missing between 1997 and 2002.

It would be wholly inaccurate, however, to characterise corruption as a problem solely of the South. No country is immune. Corruption flourishes wherever the powerful are able to undermine the rule of law for personal gain. It is as common in the North as it is in the South.

Moreover, much of the corruption that takes place in developing countries is possible only with the complicity – active or passive – of Northern financial institutions, which enable bribes and other forms of corrupt wealth to be laundered through “legitimate” investments, often in Northern economies.

Recognising the role played by Northern companies and financial institutions in facilitating corruption, the former Labour Government made promoting good governance and combating corruption the “centrepiece”  of its policy on international development. In 2006, the then Secretary of State for International Development stated:

“Bad governance can be caused or made worse by the actions of rich countries and their companies. It is often called the “supply-side” of corruption – those who provide the bribes or offer opportunities to hide stolen assets. All of us must take strong action to address these problems . . .”

Promising to tackle corruption “wherever we find it – whether here or abroad” and not to tolerate “those who extort, corrupt and deceive”, the then Government launched its Anti Corruption Action Plan in December 2006, in which it committed itself to investigating and prosecuting bribery overseas, to eliminating money laundering and to promoting responsible business conduct in developing countries. A “Proceeds of Crime” team was established within the London Metropolitan Police, funded by the Department for International Development (DfID), to investigate, recover and return the proceeds of money laundering by Politically Exposed Persons through the UK’s financial system.

Nonetheless, the UK has been widely criticised for failing to clamp down on “home grown” corruption overseas. Moreover, despite the adoption of anti-corruption procedures by government departments that support UK business overseas, whether directly or indirectly, there is continuing evidence of the Government failing to act where credible evidence of corruption is uncovered.

This Memorandum from concerned Non-Governmental Organisations (NGOs) raises similar concerns over the due diligence conducted by the CDC Group, a development finance institution wholly owned by the Department for International Development, in its dealings with two private equity firms – Emerging Capital Partners (ECP) and Ethos – that it has supported. Both firms have invested in Nigerian companies that are reported to be “fronts” for the alleged laundering of money said to have been obtained corruptly by the former Governor of Nigeria’s oil rich Delta State, James Ibori. Mr. Ibori is currently under investigation by Nigeria’s Economic and Financial Crimes Commission (EFCC) for alleged corruption.

The CDC Group:

Anti-corruption undertakings

The CDC Group (formerly the Commonwealth Development Corporation) is a public limited company that is wholly owned by the UK Government through the Department for International Development (DfID). It describes itself as the UK Government’s Development Finance Institution.

The Commonwealth Development Corporation was created in 1948 to promote private sector development in the UK’s former colonies. It was substantially restructured in 2004: instead of investing directly in companies, it now primarily does so indirectly, providing capital to “private equity funds that in turn invest in companies in the poor countries of the world”.

CDC now describes itself as a “fund of funds”.At the end of 2009, CDC had assets of 2.5 billion (US$4.0 billion) and investments in funds, themselves investing in 794 companies in 71 countries, notably in Asia and sub-Saharan Africa. Typically, the CDC-supported funds sell their investment after 7-10 years to other private sector investors, and the net proceeds of the sale are returned to CDC. DfID states that it supports CDC because there is evidence to show “that it is the private sector that drives economic growth. And it is economic growth that is the only long-term sustainable way out of poverty.”

Since CDC is a UK government agency, its financing is backed by the full faith and credit of the UK Government and using UK taxpayers’ money. Its use of government-backed funds to invest in the private sector, and its sharing of the profits that arise from such investments, thus place it at a nexus of public and private sector obligations to combat corruption.

CDC states that: “Responsible investment practices have always been core to CDC’s mandate”. The funds in which CDC invests are selected because of their managers’ specialist knowledge and understanding of the countries in which they operate.81 Critically, CDC-backed fund managers do not take a “hands off” approach to their investments, but “play a role in the companies in which they invest”,82 often through board level representation. CDC also states that “experience in identifying areas for improvements in corporate governance is usually part of a fund manager’s core skills”.

Fund managers are expected to invest only in accordance with CDC’s Investment Code, which has been approved by DfID. The Code requires, inter alia, that all businesses in which CDC’s capital is invested comply with all applicable laws and international standards intended to prevent bribery and financial crime.85 The aim is “to ensure that portfolio companies improve upon their business practices from the environmental, social and governance perspectives during their investment period.”

More specifically, CDC’s Investment Code requires it: “to ensure that CDC, and the businesses in which CDC’s capital is invested, exhibit honesty, integrity, fairness, diligence and respect in all business dealings;” and “to comply with all applicable laws and promote international best practice, including those laws and international best practice standards intended to prevent extortion, bribery and financial crime.”

Section 4 of the Investment Code also requires CDC-supported fund managers to enter into a formal agreement with CDC pursuant to which each fund manager establishes and maintains environmental, social and governance management systems that “monitor and record incidents involving portfolio companies that result in . . . material breach of law, and promote appropriate corrective actions”. Moreover, the management systems that CDC-backed funds are required to have in place must be “suitable to the level of risk of the companies in which they invest”.

Recognising that “standards within businesses are not always perfect”, CDC “insists on improved reporting by its fund managers and investee companies so that problems are identified and fixed as soon as is practicable”. More specifically, CDC’s Investment Code requires fund managers to “. . .inform CDC about incidents . . . that result in . . . material breach of law, and any corrective actions taken”.

In addition, as a financial institution, CDC is arguably bound by the UK’s anti-money laundering legislation, which requires due diligence to prevent money laundering. Best practice – and potentially the law itself – would require that CDC ensures that the funds in which it invests have adequate anti-money laundering procedures in place. CDC’s anticorruption due diligence should therefore include an enhanced review of investments involving what are deemed to be “Politically Exposed Persons” (PEPs). These persons, according to the intergovernmental Financial Action Task Force, are:

“Individuals who are or have been entrusted with prominent public functions in a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials. Business relationships with family members or close associates of PEPs involve reputational risks similar to those with PEPs themselves. The definition is not intended to cover middle ranking or more junior individuals in the foregoing categories.”

This is particularly relevant in the context of CDC-supported investments involving current or former government enterprises, banks, and government decision-makers.

Corruption in Nigeria: Of what should CDC have been mindful?

Although the vast majority of businesses in Nigeria are “clean” of corruption, the widespread looting of public assets by corrupt officials has led to many companies being established or used as fronts for money laundering.

Recent investigations by the Nigerian authorities, notably the Economic and Financial Crimes Commission (EFCC), the country’s prime anti-corruption enforcement agency, have exposed many of the networks of corruption through which public assets are amassed and subsequently “laundered” for private gain. Of particular relevance to the concerns raised by this Memorandum are the efforts of the EFCC to bring the former Governor of the oil-producing Delta State, James Ibori, to account for alleged corruption. In 2007, the EFCC charged Ibori with 170 counts of looting more than $85 million during his eight-year governorship of Delta State. Although a federal court in the Delta State capital of Asaba dismissed the case on a technicality, the EFCC has appealed this judgment and has also brought new charges following the collapse of several Nigerian banks, including Intercontinental Bank and Oceanic Bank, in 2009. The new charges relate to a multi-million pound private loan that Intercontinental Bank made to Ibori, for which Ibori is alleged to have illegally used Delta State shares in Oceanic Bank as security.

Such investigations have revealed a number of practices through which corruptly obtained funds are allegedly laundered within Nigeria. These include government officials:

• selling national assets to their front men, their associates or those close to them;

• securing private loans from banks without collateral, in return for placing government funds with those banks;

• diverting funds by moving them through a series of front companies from government accounts to personal or business accounts; and

• using front men to carry out inflated or privileged government contracts.

Given that CDC selects its fund managers in part for their local knowledge, there is a legitimate expectation that such practices would be well known to CDC-backed fund managers that invest in Nigerian companies. It is thus of great concern that two CDC-supported private equity firms, Emerging Capital Partners (ECP) and Ethos, appear to have invested in Nigerian companies that have been linked, directly or indirectly, to individuals who, variously, have been named, investigated and charged for alleged corrupt activities, had their national and international assets frozen, and who are associated in various ways with James Ibori.

Emerging Capital Partners (ECP): Investments of concern

CDC has investments in two private equity funds – Africa Fund II and Africa Fund III – run by US-based Emerging Capital Partners (ECP), which it describes as “a leader in private equity in Africa”.ECP’s Executive Chair is Thomas Gibian,who is based in

Washington, DC. ECP has equity investments in telecommunications, oil and gas, financial services, consumer products, mining, and engineering and construction.

In 2008, the value of CDC’s investments in ECP’s Africa Fund II was £23 million. The same year, CDC committed $100 million to ECP’s Africa Fund III, the successor to the Africa Fund II.

ECP lists Africa Fund II as investing in several Nigerian companies including

Intercontinental Bank, Notore (a fertilizer manufacturer)and Ocean & Oil Investments

(a holding company whose main asset is a significant shareholding in OandO, an oil and gas conglomerate).ECP Africa Fund II is the successor to AIG Africa Investment Fund, which had investments in Celtel, a telecommunications company.

Further details of these investments are outlined below:

• Notore (also Notore Chemical Industries) is an agrochemical company that evolved out of the sale in 2005 of the state-owned National Fertiliser Corporation of Nigeria

(NAFCON) when the Nigerian Government sold it off as part of its privatisation programme. 112 ECP has representation on the board of Notore: ECP Managing

Director Michael Jansa of Washington DC113 and former ECP Managing Director of Johannesburg, Navaid Burney are both Notore directors.

ECP used an offshore company, Notore Mauritius, to invest in Notore and to date is the only institutional investor in Notore. Notore Mauritius is jointly owned by ECP (20.9%), Egyptian Fertiliser Company (22%) and a Nigerian company, Oyeladuk Global Concepts (57.1%).

ECP’s Executive Chair, Thomas Gibian, has acknowledged that a number of Notore’s Nigerian directors, including Henry Imasekha, who was named in the EFCC’s 2007 affidavit, own their shares in Notore through Notore Mauritius. Gibian has confirmed that Notore Mauritius was established “based on ECP’s insistence on being accorded stronger minority shareholder rights which are available under Mauritius law as compared to Nigerian law”.

Of concern are two other potential outcomes of the arrangement. It may have enabled the directors to avoid paying tax in Nigeria on their investment in Notore and to present themselves as “foreign investors”, despite being Nigerian citizens, since their investment (nominally) comes from an offshore company. The arrangement also creates several layers of transactions that can hide, or at least cause confusion as to, the identities of Notore’s actual owners.

In its 2007 affidavit, the EFCC raised concerns about Michael Orugbo securing a loan from Oceanic Bank to buy NAFCON even though Orugbo and the bank had no previous relationship. Following the Central Bank of Nigeria’s 2009 audit of the failed banks’ non-performing loans, Notore was listed as the biggest non-performing debtor of Oceanic Bank. Oceanic’s former CEO, Cecilia Ibru, is now facing criminal charges relating to illegal loans (see below).

CBN sacked the banks’ executive directors and ordered an investigation into a number of non-performing loan portfolios, including unsecured loans to Ibori’s associates

 

• Ocean & Oil Investments is a Nigerian investment holding company whose main asset is a 32 per cent common equity stake (the largest shareholder) in OandO Plc  (OandO), Nigeria’s largest indigenous diversified oil and gas company. In 2000,

OandO acquired 30 per cent of Unipetrol, a former government oil company sold off as part of a Nigerian government privatisation programme.ECP’s investment in Ocean & Oil Investments is $35 million. OandO lists former ECP Managing

Director Johannesburg, Navaid Burney and current Managing Director Lagos,

Genevieve Sangudi as board directors in Oando; Burney is currently reported to be an OandO non-executive Director even though he is now with Standard Bank and was until 2009 representing ECP on the Oando board. ECP for its part lists ECP Managing Directors Michael Jansaand Carolyn Campbellas current board members of Ocean & Oil and Oceans and Oil Investments respectively. Neither, however, is listed on the websites of the two relevant companies.

• Celtel is a telecommunications company. Until 2005, ECP Africa Fund II was an equity investor in Celtel International, the parent company of Celtel Nigeria. ECP’s investment consisted of $50 million in common shares. ECP indicates that its current Executive Chair, Thomas Gibian, served on the board of Celtel.

• Intercontinental Bank was one of the largest Nigerian commercial banks. ECP indicates that its current Executive Chair, Thomas Gibian, was a non-executive director of Intercontinental Bank,reportedly appointed in 2007.In 2009, the entire senior management and executive board members of Intercontinental Bank were required to stand down after the Central Bank of Nigeria (CBN) had to bail the bank out. CBN Governor Lamido Sanusi ascribed Intercontinental’s collapse to “poor corporate governance practices, lax credit administration processes and the absence or non-adherence to the bank’s credit risk management practices.” Gibian was not removed, as he was a non-executive director. Intercontinental still lists him as such, although ECP is understood to have disinvested recently from the bank.

In 2007, in a sworn affidavit filed by an official of the Nigerian Economic and Financial Crimes Commission (EFCC), reference was made to an allegedly corrupt payment made “via Intercontinental Bank Manager’s Cheques”. The affidavit was submitted as evidence against former Delta State Governor James Ibori who had been charged with conspiracy, official corruption, diversion and misappropriation of public funds, stealing and money laundering.

Allegations relating to directors of ECP-backed companies in Nigeria

As widely reported in the Nigerian and international media, several of the directors of ECP-backed companies in Nigeria, and in some cases the companies themselves, have been named in corruption investigations undertaken by the Nigerian and/or UK authorities. Some of the named individuals have also been charged with corruption-related offences and two have had their bank accounts frozen. Some of the individuals reported to be under investigation are alleged to be associated with former Delta State Governor James Ibori.

Further details are set out below:

• Erastus Akingbola

Erastus Akingbola is a former managing director of Intercontinental Bank. Media reports indicate that in April 2010, a high court in Nigeria’s capital, Lagos, froze Akingbola’s national assets and over £9 million of international assets after he was charged inter alia with conspiracy to grant unsecured credit facilities, conspiracy to manipulate share prices, reckless consideration of credit facilities without adequate security, and a failure to present monthly statements of account to the Central Bank. The charges followed the collapse of Intercontinental Bank and the removal in August 2009 of its Managing Director and Executive Directors on the orders of the Governor of the Central Bank of Nigeria.

• Henry Imasekha

Henry Imasekha is currently listed on Notore’s board of directors. Imasekha is repeatedly named in the 2007 EFCC affidavit as an accomplice in James Ibori’s alleged laundering of corruptly obtained funds and is specifically described as “the character moving funds in Celtel, OandO and Notore Chemical Industries.” Media reports refer to Imasekha as “Ibori’s brain,” and Ibori’s “business front.”

Imasekha is reported to have been named in money laundering charges in the United Kingdom. The charge sheet, as reproduced on a public website, alleges that, contrary to Section 327 of the Proceeds of Crime Act 2002, Imasekha conspired with

Ibori and others to conceal, disguise, convert and transfer US$10 million in criminal property.

Questions have also been raised in the press about Imasekha’s possible role in a recent collapse of several of Nigeria’s banks, including Intercontinental Bank, largely because of their excessively high proportion of non-performing loans. Imasekha is named in a public notice issued in 2009 by the Central Bank of Nigeria ordering him and other “defaulting customers of the affected banks to pay without further delay their indebtedness, failing which the banks will take all appropriate legal actions to ensure repayment”.

Separately, Imasekha is reported to have been a defendant in a lawsuit filed in the Nigerian Federal High Court in 2007 by the President of the Nigerian Stock Exchange, alleging the unlawful sale of shares in two companies, OandO Networks Ltd and Bromley Investments Ltd, to Delta State Ministry of Finance Incorporated and Delta State Government.

In May 2010, Imasekha was reported to have fled to Ghana, following further corruption charges against Ibori.

• Michael Orugbo

Michael Orugbo, a Nigerian, is a board director of Notore, and is named in the 2007 EFCC affidavit in relation to his role in the acquisition of NAFCON.147 He is reported to be a former Ibori aide and would therefore be deemed a Politically Exposed Person.

• Onajite Okoloko

Onajite Okoloko, a Nigerian, is the CEO of Notore, a founding director of the OandO Group and a current director of OandO. In an interview with Next, a Nigerian news group, Okoloko is reported to have said that he is a personal friend and school classmate of Ibori, although he denied any business links. Okoloko is named, along with Imasekha, in the Central Bank of Nigeria’s 2009 public notice ordering him to pay his debts to the collapsed banks (see above).

• Wale Tinubu

Wale Tinubu, a Nigerian, is the Group Chief Executive and a Director of OandO. Tinubu is reported to have been a defendant, along with Imasekha, in the 2007 lawsuit filed by the President of the Nigerian Stock Exchange over the allegedly illegal sale of OandO Networks shares to Delta State Ministry of Finance Incorporated and Delta State Government.

 Ethos: Investments of concern

Ethos is “a leading private equity manager in South Africa”, established in 1984 and involved in private equity since 1996. It is “currently investing its fifth pool of capital”, Ethos Fund

V, which operates in sub-Saharan and South Africa.With CDC support, Ethos Fund V has raised $750 million and has equity investments in manufacturing, consumer products and service companies, CDC’s financial commitment to Ethos Fund V amounts to $30 million.

In 2007, Ethos led a consortium that invested $130 million in Nigeria’s Oceanic Bank, concerns over which are set out below.

• Oceanic Bank

Oceanic Bank describes itself as “one of Nigeria’s leading one-stop financial services conglomerates”. Delta State, of which James Ibori is a former governor, was a major shareholder in Oceanic; Ibori is now alleged to have used these Delta State shares as security for a loan from another bank, Intercontinental, and of subsequently selling the Oceanic Bank shares illegally to repay the Intercontinental loan.

Oceanic Bank was named in the 2007 EFCC affidavit that set out a range of allegations against James Ibori and others for alleged corruption. The Bank was also named in 2009 by the Governor of the Central Bank of Nigeria (CBN) as one of five banks whose weak corporate governance and non-performing loans had collectively brought the Nigerian economy to the brink of collapse and resulted in the CBN having to inject billions in bail out funds. CBN named Notore and OandO as non-performing debtors of the bank. The CBN Governor sacked Oceanic’s executive directors and ordered a special examination into the bank’s activities.

Oceanic Bank wholly owns OandO Networks, the company whose shares Wale

Tinubu and Henry Imasekha were alleged (in a 2007 court case brought by the President of the Nigerian Stock Exchange) to have sold illegally to Delta State government companies. The lawsuit alleged that Tinubu and Imasekha were part of a secret and illegal arrangement to hold those shares on behalf of Ibori.

Ngalaah Chuphi of Ethos private equity firm is reported to be on the board of Oceanic Bank International.

 Allegations relating to directors of Ethos-backed Oceanic Bank

A number of allegations of corruption have been reported against the directors of the Ethos-backed Oceanic Bank, as detailed below:

• Cecilia Ibru and Oboden Ibru

Cecilia Ibru, a former CEO and managing director of Oceanic Bank, was sacked by the CBN Governor in the 2009 shake-up following allegations of fraudulent loans and the Bank’s collapse. Her son, Oboden, is listed as a non-executive director of OandO, while Oceanic Bank’s 2008 Annual Report names him as a non-executive Bank director.

The Ibrus are high-profile associates of Ibori.In January 2010, a Federal High Court in Lagos is reported to have frozen the bank account of Cecilia Ibru, after the EFCC traced assets to them that were deemed to be proceeds of economic and financial crimes. These assets included vast holdings of property abroad including millions of dollars’ worth in Marlboro in the US state of Maryland. The EFFC charges reportedly name Oboden Ibru as an accomplice.

Due diligence and Politically Exposed Persons:

James Ibori

Financial institutions are under a legal duty to ensure that they do not facilitate money laundering. Best practice requires enhanced due diligence to be undertaken where Politically Exposed Persons (PEPs) are linked to financial transactions.

James Ibori is a Politically Exposed Person because he was Governor of Delta State, the oil producing state in the Niger Delta region, from 1999-2007. There is thus a legitimate expectation that CDC and the funds in which it invests would have conducted in-depth investigations into the widely reported links between Ibori and Notore, Intercontinental Bank, Oceanic Bank, OandO and Celtel.

Our own experience suggests that a cursory Internet search reveals many legal documents and media reports going back over the past 19 years alleging that Ibori was (in chronological order):

• Convicted of theft in the UK in January 1991;

• Convicted in the UK of possessing stolen credit cards in February 1992

• Subject of a forfeiture order in the US District Court of Maryland in July 1997 (see

Annex)

• Arraigned by the Economic and Financial Crimes Commission (EFCC) in Nigeria in

December 2007 on 170 counts of money laundering totalling over $100 million belonging to Delta State;

• Investigated by the London Metropolitan Police in 2007 for money laundering offences, as a result of which several of Ibori’s associates have been charged in UK courts and the UK requested Ibori’s arrest in Dubai;

• The subject of a 2007 UK court-ordered freezing of his traceable assets outside of

Nigeria

• Charged by the EFCC in April 2010 for allegedly selling off Delta State assets illegally to fund private investments while he was still in office and stealing $290 million (£196 million) from Delta State

• Arrested in Dubai on 13 May 2010, following an extradition request by the London

Metropolitan Police, after fleeing Nigeria in April 2010.

Additionally, Ibori’s sister, Christine Ibori-Ibie, and his friend, Udoamaka Onuigbo, were convicted in London in June 2010 for helping Ibori launder through the UK more than £14 million of stolen state assets between 1999 and 2006

The extent of due diligence on Ibori undertaken by ECP, Ethos and CDC is unknown. As detailed below, however, CDC insists that no connections have been established between Ibori and the ECP-and Ethos-backed investments cited in this Memorandum.

 Official responses to the allegations

The reported allegations documented in this Memorandum were first relayed to the

Department for International Development (DfID) and to CDC by Dotun Oloko, a Nigerian anti-corruption campaigner, in a detailed report entitled “Emerging Capital Partners (ECP) Investments in Nigeria”. Private Eye has also published a number of articles detailing the allegations.

The responses received to date from these UK government departments and from the private equity funds themselves are outlined below:

• CDC

CDC was first contacted by Dotun Oloko in a letter dated 1 June 2009. On 26 February 2010, CDC Chief Executive Richard Laing replied, advising that Oloko’s report “. . . has received very serious consideration by CDC’s management as well as its Board. The time it has taken us to revert to you is a consequence of the thoroughness of the review that has been undertaken . . .We have examined these allegations in depth, including discussions at Board level on a number of occasions . . . In conclusion, we believe there is no evidence to support these allegations.”

CDC went on to state:

“Through adherence to CDC’s Investment Code, all of our fund managers are required to operate to the highest standards of business integrity, as well incorporate a best practice approach on environmental, health and safety, and social risks. Our fund managers strive to ensure that their portfolio companies operate in accordance with these standards. Sometimes there are failures, and an email from you mentioned such failures in two portfolio companies – Intercontinental Bank and Oceanic Bank. We are in discussions with ECP as to how they can enhance their processes and procedures and improve their management of certain environmental, health and safety, social and governance risks.”

No details were given as to the areas where CDC deemed ECP’s procedures to be in need of enhancement, nor of the improvements that CDC had proposed.

A month later, in March 2010, CDC responded to an article in Private Eye190 linking

CDC investments to business associates of James Ibori. CDC’s General Counsel,

Mark Kenderine-Davies, advised:

“We take allegations linking CDC to business associates of convicted criminals very seriously. We have no evidence that CDC invests ‘alongside close business associates of [James] Ibori. Given the statement in the article, you must have such evidence. In light of this, I wish to invite you to attend a meeting at our office . . .

If you have evidence that we do not, we shall expect you to share it with us. We may then contact the Serious Fraud Office

If you do not have evidence we expect Private Eye to withdraw the statement made in the article in its next edition.”

Following the requested meeting with Private Eye, however, Kenderine-Davies wrote:

“I can . . . confirm that we are reviewing the list of charges provided to us at the meeting. In light of the latter, we are currently not in a position to advise you whether we still require the withdrawal of the statement made previously. We shall revert once our investigations have progressed further.”

In the same letter, CDC confirmed that the information supplied by Private Eye was substantially the same as that already “received, reviewed and . . . explored with ECP”.

CDC has not given any reasons why it now appears to have re-opened its investigation into the allegations made initially by Dotun Oloko, nor has it informed Oloko of this decision.

.  ECP

Dotun Oloko received an unsolicited email from ECP on 28 August 2009, seeking a meeting. Oloko did not respond, because he had requested anonymity and confidentiality when his report was initially sent to DfID and CDC. He subsequently became aware in October 2009 that Nigerian lawyers acting on behalf of ECP and Notore had been making substantial efforts to reach him through friends and family.

After unsolicited text messages were sent to his spouse, Oloko agreed to meet with ECP in London on 27 October 2009.

At that meeting, ECP’s Executive Chair Thomas Gibian denied that he had any knowledge of Ibori or the 2007 EFCC affidavit until he had received a copy of Oloko’s report. But Gibian did admit to knowledge of problems with the Oceanic loan used by Michael Orugbo to buy Notore and also indicated that he hoped to persuade Henry Imasekha to step down from his directorship of Notore by January 2010. Oloko  and Gibian subsequently exchanged emails until 5 March 2010, the date of Gibian’s last email. During the email exchange, Gibian advised that he would: “prepare a detailed note to you (and our Fund shareholders) regarding the measures that ECP has undertaken to ensure that there is no expropriation, money laundering or other corrupt or otherwise unacceptable activities relating to Notore involving Ibori or anyone else.”To date, no such note has yet been received by Oloko.

• Ethos

Dotun Oloko wrote to Ethos with regard to its investments in Oceanic Bank on 19 February 2010 but to date has not received any response.

• Department for International Development (DfID)

Dotun Oloko initially approached DfID anonymously through an anti-corruption NGO but subsequently contacted the Department directly on 1 February 2009, sending them a copy of his report. After 10 months and no substantive response, Oloko submitted a Freedom of Information (FOI) request on 27 November 2009 relating to DfID’s response to his report. On 2 February 2010, DfID confirmed that it held information relevant to the FOI request but was withholding it under sections 195, 196, 197, 198 31,40, 41 and 43of the Freedom of Information Act. Oloko subsequently requested an internal review of DfID’s decision to withhold this information and, on 19 March 2010, DfID replied with the review’s decision to uphold the withholding of information.

Documents released by the National Audit Office (NAO), however, under another FOI request by Oloko state that: “DfID has investigated extensively. Found no evidence of wrong-doing by CDC”

To date, DfID has failed to provide any meaningful information to Oloko about its “extensive” investigation or to indicate when they will or are likely to complete its response to his report.

The released NAO materials also reveal that ECP has agreed to “independent third party reviews of their due diligence” but that, as of 9 February 2010, no such review had been undertaken.

Some questions

From all the media reports, court documents and public notices issued by official bodies cited in this Memorandum, the following can be summarised about CDC-backed investments in Nigeria:

• Two CDC investee banks (Oceanic and Intercontinental) on which CDC-backed fund managers had board representation have had to be bailed out by the Central Bank of Nigeria (CBN), and their then CEOs (respectively Cecilia Ibru and Erastus

Akingbola) are reportedly facing criminal charges and have had their assets frozen;

• Two CDC investee companies (Notore and OandO) were publicly listed as non-performing debtors of Oceanic Bank, while Imasekha, a director of CDC investee company Notore is listed as the single largest non-performing debtor of Intercontinental Bank through Ascot Offshore;

• Three CDC investee companies Notore, OandO, Celtel have been cited as being used to move funds illegally;

• Several directors of all five CDC investee companies mentioned in this Memorandum are reportedly implicated in investigations into the money laundering activities of former Delta State Governor James Ibori.

Analysis of other CDC-backed funds in Nigeria does not reveal similar patterns of investment or concerns, 201 (although wider questions may arise over the development impact of CDC’s private equity model of investment202). In the light of this and the allegations by Nigerian and other law enforcement agencies that have been publicly available since 2007 alleging links between ECP-or Ethos-backed investments in Nigeria and associates of James Ibori, a number of questions may be legitimately asked in relation to the due diligence performed by ECP and Ethos, and by CDC:

• Why did ECP invest in OandO some two months after the company had been named by the Economic and Financial Crimes Commission (EFCC) in relation to Ibori’s alleged money laundering?

• Why did ECP increase its stake in Notore after the EFCC had named the company in relation to Ibori’s alleged money laundering?

• Did the companies named by the EFCC inform their board members, including those representing the CDC-backed investment funds, about these widely publicised allegations and legal actions? If so, what did the board members representing the investment funds do with this information? If not, how effective are these investment funds, and the board members representing them, in ensuring good corporate governance, a key goal of CDC?

• What action did ECP and Ethos take to address the governance failures that ultimately led to the collapse of Intercontinental Bank and Oceanic Bank?

• Was Ethos aware of the size and extent of unsecured loans made by Oceanic Bank to companies associated with Henry Imasekha, despite the EFCC having named him in 2007 as a business associate of Ibori?  Did Ethos – which had board representation on Oceanic Bank – question the purpose of such loans?

• Similarly, did ECP’s nominated board member on Intercontinental Bank – ECP’s current Executive Chair Thomas Gibian – know that Intercontinental was making unsecured loans to companies associated with Henry Imasekha, again despite the EFCC having named him in 2007 as a business associate of Ibori?  If so, what steps did Gibian take to stop the practice?

• When did ECP and Ethos learn of the alleged links between their investee companies in Nigeria and Ibori?

• If they were unaware of such links, what does their lack of awareness indicate about their supposed knowledge of the country in which they invested, which CDC considers to be a key attribute in choosing these fund managers?

• What steps did ECP and Ethos take to alert the Nigerian or UK authorities of any concerns such links might have raised?

• Did ECP and Ethos disclose to CDC that companies in which they were investing had been named by the EFCC in its investigations?

• When did CDC become aware of the alleged links between their investee companies in Nigeria and Ibori?

• If CDC did not flag such links, what does this indicate about the quality of its anti-corruption due diligence procedures?

• What losses has CDC incurred in relation to the five cited companies?

• What warranties did ECP and Ethos make to CDC concerning the due diligence they had undertaken relating to the five investee companies and the anti-corruption procedures they had in place? Were these warranties broken? If so, what action is CDC taking?

• CDC conducted its own board level investigation into the alleged links between Ibori and the five investee companies? If it deemed the allegations sufficiently credible to merit such an investigation, why did CDC not inform the Serious Fraud Office of them immediately?

• DfID’s support for CDC is premised on private sector-led economic growth being the way out of poverty. How was this objective realised through CDC’s support for investments in Intercontinental Bank and Oceanic Bank on which CDC-backed funds had board representation? What are the development consequences for poorer

Nigerians who are now effectively bailing out these banks after their failure helped to bring the Nigerian economy to the brink of collapse?

Conclusion

This Memorandum details serious allegations involving five companies in Nigeria that CDC has supported with UK taxpayers’ money. Citizens in both Nigeria and the UK have a right to expect that publicly-funded investments do not involve or facilitate bribery, corruption or money-laundering. CDC’s own Investment Code requires all businesses in which CDC’s capital is invested to comply with all applicable laws and international best practice standards to prevent extortion, bribery and financial crime.

To date, CDC and DfID have failed to provide satisfactory answers to questions raised in this Memorandum arising from these allegations. We urge the Secretary of State for International Development to investigate as a matter of priority the due diligence undertaken by CDC, and by the two private equity funds in which CDC has invested run by Emerging Capital Partners (ECP) and Ethos, concerning the five companies and to make its findings public.

 

Author: NewsAdmin

3068 stories / Browse all stories

Related Stories »

Provide your email below, and we will notify you the latest news freely.

sjdating    

calendar »

September 2013
M T W T F S S
« Aug   Oct »
 1
2345678
9101112131415
16171819202122
23242526272829
30