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Sterling Bank accused of selling customer’s collateral to director

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Sterling Bank Plc, the “one-customer bank”, has one customer giving it sleepless nights over a loan that not only went bad but has now snowballed into a major scandal in the banking industry, TheCable can report.

Grant Properties Limited, a property development company, has accused Sterling Bank of excising 10 hectares — which land it values at N5 billion — from a 50-hectare collateral and illegally selling it for pittance to a front company of a very senior director of the bank.

A Lagos high court has now ruled that the collateral was illegally sold, but there is also suspicion that the Asset Management Corporation of Nigeria (AMCON) is less than disinterested in the matter.

AMCON is accused of trying to arm-twist Grant Properties into abandoning the court judgment that nullified the sale of the collateral.

The business deal started in 2002 when Grant Properties secured a 50-hectare land in Lekki, Lagos state, to build “Victory Park Estate”.

It approached Unity Bank, Skye Bank, Wema Bank and Sterling Bank for an N8 billion ongoing loan to partly fund the project. Sterling was the lead of the consortium.

Grant Properties transferred the shares in its subsidiary, Knight Rook Limited, to the banks as security for the loan.

LOAN TRANSFERRED TO AMCON

After Grant Properties had secured the loan and started developing the property, it could not meet up with the repayment obligations. This also came at the time banks were experiencing liquidity problems, with many of them taken over by the Central Bank of Nigeria (CBN) which then set up AMCON to buy the bad debts.

The Grant Properties loan, which had gone bad, was transferred to the AMCON in 2011. At the time, the CBN had spent over $6.8 billion of tax payers funds purchasing the non-performing loans from failed banks.

Grant Properties was informed by Skye Bank, one of the banks financing the project, that it had assigned its own share in the project loans to AMCON.

The property company then approached AMCON with a proposal to finance the project and repay the loan. AMCON, however, advised the company to wait for other banks to transfer their share of the loans before entering negotiations with the corporation.

In handing over the debts to AMCON, Sterling Bank and others were required to transfer all Grant Properties’ collateral to the corporation.

ILLEGAL SALE OF LAND

Sterling Bank was expected to transfer, alongside the loan, every part of the land to AMCON, but it was discovered that the bank left out 10 hectares which it had sold to the Real Estate Development (RED) Company — said to be a front for a very senior director of the bank.

Olajide Awosedo, chairman of Grant Properties, said in a recent interview with journalists that a non-executive director of Sterling Bank had called him “face to face, brought out a survey of 10 hectares of my land and said, ‘Sir, sell this portion of land to me, if you want N10bn from my bank. I will make sure you get it. I am the chairman of real estate finance of the bank”.

He refused until AMCON took over the non-performing loan.

“They moved my loan to AMCON, but rather than transfer all my collateral with the loan, the bank (Sterling) withheld the 10 hectares its director had his eyes on and sold it to him through a surrogate company owned by the director and his associates,” Awosedo added.

He alleged that the director initially sold the land to his front company at N18,500/sq. metre, amounting to N1.85b for the 10 hectares — a far cry from the market worth of N5 billion, according to him.

About 2.4 hectares from the land was immediately sold to UAC Properties Development Company (UPDC), another property development company owned by UAC Plc, at a higher rate of N26,000/sq. metre. It was this that became the subject of litigation that ended in favour of Grant Properties.

The remaining 7.6 hectares were developed by Aircom Nigeria Limited, an estate development company, which built the “Cardogan Estate”. A three-bedroom apartment in the estate, TheCable gathered, goes for N48 million.

Curiously, Aircom is owned by Yemi Idowu — the non-executive director of the bank who managed the Grant Properties’ loan before the crisis.

In a seeming disregard for conflict of interest, the bank had appointed Idowu to manage a rival company’s — Grant Properties’ — account.

It appears to be a complicated web of intrigues and interests, which are said to be quite normal in the banking industry in Nigeria.

COURT SAYS SALE OF LAND ‘ILLEGAL’

Meanwhile, Grant Properties filed an action at the Lagos high court to challenge the sale of 2.4 hectares of the 10 hectares to UPDC in 2011. Six years after — precisely on June 2, 2017 — the court ruled that the land was sold by Sterling Bank AFTER the banks had assigned the company’s loan to AMCON.

The court also held that the documents of the sale were signed by Yemi Adeola, managing director (pictured), and Justina Lewa, company secretary of Sterling Bank. The bank, the court ruled, had acted alone as the other banks were not part of the sale.

A. J. Bashua, the judge, made an order nullifying the sale of the land.

“Justina Lewa who executed Exhibit F or DD2 (Deeds of Assignment) did not have power to do so and any such execution was done after interest had the transferred to AMCON,” the judgment read.

“Having therefore not complied with Exhibit C (Memorandum of Understanding) coupled to the fact that Exhibit DD2 (Deed of Assignment) was executed during the pendency of this suit, the sale to the 1st defendant amount to nullity. The claim of the claimants succeeds.”

UPDC is currently on appeal.

While Grants Properties pursued the case, Idowu and UPDC had continued developing the land — in defiance of two court orders obtained in 2012 ordering all parties to stop construction activities on the disrupted 10 hectares pending determination of the case.

“I hereby order that all the construction work engaged by either of or all the parties be stopped or abate forthwith,” T.A.O. Oyekan-Abdullai of the Lagos high court had ruled in July 2012.

But Idowu went ahead with the construction of Cadogan Estate and UPDC, on the other hand, built Alexander Miller Estate on the land, and over the years, and had apparently made huge profit while Grant Properties has been left to carry the burden of the debt obligations to AMCON.

AMCON COMPLICIT?

When it discovered that Sterling Bank had sold part of the land to its director, Grant Properties reported the inside trading to AMCON.

AMCON had promised to help retrieve the land, but it has done nothing or little to getting things rightly done, fuelling fears that the corporation is in bed with Sterling Bank.

Section 34(1) of the amended AMCON Act says when the corporation acquires an asset, the asset will be vested in the corporation alone and it shall exercise all the rights and powers of the financial institution. It adds that the debtor concerned and the financial institution would cease to have those rights.

In the event that the collateral is termed “restrictive”, section 36(1) of the acts says the financial institution from which the restrictive collateral is acquired shall hold such collateral in trust for and the sole benefit of the corporation.

AMCON did not intervene until an action was filed to challenge the sale. It has now instructed Grant Properties to withdraw the case from the court. Ordinarily, the court victory would be seen as a positive for AMCON — it would take possession of the property and recoup the loan it paid to pay off the bad debt. But it only got curiouser and curiouser.

Meanwhile, terms of settlement were proposed by Lanre Olaoluwa, AMCON’s receiver/manager, that: AMCON would provide N2 billion to help Grant Properties complete the project and settle the loan; the banks would refund the assumed secret profit of N750 million based on the assumption that the 10 hectares were resold at 26,000/sq. metre; Grant Properties would ratify the sale of the land; and that the terms of settlement would be entered in the court as a consent judgment binding all parties.

Before signing the terms of settlement, Grant Properties had been informed of AMCON’s board rejection of the proposal. The company, however, met with AMCON top officials and it was agreed that AMCON’s management would write to Sterling Bank to return the land it illegally took.

Grant Properties was later invited by the CBN to respond to a complaint from AMCON’s board. AMCON had refused to write the agreed letter, and Kola Ayeye, AMCON’s executive director, denied any record of the board intervening in the resolutions reached.

The role of AMCON has come under scrutiny because technically, it owns Knight Rook, the company whose shares served as collateral for the loan to Grant Properties. With a positive court judgment, it means AMCON has enough collateral to settle the loan.

“That is why it is surprising that AMCON is rejecting the judgement,” an insider in the deal told TheCable.

 

EVICTIONS, TORTURE, HARASSMENT

In a debt recovery action, the AMCON Act gives exercising power to its receiver/manager over all the assets and entire undertaking of the debtor company notwithstanding that only a part of the assets of the debtor was charged, or pledged as security in relation to the asset acquired by the corporation.

This, the act maintains, must be carried out without prejudice.

After securing a judgment in its favour over the land sold by Sterling Bank, Grant Properties, in June 2017, wrote to AMCON, enclosing a certified copy of the judgment, and a proposal to repay its loan. The company, in its letter, asked AMCON to value the land and the developments on it, and then take its payment from the property.

A day after AMCON received the company’s letter, armed thugs and policemen sent by AMCON’s receiver manager, Olaoluwa, allegedly took over the company’s property in a coordinated attack across the premises. In the process, it was alleged, members of staff of the company were beaten.

“My children and grandchildren have been rendered homeless,” Awosedo said in a statement. “The eviction of my children from their homes is particularly baffling, given the fact that two of the residences are rented accommodations which cannot be attached toward any debt.”

Awosedo and one of his sons suffer from apnea, a condition which affects the breathing system while sleeping, and they had always slept with the aid of continuous positive airway pressure (CPAP) machines which were taken from them.

“We pleaded with them to give us access to our machines, but our requests were denied,” Awosedo said in the statement. The receiver threatened that even if they were going to die of apnea, they would not be allowed access to the CPAP machines, according to him.

In an email exchange between Awosedo and Ayeye, seen by TheCable, Ayeye said that AMCON would advise the receiver/manager to consider releasing properties extraneous to the AMCON loan.

The receiver is harassing consumers who bought property in Victory Park Estate for not having done due diligence before purchasing. He said they bought AMCON land and they must pay AMCON again to regularise their titles.

 

THE CURIOUS CASE OF AYEYE

Ayeye, an AMCON executive director, allegedly told Grant Properties that the court judgment in its favor was of no consequence.

“The issue of the land was settled as far as AMCON is concerned,” he reportedly said. Ayeye also reportedly revealed that AMCON had taken N501 million from the bank — profits secretly made from the sale of the land — in order to ratify the title.

When Ayeye was reminded that AMCON cannot ratify an illegal act, or refuse to recognise a court judgment, he said Grant Properties should forget about the judgment and the 10 hectares of land.

AMCON and Ayeye insist that Grant Properties must not refer to the judgment, leading to speculation about the neutrality of AMCON. It had also warned Grant Properties to refrain from making any complaint to the Economic and Financial Crimes Commission (EFCC) or any other law enforcement agency.

The land illegally sold by Sterling Bank and the property on it are worth at least N30 billion today, according to Grant Properties. This is more than enough to settle their loan obligations to the corporation, which might have ballooned to about N20 billion when interests and penalties are factored in.

 

‘PROCEEDS OF SALE WAS PASSED TO GRANT PROPERTIES’

Responding to TheCable’s enquiry, Sterling Bank said the proceeds of sale of the 10 hectares was passed to Grant Properties.

“It is instructive to note that the proceeds of sale of the 10 hectares was passed to Grant Properties/Chief Awosedo for onward transmission to the subscribers that had demanded for a refund,” Olubukola Adejokun, the bank’s spokesperson, said in the email sent to TheCable.

The bank also said the 10 hectares was sold to RED and not Idowu, althought it was silent on the beneficial owner of RED.

“Sterling Bank could not have singlehandedly sold any part of the land as the security was pledged to the banking consortium that financed the project,” Adejokun explained, adding that “the decision to sell the 10 hectares was a joint decision between the consortium of banks (Wema, Skye, Unity and Sterling) and the developer (Grant Properties/Chief Olajide Awosedo).”

Asked if the sale was is in line with the AMCON Act which states that an eligible financial institution, Sterling Bank and others in this case, must hand over all assets to the corporation, Sterling Bank said “the 10 hectares had been sold before the transfer of loan to AMCON and therefore did not form part of the assets transferred to AMCON by the consortium of banks”.

The bank also said that it is not true that the court pronounced the sale illegal.

“The court ruling related to only 2.4 hectares out of the 10 hectares which the RED Company subsequently sold to UAC Property Development Company (UPDC) and this is now subject of an appeal at the Court of Appeal Lagos,” he added.

Although the case was between Grant Properties and UPDC — with a larger focus on the 2.4 hectares sold to the latter — the judgment, as against Sterling Bank’s claims, declared that the sale to either RED company or UPDC was done after the banks had transferred its right and interest to AMCON. This is against AMCON’s Act.

 

‘OUR LAWYERS WILL ISSUE A RESPONSE’

When TheCable spoke with Ayeye, he sounded furious on the phone.

“Grant Properties is just throwing wrong news everywhere,” Ayeye said. “You guys should be careful of somebody who was owing banks for about five years before AMCON took over, and for eight years that AMCON has taken over, the company has not paid us one penny.”

He asked TheCable to reach the corporation’s corporate affairs department for details.

Jude Nwauzor, AMCON’s head of corporate affairs, told TheCable that the legal department was working a rejoinder to these allegations.

“It is a running case, it didn’t just start. Our lawyers have looked at all these and they are coming with a response. We have never acted outside the jurisdiction of the law,” he said.

He explained that AMCON, being a creation of the law, is regularly being monitored by committees from the national assembly.

“These committees have an oversight function on AMCON, and from time to time, they invite the management for questioning. So, whatever we do, when we take over properties, we only do that by the order of a court as mandated by the act establishing us,” he said.

Further asked why AMCON has ignored a court order obtained in favor of Grant Properties, Nwazor urged patience as AMCON’s lawyers have been directed to issue a proper response to all allegations.

Idowu, a key player in this matter, was not ready to provide answers to questions thrown at him. “It is a personal corporate matter between two big businessmen and it has nothing to do with public interest,” he told TheCable.

“The case is in court and it is not something I should talk about,” he added.

In its code of conduct, Sterling Bank warns its directors to avoid conflict of interest in the discharge of their duties.

“A conflict of interest can arise when a director or a member of his immediate family receives improper personal benefits as a result of his or her position as a director of the bank,” part of the code of conduct reads.

“Competing with the bank for the purchase or sale of property, products, services or other interests” is listed as an example of situations that may constitute conflict of interest.

In the meantime, Grant Properties has petitioned the President Muhammadu Buhari, the CBN, the senate president, the speaker of the house of representatives and the inspector general of police. There is yet to response or action from any of them, according to the company.

-CULLED FROM THE CABLE

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INVESTIGATION

EFCC to probe Delta Gov. Okowa’s N736m substandard road project

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…..As Community Youths Protest Low Standard Job

 


 

Information reaching The Witness has revealed that the Economic and Financial Crimes Commission, (EFCC) and the Independent Corrupt Practices and Other Related Offences Commission (ICPC), are set to take over the lingering case of the ongoing substandard road contract awarded to PORTPLUS limited, a marine service company, at the sum of N736, 404, 555.60 by the Delta State government.

It would be recalled that in March, 2017, Delta state governor, Mr. Ifeanyi Okowa, had awarded to Portplus Limited, the contract to construct a three kilometers concrete pavement road with both sides drainages at Ikpide-Irri, a riverine community, Isoko South local government area of Delta state.

The substandard collapsed culvert.

The contract which is said to be a ‘kola-nut’ from the governor to the chairman of Portplus Limited, Mr. Immanuel Omoefe, an indigene of the community is already generating controversy following the substandard work and usage of low quality materials by the contractor, resulting to protest by the locals.

Speaking with our reporter, an EFCC official who does not want his name mentioned confided that, “Please don’t quote me, but I can tell you that the commission has been following stories from online media concerning the contract. We saw in the whole contract elements of fraud especially in the area of execution. We are very must interested in the issue”

One of the culverts being constructed with 10mm rods as against the specified 16mm on the BOQ

According to pur EFCC source, “As we talk, we are talking with the lawyer to the concerned indigenes of the community who petitioned governor Ifeanyi Okowa on the substandard work and he is cooperating with us.

“Once we receive the petitions been expected, our Benin city office in Edo state will swing into action and all names that will be mentioned especially the contractor would be invited for questioning. A colleague of mine in the ICPC told me too they are interested and will also step into the matter.”, Our EFCC source disclosed.

The concerned indigenes of the community through a petition addressed to governor Okowa last week and signed by their counsel, Mr. Chuks. F. Ebu, had raised the alarm of substandard job by the contractor saying that instead of construction of both sides drainages, using of rods and other materials specified in the Bill Of Quantity, (BOQ), the contractor went for substandard materials.

The 10mm used to construct one of the culverts.

The petition which was made available to tbis medium, copied the Commissioner of Police, state commissioner for works, member representing constituency 1 in the state house of Assembly, Orezi Esievo, State Director, SSS, Chairman, Isoko South local government area, all branch chairmen of Ikpide-Irri unions, President General, Isoko Development Union, (IDU) and others.

According to the petition with the title “Re:Construction Of Ikpide-Irri Township Roads: Protest Against The Substandard Job And Call For Strict Adherence To The Bill Of Quantity.”, failure by the contractor to adhere strictly to the Bill of Engineering Measurement and Evaluation, ( BEME), the BOQ and other contract papers, the Economic and Financial Crimes Commission, (EFCC) and other anti-graft agencies would be invited into the contract.

“That the culverts should be reconstructed because the converts construction was not met as rods used was 10mm at interval of 300mm instead of 16mm at interval of 150mm spacing specified in the drawings and the original Bill Of Quantity (BOQ) and concrete mixed was very poor. Also the size specified in the drawings was not professionally followed.”

Our correspondent reliably gathered that few days ago one of the controversial culverts carrying 10mm rods as against the specified 16mm collapsed during a visit by some persons from the Ministry of works.

Meanwhile, the community youths on Sunday staged a peaceful protest in the community and called on the contractor to as a matter of urgency and importance follow standards in the execution of the contract or be ready to face the music of the Economic and Financial Crimes Commission, (EFCC) and the Independent Corrupt Practices and Other Related Offences Commission (ICPC).

Speaking during the protest, the leader of the protest, an activist and indigene of the community who doubles as the President of Isoko Monitoring Group, (IMG), a Pan Isoko group known for championing of development in Isoko, Delta and beyond, Mr. Sebastine Agbefe, lamented the substandard work by Portplus limited and called on the contractor to immediately destroy and reconstruct all the culverts in the community that were done with 10mm instead of 16mm according to the BOQ.

“This is a fraud of the highest order, this is pure wickedness and we can no longer folds our arms and watch one man shortchange us because of his personal greed and selfishness. We are warning the contractor to destroy all the culverts done with 10mm and reconstruct same with 16mm according to the BOQ.

“The contractor should also make sure that both sides drainages are constructed on the road and must use standard materials specified on the BOQ. And again, Portplus must adhere strictly to the specifications on the BOQ and any attempt to compromise standards as far as this contract is concerned, Portplus will be made to face EFCC and ICPC.”, Mr. Agbefe stated.

The IMG president, however enjoined indigenes of the community, especially the youths not to take the laws into their hands even as he challenge all communities in Isoko nation to be involved in the monitoring of execution government projects in their various domains.

It was gathered that some of the youths and other indigenes who came out enmass were scared away from the protest by parents and relatives for fear of been victimized by power that be in the community that is already compromised by the contractor.

Our correspondent reliably learnt that video clips and photographs of the substandard work taken during the protest will be sent to the Economic and Financial Crimes Commission, (EFCC) and the Independent Corrupt Practices and Other Related Offences Commission (ICPC) as requested.

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INVESTIGATION

How DMO DG, Oniha’s management style is killing Nigeria’s economy

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-As financial experts call for her sack

By Festus Onajite

Nigeria’s economy is heading for more tough times ahead going by current happenstances at the Debt Management Office, DMO, manned by Ms. Patience Oniha.

There have been red alerts pointing towards a major crisis in the Nigerian economy since Oniha took over about a year ago from Dr. Abraham Nwankwo as the director-general. And despite the several millions of naira allocated to the agency, DMO itself is presently a shadow of its old self due largely to the perceived incompetence of the current DG.

The major worry at the moment is that despite the rising debt profile of the nation, the federal government has been unable to develop a fresh debt management strategy, seven months after the expiration of the Debt Management Office’s (DMO) five-year Third Strategic Plan initiated by Oniha’s predecessor.

Investigations also revealed that DMO is bereft of its own internal working plan, which we learnt, is in the pipeline.

Nigeria’s total public debt increased by 4.52 per cent in the first three months of 2018, the DMO had revealed, adding that the country’s debt increased from N21.73 trillion in December 2017 to N22.71 trillion at the end of the first quarter of 2018.

Financial experts attribute the above trend to lack of administrative skills exhibited by Ms Patience Oniha in handling affairs at the DMO. It is further argued that if no drastic steps are taken by the federal government concerning the Debt Management Office, the Nigerian economy risks a further nosedive in a few months to come.

“She is an analogue administrator who cannot operate in the digital age of debt management,” a financial expert quipped recently. He called for the sack of the director-general to be replaced by a more competent and experienced hand to manage an agency as strategic as the DMO.

As it stands, the prospect of the debt portfolio has become higher as Nigeria has just signed an agreement with France for $475million loan facility for some projects in Lagos, Kano and Ogun States.

The Debt Management Agency is a very critical arm of the federal government as far as debt management is concerned. Section 6(c) of the DMO Establishment Act 2003 states that the agency must, “prepare and implement a plan for the efficient management of Nigerian’s external and domestic debt obligations at sustainable levels compatible with desired economic activities for growth and development; and participate in negotiations aimed at realising those objectives.”

Due to its very critical role in the economy, the Debt Management Office has always operated with a strategic plan since it was establishes on 4th October 2000 to centrally coordinate the management of Nigeria’s debt. Its last strategic plan that expired last December was the third since its establishment.

Though the director-general of DMO had said that Nigeria’s steadily rising debt profile was not a big issue, the International Monetary Fund has expressed deep concerns over Nigeria’s capacity to repay its rising debts. IMF officials recently warned the government that Nigeria has been sliding down towards debt trap.

At a press conference on the sidelines of the World Bank Group Spring Meetings in Washington DC, recently Mrs Catherine Pattillo, Assistant Director, Fiscal Affairs Department of IMF, described Nigeria’s debt to revenue ratio, which she put at 63 percent, as “extremely high.”

According to her, “Borrowing by countries can create benefits if used for investments of high returns. Our evidence suggests that’s not the case in some countries, especially in Nigeria. So rising debt can create the vulnerabilities.”

Chirstine Lagarde, the head of International Monetary Fund corroborated this last month while addressing financial leaders from some developing countries. She said that global debt had soared to 220 per cent of global output, a staggering level that did not bode well for member economies.

In most economy, the debt problem was casting a shadow over future growth prospects, she said.

All efforts to reach Ms. Oniha for her angle proved futile as her mobile number 0802..…….79 was not reachable as at press time.

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INVESTIGATION

Customer battles Diamond Bank over N1.5bn fraud

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Diamond Bank Plc may have to shell out the princely sum of N2.6 billion if it loses the suit brought against it by a limited liability company Gitto Costruzioni Generali Nigeria Limited. The company which specializes in construction is suing the bank for allegedly mismanaging its accounts domiciled in the bank.
The statement of claim filed by B. A. M Ajibade (SAN) averred that the deponent had sometime in 2004 opened a main account with Diamond Bank to execute construction projects. Moreover, in the course of the normal relationship between bank and customer it was able to secure overdrafts, loans and bank guarantees.
According to a copy of the statement of claim obtained by this newspaper, trouble began when the bank allegedly began to overcharge the company’s main account with sundry levies including Commission on Turnover (COT), lending fees, bank guarantee fees, transfer fees and interest on loans in a manner contrary to the written agreements the company had earlier signed with the bank.
The statement claimed further that an audit of the company’s accounts revealed that it had been overcharged to the tune of N1.5 billion by Diamond Bank. It further claimed that Diamond Bank voluntarily admitted to having charged excessively to the tune of about N246 million.
The company further claimed that the uncertainty surrounding its accounts with Diamond Bank and the bank’s withdrawal of funds from its accounts through illicit charges caused cash flow problems and delays for the company and contributed to the company’s inability to execute some major projects, including the Akwa Ibom Airport, in a timely and efficient manner.
It is therefore claiming N564 million in damages for loss of profit, N1 billion in special damages for consequential loss, another 1 billion in general damages for breach of the banker/customer relationship, and an additional N100 million in legal costs.
The suit has been adjourned till 15th of October, 2018 for hearing.
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