NIGERIA: Sanusi’s Suit Stalls FRC Probe into CBN Accounts

Following a lawsuit filed by the suspended Governor for the Central Bank of Nigeria (CBN), the Financial Reporting Council of Nigeria (FRC) Thursday suspended its hearing into 2011 and 2012 financial accounts of the central bank.
The Chief Executive Officer of FRC, Mr. Jim Obazee, who announced the adjournment of the hearing at 5.08 pm, immediately after a one-hour break, said he had received a letter from Sanusi’s lawyers during the recess.
Although Sanusi and the acting CBN Governor, Dr. Sarah Alade, were not present at the second day of the hearing, which commenced on Wednesday, those that attended yesterday’s hearing were the Deputy Governor, Operations, CBN, Dr. Kingsley Moghalu; Deputy Governor, Corporate Services, CBN, Alhaji Suleiman Barau; the immediate past CBN Deputy Governor, Operations, Mr. Tunde Lemo; Managing Director of the Bank of Industry (BoI), Ms. Evelyn Oputu; Mr. Babatunde Dayo; Mr. Gabriel Okpeh; and Mr. Ezekiel Ejedele
Part of the letter from Sanusi’s lawyers that was read out by Obazee stated: “In view of the pending application for interlocutory injunction dated March 26, 2014, we advise that in line with the position of the law, where there is a pending action before a court of competent jurisdiction, an application for an injunction that the status quo be maintained pending the interpretation of the injunction.”
Obazee however said the investigative process would continue at the CBN office, which he described as the administrative procedure of the FRC.
He added: “Because of the documentations that had been sent, we will wait for the court papers and study the court papers before we invite as appropriate. On that note, we would like to end this session until we read through and come out with definite position.”
Speaking to journalists for the first time since the suspension of Sanusi, the FRC boss also said: “We looked at the CBN results and found out that they were not reporting with a financial reporting framework. They were not reporting using Nigerian Generally Accepted Accounting Principles (GAAP), neither were they using the International Financial Reporting Standard (IFRS) principles.
“The CBN said they complied with the CBN GAAP, which is not acceptable, whether locally or internationally. You don’t set up your own rules to guide yourself. In financial reporting, it is either your are following GAAP or the IFRS.”
When asked about the whereabouts of Sanusi, he said: “We were told he was downstairs when we started. We wrote to him, we spoke to him and he confirmed that he would be here. The investigation is not targeted at Sanusi.”
However, during the first session on Wednesday, Obazee had said the investigation was based on the items listed in the presidency’s letter of suspension to Sanusi.
In his submission before the Federal High Court in Lagos, Sanusi urged the court to restrain the council from conducting any investigation, inquiry hearing or proceeding against him in respect of his office pending the determination of the suit. The defendants in the suit are the FRC and Obazee.
Sanusi, in the suit, is contending that while he is not averse to being investigated, he wants an impartial authority and not the FRC to do so. He said the FRC had already prejudged and issued the briefing note, which led to his suspension.
He therefore wondered why the same council would be the one conducting an investigation against him afterwards.
The suspended CBN governor said the FRC on June 3, 2013 issued him a briefing note in relation to the CBN’s audited financial statements for the year ended December 31, 2012 and that the council made several malicious and criminal allegations against the leadership of the bank, including allegations of financial recklessness, fraud, incompetence, misconduct, wastefulness and abuse of due process.
He said consequent upon the briefing note, President Goodluck Jonathan, by a letter dated February 19, suspended him from office.
He said by a dated March 14, the FRC invited him to appear before it on March 27 with respect to its investigation into all the activities of the CBN during his tenure as governor.
Sanusi said when he sought clarification on the invitation, he was surprised that rather than receive a response to his letter, the respondent published in several newspapers an announcement of the intention to conduct investigations into the CBN’s financial years ending 2011 and 2012, as well as all transactions and events which impacted on those years and which will impact on the years ahead.
He therefore asked the court to determine, whether in light of the provisions of Sections 7, 8, 11, 25, 28, 58(2), 62, 63 & 68 or any other section of the Financial Reporting Council of Nigeria Act 2011, the defendants are conferred with powers to conduct wide ranging investigations as proposed and set out in the 1st defendant’s advertisement widely published in various newspapers on March 24, 2014 and letter to the plaintiff dated 14th March, 2014 which is beyond reviewing the financial statement and ensuring statutory compliance with financial reporting standards.
He also wants the court to determine whether in light of the provisions of Sections 7, 8, 11, 25, 28, 58(2), 62, 63 & 68 or any other section of the FRC Act 2011, the defendants are conferred with the statutory power to investigate him as governor of the CBN at all, and if so, whether such can extend beyond the powers, functions and objects of the Act, or entail investigation of the peculiar and sensitive monetary, supervisory, regulatory and economic advisory duties set out in the CBN Act.
Furthermore, he sought to know “whether the invitation to the plaintiff by the defendants for the purpose of their investigations into the activities of the CBN as contained in their letter to the plaintiff dated 14th March, 2014, after having already reached their conclusions and findings on the plaintiff and recommended that he be removed from office and criminally prosecuted as contained in their Briefing Note of 7th June, 2013, to the President of the Federal Republic of Nigeria without according him a hearing, is not contrary to the principles of natural justice, and in breach of  constitutional safeguards to fair hearing”.
Sanusi wants the court to also declare that by the 1st defendant constituting itself into an investigating body in the manner contained in its several newspapers advertorial of March 24, 2014, and by the 2nd defendant’s letter to the plaintiff dated 14th March, 2014, the defendants acted ultra vires of their respective powers and functions as statutorily conferred on them under the FRC Act 2011.
He is further asking the court to declare that the conduct, actions, decisions and conclusions of the defendants in respect of the plaintiff, particularly as manifested in the Briefing Note dated 7th June, 2013 submitted by the defendants to the president et al, were ultra vires the powers of the defendants under the FRCN Acts, 2011 and were in flagrant contravention of the rules of natural justice as given by common law, statute, constitutional law, binding treaties and sound principles of administrative law to the plaintiff to the three pillars of justice.
Earlier during the hearing and before the break, the FRC boss who had taken the items in the letter one after the other, gave the CBN officials and others present the opportunity to comment on all the issues raised.
However, there was confusion over the intervention funds that were disbursed by the CBN and the BoI, as the CBN deputy governors and the BoI officials could not give a clear answer on that.
The FRC boss also said the council was unable to trace management’s approval for the N500 billion intervention fund in 2011 and N535 billion for 2012; the board’s as well as the Federal Executive Council’s approval for the fund.
“We did not understand the debenture certificate and we were unable to believe there was no debenture issued. We also want the Bol to confirm whether they are in custody of the N500 billion because we can still see monies coming out of the CBN, but we can’t find the money in the central bank’s balance sheet. We can’t find if the investment is registered and we want to know if it is warehoused at the BoI.”
Continuing, Obazee said: “We looked at the different guidelines that were issued on the intervention funds. The CBN has issued up to six guidelines on this, the fourth guideline never included AMCON, but it showed that the CBN gave N26 billion to AMCON from the fund as one of the beneficiaries.
“AMCON manages debt. So under what condition did AMCON get N26 billion from it?”
In his summation, Obazee said the debenture was recording huge losses.
Responding to the issue, Oputu explained: “No asset of the CBN or BoI was used as security for this debenture and there is no law that says we should register a debenture in which there is no security.
“But for whether the funds are warehoused at the BoI or not, the thing is that we that we signed an agreement as to how it should flow and we have been guided by that agreement and the funds are not expected to be fully domiciled with the BoI.
“We need to understand what the whole issue is about. What happened in the particular case of AMCON was that we had received securities from those participating commercial banks and we gave the funds to them.
“Meanwhile, those commercial banks sold those assets to AMCON because they were troubled, and AMCON paid the commercial banks for those funds.
“AMCON felt it was unfair and wrote to the central bank that since they had the obligation on their books and they had paid the commercial banks, it was only right for them to have the funds, which the central bank approved. Following that, the funds flowed to AMCON.”
In the same vein, the deputy governors of the CBN could not give clear answers on whether the funds were domiciled with the CBN or the BoI.
Responding to the allegation that the central bank diverted funds meant for intervention projects into education institutions and the construction of five palaces for traditional rulers at the cost of N10 billion, Barau said the allegation was false.
Also, Lemo said: “N10 billion for five palaces can never be deemed interventionist. They will interrogate the numbers to get the actual figures. But let me say that we have a lot of respect for the office of Mr. President.
“Perhaps communication between him and the governor could have been managed better. We don’t report directly to Mr. President and we would reserve that for the governor.”
Further interrogating the donations in the central bank’s account, Obazee said he was not comfortable with the classification of funds.
He added: “When we looked at the CBN financial statements, we saw donations scattered around and we were not able to reconcile them, so in doing the review for donations, we expect that all the donations should be put together.
“Some of the breakdown of the donations includes advances to the governor that he didn’t retire and it ended up in operating cost. That should not be so. There are corporate governance issues involved.
“The Permanent Secretary, Ministry of Finance, is a member of the board of the CBN, but you pay for technical experts to be attached to him and the CBN is paying for it, which is a corporate governance issue.
“If he is a board member of the CBN, the CBN should not pay for his technical assistance because that will prevent him from speaking independently at the CBN.”
Lemo also explained that the reason why the donations were scattered in the financial statement was because of the rate at which the CBN intervened in the economy.
The former deputy governor said: “If we put everything together as donations, it crowds out other types of donations; that is why we decided that for disclosure purposes and for transparency, let us have two main line items that would be reported and then we have a note attached to it.
“Because of the developmental role of the CBN, if we put it all together, it gets swallowed up and nobody understands why we are doing it. So the intention was not to hide anything.”
Obazee also faulted the N20.02 billion recorded as professional and legal fees in the CBN 2011 accounts.
Also, he said the $5 billion investment by the CBN as equity contribution as a member of the Islamic Liquidity Management Corporation (ILMC), which he said the CBN claimed it was empowered by its law to invest, was not stated in the Act.

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