N13bn transnational fraud exposes Nigeria’s corporate governance deficit

…As FIRS loses N1.6bn to ADWA 

...Forensic evidence nails MTN as debtors

By KELECHI MGBOJI

Facts have emerged how a British firm, Allan Dick West Africa (ADWA) Limited, a subsidiary of Allan Dick Company (ADC) United Kingdom, capitalized on weak corporate governance culture in the country to defraud local companies, banks and institutions of about N13 billion.

The UK firm which came as portfolio investors raised substantial funds through Nigerian financial institutions (names withheld) and subsequently transferred the money to companies and individuals’ bank accounts in the United Kingdom within short period of operation as telecommunications services provider.

To make matters worse, on the eve of their departure, the UK firm whose case files are currently being investigated by the Serious Fraud Office of London and the Economic and Financial Crimes Commission (EFCC) Nigeria, was discovered by liquidators to have destroyed every trace of their transactions in the country to cover up their tracks.

Court-appointed joint liquidators, Akinwumi & Busari and Ihekwazu &Co, both legal practitioners, told Exclusive Reporters which exclusively has been tracking the scandalous development that it was a classic case of transnational fraud that exposes the country’s weak governance culture.

The liquidators who confirmed they had petitioned the Serious Fraud Office, UK, and other relevant authorities both international and local are now working hard to muster evidence for subsequent prosecution of the parent company based in UK.

The firm incorporated in Nigeria on February 22, 2001 as a wholly owned subsidiary of Alan Dick & Company Limited UK, had obtained unsecured credit in the sum of N6 billion and N5 billion from two lenders whose platform they eventually used to transfer the funds back to their home country in the wake of the financial meltdown in 2008.

With huge liabilities hanging on their neck, by June 2008, directors of the firm initiated a members’ voluntary winding-up process which was contested in court by creditors and on December 17, 2008, the members’ voluntary winding up was substituted with a court-ordered liquidation on the application of the banks.  

In exclusive interview, the liquidators disclosed that they discovered that directors of Alan Dick carried out considerable number of fraudulent transfers of funds from Nigeria to the UK. According to them, financial department of Alan Dick West Africa (ADWA) was substantially run from the UK and documents were consciously destroyed.

Besides, the coincidence in the timing of the movement of funds from Nigeria to England and the period in which the English company was in financial difficulties raises a lot of questions and doubts.  

Furthermore, it was uncovered that dividend of N1.296 billion for the financial year ended 31 March 31, 2005, was paid at a time when the firm was operating at a loss and had negative shareholders’ funds.

Based on their findings, liquidators concluded that there was no need for the credit facilities (loan) of over N8 billion from the banks in view of the fact that ADWA was paid in advance for majority of its contracts.

During the period, it was discovered that the firm did not pay tax during the period, leaving a tax liability of about N1.6 billion without molestation by the Federal Inland Revenue Service (FIRS) whose staffers are believed to have compromised their status as federal government's revenue collectors.
FIRS was said to have gone to court challenging refusal of liquidators to pay to them tax liabilities of Allan Dick which liquidators contested in court.

When contacted, FIRS Director of Corporate Communications, Mr. Emmanuel Obeta, refused to comment on why and how the Service alolowed tax liability of N1.6 billion over five year period, saying that the matter is in a Lagos High Court.

But determined to pursue this classic case of cross-border insolvency to a logical conclusion, and ensure that the ADWA directors are held accountable for any fraudulent activities and ensure that they contribute to offsetting the liabilities of the firm, liquidators have petitioned the Serious Fraud Office, UK, and also enlisted the services of some authorities in the UK including international forensic accountants.

MTN connection

Our investigations authoritatively reveal how MTN filed credit claims to the liquidators, seeking to recover alleged debt of about N13 billion purportedly owed it by ADWA in liquidation which also failed to settle local sub-contractors for services rendered to its client, MTN Nigeria.

Liquidators said that forensic documents obtained by experts from Ghana which showed some of the financial transactions serially cleaned up, helped to nail MTN, and it turned out that MTN was actually a debtor to the UK firm.

Rest of the story and raging controversy over sharing of dividends of realized assets of Allan Dick is for next edition. Keep date with our next edition.