Oando Crisis, SEC and Pertinent Questions on Corporate Legal Rights

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For almost two years, Today’s Echo has monitored the drawn-out battle over the control of Oando Plc, arguably Nigeria’s biggest integrated oil and gas firm. The lingering crisis at Oando Plc finally reached a turning point on Friday, May 31, 2019, when the Nigerian Securities and Exchange Commission (SEC) released a statement, ordering the removal of the company’s CEO, Wale Tinubu, Deputy, Omamofe Boyo and other members of the board.

However, there remains a question of whether the SEC’s action is within its power under the law. Has the SEC become a court of law that can deliver judgement? Is this a timely move or the violation of legal rights? To put the issue in proper perspective we may first examine the origin of the protracted conflict and why the SEC decided to investigate Oando in the first place.

Origin of the Conflict at Oando

The SEC has stated that it launched an investigation on Oando and its shares following the receipts of two petitions from Dahiru Mangal and Ansbury Incorporated in 2017.

On September 5, 2017, Ansbury Investment Inc, sent a petition to the SEC, seeking the postponement of Oando Plc’s Annual General Meeting (AGM).

 Ansbury investment is a majority shareholder in Ocean and Oil Development (BVI) which holds 99 per cent of Ocean and Oil Development (OODP) Nigeria and 56 per cent equity stake in Oando Plc. Ansbury had petitioned the SEC to intervene and enable its majority shareholders to change the management of Oando, which it alleged wanted to continue running the oil firm even when it was not improving its fortunes.

Ansbury accused the management of Oando Plc of mismanaging the company, causing it to suffer a huge loss of N34.9 billion over a two years period. The Ansbury shareholders also said Oando plc’s current liabilities as at December 31, 2016 far exceeded the current assets by N263.7 billion confirming serious financial imbalance from the previous financial year.

The face behind Ansbury Investment is Gabrielle Volpi, an Italian and close ally of PDP presidential candidate, Alhaji Atiku Abubakar. Volpi is also the CEO of integrated logistics services giant, Intels.

 A prominent shareholder of the company, Alhaji Dalhiru Mangal also called for the SEC to stop the AGM. In his petition, Mangal said he owns 17.9% while Oando Plc’s management says he owns only 4%.

The management of Oando Plc promptly denied the allegations levelled against it and refuted claims of the accusers to ownership of the company. In a statement made available to the media, Oando’s management said, “Ansbury Inc (Ansbury) is not a shareholder of the company, but a shareholder in a company domiciled in a jurisdiction outside Nigeria which in turn holds shares in a Nigerian investment company that is a shareholder in Oando.”

The AGM was eventually held and Wale Tinubu remained at the helm in Oando.

However, shortly after, the SEC suspended trading on Oando shares at the NSE pending the resolution of the issue. The ban was eventually lifted after the then SEC Director-General, Munir Gwarzo was dismissed by the former Finance Minister, Kemi Adeosun due to allegations of misappropriation and abuse of office.

Oando bounced back immediately ban on the trading of its shares on the NSE and JSE was lifted, with an increase of 10% in value within a day after the lifting.

Who Wants to Take Over Oando

Wale Tinubu has accused Volpi and his co-conspirators of trying to push him out and take over the company. Yet it is true that Volpi really has scores to settle with him.

Oando’s complex shareholding explained. Courtesy: Nairametrics
JAT: Jubril Adewale Tinubu
Mofe: Omamofe Boyo
OODP: Ocean and Oil Development Partners Limited
OODP BVI: Ocean and Oil Development Partners (British Virgin Islands)
OOIL: Ocean and Oil Investments Limited

Volpi and Mangal have invested large sums of money into Oando indirectly. In 2014, Oando acquired the assets of Conoco Philips in Nigeria in a deal that cost $1.5billion.

Mr. Volpi reportedly gave Oando’s Wale Tinubu the sum of $900 million to effect the deal. In addition, Mr. Mangal reportedly contributed $250 million while former Vice President Atiku Abubakar contributed $50 million to the purchase which proved a disastrous investment for Oando. To date, the investors have not seen any significant return on investment. In addition, Volpi lent $80 million to Whitmore Limited, a company owned by Wale Tinubu to acquire a stake in OODPL BVI.

Volpi’s claims of majority ownership of interests in Oando Plc may not be false but is difficult to verify due to the complex ownership structure of the company. After his massive contributions into the investment chain, Volpi’s Ansbury reportedly owns 61.9% of OODP BVI, the investment vehicle registered in the British Virgin Islands, which Wale Tinubu used to acquire Oando Plc. OODP BVI owns 99% of OODP, the holding company that owns 55.96% of Oando Plc, while Alhaji Mangal and the other shareholders own the rest of the company shares.

SEC Sanctions and Pertinent Questions

According to the SEC, its recent action follows the conclusion of its investigations on Oando. In a statement signed by Mary Uduk, the acting Director-General of SEC, the regulatory body said its investigations revealed nine major infractions such as alleged corporate governance lapses, failure of internal controls and incidental issues arising from the sale of a subsidiary.

Others are suspected market abuse and insider dealings, related party transactions, payment of interim dividends despite liquidity constraints, false disclosure, non-disclosure of beneficial ownership and tax-related issues.

Besides ordering the immediate removal of Tinubu, Boyo and other directors, the SEC banned Tinubu from being director in any Nigerian company for the next five years and also directed Oando Plc to pay the total sum of N417,692, 316 as fine.

In a swift reaction, Oando’s management challenged the SEC’s stance and announced its readiness to engage legal means to enforce its fundamental rights. True to its words three days later, Oando got a court injunction that stopped the SEC from enforcing the arbitrary sanctions

Although, the court has stopped the SEC from enforcing the sanctions and installing its own person to head Oando, several reactions have trailed the regulatory body’s decisions. While many believe the SEC was doing the right thing in protecting investors from poor management decisions, several others believe Tinubu is being deliberately being eliminated to pave way for those who want to takeover Oando. Some are even insinuating political motives, alleging that it was part of a grand plot to undermine senior All Progressives Congress (APC) chieftain and Wale’s uncle, Bola Tinubu.

A source from within the NSE told Today’s Echo that the SEC went beyond its limits on the sanctions. According to the investment advisor, while the SEC as a regulatory body for the Nigerian Stocks Exchange (NSE) can make recommendations to protect the interests of investors, its actions are not supposed to affect the company beyond its activities in the NSE.

“As a publicly listed company, Oando can forfeit its listing, or trading on its shares may be suspended but analysts believe it is not within the SEC’s powers to remove the directors of the company. That decision should be left to the shareholders or the court.”

The question then arises. Why didn’t the SEC make the full details of its report public and why didn’t it just make its recommendations to the court and act as the plaintiff? These questions also seem deeper when the reason why the SEC investigated Oando in the first place is considered. A dispute over debt developed into a dispute over the shareholding of the company and the matter was brought to the SEC.

By using holding companies to indirectly invest in Oando, Wale Tinubu and Onamofe Boyo have protected the company from arbitrary takeover. It now becomes a subject of corporate legal interpretations whether Ansbury’s majority shareholding in OODP BVI translates to majority shareholding in Oando. Sometimes, reports of findings are multifaceted and also subject to interpretations. This is why the general public needs to see the full forensic audit.

In the United States, Enron’s CEO, Jeff Skillings had already resigned when the Securities and Exchange Commission came out with the report of its investigations, charging Skilling and other indicted to Enron executives with fraud. But it was not the job of the SEC to prosecute Skilling, it was the Department of Justice that did that. It is also farfetched at this time to draw parallels between Jeff Skillings and Wale Tinubu; the former was convicted by law court while the latter has only been indicted by a regulator. It is left for him to respond to those accusations.

One of the people asking pertinent questions on the issue is Atedo Peterside, the founder of Stanbic IBTC Bank Plc and Chairman, ANAP Business Jets Ltd. The erudite businessman called on the SEC to release its forensic audit report on Oando Plc

 “On Oando, what I don’t understand is why the SEC would not give the findings of the Forensic Audit to Oando and give them an opportunity to defend themselves? The findings of the Forensic Audit should be made public alongside Oando’s responses so we can all judge for ourselves?”

Peterside and some other members of Nigeria’s corporate sector are asking questions that beg for answers in this unending war of attrition over who controls Nigeria’s largest integrated oil and gas firm. But for now, Tinubu and his team are holding on and fighting back. They deserve to be heard too.

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