Forensic Audit Outcome: Controversy trails Oando’s future board members


… Stakeholders back SEC    …SEC sets up Interim Management

…as Oando demands withdrawal of penalties within 3 days

By Kayode Tokede and Olabode Jegede

Over Securities and Exchange Commission’s (SEC) directive that shareholders of Oando Plc by July 1, 2019 appoint new Group Chief Executive Officer, and Deputy Group Chief Executive Officer for the company, stakeholders are contemplating the future board members as the exiting board of directors might influence the Extra-General Meeting outcome.

However, SEC announced on Sunday night the approval of a former Managing Director of Shell Petroleum Development Company and former Chairman of Julius Berger Plc, Mr. Mutiu Olaniyi Adio Sunmonu as head of Interim Management Team.

The press release states “Further to our Press Release on Oando Plc, dated May 31, 2019, the Commission hereby informs the public of the constitution of an Interim Management Team headed by Mr. Mutiu Olaniyi Adio Sunmonu CON, to oversee the affairs of Oando Plc, and conduct an Extra Ordinary General Meeting on or before July 1, 2019 to appoint new Directors to the Board of the Company, who would subsequently select a Management Team for Oando Plc.”

SEC in a release at the weekend barred Adewale Tinubu, the company’s Group Chief Executive Officer, and Omamofe Boyo, the Deputy Group Chief Executive Officer (DGCEO), from being directors of a public company for five years.

Findings by Nigerian NewsDirect revealed that Mr. Tanimu Yakubu with 5,997,315 direct shares and 5,998,700 indirect shares has one of the highest issued share capital in the indigenous energy company listed on the Nigerian Stock Exchange (NSE) and inward listing on the Johannesburg Stock Exchange.

The embattled GCEO, Tinubu has 3,670,995 indirect holdings, while the DGCEO has 2,354,713 indirect share capital in the company.

Further findings revealed that Ocean and Oil Investments Limited (OOIL) owns approximately 159,701,243 (1.28 per cent of total number of shares) shares in the Company. Tinubu and Boyo own 0.70per cent and 0.28per cent respectively in the Company through OOIL.

In addition, Ocean and Oil Development Partners Limited (OODP) owns 7,131,736,673 (57.37 per cent) shares in Oando. OODP is owned 40 per cent by Mr. Gabriele Volpi , 40per cent by the GCEO and 20 per cent by the DGCEO of the Company.

Other prominent shareholders include, Mr. O. Adeyemo with 75,000 direct and 1,723,898 indirect shareholding while Mr. Mobolaji Osunsanya has 269,988 and 1,890,398 direct and indirect issued share capital respectively.

The like of Mr. Ike Osakwe, 139,343; Mr. Ademola Akinrele, 96,510 and Chief Sena Anthony 299,133 have direct issued share capital.

Meanwhile, Alhaji Bukar Goni Aji represents the interest of Mangal Group. Mangal Group owns 15.92per cent of Oando Plc.

It would be recalled that in early 2018, the Chairman of Mangal Group and Max Air, Alhaji Dahiru Mangal had petitioned SEC over the affairs of Oando Plc which was resolved through a peace accord initiated by the Emir of Kano Malam Lamido Sanusi.

SEC in March 2018 announced the commencement of audit of Oando Plc’s account. It said it had appointed Deloite Nigeria to proceed with the forensic audit.

A source said the embattled management of the company might influence shareholders’ decision on July 1, 2019, expressing that the case is long overdue.

According to him, “The key thing is that the market has punished them significantly, the price of the shares of the Company viz a vis the expectation of the market in terms of performance is ridiculous. This is a company that did an offer of N90 and as at today trading less than N5.

“The regulators did the right thing by coming in to take the right decision on the company and I am hoping that the new management will come and do the appropriate thing in turning around the fortunes of the company.”

He added that the sanction would instill transparency and corporate governance in the nation’s capital market, saying that the outcome showed that nobody was above the law in the market.

He said that some companies had collapsed due to lack of transparency and corporate governance.

The National Chairman of Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said the sanction of Oando management is on the outcome of the forensic audit.

According to him, SEC sanction was based on the forensic report, stressing that if Oando should find faults in the report, the company can take court actions.

Speaking further he said, “But for me, I think it should be a lesson for other listed companies. Oando has to put in place a succession plan.

“SEC also has to be proactive. The management of SEC must be active and not folding their hands while there are serious issues to address in the capital market.

“On the other hand, Oando taking SEC to court will be a distraction and that will affect the company negatively.

Now, that the company has deemed it possible to return to profitability, let nothing hold them back to work for investors who invested in them.

“The Board members should sit down and take a decision on what should be done on SEC directives, either to go to court to challenge, or to implement those directives so that the company can move forward.”

Another shareholder, Mr. Adebayo Adeleke said that “Oando issue has been on since 2017 and there has been a forensic audit report which the former Minister of Finance, Kemi Adeosun order that time.

“I believe SEC has had enough time to go through and now that they have come up with a position informed by the recommendation in the forensic audit, stating that the GCEO and GDCEO should resign and banned from holding a director position in any quoted companies for five years.”

He noted that Oando company secretary has responded that they will do everything to protect shareholders and the asset of the company and therefore they are going to court.

According to him, with this having heard from SEC, we will exercise patience and hear from the court. We are no longer in the military regime, we are in the civilian regime and when there is a disagreement, the best thing is to go to court. It is a simple case not a criminal case and let the court determine who is right and who is wrong.

He however said that legal judgement is always a long procedure, it is better to see how it will all end.

Responding also, the managing director of HighCap Securities Limited, David Adonri said that Oando has been a troubled entity under Tinubu due to mismanagement of the board, with a lot of accusations, stating that management has been a failure to the company.

He said further that for SEC to slam the sanction on the company, it means the firm is guilty of the said offence.

The chief operating officer, InvestData Limited, Ambrose Omordion said that the suspension would send a signal to other managing directors and executives in the market.

Omordion said that the outcome of the forensic audit showed that SEC could bite and not only bark. He said that the investing public had been calling for change in the company’s management for a long time.

According to Omordion, there will be sanity in the company when the new management takes over in July.

He said, “Other companies and their directors will sit up, seeing how Oando management and its directors ended up.

“SEC decision will further boost corporate governance and transparency in quoted companies and increase investors’ confidence.”

The company denied the allegation that it does not have an effective internal control process in place as required by $61 of the Investments and Securities Act 2007, stating that in the absence of any specific instances or examples adduced by the SEC in its letter, “the company is of the position that there is no basis for this finding as statutory internal control processes are strictly followed in preparing the financial statements of the company. The SEC is therefore put to further proof of this allegation.”

It added: “The company reiterates that it did not violate the provisions of the ISA in respect of the sale of its subsidiary, OEPL to Green Park Management Limited as it was always the intention of the company to seek SEC’s approval prior to the completion of the sale. The same is applicable to obtaining the consent of the Minister of Petroleum to the sale. The practice is that SEC does not give consent unless and until the consent of the Minister concerned with that transaction has been sought and obtained. In fact, the transaction was one in which SEC’s approval was a condition subsequent to the sale.

“The accounting treatment accorded the transaction at closing (prior to completion) was in full compliance with the International Financial Reporting Standards (IFRS) and the rules of the Financial Reporting Council.

“The company rejects the assertion by SEC that the sale of OEPL in 2013 was fictitious or orchestrated to enable the company record a profit and pay dividends. The subsequent events that resulted in the inability of the company to conclude this transaction with a third party on an arm’s length basis could not have been foreseen at the time the transaction was closed and appropriately recorded in the company’s books.

“The 2013 audited accounts and subsequent quarterly reports of the Company were the proper account to be used in the 2014 Rights Circular and at the time of inclusion, did not contain any untrue statement or mis-statement. There was no intention on the part of the Company to mislead the public as alleged by SEC.

“The company has always maintained that its policy and procedure on Insider dealings and sale of shares during closed periods are in accordance with best corporate governance standards. We refer you to our letter dated [26th May 2017] for our detailed response on this allegation.

“The company has always in the spirit of transparency and accountability, fully disclosed all related party transactions with Board members and management in its audited financial statements. The SEC has not specified the details of the related party transactions that were undisclosed in 2012 and 2014. As a result, we are unable to respond in detail to this allegation and again put the SEC to further proof of same.”

It added, “The Commission claims that the company declared dividends in 2013 and 2014 from unrealised profits. The company has repeatedly denied this claim and provided evidence to the SEC in its earlier communication. The interim dividend declared in September 2014 and paid by the company in November 2014 was paid from the first half of 2014 profits of the company. At that point in time, the company had sufficient distributable reserves and it is acceptable under the law to pay out dividends if reserves exist at the point of declaration.

The declaration of the interim dividend on the basis of reserves available at the point of declaration, complied fully with the provisions of section 379 (2) of the Companies and Allied Matters Act.

“The SEC would observe that by the company’s letters dated 21st July 2017, 23rd August 2017, 24th August 2017, 28th August 2017 and 21st September 2017, Oando repeatedly brought to the attention of the SEC the fact that to the best of the company’s knowledge, Alhaji Dahiru Mangal held less than five of the shares in the company and requested that the SEC compel Alhaji Mangal to disclose his full beneficial ownership in Oando in accordance with Section 95(1-5) of the Companies and Allied Matters Act to enable the Company comply with Rule 17.13 of the NSE Rule book.

“The Company denies that it deducted and/or remitted any amount in excess of the statutory 10% Withholding Tax deductions from the dividend paid to shareholders in 2014 as required by the Companies Income Tax Act (CITA). We put the SEC to further proof of this allegation.

“Oando hereby states that the SEC did not follow the legal procedure prescribed under both statutory and case laws in making an order for the resignation of and/or barring the directors of the Company from holding the position of director in any public company. We therefore maintain that such order from the SEC is invalid, illegal, ultra vires and should be rescinded.”

It reiterated that SEC’s actions on the matter would have a hugely negative impact on the company’s reputation as a leading indigenous oil and gas company and its shareholders, investors and stakeholders, whose interests the SEC has a duty to protect. It condemned what it described as the disturbing pattern in which the SEC had repeatedly taken harsh punitive actions towards the company without according it the fundamental principle of fair hearing.

These, it maintained have had negative effects on the company’s share price, goodwill and commercial fortunes as well as those of its subsidiaries.

“In view of the foregoing, the company demands a withdrawal by the SEC of the penalties listed in the Letter within three days from the receipt of this letter as they are largely unfounded and remain unsubstantiated in the absence of any representation from the Company before SEC arrived at its sanctions. The company hereby reserves its right to challenge the findings in the letter in the appropriate court of law,” it added.

Oando which as at May 31, 2019, its share price stood at N4.40 on January 25, 2010 carried out a right issue of  301.69 million ordinary shares of 50 kobo each at N70 per share  on the basis of one new ordinary share for every three  ordinary shares of 50 kobo. This shows that shareholders value in the company has been eroded over the years.


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