The recent earth-shaking decision of the Central Bank of Nigeria Governor Mr. Sanusi Lamido Sanusi purportedly acting under the Banking and other Financial Institutions Act BOFIA and under relevant Laws to remove the Managing Directors of 5 Banks and other Executive Directors of some of the nations 26 Banks that survived the consolidation exercise namely FinBank Plc, AfriBank Plc, Oceanic Bank Plc, Union Bank Plc and Intercontinental Plc continues to generate ripples and intense debate throughout the length and breadth of the Federal Republic of Nigeria.
It is infact the hottest issue in the news in the nation at the moment. On Friday the 14th August 2009, the Governor of Nigeria's Central Bank acting under Sections 33 & 35 of the Banking and Other Financial Institutions Act BOFIA announced the removal of the following Managing Directors of the aforesaid banks, namely Mr. Okey Nwosu of FinBank Plc, Mr. Sebastian Adigwe of Afribank Pic, Mr. Barth Ebong of Union Bank Plc, Mrs Cecilia Ibru of Oceanic Bank Plc and Mr. Erastus Akingbola of Intercontinental Bank Pfc. Also removed alongside the former .Chief Executive Officers CEO were ail Executive Directors of the said banks. The sacked CEO's were simultaneously replaced with Mrs. Suzanme Iroche of FinBank Plc, Mr. Nebolisa Arah of AfriBank Plc, Mr. John Aboh of Oceanic Bank Plc, Mr. Maymud Alabi of Intercontinental Bank Plc and Mrs. Funke Osibodu of Union Bank Plc.
The Apex Bank also injected N420 billion Naira into the affected banks to prevent them from collapsing and having a disastrous effect on the nation's economy. The C.B.N. Governor gave the reasons for the drastic action as being the need to prevent the nation's banking industry where the 5 affected banks were major players accounting for 40% of the nation's total loan portfolio from a complete collapse. Mr. Lamido Sanusi in his riot-act of a speech painstakingly set out the steps that had hitherto been taken to stave off the Banks from coming under the sledge hammer but all of which could not avail the embattled Banks and their CEO's. As an aside from my modest knowledge of Economics I find the CBN Governor's position quite convincing contrary to the rash comments from sectors which have made ail manner of wild allegations against the C.B.N's helmsman ranging from the pursuit of an ethnic agenda, to undue haste and improper procedure, denial of fair hearing, grand standing even an attempt to rubbish the contributions of his immediate predecessor Prof Charles Soludo. Perhaps these critics need to re-read Mallam Sanusi's speech again.
However, without prejudice to one's opinion on the radical actions of Lamido Sanusi, a number of Legal and Quasi - Legal issues have arisen-for objective analysis, short of an indepth discussion of the merits and demerits of the several litigations that have now been initiated by the dramatis personse in this very topical economic and financial drama.
Yes, things have certainly fallen apart in the nation's economy and Nigerians are no longer at ease.
The first legal issue that calls for examination on this topic, is the legal validity or otherwise of Mallam Sanusi's action. In the express words of the C.B.N. Governor "Therefore, in exercise of my powers as contained in Sections 33 and 35 of the Banks and other Financial Institutions Act 1991, as amended, and after securing the consent of the Board of directors of the CBN. I hereby remove the Managing Directors (MDs) and the Executive Directors (EDS) of the following banks from office with effect from Friday. August 14. 2009.
1. Afribank Plc
2. Intercontinental Bank Plc
3. Union Bank of Nigeria Plc
4. Oceanic International Plc
5. FinBank Plc "
What do sections 33 and 35 of the Banking and other Financial Institutions Act as Amended BOFIA say:- "Section 33 - Special examination
(i) The Governor shall have power to order a special examination or investigation of the books and affairs of a bank where he is satisfied that -
(a) It is in the public interest so to do: or
(b) The bank has been carrying on its business in a manner detrimental to the interest of its depositors and creditors or
(c) The bank has "insufficient" assets to cover its liabilities to the public or
(d) The bank has been contravening the provisions of this Act or
(e) An application is made thereby
(ii) A director or shareholder of the bank or
(iii) A depositor or creditor of the bank" While Section 35 reads "Failing bank
(a) Where a bank informs the Bank that (a) it is unlikely to become unable to meet its obligations under this Act or
(b) It is about to suspend payment to any extent: or
(c) It is unsolvent; or
(d) Where, after an examination under Section 33 of this Act or otherwise howsoever, the Bank is satisfied that the bank is in a grave situation as regards the matter referred to in Section 33(i) of this Act. the Governor may by order in writing exercise any one or more of the powers specified in subsection (2) of this section.
(2) The Governor may by order in writing under subsection (i) of this Section
(a) __________
(b) __________
(c) remove for reasons to be recorded in writing with effect from such date as may be set out in the order, any manager or officer of the bank. notwithstanding anything in any written law or any limitations contained in the memorandum and articles of association of the bank" [Emphasis provided]
In the light of the above provisions particularly the portions emphasized, can the powers of the C.B.N Governor to take the steps he has taken including the sack of
M.D's of the 5 Failing or Distressed Bank be disputed?
The obvious answer is NO. The answer is even more obvious in view of the Statements of the CBN Governor that "Due to these circumstances. I instructed the Director of Banking Supervision of the CBN to carry out a special Examination of the following banks:
1. Afribank Plc
2. Finbank
3. Intercontinental bank Plc
4. Oceanic bank Plc and
5. Union Bank Plc
The result of the Special Examination revealed "that the Expended Discount Window EDW of the five banks amounted N127.85 billion by the end of July 2009 representing 89.81 per cent of the total industry exposure to the CBN on its discount window", "while the five banks account for 39.93 percent of loans", and nearly 50% of the debt portofolio of Nigerian Banks.
Yet, some do gooders have alleged that the C.B.N. Governor has no powers to remove the sacked CEO's and that the procedures employed was wrong, that the CEO's were denied a fair hearing and that the decision was hasty.
At the expense of reputation the charge of lack of powers to remove the CEO's will not stick in view of the clear wordings of the statute prescribed above. It is a firmly established principle of law that a statute must be given a literal rule of interpretation, the fact that the application of the law has an harsh effect notwithstanding. See the recent case of Grosvenor Casinos V. hallaoui (2009) 4 - 55S.C. 200 where the extant Nigerian Law on the Registration of Foreign Judgments was applied literally not withstanding that it had the effect of allowing a Nigerian to perpetrate fraud on an English businesswoman by refusing to be subject to English courts.
The second objection of the denial of fair hearing, however being a constitutional point requires a more detailed examination.
Section 36 (1) of the 1999 constitution provides that in the determination of his civil rights and obligation a person will be entitled to fair hearing. The pertinent question is whether the special examination conducted by the C.B.N. into the affairs of the 5 distress banks amounts to the determination of the civil rights and obligations of the 5 sacked CEO's or not as to warrant to the determination of his civil rights and obligations or is a mere administrative investigation?.
Where what is involved is the determination of the sacked CEO's civil rights and obligations, then the C.B.N. would be obliged to act judicially or quasi - judicially. In such an instance an hearing which will afford the sacked C.E.O.'s an opportunity of a fair trial or fair hearing is imperative. Thus the C.B.N. Governor would have had to set up a pane! where:-
(i) the sacked CEO's must be given the opportunity to be present all through the proceedings and hear the evidence against them.
(ii) to cross-examine or otherwise confront or contradict all the witnesses that testify against them or their interest.
(iii) to have read before them all the documents tendered on evidence at the hearing
(iv) to have disclosed to them the nature of all relevant material evidence including documentary and real evidence, prejudicial to them save in recognized exceptions;
(v) to know the case they have to meet at the hearing and have adequate opportunity to prepare for their defence and
(vi) to give evidence by themselves, call witnesses, if they like, and make oral submission either personally or through a Counsel of their choice.
All this requirements are necessary for the determination of the civil rights and obligations.
Kotoye V. CBN (1989) 1 NLWR (Pt 98) 419. Eperohum V. University of Lagos (1986) 4 NWLR fpt 34) 162. Baba V NCAIC (1991) 5 NWLR (PT 192) 88, Garba V. University of Maiduguri (1986) 1 NWLR (pt 18) 50 LPDC V Fawehinmi (1985) 2 NWLR (Pt 7) 300
However where an administrative panel or body is merely to investigate and make exploratory findings, then there is no determination of any civil right or obligations thus the issue of fair hearing will not arise
Baba V. NCATC (1990) 5 NWLR (pt 192) 308, R V Director of Audit (WR) (1961) NSCC 292, Adedejl V. Police Service Commission fl967) NSCC 59, Hart V. Military Governor River State (1976) NSCC 622
With such administrative tribunals the rules for judicial or quasi-judicial tribunals as
to fair hearing will not apply?
The question then is, where do we place sack of the 5 CEO's?. It is submitted that by a community reading of sections 33 and 35 of the BOHA, the sacking of the CEO's by the CBN Governor based on the result of the investigation of the books and affairs of the concerned bank is a Ministerial Act. as opposed to a judicial or quasi Judicial act, as he merely exercised a discretion on the report of the special examination which showed that the 5 banks were in distress and had breached various banking regulations which breaches had grave consequences on not only the banking sector but the entire economy. So all the talk about fair hearing will not apply.
Baba V NCAIC (supra)
Amaka V. Lt Governor. Western Region (1956) SCNLR
Owovemi V. Adekova (2003) 12 SC (pt 1) 122.
Thus with respect all the talk about the 5 CEO's being given a fair hearing before being sacked will not apply. A related issue is the criticism in some quarters that the C.B.N's Governor action was hasty. Undoubtedly the C.B.N. Governor has a discretion among other things to remove the 5 CEO's under Section 35 (1) and (2) of the BOFIA "where, after an examination under Section 33 of this Act or otherwise howsoever, the Bank is satisfied that the bank is in a grave situation as regards the matters referred to in Section 33 (i) of this Act, the Governor may by order in writing exercise any one or more of the powers specified in subsection (2) of this Section"
(2) The Governor may by order in writing under subsection (1) of this section
(c) remove for reasons to be recorded in writing with effect from such date as may be set out in the Order, any manager or officer of the bank".
If as alluded to by the CBN Governor in his speech of the 14th August 2008, the 5 Banks under the sacked CEO's accounted for 39.93 per cent of non-performing loans in the banking-sector and 89.31 percent of the Expended Discount Window. EDW of the exposure of the entire banking Industry, perhaps the critics would only have been satisfied as to the timeliness of Mallam Sanusi's action only if he had allowed the entire banking system to collapse after all the banks had been audited presumably by December for the CBN Governor's action to be Justified.
As for the charge of sectionalism, regionalism or Northernization, no intellectual discourse or platform worth its salt will dignify such hogwash with a reply. It is submitted that the only objective counter argument to the C.B.N, Governor's speech. is if critics come up with facts and figures to debunks those given by Mallam Sanusi. IN the absence of that these self-serving critics will be better off maintaining a dignified silence.
In typical Nigerian fashion the sack of the 5 CEO's has triggered off a chain of re-actions which reactions have developed a life of their own outside of the initial action by the CBN Governor. In the aftermath of the CBN Governor's action, he had remarked that "However we will also ensure that officers of banks and debtors who contribute to bank failures are brought to book to the full extent of the law and that all proceeds of infraction are confiscated where legally feasible". This statement had been interpreted by a section of the Media as tantamount to saying the 5 CEO's had committed Criminal offences in giving out huge non-performing loans and will be prosecuted. The embattled Economic and Financial Crimes Commission EFCC in dire need of public support and approval in the face of its badly dented image courtesy of its lack-lustre prosecution of allegedly corrupt public officers seized upon this golden opportunity the way a drowning man will cling on to a life line and a gasp of oxygen. Encouraged by a sensation seeking section of the Media and a tough talking Central Bank, the 5 CEO's were declared wanted and their actions criminal, the List of Debtors of the 5 Banks was published and both Directors and Debtors of Banks were invited and in many causes "hauled" into EFCC custody for investigation. Yes, the EFCC that had seemed fated for irrelevance, suddenly found its voice and with the voice the bravado to criminilize otherwise simple banking transactions that had not been proven to have metamorphosized into criminal and fraudulent transactions. Not done the commission has sternly warned the Judiciary that "while it is within the right of every Nigerian to seek legal redress against perceived wrong, we would crave the indulgence of the respected members of the Nigerian Bench not to consider any frivolous interlocutory application from bank debtors at this particular point in time" Not even the military at the height of its power ever issued a directive at the Judiciary as to how conduct its affairs!! And this from a person who is a lawyer by training. Thankfully, the Nigerian Bar Association has promptly condemned this act of intimidation and blackmail by the EFCC. Perhaps the EFCC Chairperson needs to be reminded that justice is not a one way traffic Justice is as much for the Defendant as it is for the Prosecution. "The court has a constitutional duty to be fair to all sides to a case, be it Plaintiff or Defendant, Prosecution or Accused all are entitled to a fair hearing which does not contemplate a standard of justice which is biased in favour of the party and to the prejudice of the other. Rather it imposes and ambidextrous standard of justice in which the court must be fair to both sides of the conflict"
Ndu V. State fl990) 7 NWLR (Pt 164) 550
Amanchukwu V. F.R.N. (209) 2 - 3 s (Pt 1) 93.
This is a settled position at law that has constitutional backing under section 36(i) of the 1999 Constitution and not even the allusion by the.EFCC to the fact that "some of us may not know but these are very critical times for the banking sector and our beloved nation" Can dislodge this imperative. Thus the appeal by the EFCC to sentiments so that the fundamental rights of the accused can be suspended in the fight against corruption cannot be allowed or condoned. Let the commission and every one Fighting any manner of social vice learn to follow the due process or else anarchy will prevail!.
The point must be made that the fact that a bank's customer is owing the said bank N1 trillion Naira or $1 billion Dollars does not necessarily make the debtor a criminal. Criminality In respect of bank loans depend on a number of variables what are the terms of the contract, is the money due, is the money to be paid in instalments, is their any moratorium on payment etc. Some of the indices of criminality in relation to loan transactions include: the diversion of the loan to other purposes outside the agreed purpose, the use of false or fake documents as security, the use of non-existent collateral as security for loan, the unwillingness to pay even where there has the ability or resources to repay. Thus the fact that some of the debtors of the failing banks have large sums of money standing against their names is no evidence that they are fraudulent, it is possible that by their loan agreements the debts are not due and there is also the issue of some of them disputing the amount of their indebtedness. But the EFCC basking in the euphoria of the ongoing Trial by Media (which incidentally was one of the themes of the recently concluded Annual Bar Conference 2009 which session organised by the Section on Public interest and Development Law SP1DEL Mrs. Farida Waziri personally attended) has criminalised all manner of credit facility and gone after all the big debtors of the 5 Banks and ironically realised huge sums of money worth over N66 billion Naira.
By this successful recovery, all eyes are closed to the fact that these sums of money were recovered by intimidation and arm-twisting: this is where the danger lies to the acceptance of due process and rule of law in Nigeria.
Due to the failure of leadership over decades Nigerians have become disillusioned with all public institutions including the judiciary which they see as only protecting the rich, slow and in effective in giving them justice, so all over the land there is constant recourse to extra-legal means of getting justice: politicians and even traders are sworn on fetish oaths to secure allegiance and even loyalty to contract, police resort to extra judicial killings to avoid long and expensive pro-sections which may not secure convictions, criminal suspects of all types from the pickpocket, petty thief to the armed robber, ritual killer and kidnapper are subjected to the instant jungle justice of lynchings. All courtesy of the general discontent with the prevailing legal system. So when now the nation's major anti-graft agency has shown that the way to go in respect of simple banking loans is intimidation and arm-twisting, I shudder at what this portends for the nation at all levels!!
However, the bank debtors have only themselves to blame when they in the words of Richard Brinsley Sheridan show that "It is not in their interest to pay the principal nor their principle to pay the interest" or behave in a manner described by the American Oil Executive and Financier J.P. Getty "If you owe the bank $100 million. that is your problem, if you owe the bank $100 million that is the bank's problem
Yes, now that our debtor compatriots have by their huge debts created problems for the banks which problems the bank have been able to solve through the strong arm tactics of the EFCC. The only worry for many of us who are stakeholders in the nation's legal system is the long term effect of this solution on not only the nation's legal system but the observance of due process, rule of law and the respect for Constitutional means and methods. Our people are naturally impatient, now they have been told that you do not have to follow to get redress, and that Nigerians respond faster to the use of force or at least the threat of it. God help us all!!
A related development still on the part of the EFCC is the disobedience to court order. A number of detained CEO's have obtained court orders for their release on bail, but the EFC still basking in its new found powers has refused to release the persons concerned sighting its re-vitalized fight against corruption as alibi and defence. This yet another show of might that is likely to be emulated by the populace and where the courts in the case of ordinary citizens respond with their awesome powers to punish contempt. The citizens remark that they are being punished because they are not in position of authority. Did the EFCC not do so and got away with it? Once again the courts and the law will come wider unwarranted attack. No thanks to the executive lawlessness and rascality shown by the EFCC.
One other aspect of this saga is worthy of consideration is the role played by auditor and accountants in this unfortunate episode. Many of this banks in the last few years preceding this saga posted very impressive performances in their Statements of Accounts for which the Banks and their MD's were rewarded with many awards both locally and internationally. Yet a few months after the publication of these bumper results by the Auditors the Banks are in trouble. How come the Auditors did not detect these anomalies. It will be recalled that this is not the first time external auditors usually Chartered Accountants will be caught in the web of misleading financial reports. During the failed Bank Saga in the 1990's several Accountants and Accounting Firms were involved in the auditing of Financial reports which proved to be misleading but there is no single record of any punishment for erring auditors. Indeed, the standard defence for auditors and accountants was that the auditing and financial reports were based on documents and materials made available by the audited company. These Auditors simply played the ostrich, the public was told that auditors had no way of knowing that the presented documents were false, doctored or concocted, so we were made to believe that the work of auditors/accountants was simply Bookeeping, merely adding up figures.
Thus until the recent Cadbury scandal when one of the nations Chartered Accounting Firms was sanctioned by way of suspension from auditing accounts of public quoted companies, no Chartered Accountant has even been brought to book for unethical practices in respect of the production of financial reports. Similarly the leading orgainsation for Chartered Accountants Institute of Chartered Accountant of Nigeria 1CAN who make up over 95% of External Auditors in the nation's economy stood solidly behind its members deflecting any form of criticism. Now the issue of unethical and even criminal conduct by auditors has arisen once more, and this time perhaps bowing to public pressure 1CAN has now threatened to sanction erring members implicated in the ongoing banking crisis by subjecting to professional Disciplinary proceedings any member found guilty of criminal conduct in a court of law
This is a most welcome development and show the sensitivity of 1CAN to the mood of the nation.
The point must also be made that the sanctioning of Corporate executives and Financial professionals is neither a Nigerian initiative or a new phenomenon rather even in Europe and America the bastions of democracy, rule of law and free enterprise, the regulators do not play with the investments of the citizen or any activity capable of putting the economy at risk. The regulators therein are quick to read the "Riots Act" at defaulters and literally throw the book at any erring player no matter how highly placed, Chief Executives of the world's leading organisations in those countries have been known to be convicted and sentenced to long terms of imprisonment without parole: examples:- the Bank-of Credit and Commerce International BCCI crisis in the late 1980's, the Arthur Anderson problems at the turn of this Century and Millennium, the Enron problem in the U.S.A. the Simens scandal in Germany and Austria, and the Halliburton scam in the USA amongst others. In the handling of these issues the fact that these corporate financial scandals arose in the most democratic and law abiding of societies did not prevent the authorities thereat from wielding the big stick.
In the Enron scam, a former high ranking member of the U.S. Government under President George Bush Jr. Donald Rumsfield lost his job; while only recently a United States Congressman William Je fferson was convicted and sentenced to prison. Thus in that regard the CBN and other regulatory authorities will be following acceptable precedent even best global practices if all executives and others found guilty of offences after due prosecution are convicted and given the appropriate punishments.
But prosecution there must be, Not persecution or trial by media as seems to be -prevalent at the moment. Here the EFCC statutorily charged with the prosecution of the various bank executives including 5 sacked CEO's must strongly resist the temptation to play to the gallery or the anti - corruption agency will be the loser at the end of the day. Imagine, if after all the present Media blitz and attention on the embattled Bank Executives, many of them were to get off the hook, either because they have been charged to court for offences unknown to law, or because the required evidence or witnesses were not produced in court, the evidence produced is insufficient to ground a conviction, improper foundation laid for evidence to be admissible, public documents not certified as required by law on the flimsy excuse that being electronic or computer generated evidence no such certification is required. The public will not accept excuses neither will the appeal to sentiments that the courts are frustrating the fight against corruption be acceptable. The EFCC must anticipate all possible pitfalls and do the best possible to reduce them to the basest minimum. Thankfully very seasoned lawyers including SANS have been engaged to handle the prosecutions of cases, and the fiat of the Attorney-General is being sought to eliminate any "territorial wars" even though on the authority of Osahon V. Fed. Republic of Nigeria (2006) 2 S.C. (Pt. II) 1, this may not be necessary or might even be sought after prosecution has commenced. But there is no harm in making assurance doubly sure; in view of the Federal Attorney - General's Constitutional Supremacy and absolute discretion to scuttle any prosecution if he so desires, there is a lot more wisdom in not only obtaining the A.G's fiat but his complete support for these most important prosecutions. The EFCC's initiative is therefore most welcome, having been taken Ex-abundantia Cautela - The exercise of abundance of Caution. The EFCC must de-emphasize unnecessary publicity and be realistic in its expectations; it will be unduly ambitious to imagine that all the bank executives allegedly to have been involved in fraudulent transactions which led to the almost collapse of the embattled banks will be convicted; it should be satisfied if more than a handful are convicted and not blame the court for its failure but ready to accept defeat where it fails.
Overall, the Nigerian Banking Sector is in need of a thorough cleansing and Mallam Sanusi's initiative if pursued to its logical conclusion should have the desired result. Here is wishing the CBN Governor success in this patriotic endeavour.
The Apex Bank also injected N420 billion Naira into the affected banks to prevent them from collapsing and having a disastrous effect on the nation's economy. The C.B.N. Governor gave the reasons for the drastic action as being the need to prevent the nation's banking industry where the 5 affected banks were major players accounting for 40% of the nation's total loan portfolio from a complete collapse. Mr. Lamido Sanusi in his riot-act of a speech painstakingly set out the steps that had hitherto been taken to stave off the Banks from coming under the sledge hammer but all of which could not avail the embattled Banks and their CEO's. As an aside from my modest knowledge of Economics I find the CBN Governor's position quite convincing contrary to the rash comments from sectors which have made ail manner of wild allegations against the C.B.N's helmsman ranging from the pursuit of an ethnic agenda, to undue haste and improper procedure, denial of fair hearing, grand standing even an attempt to rubbish the contributions of his immediate predecessor Prof Charles Soludo. Perhaps these critics need to re-read Mallam Sanusi's speech again.
However, without prejudice to one's opinion on the radical actions of Lamido Sanusi, a number of Legal and Quasi - Legal issues have arisen-for objective analysis, short of an indepth discussion of the merits and demerits of the several litigations that have now been initiated by the dramatis personse in this very topical economic and financial drama.
Yes, things have certainly fallen apart in the nation's economy and Nigerians are no longer at ease.
The first legal issue that calls for examination on this topic, is the legal validity or otherwise of Mallam Sanusi's action. In the express words of the C.B.N. Governor "Therefore, in exercise of my powers as contained in Sections 33 and 35 of the Banks and other Financial Institutions Act 1991, as amended, and after securing the consent of the Board of directors of the CBN. I hereby remove the Managing Directors (MDs) and the Executive Directors (EDS) of the following banks from office with effect from Friday. August 14. 2009.
1. Afribank Plc
2. Intercontinental Bank Plc
3. Union Bank of Nigeria Plc
4. Oceanic International Plc
5. FinBank Plc "
What do sections 33 and 35 of the Banking and other Financial Institutions Act as Amended BOFIA say:- "Section 33 - Special examination
(i) The Governor shall have power to order a special examination or investigation of the books and affairs of a bank where he is satisfied that -
(a) It is in the public interest so to do: or
(b) The bank has been carrying on its business in a manner detrimental to the interest of its depositors and creditors or
(c) The bank has "insufficient" assets to cover its liabilities to the public or
(d) The bank has been contravening the provisions of this Act or
(e) An application is made thereby
(ii) A director or shareholder of the bank or
(iii) A depositor or creditor of the bank" While Section 35 reads "Failing bank
(a) Where a bank informs the Bank that (a) it is unlikely to become unable to meet its obligations under this Act or
(b) It is about to suspend payment to any extent: or
(c) It is unsolvent; or
(d) Where, after an examination under Section 33 of this Act or otherwise howsoever, the Bank is satisfied that the bank is in a grave situation as regards the matter referred to in Section 33(i) of this Act. the Governor may by order in writing exercise any one or more of the powers specified in subsection (2) of this section.
(2) The Governor may by order in writing under subsection (i) of this Section
(a) __________
(b) __________
(c) remove for reasons to be recorded in writing with effect from such date as may be set out in the order, any manager or officer of the bank. notwithstanding anything in any written law or any limitations contained in the memorandum and articles of association of the bank" [Emphasis provided]
In the light of the above provisions particularly the portions emphasized, can the powers of the C.B.N Governor to take the steps he has taken including the sack of
M.D's of the 5 Failing or Distressed Bank be disputed?
The obvious answer is NO. The answer is even more obvious in view of the Statements of the CBN Governor that "Due to these circumstances. I instructed the Director of Banking Supervision of the CBN to carry out a special Examination of the following banks:
1. Afribank Plc
2. Finbank
3. Intercontinental bank Plc
4. Oceanic bank Plc and
5. Union Bank Plc
The result of the Special Examination revealed "that the Expended Discount Window EDW of the five banks amounted N127.85 billion by the end of July 2009 representing 89.81 per cent of the total industry exposure to the CBN on its discount window", "while the five banks account for 39.93 percent of loans", and nearly 50% of the debt portofolio of Nigerian Banks.
Yet, some do gooders have alleged that the C.B.N. Governor has no powers to remove the sacked CEO's and that the procedures employed was wrong, that the CEO's were denied a fair hearing and that the decision was hasty.
At the expense of reputation the charge of lack of powers to remove the CEO's will not stick in view of the clear wordings of the statute prescribed above. It is a firmly established principle of law that a statute must be given a literal rule of interpretation, the fact that the application of the law has an harsh effect notwithstanding. See the recent case of Grosvenor Casinos V. hallaoui (2009) 4 - 55S.C. 200 where the extant Nigerian Law on the Registration of Foreign Judgments was applied literally not withstanding that it had the effect of allowing a Nigerian to perpetrate fraud on an English businesswoman by refusing to be subject to English courts.
The second objection of the denial of fair hearing, however being a constitutional point requires a more detailed examination.
Section 36 (1) of the 1999 constitution provides that in the determination of his civil rights and obligation a person will be entitled to fair hearing. The pertinent question is whether the special examination conducted by the C.B.N. into the affairs of the 5 distress banks amounts to the determination of the civil rights and obligations of the 5 sacked CEO's or not as to warrant to the determination of his civil rights and obligations or is a mere administrative investigation?.
Where what is involved is the determination of the sacked CEO's civil rights and obligations, then the C.B.N. would be obliged to act judicially or quasi - judicially. In such an instance an hearing which will afford the sacked C.E.O.'s an opportunity of a fair trial or fair hearing is imperative. Thus the C.B.N. Governor would have had to set up a pane! where:-
(i) the sacked CEO's must be given the opportunity to be present all through the proceedings and hear the evidence against them.
(ii) to cross-examine or otherwise confront or contradict all the witnesses that testify against them or their interest.
(iii) to have read before them all the documents tendered on evidence at the hearing
(iv) to have disclosed to them the nature of all relevant material evidence including documentary and real evidence, prejudicial to them save in recognized exceptions;
(v) to know the case they have to meet at the hearing and have adequate opportunity to prepare for their defence and
(vi) to give evidence by themselves, call witnesses, if they like, and make oral submission either personally or through a Counsel of their choice.
All this requirements are necessary for the determination of the civil rights and obligations.
Kotoye V. CBN (1989) 1 NLWR (Pt 98) 419. Eperohum V. University of Lagos (1986) 4 NWLR fpt 34) 162. Baba V NCAIC (1991) 5 NWLR (PT 192) 88, Garba V. University of Maiduguri (1986) 1 NWLR (pt 18) 50 LPDC V Fawehinmi (1985) 2 NWLR (Pt 7) 300
However where an administrative panel or body is merely to investigate and make exploratory findings, then there is no determination of any civil right or obligations thus the issue of fair hearing will not arise
Baba V. NCATC (1990) 5 NWLR (pt 192) 308, R V Director of Audit (WR) (1961) NSCC 292, Adedejl V. Police Service Commission fl967) NSCC 59, Hart V. Military Governor River State (1976) NSCC 622
With such administrative tribunals the rules for judicial or quasi-judicial tribunals as
to fair hearing will not apply?
The question then is, where do we place sack of the 5 CEO's?. It is submitted that by a community reading of sections 33 and 35 of the BOHA, the sacking of the CEO's by the CBN Governor based on the result of the investigation of the books and affairs of the concerned bank is a Ministerial Act. as opposed to a judicial or quasi Judicial act, as he merely exercised a discretion on the report of the special examination which showed that the 5 banks were in distress and had breached various banking regulations which breaches had grave consequences on not only the banking sector but the entire economy. So all the talk about fair hearing will not apply.
Baba V NCAIC (supra)
Amaka V. Lt Governor. Western Region (1956) SCNLR
Owovemi V. Adekova (2003) 12 SC (pt 1) 122.
Thus with respect all the talk about the 5 CEO's being given a fair hearing before being sacked will not apply. A related issue is the criticism in some quarters that the C.B.N's Governor action was hasty. Undoubtedly the C.B.N. Governor has a discretion among other things to remove the 5 CEO's under Section 35 (1) and (2) of the BOFIA "where, after an examination under Section 33 of this Act or otherwise howsoever, the Bank is satisfied that the bank is in a grave situation as regards the matters referred to in Section 33 (i) of this Act, the Governor may by order in writing exercise any one or more of the powers specified in subsection (2) of this Section"
(2) The Governor may by order in writing under subsection (1) of this section
(c) remove for reasons to be recorded in writing with effect from such date as may be set out in the Order, any manager or officer of the bank".
If as alluded to by the CBN Governor in his speech of the 14th August 2008, the 5 Banks under the sacked CEO's accounted for 39.93 per cent of non-performing loans in the banking-sector and 89.31 percent of the Expended Discount Window. EDW of the exposure of the entire banking Industry, perhaps the critics would only have been satisfied as to the timeliness of Mallam Sanusi's action only if he had allowed the entire banking system to collapse after all the banks had been audited presumably by December for the CBN Governor's action to be Justified.
As for the charge of sectionalism, regionalism or Northernization, no intellectual discourse or platform worth its salt will dignify such hogwash with a reply. It is submitted that the only objective counter argument to the C.B.N, Governor's speech. is if critics come up with facts and figures to debunks those given by Mallam Sanusi. IN the absence of that these self-serving critics will be better off maintaining a dignified silence.
In typical Nigerian fashion the sack of the 5 CEO's has triggered off a chain of re-actions which reactions have developed a life of their own outside of the initial action by the CBN Governor. In the aftermath of the CBN Governor's action, he had remarked that "However we will also ensure that officers of banks and debtors who contribute to bank failures are brought to book to the full extent of the law and that all proceeds of infraction are confiscated where legally feasible". This statement had been interpreted by a section of the Media as tantamount to saying the 5 CEO's had committed Criminal offences in giving out huge non-performing loans and will be prosecuted. The embattled Economic and Financial Crimes Commission EFCC in dire need of public support and approval in the face of its badly dented image courtesy of its lack-lustre prosecution of allegedly corrupt public officers seized upon this golden opportunity the way a drowning man will cling on to a life line and a gasp of oxygen. Encouraged by a sensation seeking section of the Media and a tough talking Central Bank, the 5 CEO's were declared wanted and their actions criminal, the List of Debtors of the 5 Banks was published and both Directors and Debtors of Banks were invited and in many causes "hauled" into EFCC custody for investigation. Yes, the EFCC that had seemed fated for irrelevance, suddenly found its voice and with the voice the bravado to criminilize otherwise simple banking transactions that had not been proven to have metamorphosized into criminal and fraudulent transactions. Not done the commission has sternly warned the Judiciary that "while it is within the right of every Nigerian to seek legal redress against perceived wrong, we would crave the indulgence of the respected members of the Nigerian Bench not to consider any frivolous interlocutory application from bank debtors at this particular point in time" Not even the military at the height of its power ever issued a directive at the Judiciary as to how conduct its affairs!! And this from a person who is a lawyer by training. Thankfully, the Nigerian Bar Association has promptly condemned this act of intimidation and blackmail by the EFCC. Perhaps the EFCC Chairperson needs to be reminded that justice is not a one way traffic Justice is as much for the Defendant as it is for the Prosecution. "The court has a constitutional duty to be fair to all sides to a case, be it Plaintiff or Defendant, Prosecution or Accused all are entitled to a fair hearing which does not contemplate a standard of justice which is biased in favour of the party and to the prejudice of the other. Rather it imposes and ambidextrous standard of justice in which the court must be fair to both sides of the conflict"
Ndu V. State fl990) 7 NWLR (Pt 164) 550
Amanchukwu V. F.R.N. (209) 2 - 3 s (Pt 1) 93.
This is a settled position at law that has constitutional backing under section 36(i) of the 1999 Constitution and not even the allusion by the.EFCC to the fact that "some of us may not know but these are very critical times for the banking sector and our beloved nation" Can dislodge this imperative. Thus the appeal by the EFCC to sentiments so that the fundamental rights of the accused can be suspended in the fight against corruption cannot be allowed or condoned. Let the commission and every one Fighting any manner of social vice learn to follow the due process or else anarchy will prevail!.
The point must be made that the fact that a bank's customer is owing the said bank N1 trillion Naira or $1 billion Dollars does not necessarily make the debtor a criminal. Criminality In respect of bank loans depend on a number of variables what are the terms of the contract, is the money due, is the money to be paid in instalments, is their any moratorium on payment etc. Some of the indices of criminality in relation to loan transactions include: the diversion of the loan to other purposes outside the agreed purpose, the use of false or fake documents as security, the use of non-existent collateral as security for loan, the unwillingness to pay even where there has the ability or resources to repay. Thus the fact that some of the debtors of the failing banks have large sums of money standing against their names is no evidence that they are fraudulent, it is possible that by their loan agreements the debts are not due and there is also the issue of some of them disputing the amount of their indebtedness. But the EFCC basking in the euphoria of the ongoing Trial by Media (which incidentally was one of the themes of the recently concluded Annual Bar Conference 2009 which session organised by the Section on Public interest and Development Law SP1DEL Mrs. Farida Waziri personally attended) has criminalised all manner of credit facility and gone after all the big debtors of the 5 Banks and ironically realised huge sums of money worth over N66 billion Naira.
By this successful recovery, all eyes are closed to the fact that these sums of money were recovered by intimidation and arm-twisting: this is where the danger lies to the acceptance of due process and rule of law in Nigeria.
Due to the failure of leadership over decades Nigerians have become disillusioned with all public institutions including the judiciary which they see as only protecting the rich, slow and in effective in giving them justice, so all over the land there is constant recourse to extra-legal means of getting justice: politicians and even traders are sworn on fetish oaths to secure allegiance and even loyalty to contract, police resort to extra judicial killings to avoid long and expensive pro-sections which may not secure convictions, criminal suspects of all types from the pickpocket, petty thief to the armed robber, ritual killer and kidnapper are subjected to the instant jungle justice of lynchings. All courtesy of the general discontent with the prevailing legal system. So when now the nation's major anti-graft agency has shown that the way to go in respect of simple banking loans is intimidation and arm-twisting, I shudder at what this portends for the nation at all levels!!
However, the bank debtors have only themselves to blame when they in the words of Richard Brinsley Sheridan show that "It is not in their interest to pay the principal nor their principle to pay the interest" or behave in a manner described by the American Oil Executive and Financier J.P. Getty "If you owe the bank $100 million. that is your problem, if you owe the bank $100 million that is the bank's problem
Yes, now that our debtor compatriots have by their huge debts created problems for the banks which problems the bank have been able to solve through the strong arm tactics of the EFCC. The only worry for many of us who are stakeholders in the nation's legal system is the long term effect of this solution on not only the nation's legal system but the observance of due process, rule of law and the respect for Constitutional means and methods. Our people are naturally impatient, now they have been told that you do not have to follow to get redress, and that Nigerians respond faster to the use of force or at least the threat of it. God help us all!!
A related development still on the part of the EFCC is the disobedience to court order. A number of detained CEO's have obtained court orders for their release on bail, but the EFC still basking in its new found powers has refused to release the persons concerned sighting its re-vitalized fight against corruption as alibi and defence. This yet another show of might that is likely to be emulated by the populace and where the courts in the case of ordinary citizens respond with their awesome powers to punish contempt. The citizens remark that they are being punished because they are not in position of authority. Did the EFCC not do so and got away with it? Once again the courts and the law will come wider unwarranted attack. No thanks to the executive lawlessness and rascality shown by the EFCC.
One other aspect of this saga is worthy of consideration is the role played by auditor and accountants in this unfortunate episode. Many of this banks in the last few years preceding this saga posted very impressive performances in their Statements of Accounts for which the Banks and their MD's were rewarded with many awards both locally and internationally. Yet a few months after the publication of these bumper results by the Auditors the Banks are in trouble. How come the Auditors did not detect these anomalies. It will be recalled that this is not the first time external auditors usually Chartered Accountants will be caught in the web of misleading financial reports. During the failed Bank Saga in the 1990's several Accountants and Accounting Firms were involved in the auditing of Financial reports which proved to be misleading but there is no single record of any punishment for erring auditors. Indeed, the standard defence for auditors and accountants was that the auditing and financial reports were based on documents and materials made available by the audited company. These Auditors simply played the ostrich, the public was told that auditors had no way of knowing that the presented documents were false, doctored or concocted, so we were made to believe that the work of auditors/accountants was simply Bookeeping, merely adding up figures.
Thus until the recent Cadbury scandal when one of the nations Chartered Accounting Firms was sanctioned by way of suspension from auditing accounts of public quoted companies, no Chartered Accountant has even been brought to book for unethical practices in respect of the production of financial reports. Similarly the leading orgainsation for Chartered Accountants Institute of Chartered Accountant of Nigeria 1CAN who make up over 95% of External Auditors in the nation's economy stood solidly behind its members deflecting any form of criticism. Now the issue of unethical and even criminal conduct by auditors has arisen once more, and this time perhaps bowing to public pressure 1CAN has now threatened to sanction erring members implicated in the ongoing banking crisis by subjecting to professional Disciplinary proceedings any member found guilty of criminal conduct in a court of law
This is a most welcome development and show the sensitivity of 1CAN to the mood of the nation.
The point must also be made that the sanctioning of Corporate executives and Financial professionals is neither a Nigerian initiative or a new phenomenon rather even in Europe and America the bastions of democracy, rule of law and free enterprise, the regulators do not play with the investments of the citizen or any activity capable of putting the economy at risk. The regulators therein are quick to read the "Riots Act" at defaulters and literally throw the book at any erring player no matter how highly placed, Chief Executives of the world's leading organisations in those countries have been known to be convicted and sentenced to long terms of imprisonment without parole: examples:- the Bank-of Credit and Commerce International BCCI crisis in the late 1980's, the Arthur Anderson problems at the turn of this Century and Millennium, the Enron problem in the U.S.A. the Simens scandal in Germany and Austria, and the Halliburton scam in the USA amongst others. In the handling of these issues the fact that these corporate financial scandals arose in the most democratic and law abiding of societies did not prevent the authorities thereat from wielding the big stick.
In the Enron scam, a former high ranking member of the U.S. Government under President George Bush Jr. Donald Rumsfield lost his job; while only recently a United States Congressman William Je fferson was convicted and sentenced to prison. Thus in that regard the CBN and other regulatory authorities will be following acceptable precedent even best global practices if all executives and others found guilty of offences after due prosecution are convicted and given the appropriate punishments.
But prosecution there must be, Not persecution or trial by media as seems to be -prevalent at the moment. Here the EFCC statutorily charged with the prosecution of the various bank executives including 5 sacked CEO's must strongly resist the temptation to play to the gallery or the anti - corruption agency will be the loser at the end of the day. Imagine, if after all the present Media blitz and attention on the embattled Bank Executives, many of them were to get off the hook, either because they have been charged to court for offences unknown to law, or because the required evidence or witnesses were not produced in court, the evidence produced is insufficient to ground a conviction, improper foundation laid for evidence to be admissible, public documents not certified as required by law on the flimsy excuse that being electronic or computer generated evidence no such certification is required. The public will not accept excuses neither will the appeal to sentiments that the courts are frustrating the fight against corruption be acceptable. The EFCC must anticipate all possible pitfalls and do the best possible to reduce them to the basest minimum. Thankfully very seasoned lawyers including SANS have been engaged to handle the prosecutions of cases, and the fiat of the Attorney-General is being sought to eliminate any "territorial wars" even though on the authority of Osahon V. Fed. Republic of Nigeria (2006) 2 S.C. (Pt. II) 1, this may not be necessary or might even be sought after prosecution has commenced. But there is no harm in making assurance doubly sure; in view of the Federal Attorney - General's Constitutional Supremacy and absolute discretion to scuttle any prosecution if he so desires, there is a lot more wisdom in not only obtaining the A.G's fiat but his complete support for these most important prosecutions. The EFCC's initiative is therefore most welcome, having been taken Ex-abundantia Cautela - The exercise of abundance of Caution. The EFCC must de-emphasize unnecessary publicity and be realistic in its expectations; it will be unduly ambitious to imagine that all the bank executives allegedly to have been involved in fraudulent transactions which led to the almost collapse of the embattled banks will be convicted; it should be satisfied if more than a handful are convicted and not blame the court for its failure but ready to accept defeat where it fails.
Overall, the Nigerian Banking Sector is in need of a thorough cleansing and Mallam Sanusi's initiative if pursued to its logical conclusion should have the desired result. Here is wishing the CBN Governor success in this patriotic endeavour.
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