The Looting Of Bank PHB

The Economic and Financial Crimes Commission discovers a huge deposit of illegal banking transactions carried out by Francis Atuche, former CEO of Bank PHB, and may soon add fresh charges

By Oluokun Ayorinde/Abuja

In response to the directive of Central Bank of Nigeria, CBN, that banks operating in Nigeria should raise their capital base to N25 billion if they wanted to remain in business by the end of that year, officials of the defunct Platinum Bank and Habib Bank met on 22 October 2005 to sign agreements that led to the merger of their operations. The two banks transmuted into Bank PHB to emerge as one of the 25 banks that scaled the CBN recapitalisation hurdle by the deadline of 31 December 2005. Heading the new institution was Francis Atuche, who immediately announced that he would make Bank PHB one of the nation’s top five banks. Platinum and Habib banks were not significant players in the pre-consolidation era.

Aided by a relentless advertising blitz on local and international media and rapid branch expansion, Bank PHB smelt like a freshly minted note. It acquired the image of an institution that could take on all and leave them reeling. The bullishness peaked with the controversial acquisition of troubled Spring Bank. Atuche seemed on his way to achieving his dream. He won awards in recognition of his perceived remoulding of the bank.

Under Atuche, Bank PHB was rated as one of Nigeria’s fastest growing banks. It closed its 2008 financial year with gross earnings at N87 billion, 141 per cent higher than the gross earnings of N36 billion made in 2007; profit before tax stood at N26 billion, a 153 per cent improvement on the previous year’s figure and well over the estimated banking industry growth rate of 81 per cent.

Atuche and Bank PHB were moving like meteors. Then came a change in the leadership of the CBN, when last May, Sanusi Lamido Sanusi took over from Professor Charles Soludo as CBN Governor. Based on allegations that most of the players in the banking industry, through various forms of “creative accounting”, were hiding huge loans incurred as a result of their exposure to the capital market and importers of refined petroleum products, Sanusi ordered a special examination of the books of the operators.

The result of the examination of the first set of 10 banks, made known on 14 August, led to the sack of the CEOs and boards of Oceanic Bank, Union Bank, Afribank, Finbank and Intercontinental Bank. Sanusi accused the sacked chief executives of poor governance and putting their banks in jeopardy through weak risk management framework, as manifested in indiscriminate lending to operators in the capital market. “These banks were unable to meet their maturing obligations, as they fall due, without resorting to the CBN or the inter-bank market. As a matter of fact, the outstanding balance on the Expanded Discount Window of the five banks amounted to 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 their net guaranteed inter-bank takings stood at N253.30 billion as at August 02, 2009. Their Liquidity Ratios ranged from 17.65 per cent to 24 per cent as at May 31, 2009 below the regulatory minimum is 25 per cent,” said Sanusi. The CBN Governor also announced the injection of N420 billion into the five banks for emergency capitalisation.

While the sacked CEOs were immediately arrested and have been charged with various offences for which they are currently undergoing trial, the CBN embarked on the second leg of its examination of the books of the remaining 14 banks. Even before the results of that final examination was announced on 2 October, there had been speculations that Bank PHB was like a queen wearing a velvet robe atop dirty and tattered undergarments. Before the release of the reports, the industry was abuzz with suggestions that Atuche had been asked to quit because of the indictment of Bank PHB. On 2 October, those rumours proved to have been well founded, as Atuche resigned. “As in all things however, there is a time to say goodbye. As I bow out today from the bank, I earnestly urge each and everyone of you to keep the PHB passion aflame so that the height, the Mount Everest, which we envisioned shall not only be accomplished, but shall be surpassed and we would have created an institution that would outlive us,” Atuche said in a letter addressed to staff of the bank.

Later that day, the CBN announced that it had sacked Atuche along with Mr. Ike Oraekwuotu of Equitorial Trust Bank and Charles Ojo of Spring Bank, which Bank PHB had already acquired. The CBN also announced the appointment of new chief executives for the three banks, namely Mr. Cyril Chukwumah for Bank PHB plc; Mr. G.O. Folayan for Equitorial Trust Bank plc; and Mrs. Sola Ayodele for Spring Bank plc. The CBN said its special examination revealed that nine out of the 14 banks it examined–Access Bank, Citibank Nigeria Limited, Ecobank Nigeria, Fidelity Bank, First City Monument Bank, Skye Bank, Stanbic IBTC Bank, Standard Chartered Bank Limited and Zenith Bank–were found to have adequate capital and liquidity to support the level of their current operations and future growth.

According to the apex bank, it had taken a number of measures aimed at arresting the grave situation of Bank PHB, Equitorial Trust Bank, Spring Bank and Wema Bank. As announced by the CBN, the measures include the removal of the managing directors of Bank PHB, Equitorial Trust Bank and Spring Bank and the appointment of new managing directors for them, namely: Mr. Cyril Chukwumah for Bank PHB; Mr. G.O. Folayan for Equitorial Trust Bank Plc; and Mrs. Sola Ayodele for Spring Bank. (b) The removal of all Executive Directors in Bank PHB, Equitorial Trust Bank and Spring Bank. New Executive Directors will be appointed for these banks in due course. (c) The removal of all non-Executive Directors in Spring Bank. (d) The removal of Dr. Mike Adenuga, Jr., CON, as a non-Executive Director of Equitorial Trust Bank. The tenth bank, Unity Bank, was adjudged to have insufficient capital, but not in grave situation because it has a healthy liquidity position. (e) The order to the board of Wema Bank to recapitalise by 30 June 2010.

CBN noted that Wema Bank came under new ownership and management last June, which took over a bank already in a grave situation and should not be held responsible for the present condition of the bank. f) The provision of a total of N200 billion by the CBN as liquidity support and long term loans for the four banks adjudged to be in a grave situation to enable them continue normal business, while pursuing recapitalisation options.

The apex bank returned ETB to Adenuga two weeks ago with a promise by the businessman to recapitalise the bank. But the Economic and Financial Crimes Commission, EFCC, immediately put Atuche under watch. He was arrested on 16 October along with  Mr. Peter Ololo, Managing Director of Falcon Securities, over non-performing loans. EFCC investigators also claimed they have established instances of self-enrichment at the expense of Bank PHB, poor corporate governance practices, lax credit administration processes and non-adherence to sound credit-risk management practices against Atuche. Ololo is already on trial over his company’s N89.16billion debt exposure to the five banks, whose chief executives were sacked after the first round of CBN examination.

But Ololo, according to EFCC findings, also obtained about N16 billion unsecured loan from Bank PHB while Atuche was the CEO. The anti-graft agency arraigned Atuche and a director of the bank, Charles Ojo, who also managed Spring Bank, on a 26-count charge bordering on reckless granting of credit facilities without adequate collateral; granting facilities above their approval limits; concealment and fraud totaling N79 billion before a Federal High Court sitting in Lagos on 29, October. EFCC also accused the two bankers of granting billions of naira in credit facilities to companies they have interest in.

Specifically, the bankers were accused of granting credit facility of N5 billion to PHB Asset Management Ltd, a company in which they have interest, without adequate collateral. Atuche and  Ojo were also accused  of granting an unsecured credit facility of N7 billion to Platinum Capital Ltd, a company in which they are directors.

The sacked Bank PHB boss and other unnamed officials of the bank, which EFCC said are at large, were also accused of recklessness in the way they granted an unsecured facility of N4 billion to Petosan Oil and Gas Ltd, owned by Ololo. Similarly, the EFCC alleged that on or about 16 November 2007, Atuche granted credit of N4 billion to Futureview Financial Services Ltd without adequate security.

Again, he was accused of colluding with others who are now at large to grant a credit facility of N4 billion to Extra Oil Ltd without adequate security.

In another instance, Atuche was found to have provided unsecured credit facility to Tradjek Nigeria Ltd. The company, EFCC told the court, was given an unsecured credit facility of N3.5 billion on 5 November 2007. There was also Springboard Trust and Investment Limited, to which Atuche granted a credit facility of N3.58 billion without adequate collateral on 30 June.

Sonadec Securities Limited was also alleged to have been a beneficiary of loans. The former Bank PHB CEO was alleged to have extended an unsecured credit facility of N2.31 billion to the company on 30 June.

In all, Atuche and Ojo were accused of mismanagement of about N80 billion in the 26 charges against them. But they pleaded not guilty to all the charges. EFCC had earlier directed that the accounts of BankPHB Asset Management Limited and Platinum Capital Limited be frozen. The agency said it discovered that rather than being subsidiaries of Bank PHB, the two companies were fully owned by Atuche.

But even more scandalous is the emerging report that some of the companies allegedly granted credit facilities by Atuche may not have been the real beneficiary of the funds. A particular instance, according to EFCC sources, is that of Ololo.

The stockbroker was said to have told investigators that he never applied for any billion naira loan from Bank PHB to build a tank farm in Calabar, contrary to what Atuche told the EFCC and which provided a basis for one of the charges against him. Ololo, who is also the chief executive of Pogoson Oil &Gas, was reported to have told EFCC men that he did not have any tank farm in Calabar and that his signature must have been forged in the document which linked him with the loan. EFCC investigators also said they find it curious that the account credited to Ololo was opened on 27 December 2007 and was on the same day credited with N4billion. The Falcon Securities boss was said to have challenged EFCC operators to dig deeper.

Officials of the anti-graft agency said Atuche has been asked to explain the whereabouts of the N4billion. The EFCC also said it is conducting investigations to unearth the real beneficiary of N3.5 billion and N3.9 billion loans allegedly granted to Carejeke and Futureviews Limited. Also, under investigation is the N3.5 billion, which bank PHB claimed was granted to Extra Oil Nigeria Limited.

Extra Oil Nigeria Limited is purportedly owned by one Diamond Uju, who does not operate an account with the bank. In Bank PHB records, however, the oil firm was recorded as belonging to one Tochukwu Kema Kolam, an alleged economist. But the EFCC said it discovered that Kema is a lawyer and a staff of Futureviews Securities Limited. In the opinion of investigators, the account may have been opened without the knowledge of the real owner of Extra Oil Nigeria Limited with phoney documents, with the ultimate aim of using it to wire money out of the country. “In the course of investigation, it was discovered that Atuche created fictitious accounts, put money there and laundered same out of the country,” said an EFCC source who claimed that charges of money laundering may be added to Atuche’s problems. For Atuche, the cloud of trouble is just gathering.

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