Forensic Audit: Investors, Analysts Urge Oando Plc To Prove Innocence

As was expected, reactions have continued to greet the sacking, on the night of Friday, May 31, 2019, of Jubril Adewale Tinubu and Omamofe Boyo, the Group Chief Executive Office and Deputy respectively of integrated energy giant- Oando Plc.
Announcing the conclusion of investigation into Oando Plc, the SEC said “findings from the report revealed serious infractions such as false disclosures, market abuses, misstatements in financial statements, internal control failures, and corporate governance lapses stemming from poor board oversight, irregular approval of directors’ remuneration, unjustified disbursements to directors and management of the company, related party transactions not conducted at arm’s length, amongst others”.
The commission, therefore, ordered, the resignation of some board members, while barring Tinubu and Boyo, from being directors of public companies for a period of five years. The commission also ordered the convening of an Extra-Ordinary General Meeting on or before July 1, 2019, where they will appoint new directors, as part of measures to address identified violations in the company.
For many, it was an event that was bound to happen, except that the time had remained unknown all the while. There is also a consensus among those who spoke to Investdata News, this is a wakeup call for shareholders of public companies to take their investments more seriously, just as they challenged the board of Oando Plc to prove the report of the forensic audit wrong.
According to Nona Awoh, an investment analyst and activist, there can be no better investor protection.
The SEC action, he said, was based on the outcome of a forensic audit by Deloitte & Touche, a firm of international external auditors and that “the company (Oando Plc) must, therefore, prove otherwise.”
“Much more important,” he believes, “investors themselves need to learn to protect themselves, which means they must begin to ask the right questions and taking up management of public companies.
“I’m not sure we are doing enough (as shareholders), because if we were doing enough, maybe we would have seen some of the things the SEC is talking about… Maybe we saw it, but did not take cognizance of the full impact of what they are talking about,” Awoh added.
But Atedo Peterside, founding chief executive of Stanbic IBTC Bank Plc, in a tweet via his personal handle on Saturday, expressed disappointment that “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,” he stressed.
Reacting, Awoh told Investdata News: “That is one way to look at it, but I don’t want to believe that they (the board of Oando Plc) did not have an inkling as to where the forensic audit was headed, because the auditors would have asked questions and raised queries.”
It would have been difficult for the SEC to give the Oando management the report, he noted, even as he stressed that of more importance is: “What did the investors themselves do?”
Reacting, Ambrose Omordion, the Chief Operating Officer, InvestData Consulting Ltd., while applauding the SEC’s decision, said it is capable of sending strong signals to the management of other public companies as a proof that the commission is not only able to bark, but can bite too.
He expressed unhappiness with the fact that Oando Plc continues to declare a loss, meaning there have not been dividends declared, as a result of which shareholders do not receive any return on their investment. As if this was not enough, the value of their investment on the Nigerian Stock Exchange (NSE) has nose-dived over the period, he added.
Ironically, he continued, executive directors salaries soared by 78% from N682.451m in 2017 to N1.214bn, including the highest paid director (the Group CEO), going home with a mouth-watering N568m, up by 67% from N340m in the prior year to N568m in 2018.
The investing public had been calling for a change in the company’s management for a long time, he added.
Reacting to the sack on tweeter, one analyst stretched the irony to the point that while “Tinubu earns more than double the CEO of Nestle (Mauricio Alarcon, with N210m annual pay), yet Nestle has delivered more value to Nigerian shareholders and stakeholders than Oando.”
He earns more than the CEOs of Seplat Petroleum (N483m), Baker Magunda of Guinness Nigeria, N461m; Joseph Makoju, Dangote Cement, N429m; or Segun Agbaje, Guaranty Trust Bank, N384m, among others, all of which regularly reward shareholders with dividends.
The SEC move, he believes, will restore sanity to the company, just as it would enable investors to get the true health status of Oando Plc, beyond what has so far been disclosed, even as “other companies and their directors will seat up, seeing how Oando management and its directors ended up.
“SEC decision will further boost corporate governance and transparency in quoted companies at same time investors confidence going forward,” Omordion stressed.
In his own analysis of weekend’s action in Oando Plc, Alhaji Gbadebo Olatokunbo, shareholder activist and Co-founder, Nigeria (now “NOBLE”) Shareholders Solidarity Association, in a brief note to Investdata News, noted that as a shareholder of Oando, he does not believe that what the company has published has been suspicious all along.
Some people, he wrote, have been playing “very dangerous games with most of the reports and accounts (published),” following which he is not surprised at the SEC sanction.
“Check the performances of other companies in the same sector with that of Oando, then you will appreciate my point of view, that Oando is a great disgrace, disappointment and embarrassment to corporate Nigeria, because no multinational company in its shoe would have performed so badly like the management and board of Oando did, to be candid it was a dent to the Nigeria corporate world.”
Olatokunbo said the management and board of Oando had taken their shareholders for a ride for too long, before the SEC intervention, agreeing with Omordion that the weekend’s action would serve as a deterrent to other companies in the same bad habit.
Contrary to claim by the board of Oando Plc in a press statement also on Friday night, SaharaReporters, on Monday noted that the commission, in a six-page letter dated Friday, May 31, 2019, communicated the outcome of the forensic audit, which was signed by Ms. Mary Uduk, acting director-general of the SEC and addressed to the company’s chairman, Oba Adedotun Gbadebo, the Alake of Egbaland.

Nine Major Infractions
According to the SEC’s letter, the investigations revealed nine major infractions, including alleged corporate governance lapses, failure of internal controls, incidental issues arising from the sale of a subsidiary, 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.
The letter noted the corporate governance lapses stemming from poor board oversight included irregular approval of director’s remuneration, director’s participation in matters in which they had declared an interest, unjustified disbursements to directors and management of the company, failure of the audit committee to hold meetings with management, internal auditors and external auditors.
“Oando Plc failed to establish an effective system of internal controls as required under Section 61 of the ISA 2007, over its financial reporting thereby compromising the integrity of the company’s financial controls and reporting as revealed by the misstatements in the financial statement, a high number of related party transactions and unjustified disbursement to directors.
“In 2013, Oando Plc reported the sale of its subsidiary, Oando Exploration and Production Limited (OEPL), to Green Park Management Limited without obtaining the approval of the commission, (in violation of the provisions of the Investment and Securities Act (ISA) 2007) and the consent of the Minister of Petroleum (As required under the Petroleum Act,1969).
“In 2012, 2013 and 2014 and 2015, certain insiders of Oando PLC sold shares of the company during “close period” despite having knowledge of active closed periods by the company and contrary to the Rules of the NSE. The insiders include Ocean an Oil Investment Limited (OOIL – represented by Jubril Adewale Tinubu and Godwin Omamofe Boyo), Ocean and Oil Development partners (OODP – represented by Jubril Adewale Tinubu, Godwin Omamofe Boyo, Francesco Cuzzocera), and ECP African Fund II PC (a Company in which Nana Appiah-Korang wards Director).”
The letter also detailed how OODP, the major shareholder in Oando PLC represented by Jubril Adewale Tinubu, Godwin Omamofe Boyo and Francesco Cuzzocera, authorized the sale of 1,210,000,000 units of OODP shares in Oando Plc valued at N21,455,909,256.
The trades purportedly took place between January and October 2015, preceding the release of the 2014 audited financial statements on October 23, 2015, in which Oando Plc declared an unprecedented loss of N183 billion.
SEC further noted that during this period, these representatives of OODP were insiders of Oando Plc and had access to material non-public information regarding the poor financial status of the company commencing December 2014, in violation of the provisions of the ISA 2007 regarding insider dealing.
This violation is being referred to the appropriate law enforcement agency, SEC says.
Oando PLC was also allegedly involved in several related party transactions linked to key board members, particularly Jubril Adewale Tinubu and Godwin Omamofe.
According to SEC, some of the related party transactions were not disclosed in the 2012 and 2014 financial statements, adding that an impression was created in the 2013 and the 2015 financial statements that these disclosures had been accurately reported. SEC also says Oando Plc failed to fully comply with the SEC Code of Corporate Governance for public companies.

Other Infractions
The SEC letter also highlighted other infractions, including that Alhaji Dahiru Baraú Mangal failed to disclose his substantial ownership in Oando Plc as required by CAMA, just as Oando failed to notify the NSE of the 5% shareholding and above, as required by the rules of the exchange.
“This is being referred to the Corporate Affairs Commission (CAC) and the Nigerian Stock Exchange (NSE),” SEC notes in the letter.
Tax-related issues mentioned in the letter included that Oando Plc management deducted 24% of the dividend paid to shareholders in 2014 as withholding tax, rather than the statutory 10%, besides failing to comply with several tax laws such as Companies Income Tax Act, Value Added Tax Act, etc.
The commission listed those who sat on the board while corporate governance lapse and internal control failures of such magnitude occurred in the company to include: Oba Micheal Adetoun Gbadebo, Mobolaji Osunsanya, Olufemi Adeyemo, Oghogho Akpata, Chief Sena Anthony, and Mrs. Ammuna Lawan Alli.

Oando Plc was directed to pay the total sum of N417,692, 316 as fine, a breakdown of which included the sum of “N42,750,000 to the Commission, for non-disclosure of related party transactions in its 2012 Financial Statements, in violation of Rule 39 (1&7) of the SEC Rules and Regulations, 2013, made pursuant to the ISA 2007
“N30,625,000 to the Commission, for non-disclosure of related party transactions and its 2014 Financial Statements, in violation of Rule 39 (1&7) of the SEC Rules and Regulations 2013, made pursuant to ISA 2007.”
Additionally, “for certification of untrue statements of materials facts in the 2013, 2014 and 2015 financial statements of Oando Plc in violation of Section 60 (2 (b) (ii) of the ISA 2007, Mr. Jubril Adewale Tinubu (Group Chief Executive Officer) and Mr. Olufemi Adeyemo (Chief Financial Officer) are ordered to the sum of N91,125,000 (each) to the commission.”
For publishing untrue statement in its 2012 Financial Statements, in violation of Rule 3 (4) of the SEC Rules and Regulations, made pursuant to the ISA 2007, the company was fined N8,450,000.
According to SaharaReporters, Oando is to pay another “N7,850,000 to the Commission for publishing untrue statements in its 2013 Financial Statements, in violation of 3 (4) of the SEC Rules and Regulations, made pursuant to the ISA 2007.
SEC also ordered the directors of Oando Plc to immediately refund to Oando Plc, the total sum of N145,767,316, being remuneration and other benefits paid to them above the provisions of the Board Charter.

Allegations Unsubstantiated- Oando
But reacting to the SEC statement, Oando insisted that the “alleged infractions and penalties are unsubstantiated, ultra vires, invalid and calculated to prejudice the business of the Company.”
The company said its management was not afforded “the opportunity to see, review and respond to the forensic audit report and so is unable to ascertain what findings (if any) were made in relation to the alleged infractions and defend itself accordingly before the SEC.”
Consequently, the statement by Ayotola Jagun, its company secretary said Oando reserves the “rights to take all legal steps to protect its business and assets whilst remaining committed to act in the best interests of all its shareholders.”

Interim Management
As if to forestall any intention by the board and management of Oando Plc, the commission, on Sunday night announced the appointment of Mutiu Olaniyi Adio Sunmonu, former managing director of Shell Petroleum Development Company, as head of the Interim Management Committee.
This was followed on Monday morning with the sealing of the company’s corporate headquarters on Ozumba Mbadiwe street in Victoria Island by men of the Nigerian Police.