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Central Bank declares Springbank distressed 11/6/2007


By Segun Adeleye, Head Business desk
THE first shock of the consolidation of banks is here, a year and half after the exercise that was widely hailed as the magic pill for distress in the all-important sector.
The Central Bank of Nigeria (CBN) has tactically declared Springbank Plc insolvent.
The apex bank, which is believed to be deeply involved in the crises that seem to have brought the bank to its knees, made a belated move last Tuesday to save the situation, but there were no signs yesterday that it was successful. Springbank is the product of the 2005 merger of Omegabank Plc, ACB International Bank Plc, Citizens International Bank Plc, Guardian Express Bank Plc and Trans International Bank Plc.
The CBN Governor, in a letter written to Rev Canon Segun Agbetuyi, the Chairman of Spring Bank Plc on June 5, ordered the removal of 13 directors and called for a new board immediately.
To be removed are Rev Canon Segun Agbetuyi, Dr Cosmas Maduka, Prof Anya O. Anya, Chief Tony Ezenna, Chief Adebayo Adetuyi, Chief Anthony Adeniyi, Mazi Okechukwu Unegbu and Mr Edwin Mmuomenam.
The rest are Mohammed Ibrahim Sani, Dr O.B.A Kola-Daisi, Mr Ifeatu C. Onejema, Mr Olabisi I. Afolabi and Mr Tolulope Fadahunsi.
In the letter entitled, ‘Banks and other Financial Institutions Act No.25 of 1991 (As Amended) Removal as Director of a Bank’, Soludo wrote: "Whereas the Central Bank of Nigeria is satisfied that Spring Bank Plc is in a grave situation, having become insolvent with negative shareholders’ fund contrary to prudential requirements stipulated by the Central Bank of Nigeria pursuant to the provisions of the Banks and other Financial Institutions Act, 1991, and the Central Bank of Nigeria Act, 1991, as amended.
"Now therefore, I, Professor Chukwuma C. Soludo, Governor of the Central Bank of Nigeria, in exercise of the powers conferred on me by Section 33 of the Banks and other Financial Institutions Act, 1991, as amended, hereby remove as directors of Spring Bank Plc, the persons whose names are specified in the schedule hereto with effect from the 5
thday of June, 2007."
However, another directive from the apex bank that a new board should be constituted by Mr Mike Chukwu, the managing director/CEO, latest Friday June 8, was not successful as some interested parties rejected the choice of Mr Chukwu, who is described as a principal player in the crises.
The crises started shortly after the end of consolidation in December, 2005 when it was discovered that the claims by some shareholders to have brought billions of naira into the merger were false.
Specifically, N3.801 billion worth of shares owned by three major shareholders of Guardian Express Bank were said to two billion shares valued at N2.4 billion belonging to Maduka, 834 million shares valued at N1.001 billion belonging to Ezenna and 240 million shares valued at N410 million belonging to Mmuomenam.
The findings and recommendations report of some unresolved issues of the merger stated that "Coscharis Motors Ltd with 2.0 billion shares; Ezenna Anthony Ifeanyichukwu 834 million shares and Edic Chemical and Allied Distributors Ltd with 200 million units. Our review of the accounts of the investors showed that two accounts were maintained for each of them as customers of the bank, one in perpetual debit and the other in perpetual credit.
"Further review showed that the cheques presented by Ezenna Anthony Ifeanyichukwu (Orange Drug Ltd) and Coscharis Motors were given post value dates of 24/08/2005 and 30/06/2005 respectively, that is after the closure of the IPO exercise, thereby suspending the debits. A consolidation of the two accounts maintained by each of the investors/customers showed that they did not have enough funds to accommodate the value of the cheques."
It was as a result of these irregularities that it became clear shortly after consolidation that the new bank did not have the mandatory N25 billion shareholders’ fund after all, but accumulated loan losses of N15.546 billion.
Some partners in the merger who were expecting readjustment on the board to reflect the new reality after the review were shocked when the CBN approved that the status quo should remain. They protested that the CBN guideline on consolidation did not give exception to any ailing bank to utilise revaluation surplus to beef up its capital, as the Guardian Express team that turned out to have brought nothing to the merger wanted to remain in charge.
In fact, the chairman of the bank, Rev Agbetuyi, had foreseen the doomsday when he wrote a strongly-worded letter to the CBN boss on March 1, urging him to move fast and rescue the bank.
He said in his letter, "the shareholders of five of the six legacy banks seem to be united in their strong-held view that because of insider issues and corporate governace problems which have already become embedded in the Spring Bank system under Mr Maduka’s control in a very short period since existence, it may be difficult to work together with the Guardian Express legacy team going forward."
As for the managing director, Mr Mike Chukwu, the chairman said he was incompetent as he had only briefly headed Guardian Express Bank which major operations (60 per cent) were Mr Maduka’s businesses.
The crises became deeper when the CBN failed to act swiftly on the suggestions which include appointing an acting managing director, recovery of bad loans, recapitalisation among others.
A section of the aggrieved parties went ahead to petition the Attorney General of the Federation and Minister of Justice when they lost hope on the ability of the CBN to sanction those that perpetrated the fraud. In fact, the Guardian Express team are believed to be untouchable in the system.
Chief Bayo Ojo (SAN), the Attorney-General of the Federation and Minister of Justice however intervened on the matter last month.
In a letter to the chairman of the bank dated May 24 2007, he acknowledged the petition against some directors of the bank and ordered that they should step down.
"I understand from the petition and attached evidence that following complaints made to the CBN regarding the existence of fraud in the recapitalisation process of Guardian Express Bank Plc, a team of CBN and NDIC officials were sent to the Bank. The team has now established that a fraud was indeed committed by some directors of the bank who currently sit on the board of Spring Bank Plc…
"Based on the foregoing and the need to undertake a proper investigation of the offences allegedly committed, I am requesting by this letter that the affected non- executive Directors, Dr Cosmas Maduka, Chief Tony Ezenna and Mr Edwin Mmuomenam be directed to step down immediately from the board of Spring Bank Plc. In addition, Mr Mike Chukwu and Mr Ifeatu Onejeme, executive directors at Guardian Express Bank Plc when the irregularities were committed, should equally step down from the current board of Spring Bank Plc as directors
"This action is crucial for creating the required atmosphere in the bank that would make for preservation of factual information necessary for our effective prosecution of the directors which will soon commence in earnest, after detailed police investigation.
"Please note that if by Monday, May 28, 2007 your bank does not comply with the above directive, I shall have no other alternative than to order the arrest of the said directors by the police to enable the investigation proceed unhindered."
There was no sign of any action on this letter which was also sent to the EFCC, NDIC and Inspector General of Police, until the June 5 letter through which the CBN boss removed 13 directors of the bank, leaving behind the managing director, Mike Chukwu, to reconstitute the board.