₦airaland Forum

ECONET FOUNDER REVEALS STORY BEHIND COMPANY’S DOWNFALL IN NIGERIA

Econet Wireless holds the record of being the first GSM operator to go live in Nigeria. This was way back in 2001 when they were only two operators, the other being MTN. Over the years, the company has undergone so many changes of name and management that we can hardly keep up.

Strive Masiyiwa, CEO and Founder of Econet Wireless, recently took to his blog to reveal his side of the story behind the company’s downfall in Nigeria. An extract from the blog post:

It’s time to play by a different (ethical) set of rules (Part 7) Nigeria 1 of 5

___Sometimes the price can be very high in the fight against corruption.

I had the privilege of making Nigeria’s first GSM phone call back in 2001 when I called the regulator to say, “We’re live!” Who would’ve believed then that Nigeria today would have more than 167 million mobile phones?!

It all started out as a very exciting new chapter for enterprise in Africa. Shortly after President Obasanjo was elected, the new government announced an incredibly transparent international auction process for three national mobile phone licenses.

To participate in the bid, you not only had to raise money, but there had to be a member of the bidding consortium who was an experienced GSM operator. Econet Wireless met the requirements because of its experience in Zimbabwe and Botswana. Our Nigerian partners, which included state governments, local banks and high net worth individuals, were financial investors. The largest shareholder had only 10%. That was the written agreement.

I managed to assemble a consortium of 22 investors to put up the money needed to bid. Our shareholders were all Nigerian, mostly institutional investors including leading banks and two state governments, Lagos State and Delta State. The license cost us $285m and was the most expensive license ever issued in Africa at the time. This was 2001.

We considered the investment not only about putting together a network, but also about building a nation. We knew it had the potential to transform Nigeria’s entire business and social architecture.

Most of our investors had between 1-10% shareholding. Econet Wireless Nigeria had only 5% of the shares, but that was fine because it was 5% ownership of a very big pie.

As the “technical partner and operator,” Econet was the company with the expertise to build and operate such a business. Our financial investors recognised this, and also allowed us to receive 3% of the turnover as our fees. This was standard practice in the industry.

We were one of the winning bidders and they gave us just six months to set up business and get our network operating. We were under a lot of pressure but our network was live two days before the others! Customers were pouring in. We were number one in the market with an estimated 57% market share.

___Then came the fateful day when I was told that our company must pay a total of $9m in bribes to senior politicians (in state government) who had facilitated the raising of the money to pay for the license.

I refused to authorise the illegal payments. Meeting after meeting was held to try to get me to agree, but I would not. The money would not be paid as long as Econet was the operator and I had signing authority.

James Ibori, the Governor of Delta State, was demanding $4,5m be paid to him in his personal capacity. He was one of the most powerful men in the country and had a reputation for violence. When he heard that I was refusing to approve payment he issued an ultimatum:

___”Pay or I will chase you and your people out of the country.”

I refused.

The shareholders met and voted Econet Wireless Nigeria out of management. They cancelled our management contract. James Ibori and his colleagues personally attended the meeting to remove us. After the meeting one of them (a prominent local businessman even today) came up to me and said: “Unfortunately for you, God does not have a vote.”

I had to withdraw all my staff and their families: 200 people in all. We left Nigeria.

Most of our people had to be retrenched. The loss of the contract almost drove us to bankruptcy as a group.

They invited a big international operator to replace us as technical partner and operator. They changed the name of the company from Econet to V-Mobile.

Within days of their arrival, the managers of the new operator signed off the payments demanded as bribes.

Then what happened?

A few noble Nigerians had both the integrity and courage to carefully collect all the documentation on the movement of the money, and pass it all on to me.

___There’s a saying worth remembering in uncovering the trail of destruction that is corruption: “Follow the money”…

I bided my time… then I wrote a letter to the United States Department of Justice!

It was 2003.

To be continued…

___As citizens, we have a duty to speak out to stop the rot

Nigeria has an agency known as the Economic and Financial Crimes Commission (EFCC). After we had to leave the country, a few noble people at the company tipped off not only me but the EFCC about the payment of the bribes, which had by this time risen from $9m to $13,5m.

I had never actually heard about this agency myself until I got a call from the Nigerian Embassy in South Africa to say they wanted to come and see me to interview me as a witness.

[b]A team of very senior EFCC officers came to see us in South Africa. They were solid and professional in their enquiry. It was clear they wanted to do something about it.

However, when these officers returned home to Nigeria, they got into very serious trouble. Their investigations into the irregular payments had been brought to the attention of James Ibori (Governor of Delta State)…

Soon thereafter, the most senior officer leading the investigation was demoted and sent to a remote part of the country as an ordinary policeman!

Agencies like EFCC in Nigeria sometimes have brave and gallant law enforcement officers. Unfortunately, as I observed, they’re often let down by their political bosses, and sometimes even by the courts. This can change if activism from the citizenry emerges to support their work.

___We should not only support official efforts to stop corruption but also help these agencies and organisations in their investigations. If you have relevant information about illegal activities, passing it on could make all the difference between impunity and imprisonment.[/b]

In my letter to the US Justice Department, I detailed the full history of the demands for a bribe. I had dates, times, records. I then reminded them that since the big international operator had a listing on the New York Stock Exchange, they were duty-bound to launch an enquiry. Why did I go to them?

The United States government has a law called the Foreign Corrupt Practices Act. The United Kingdom has a similar one called the British Anti-Bribery Act. Whatever you do, make sure you never fall foul of those laws because, if they ever use them to come after you, you’re a “gonner” my friends.

A few weeks later, US officials wrote back advising me that an enquiry had been launched. They contacted the big international company seeking answers to my allegations. My contacts at the company called to tell me, “All hell has broken loose at the company.”

The parent company of the South African-based multinational sent external auditors and lawyers from London to Nigeria. They immediately dismissed all the senior executives sent to Nigeria to run the company, and they left in a hurry!

Although they fled the scene of the crime and returned to their country — after admitting even to both the US Justice Department and the EFCC that the money had been paid out – the stolen funds were never returned to the Nigerian people, even to this day.

Meanwhile, the departure of the other mobile operator did not mean we could return to Nigeria. The shareholders found another operator, this time from the Middle East.

They sold this new operator the control of the company even though Econet Wireless Nigeria had the “right of first refusal” over any sale. They simply ignored that provision in our agreement. This was illegal, both according to our shareholders agreement and Nigerian Company Law. It was left for us to take up the fight in another forum, the Nigerian courts.

To be continued…

gabrielahamz:
My God! How do we intend to move forward in this country with this albatross (corruption) hanging over our heads. We hound and frustrate our most dedicated officers because they dared to fight corruption.
$9 million dollars in bribery to senior politicians in state governments, Delta and Lagos states. This is not about Ibori alone. Clearly other 'politicians and local business men' were complicit in this illegality.
Buhari must not fail Nigerians in this fight against corruption.
It is indeed time to play by a different set of rules.

The state government of Akwa Ibom held 15% of the equity in Econet Wireless Nigeria. This state was not one of the original investors but joined us later.

After five years, the governor of the state of Akwa Ibom decided to sell its stake. It had more than doubled in value in dollar terms, which meant it had been a good investment.

The state governor, an elderly gentleman called Victor Attah, sent a message through a friend that he wanted to see me in London to find out if I was interested in exercising Econet’s right to buy its shares. I agreed to meet him in London.

"I want to sell the shares to build an airport before I leave office," the governor explained.

The governor was accompanied to the meeting by a British lawyer who sat quietly taking notes. His name was Bhadresh Gohil.

With a wave of his hand, the governor said, "Mr Gohil is our legal advisor here in London. I have instructed him to handle all our negotiations with you."

The meeting did not last more than 30 minutes, as the governor was on his way to catch a flight to the U.S.

We agreed with Mr Gohil that we would meet with my own advisors a few days later to start the process.

A few days later, I went to his office with a professional banker who advised me on such transactions. We met in the lawyer's plush London offices. He was confident and smooth-spoken as he explained how much we were expected to pay. Then he explained that our money was to go to a "Special Purpose Vehicle" (SPV) before it was transferred to Nigeria. It was a sophisticated structure and he showed me a drawing of how it would work. I wrote it all down very carefully into my notebook.

___Such corporate entities as SPVs can definitely have legitimate purposes, but this one did not!

[b]As I quizzed him about why such an unusual structure was necessary, Mr Gohil changed tact and tried to entice me with an offer I could not refuse (or so he hoped): "I'm also the advisor to the governor of Delta State, Mr James Ibori, and if you agree to pay for these shares using this structure, we will offer you shares belonging to all the state governments. In total, you can have more than 30% additional shares. It will be enough to take control of the company. My clients just want out, and they are willing to give you what you have always wanted."

I listened to him, quietly taking notes in my small notebook. I did not give away anything, but inside I was very angry. From the design of the structure, I knew immediately that it was meant to siphon off money before it reached the state governments. It was clear there was a conspiracy to steal a lot of money.

___Having already pocketed $13.5m, now the government officials could easily pocket probably another $100m through the sale process that they had developed with the help of Mr Gohil and other clever advisors in London!

When I left the meeting I immediately contacted the mutual friend who'd set up the governor's meeting. The friend was so embarrassed as I explained the corrupt structure clearly designed to steal money from the state governments. He promised to raise the issue with Governor Victor Attah. A few days later he came back and said Governor Attah had claimed ignorance about the proposal put to me by Mr Gohil. He said he would speak to Mr Gohil and tell him it had to be done properly without the structures.[/b]

We never heard from them again. Mr Gohil simply vanished. A few months later we were told that the shares had been offered to a company from the Middle East who subsequently bought them. I was not privy to how they did it except that they had violated my right to buy the shares... That is another chapter in the saga, but not for now.

Fast-forward three years, long after the sale. Our lawyers in London called me one day and asked if I could come urgently to a meeting with the Proceeds of Corruption Unit of the London Metropolitan Police: "You are not in any trouble, but I think you will find what they have to say very interesting!"

This special unit was launched by the British to investigate corruption by foreign government officials who try to launder stolen money to the U.S. and the UK.

The officers asked me to explain everything I knew about the sale of V-Mobile shares to Celtel (later Zain).

I explained the history of the entire transaction and the shareholders disputes that had led to our departure. After awhile, they asked me to focus on specific events, and, in particular, my meetings in London with the governor of Akwa Ibom, and also the meetings with Mr Gohil. It became clear to me that they had a lot of information!

"What can you tell us about this structure, using a Special Purpose Vehicle?"

I explained my understanding of it. Later on, I gave them my diary in which I had recorded the details of my meeting that day with Mr Gohil.

Below my drawing of the structure, I had written in bold letters:

"This is corrupt!!!"

Not long after my meeting with the Proceeds of Corruption Unit, Mr Gohil was arrested together with one of his partners and several others. I later learned that when the Middle Eastern company bought the shares, some of the proceeds had been diverted using the Gohil structure. Some of the money was sent to a bank in London. This large amount of money was enough to alert the British authorities that money was being laundered through their banking system.

Their investigations led them to Gohil and his associates. They raided his offices and found stashes of documents, including details of the structures. Now they were looking for witnesses to help prosecute them for corruption and money laundering.

The British authorities tried without success to get other parties, including the governor of Akwa Ibom, to come out and clear their names but they refused. Officials of President Umaru Musa Yar'Aduah's government successfully thwarted all extradition requests.

I was asked to be a witness in the trial of those who had been arrested in London. I willingly accepted. Next I will tell you about my role as a 'Witness to the Crown" on behalf of the people of Nigeria whose money had been stolen. It would be the first time that someone big went to jail (in a foreign country) for stealing money from Africans.

To be continued . . .
]

A brush with President Charles Taylor of Liberia.

When you’re setting up a cell phone network, one of the most critical facilities you have to build is what is known as the Switch Center. This is where we house the huge complex of computers that process calls coming in and out. The equipment is housed in highly secure buildings that cost millions. It takes months to prepare such a facility before you can even install the equipment.
[b]
In 2001 after we got the license in Nigeria, we set about trying to find a building big enough to house the Switch facilities in Lagos. It was not an easy task to find the right type of building, and time was running out. We had paid $285m for the license, and had been given six months to set up our operations. Failure to meet the deadline would have resulted in a loss of the license.

Then one day our estate agent came and told me they had found the perfect building. It was actually the Liberian Embassy building in Lagos. The government of Liberia, then ruled by Charles Taylor, wanted to sell the building and move to the political capital, Abuja.

It took only a few days for our people to reach agreement over the price. Sale and purchase documents were drawn up and payment terms prescribed. It was a lot of money, which meant I would have to personally sign off on the payment. As I sat there in my office in Lagos, looking at the documents, I noticed that payment had to go to an account in Switzerland...

"Why is the money not going to Liberia?" I quizzed my staff. Initially, it seemed to be a detail no one had picked up.

___"Is it really our business where they want the money sent?" someone asked.

I refused to sign.

The ambassador came to see me at my office, with an entourage of officials. There was a sense of urgency on their part.

I explained to the ambassador that I wanted a Government of Liberia bank account number, and I also wanted a Cabinet Minute authorising the sale. (A Cabinet Minute usually covers essential matters for consideration by a government cabinet minister, such as purpose, recommendation, background and options. It records the outcome of Cabinet's consideration of the previous week's Cabinet committee decisions).

He seemed to agree that my request was reasonable and promised to cooperate.

The following day he called me and said the President's brother had been dispatched to "sort out the misunderstanding over the account details."

"Ambassador, there is no misunderstanding. This is government property, and all I want is the necessary documentation to show that the sale has been formally approved by all relevant authorities, and I want an account in Liberia."

He was now getting quite desperate and agitated, even suggesting they had another buyer in the wings.

I would not budge.

On another occasion, he invited me to travel to Liberia as a guest of the President. He thought it would impress me. Sometimes (not always), corrupters try to dangle the "flattery" of high-level meetings with top leaders or their close family members to reel you into their illegal activities.

"Sorry Ambassador," I replied politely but firmly, "I have a network to launch. We have paid $285m for the license and have a tight deadline. Please give me the documents I need."

Of course, by this time I had long worked out what was happening and was already looking for an alternative building. I let them stew for a few days, then told him I was no longer interested and moved on.[/b]

We ordered specialised containers to store our equipment and airfreighted them to Lagos. It was a more costly solution than if we had bought the Liberian Embassy building.

Many years later, Charles Taylor was forced to hand over power to his vice president after a civil war in which tens of thousands of people were killed. He was eventually sentenced to a total of 50 years in prison by the United Nations-backed Special Court for Sierra Leone near The Hague, in the Netherlands for his leading role in war crimes, crimes against humanity and other violations of international humanitarian law.

Corruption Kills!

The solution we used to house the equipment cost us more money than if we had simply bought the Liberian Embassy Building. But this was nothing compared to the fact that Charles Taylor would have used the money to buy arms to maim and kill thousands of people. God spared me a part in Taylor's 'blood guilt'.

When we turn a blind eye to corruption we are exposing millions of people to suffering and even death:
_Schools are not built or have no books;
_No proper health facilities;
_Bad or non existent roads leading to accidents.
_there is no money to develop things properly.
This is how we must look at corruption: it kills!

Afterthought 1.
The moment I saw bank details of an account in Switzerland with no name, I knew in my heart that this was Charles Taylor's personal account. That was when I decided I would never sign the agreement. When you're doing a deal of whatever size, take careful note of all transaction details. If it's a business deal, make sure all your team does too. Never let anyone try to "rush" or flatter you into a decision and signature. Sometimes corruption is in the fine print. Let the buyer beware!

By
Strive Masiyiwa
The Executive Chairman & Founder of the Econet Group.

okosodo:
propagandulo yorubanus

WETINUSABI:
Yesssuuus...wtf.

When will biafrans grow some brain. Every bit about corruption in recent times to you people is propaganda and you all call Nigeria a zoo? Even UK and other international correspondence are revealing the massive scale of corruption that has been ongoing in this country under PDP, yet dullards like you term it APC propaganda.Go 2hell, i am full born edo. ozuo nب mak°un

Damn, if Nigeria is a Zoo, Biafra no doubt would be a Jungle filled with chimpanzees like you.

WETINUSABI:
Yesssuuus...wtf.

When will biafrans grow some brain. Every bit about corruption in recent times to you people is propaganda and you all call Nigeria a zoo? Even UK and other international correspondence are revealing the massive scale of corruption that has been ongoing in this country under PDP, yet dullards like you term it APC propaganda.

Damn, if Nigeria is a Zoo, Biafra no doubt would be a Jungle filled with chimpanzees like you.

SweetJoystick:
Really detailed, it's obviously very good to take notes in business meetings. God go punish James Onanefe Ibori