On September 19, the Securities and Exchange Commission (SEC) announced that Victor Ogiemwonyi, the Managing Director of Partnership Investment Company Plc (PIC) and Partnership Securities Limited (PSL) has been banned for life from serving as a director in any public company in Nigeria for unprofessional conduct in respect of the activities both companies.
The operating licenses of both companies were also withdrawn. A number of directors of the companies were, along with Mr Ogiemwonyi, suspended from engaging in capital market activities in the Nigerian Capital Market. Those suspended included Henry Omoragbon, the Chairman of the companies, Funke Ogiemwonyi, Mr Ogiemwonyi’s wife, and Arese Ugwu, Mr Ogiemwonyi’s daughter and, ironically, the founder of Smart Money Africa, a personal finance platform, and the author of a book called The Smart Money Woman: An African Girl’s Journey to Financial Freedom. In addition to the bans, fines ranging from N1 million to N3 million were imposed on Ogiemwonyi, his wife and daughter and Omoragbon.
The reason for the SEC’s action was PSL’s unlawful sale of 48,200 shares in Forte Oil Plc belonging to one Cletus Mbaji Uchendu, and the misappropriation of the proceeds therefrom and of the dividend that accrued on the shares. However, there were hundreds of other reasons why the SEC might have imposed the penalties that it did. On January 14, 2016, one Chief Charles Adogah filed a petition at the Federal High Court, Lagos, seeking the winding up of PIC on the ground that it was unable to pay its debts, and was indebted to the petitioner in the sum of N40 million. At the hearing of the petition on June 12, 2017, when a winding up order was made, a number of other parties attended to support the petition.
In separate, and unrelated, proceedings, the former Chief Executive Officer of Togolese based Ecobank Transnational Incorporated (ETI), the parent company of Ecobank Nigeria Plc, filed a petition on November 1 2016, seeking the winding up of PIC and PSL for the failure to pay some N1.3 billion being the proceeds of the sales of his ETI shares that had been sold by PSL. Over one hundred other creditors have appeared to support of the petition, as has the SEC, which had prepared a report, dated November 16, 2016, alleging that, amongst other infractions, PIC and PSL had engaged in unauthorised capital market operations, had co-mingled client funds with their own, had been operating without the requisite number of sponsored individuals, had inadequate liquidity positions with liabilities of N10.5 billion and stated assets of only N1.6 billion. On October 31 2016, the Federal High Court appointed an interim provisional liquidator to take possession of the assets of the companies, so as to protect them for the benefit of creditors. Those proceedings are now stalled before the Federal High Court because PIC and PSL have appealed against the appointment of the provisional liquidator, and are seeking to stay the proceedings until the appeal is concluded. It is certain that not all the victims of the activities of PIC and PSL have come forward, and the reality is that both companies can now be viewed as dead, with their activities halted following the appointment of the provisional liquidator, who remains in place.
Mr Ogiemwonyi was arrested by the EFCC in October 2016 and, in December 2016, was charged with stealing the proceeds from the sales of the ETI shares. He was granted bail immediately, but was unable to fulfil the bail conditions until 2017, spending Christmas of 2016 and the New Year in Ikoyi prison. His trial is pending before the Lagos High Court, where it is being subjected to the usual.
Bernard Madoff is described in Wikipedia as an “American fraudster and a former stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered the largest financial fraud in U.S. history. Prosecutors estimated the size of the fraud to be $64.8 billion, based on the amounts in the accounts of Madoff’s 4,800 clients as of November 30, 2008.” In December 2008, after his sons reported him to the authorities, Mr Madoff was arrested by the FBI and charged with securities fraud. The U.S. Securities and Exchange Commission had previously conducted multiple investigations into Madoff’s business practices, but had not uncovered the massive fraud. In March 2009, at his first hearing, he pleaded guilty to 11 felony charges and was convicted. In June 2009, he was sentenced to 150 years on each count and is serving his sentence in a federal prison in North Carolina. His scheduled date of release is November 14, 2139, by which time he would be 201 years old!
The U.S. Securities Investor Protection Corporation (SIPC), created under the Securities Investor Protection Act of 1970 to protect investors appointed a trustee, who estimated the actual losses to investors at $18 billion. The trustee reports that, as at September 22 2017, $12.7 billion had been recovered.
Turning to the question with which this article starts, it seems clear that although Mr Ogiemwonyi has been responsible for significant losses to investors in the Nigerian capital market, the scope of his alleged misdeeds pales into insignificance when compared to Mr Madoff’s. First, the extent of the losses caused by PIC and PSL, as recorded by the SEC, even if multiplied by a factor of five, to make it in excess of N40 billion, does not approach the $18 billion lost to Madoff. Secondly, there has been a significant recovery achieved in the Madoff case, primarily as a result of a legal system that produces results. Third, Mr Madoff, recognising that he could not toy with the US federal legal system, chose not to fight the charges brought against him. Mr Ogiemwonyi, however, has hired a senior S.A.N., and is vigorously fighting both the civil and criminal actions brought against him, such that commentators wonder how much of the monies stolen from his victims is being received by the lawyer. In addition, Mr Madoff’s punishment was stringent. Not only did he receive eleven 150 year sentences, he was ordered to pay $170 billion in restitution. Mr Ogiemwonyi’s penalty from the SEC is a life ban from the Nigerian Capital Market and fines totalling less than N6 million.
One thing that the two cases have in common is the regulatory failures. The US Securities and Exchange Commission, in spite of numerous investigations of Madoff found nothing. Our SEC, to its credit, did find infractions when it conducted its investigation into Mr Ogiemwonyi’s activities. However, it failed to conduct any investigations into Mr Ogiemwonyi’s companies for at least eleven months from when it should have been aware that all was not well in the Partnership bubble. This begs the question as to whether the fact that Mr Ogiemwonyi had hitherto been regarded as a leading light amongst capital market operators may have blinded the regulators as to what was going on. This was certainly a factor in Mr Madoff’s ability to get away with his scheme for such a long time. Whilst the SEC has now acted to prevent Mr Ogiemwonyi and his family from further predation on unsuspecting members of the public, it does not appear to have taken any concrete steps to help the victims to recover their money, leaving them to their own devices. In the Madoff case, the SIPC has fought to make recoveries for the benefit of victims, and has been quite successful in this regard.
No, Victor Ogiemwonyi is not Nigeria’s Bernie Madoff. However, he is the closest we have unearthed to date, and if the regulatory authorities do not improve their performances, one fears that we may some day be cursed with someone as bad as Madoff.
The writer, Rafiu Ajakaye, is a Lagos-based journalist