The Persistent Ecobank Crisis

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Just as Ecobank Transnational Incorporated, ETI, was beginning to regain public confidence after series of internal crisis, the International Monetary Fund, IMF warns that the bank’s corporate governance issues still pose a serious threat to Africa’s financial stability

In January 2014, Nigeria’s Security and Exchange Commission, SEC, released a scathing report which indicted the management of Ecobank Transnational Incorported, ETI over poor corporate governance practices. The indictment followed SEC’s six months of investigation into allegations of corporate governance breaches by top management officials of the bank. SEC listed a string of failings, including “the absence of a clear vision and strategy to drive the institution”, conflicts of interests at the top and a lack of transparency in pay procedures at the group. Though not unexpected, the SEC’s report eventually set off series of internal infighting which affected the bank’s corporate image. For most part of 2014, the bank was busy making major management and policy changes aimed at reassuring stakeholders that all is well.

•ECOBANK Headquarters, Lome

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But just as the dust raised by SEC’s report was beginning to settle, the International Monetary Fund, IMF two week ago warned that Ecobank Transnational Incorporation (ETI), parent company of the Ecobank Group, with operations in 36 African countries and total assets of $23 billion, still poses a major threat to the continent’s financial stability.

In the report, IMF noted that the group has in the process of rapid expansion paid less than adequate attention to good governance, a situation that now gives cause for concern. The IMF in the pan-African banking report noted that through a rapid scope of expansion, Ecobank is gaining systemic importance in many cross-border operations. It however warned that its deficient supervision system remains a major source of peril to financial stability. The report added that the group’s Nigerian subsidiary, one of its largest, in particular, is plagued by “poor governance, questionable transactions and an unsustainable operation model. The Nigerian Ecobank unit represents as much as 45 percent of ETI’s operations.

Reacting to the development last week, Ecobank management dismissed the IMF report describing it as misperception. In defense of its position, Ecobank’s spokesman, Richard Uku said the report contains some inaccuracies, besides being “roughly 18 months out of date as regards some of its references to the Ecobank Group. “The internal governance issues that was referred to at Ecobank dates back to a period of several months between mid-2013 and early 2014. The Ecobank Group dealt conclusively with those internal governance issues at the time. The matter culminated in the dismissal of the then Group CEO, Mr. Thierry Tanoh, who was replaced by Mr Albert Essien in March 2014,” he said.

Although Ecobank belittled the IMF report, some industry watchers believe it poses yet another credibility problem for the bank. It is believed that stakeholders and customers would not ignore such warning coming from IMF. An industry analyst told this medium that the series of problems that Ecobank have had to contend with in the last two years are indications that there are fundamental issues which the bank has failed to address. The London Financial Times reported late last year that it sighted some documents that shows outflow of depositors from the bank.

•Albert Essien

Aside the current IMF warning, the bank is presently battling a $11.6 million court judgment awarded to its former chief executive officer, Thierry Tanoh after he filed a wrongful dismissal suit following the bank’s decision to fire him last March. Ecobank’s board removed Tanoh, a citizen of Ivory Coast, after months of turmoil over corporate governance that rocked the bank and cast a spotlight on how best to regulate African banks that operate across borders. Tanoh’s sack was the culmination of series of crisis that started back in 2013.

Precisely in April 2013, the Central Bank of Nigeria, CBN, wrote to the management of Ecobank Transnational Incorporated, ETI, questioning Mr. Kolawole Lawson’s fitness to continue as the chairman of the bank. The CBN’s inquiry was hinged on the report that Lawson’s family business had taken several loans from the bank, amounting to over $10 million (N1.6 billion), which he refused to pay back. CBN also disclosed that Lawson had huge outstanding non-performing facilities at the Asset Management Corporation of Nigeria, AMCON. Following the CBN’s letter, an emergency meeting of Ecobank board of directors was convened in July 2013.

At the meeting, some directors were reported to have demanded for Lawson’s resignation, citing his contravention of standing rules on loan facilities. Series of meetings were convened to resolve the issue, which factionalised the board. Despite the internal boardroom wrangling, the bank later issued a statement saying that Lawson had paid off part of the AMCON debt. AMCON confirmed the payment in a separate statement. Ecobank also said that Lawson had repaid a separate debt his family company owed the bank. The matter was finally allowed to rest, but industry watchers believe the loans were hurriedly paid back by Lawson to avoid further embarrassment for the bank.

The confidence in the banks’s leadership further took a fresh knock when in August that same year, Laurence do Rego, a suspended executive director in charge of Risk and Finance, made separate allegations about mismanagement in the bank. In a letter to the Securities and Exchange Commission, SEC, Rego alleged that Lawson and Tanoh, attempted to sell off the bank’s non-core assets at “well below market value”. She also alleged that the bank’s board “is not operating in the interests of shareholders.” Rego also alleged that she was asked to write off debts owed by a real estate company Lawson chairs, and to manipulate the bank’s 2012 results to improve those of 2013, when Tanoh was confirmed as the chief executive officer. Ecobank had reported that its 2012 pre-tax profit rose to its highest ever level of $348 million, up a quarter on the same period in 2011. Rego alleged that the result was manipulated.

SEC formally commenced investigation on the allegation a week after it received Rego’s letter. All executive directors of the bank were issued a specific questionnaire on the matter. A source at SEC told this medium during the period of the investigation that the core elements of Rego’s allegation were on material misstatement of Ecobank’s performance. The source said the outcome of SEC’s investigation would, among other things, determine whether the bonus awarded to Tanoh for that year was proper. While the outcome of SEC investigation was being awaited, the management of Ecobank, after a heated boardroom meeting in Accra, Ghana, announced that Lawson was stepping aside. The bank said the decision was necessary to restore confidence among depositors and shareholders. Andre Siaka was immediately announced as his interim replacement.

In a face-saving move, the new board, led by Siaka, described the allegations against Lawson as baseless, saying that it had total confidence in him. The bank said it only decided to allow Lawson to step aside to restore stakeholders’ confidence. The bank’s spokesperson, Jeremy Reynolds, in a statement accused Rego of instigating the crisis in the bank because of her suspension over allegation of presenting false credentials to the bank. Rego, however, said she had never lied about her qualification and provided documents from the Ministry of Education in France supporting her claim. In her communications with the SEC and ETI board directors, she suggested that her refusal to comply with demands she believed were not in the interest of the bank led to her suspension.

Six month after a thorough investigation, SEC released a report which cleared the air on the issue. The report indicted the bank’s management, noting that there were clear corporate governance lapses in the bank. The report further recommended the appointment of a new chairman to lead efforts to improve governance at the bank. The report recommended that an Extraordinary General Meeting, EGM, will most probably prompt a debate over whether Thierry Tanoh is the right man to lead the bank.

After series of board maneuvering , Tanoh was forced out of his exalted position at a rather quiet board meeting of the bank held on the tenth floor of the imposing Hilton Hotel in Yaounde, Cameroun. It was revealed that he had failed to comply with instructions of SEC to recall Laurence do Rego.

Thierry Tanoh, CEO d'Ecobank photographié pour Forbes Afrique.

Sources said hints that the CEO may be attending his last board meeting first came when it emerged that the directors had been advancing a position which was seen as unfavourable to Tanoh, and in the end, the former CEO did not even attend the Yaounde crucial meeting. South Africa’s Public Investment Corporation (PIC), Ecobank’s single largest shareholder, had also expressed concerns about Tanoh. After series of boardroom meetings, Tanoh was eventually showed the way out on March 13, 2014.

In a twist to the matter however, Tanoh approached a Togolese court seeking damages on the ground that he was wrongly booted out by the bank. The industrial court hearing arguments from both parties, upheld Tanoh’s case and awarded him $11.6 million as damage.

Although the size of the court judgment is dwarfed by Ecobank’s assets, which in 2013 totalled $22.5 billion according to the company’s website, the labour court ruling represents a sharp legal setback for Ecobank. The ruling also exposes jurisdictional risk for the bank, given that Ecobank Transnational Incorporated (ETI), the parent company, is one of the dominant business forces in the Togolese capital.

The bank said in a statement it would appeal and file a criminal complaint against Tanoh in Lome for allegedly removing papers and deleting computer files while he was CEO. Ecobank also said it would convene a board meeting over the issue. “ETI does not accept the legitimacy of the Togolese court’s ruling because the court does not have legal jurisdiction over Mr Tanoh’s employment contract,” the bank said, adding that it stood by its decision to remove Tanoh.Courtesy:thenewsnigeria.