The culture of cover-ups, cutting corners and book cooking, enthroned by top executives at defunct Intercontinental Bank Plc was exported to its Ghana subsidiary, Intercontinental Bank Ghana Limited, documents now in possession of BusinessDay show.
Intercontinental Bank Ghana’s main executives were protégés of the defunct bank’s leadership under Erastus Akingbola, some of whom were specifically seconded from Nigeria to head the bank’s business in Ghana.
Financial accounts submitted to regulator, the Bank of Ghana, covering a period of two years and showing profits, were masked and manipulated to deceive the authorities, according to investigators who worked on the books of the subsidiary.
It has now emerged from documents seen by BusinessDay, that for more than two years, between January 2008 and April 2010, the subsidiary suffered a revaluation loss of about GHc49.4 million in foreign exchange transactions that was covered up and later presented to shareholders and the Bank of Ghana (Ghana’s central bank) as profit, in its financials.
“This loss was claimed to have been largely due to FX [foreign exchange] transaction losses and non-revaluation of FCY [foreign currency] accounts for over two and a half years,” investigators noted in one document.
But reports of examination of what had gone terribly wrong in the bank’s operation show a pattern that had developed through a combination of incompetence and sabotage of the foreign exchange transactions system at the subsidiary.
For instance, from January 2008, according to investigators, “the auto-revaluation feature was not enabled for all the Nostro Accounts. The implication of this was that no revaluation was being done on the Nostro balances.” A Nostro account is an account at a foreign bank where a domestic bank keeps reserves of a foreign currency.
As it December 31, 2008, Intercontinental Bank Ghana made a revaluation loss of GHc110,596.68 on all foreign currency assets and liabilities that were revalued. When the next revaluation was done on October 9, 2009, it resulted in a loss of GHc11,969,914, but this was manually reversed.
Documents seen by BusinessDay also show that the bank’s general ledger (GL) No.340000009 after a review, indicated a revaluation loss of GHc42,586,790.45 by end of December 2010, a situation that could have resulted in a loss for the year.
“This should have resulted into a loss of GHc32,937,790.45 instead of a profit of GHc9,649,000 declared by the Bank as at December 31,2010,” according to an investigative audit report.
This cover-up appeared to have been perpetuated for the purpose of securing personal gains by senior executives. After covering up the loss and presenting the financials to show profits, staff were paid bonuses totaling GHc965,000 (or $644,493) out of the fictitious profit, with the erstwhile managing director of the subsidiary, Albert Mmegwa collecting $100,000 as his share.
Findings show that the foreign exchange related losses recorded between March and April 2010 resulted from trades entered into by the FX Trading Unit, between December 2009 and April 2010, but which tickets were presented for posting only in April 2010. “The suppression of the trading tickets was made possible due to lack of access to the trading platform by the treasury department’s resident controller,” investigators noted in what is now being linked to a pattern of behaviour entrenched in the defunct bank.
Documents also show that the cover up was deliberate. For instance, in an effort not to disclose the revaluation losses in the 2010 audited financial statement, the bank’s management transferred the loss into a fixed deposit liability GL (I-Cash 210500001) “with an alleged intention of writing it off over 2-years.”
BusinessDay learnt that the decision not to write off the loss was that of management, which thought that this would have eroded the shareholders’ fund, a situation that could have collapsed the bank.
It is this cover up, considered by analysts familiar with such financial dealings as a financial crime, that would resonate among those who know about the case of the defunct parent bank in Nigeria, where it’s embattled former chief executive, Erastus Akingbola, and executive director, are about to open their defence in alleged fraud charges brought against them, at a Lagos High Court.