…Parties Allege Victimisation
…Accuse Agency of Disregard For Court Orders
…N4trn Debt Threatened
BEVERLY HILLS, March 07, (THEWILL) – The Assets Management Corporation of Nigeria (AMCON) is firing from all cylinders to recover over N4 trillion owed it by various entities that are regarded as recalcitrant debtors. To justify its calling, the bad debt bank is pursuing its daunting task with ruthless single-mindedness. While this tough stance has earned AMCON unceasing accolade, the flipside is that among the “recalcitrant debtors” are victims of wrongfully classified debts.
THEWILL learnt from those familiar with the matter that while some of the debts owed AMCON (referred to as AMCON debts), are real and indisputable, others are not. The latter constitutes part of the countless litigations in which AMCON is either a plaintiff or defendant, or joined as such.
Among the wrongfully classified toxic assets are unsubstantiated, non-existent, disputed and interest capitalization facilities. Legal and finance experts revealed that AMCON’s debt recovery drive has created casualties of victimization and highhandedness – those with wrongfully classified debts hung on their neck like millstone.
A legal practitioner who is extensively involved in AMCON related matters traced the origin of this anomaly to the procedure for buying the Non-Performing Loans (NPLs). He argued that this has created fundamentally legal and administrative challenges as due diligence was not exercised over the integrity of the toxic assets. This, he said, led to AMCON buying unsubstantiated and disputed loans that have now created a problem for the system.
“AMCON parades over N4 trillion debts; sadly, this figure includes unsubstantiated debts – debts that never existed; and debts whose figures remain controversial and doubtful. It is therefore futile to engage in the pursuit of such debts. From my extensive handling of AMCON related matters, I would say that a lot of the AMCON debts will never be recovered”, said Victor Ukutt, Principal Partner, Victor Ukutt & Co. (Legal Practitioners) in their Lagos Chambers.
Ukutt told THEWILL that the coming of AMCON revealed deep-rooted rot in the Nigerian banking sector: Some corrupt bank officials used the customers’ accounts for various fraudulent practices. The procedure for acquiring the toxic loans allowed fraudulent bank officials to go free while innocent customers, the victims, suffer.
“On the issue of non-performing loans, I can say with certainty that many of those debts AMCON is claiming to be recovering never existed in the first place because they are fictitious debts, disputed debts, interest-capitalization for years.
“AMCON should have been able to say, ‘Mr A, we learnt you are indebted to Bank C; is it correct?’ If it is correct, ‘how much have you paid back and how much is outstanding?’ There was no such communication. They bought over the loans from the banks; some of these are debts that did not exist. AMCON will now write to the so-called debtor, ‘Come and pay us this amount of money you owe a particular bank’. Then dispute will arise”, Ukutt explained in an exclusive interview with THEWILL.
Expatiating further, he said: “Really, the AMCON Act empowers the purchase of the debts, but the Act was silent on the procedure. The procedure ought to be fair and transparent. The debtor ought to have been put on notice. Even the 2015 Amendment Act was silent on it. But, this is a case of a third party getting involved in a two-party matter and there must be fairness on all sides. If AMCON had wanted a transparent process, to avoid dispute over indebtedness, the so-called debtor should have been put on notice before AMCON purchased the debt.”
Unsubstantiated Facilities
Among the unsubstantiated facilities Ukutt explained to THEWILL was the case of Bamidele Enterprises Limited (not real name) who applied for a credit facility to invest in their diesel distribution business. The application was never approved and no facility was extended to the customer. Surprisingly, Bamidele Enterprises Limited was published in the CBN’s list of bad debtors.
The business owner was shocked when a team of AMCON and security officials stormed his house over the “debt” arising from a “facility” granted him by a nationalized bank . A third generation bank that acquired the bridge bank eventually inherited the controversial debt.
Giving further details, the legal practitioner told THEWILL that none of the fundamental terms and conditions in loan administration existed in the claimed facility extended to Mr Bamidele’s firm: “There must be availability of that product. There also has to be a warehousing agreement, and then the bank has to confirm from the supplier that they have diesel (the product) and they have to sign a tripartite warehousing agreement.
“The bank did not execute any of these agreements; the money was not given to the customer. What the bank did was to credit the customer’s account with over N100 million which was immediately transferred out; and the money disappeared. The customer never knew about this fraud. This is why customers, especially business people, should obtain their bank statements at least monthly.”
A twist in the narrative was that “a fictitious legal mortgage over a property at Modakeke – Ife (Osun state)”, was claimed to have been executed in respect of the facility. They also put another name as chairman of the company. The man they claimed to be the chairman of the company denied any knowing of Bamidele Enterprises Limited and a loan facility with any bank.
“We went to court after my findings showed that no such transaction existed. Eventually, the court gave judgement against the bank in 2018 after nine years of legal battle. The bank was ordered to refund the entire amount it wrongfully debited to the customer’s account with interest, now hitting about N200 million. AMCON went on an appeal. That is where the matter is now and only God knows for how long. Meanwhile, the customer’s business is crumbled”, the legal practitioner said.
A similar case occurred at Eket, Akwa Ibom state where AMCON with security agents and operatives of the Economic and Financial Crimes Commission (EFCC) swooped on the owner of Akpan Udoh Company Limited (not real name) in 2010. The matter was a loan of N700 million said to have been granted the company by an old generation bank.
Mr Udoh was bundled into a waiting van and taken to Eket Police Station preparatory to being conveyed to Abuja via Lagos. He quickly contacted his lawyer who advised him to issue cheques of another bank for N900 million which AMCON claimed the company was owing, so that Mr Udoh could be left off the hook. That was done.
The lawyer flew into Eket the same day and issued a stop-order on the N900 million cheques after a meeting with Mr Udoh showed the facility was never granted to him by the said bank. The lawyer explained in his stop-order that the cheques were issued under duress and at gun point.
Mr Udoh sued the bank at the Federal High Court, Uyo, and joined AMCON, CBN and EFCC . The court gave judgement against the bank in 2014 after years of litigation. “You can see that the N700 million is lost because the loan never existed in the first place. Yet it was among the AMCON debts”, a legal practitioner told THEWILL.
In another instance a bank, now acquired by a major lender, claimed to have granted a facility to one Alhaji Muhammed (not real name). The facility was a bridging loan (to buy shares) which Muhammed secured with his own shares and stock worth over N100 million. The transaction had not been fully consummated when AMCON bought the facility as NPL and dispute ensued.
It was revealed that, contrary to the bank’s communication with Muhammed that the transaction was on course, no shares were purchased for him. “The bank claimed to have bought the shares, which the customer never saw till today. No shares were shown to the man. The bank later claimed to have credited the customer’s account. There was no evidence to that effect.
“AMCON started harassing the man. We sued the bank at a Federal High Court in Lagos where AMCON was a third defender after CBN. The court delivered judgement in favour of Mohammed in 2015. The stockbroker had confirmed releasing Muhammed’s shares, on his instruction, to the bank as collateral. The bank could not even present evidence of the shares they claimed to have bought. The man’s shares used as collateral could not be accounted for. This is among the debts that AMCON bought”, a source familiar with the matter said.
THEWILL also learnt that many AMCON debts in dispute have to do with faulty processes created by the banks to swindle the customer. This includes the execution of stamp duty to perfect a legal mortgage used as collateral. Some banks were said to have under-declared the value of the mortgaged property so as to pay less stamp duty; but the customer (borrower) is debited with the charges for real/full value of the transaction.
A legal expert said the Supreme Court had ruled that the value declared for the purpose of stamp duty would be deemed to be the value of the facility even where the actual value exceeds the declared value. “There are cases like this; and the client would, through his lawyer, insist on the Supreme Court pronouncement on the matter. How will AMCON be carrying the wrong value of the facility as NPL?”, the lawyer asked.
Some disputed debts are also term-loan facilities
A term loan is one that has fixed duration, like 6 months, one year, two years, as the case may be. According to a legal practitioner, the Supreme Court has made pronouncement with preponderance of authorities, that where a facility with fixed duration occurs, you cannot charge interest outside that duration, because you have already agreed on the tenor or lifespan of the facility, even if the customer did not pay.
“What you can do, is to claim damages for breach of contract, not for you to begin to calculate interest outside the tenor. These are parts of the debts that AMCON bought over as jumbo debt. They now use security agents to deal with the client and confiscate his property”, the legal practitioner explained.
He said there are cases involving 10-year-old facilities and the bank is still charging interest. “Curiously, interest capitalization is now regarded as bad loans. Even abandoned accounts are packed with interest capitalization. How would AMCON realize such bad debts?
“In some cases, also, the Loan Purchase Agreement (LPA) contains discrepancies. If the loan purchase figure differs with the amount you want to recover, it is null and void. These are part of the AMCON dilemma but no one is ready to look that way because ‘AMCON debts must be recovered’.”
The Case of Suru Worldwide Ventures
A particular case of wrongfully categorization as non-performing loan was that of Suru Worldwide Venture, a Lagos-based firm which is into property and hotel business. The Group Managing Director, Mr Edward Akinlade, had in a press conference in Lagos late 2020, narrated his ordeal in the hands of AMCON over a facility his firm had with a third generation bank. Mr Akinlade later spoke with THEWILL to expatiate on the issues he raised at the media chat.
He explained that his firm had a funding of about N13.5 billion from a new generation bank that was later acquired by a Tier-1 lender. He revealed that his firm had drawn down N10 billion and that the facility was performing and being serviced. Yet it was surreptitiously sold to AMCON after the firm had paid over N700 million in the three months preceding the sale of the loan to AMCON.
“AMCON was set up to purchase non-performing loans, but our loan was performing yet they sold it. We sued the bank in 2011 for that action – mismanaging our account”, Akinlade told THEWILL.
He added, “We proved to AMCON that we had drawn N10 billion from the facility and could not see the basis for the facility being sold to them for N15 billion. We found out that they had heaped a huge interest liability on the outstanding amount to build it to N15 billion. AMCON had paid N8.3 billion into the account.”
The company approached AMCON to work out a modality for funding the firm’s projects and AMCON asked them to sell their assets and raise money to pay their debt, promising to support the firm thereafter. “I sold my 8-acres land in Ikeja GRA, for about N1.75 billion and paid the proceed to AMCON who thereafter wrote us that we owe the Corporation N6.3 billion,” Akinlade said.
THEWILL learnt that AMCON refused to accept an offshore facility the firm obtained from the London subsidiary of a Nigerian bank, on the grounds that AMCON debtors are prohibited from obtaining loans from Nigerian banks. Akinlade’s argument that the London bank is a separate entity was not accepted as AMCON wrote the London bank not to grant the facility.
“To our surprise, AMCON went to court asking to be given the power to confiscate our assets on the ground that the loan was properly bought. The court dismissed AMCON’s case. Instead of appealing the case, AMCON counter-sued us for N26 billion in the N36 billion case we had instituted against the bank for mismanaging our account. The Court dismissed the case with N100,000 cost, stating that AMCON should have appealed the original case.”
Akinlade said AMCON approached anther bank for an Order to the Inspector-General of Police (IGP) to assist AMCON to recover their asset being occupied by hooligans. According to him, “AMCON listed our hotel, Best Western on Allen Avenue, Ikeja, Lagos among the assets. In the early hours of September 27, 2017, AMCON came to the hotel with a team of Mobile Police personnel, tear-gassed everybody away and took physical possession of the facility.
“We subsequently sued AMCON to recover our hotel on the ground that we were not joined in the case. The Court of Appeal agreed with us and told AMCON to go and sue us properly, with our firm joined, if truly they wanted to confiscate the asset. AMCON appealed to the Supreme Court and is still holding on to the property. That is where the matter is now”, Akinlade said.
“The hotel has been empty since then and is basically destroyed. A hotel that was worth about N6.3 billion is now worth N1.3 billion for so many reasons: It was a functioning business, now it is just brick and mortar. All the furniture is wrecked. Everything inside the hotel that I spent over N1 billion to fix about 10 years ago, is gone.
Asked what the way forward is, Akinlade said, “AMCON has been reaching out to us for settlement of the N6.3 billion. I told them I want to settle, but you owe me N2 billion now. I am not going to bear the losses of N5 billion of the action you took: Loss of revenue ever since, litigation from legitimate customers who were tear-gassed out of the hotel, loss of goodwill, loss of our name. Best Western is an American franchise. I have a contract for it.
All the cost we calculated at over N8 billion. We deduct their N6.3 billion from N8 billion and we have explained to AMCON that they are owing us N2 billion. We have been waiting for 10 years, and we will continue to wait. I do believe that God will see us through.”
Akinlade said he had petitioned the Public Petition Committee of the National Assembly that AMCON used illegal means and Police to take over his property in 2017 and that he was in hospital for one week after the incident. He disclosed that AMCON has not honoured the invitation on the three occasions that the Public Petition Committee invited them.
“I have also petitioned the ‘Lagos State Tribunal Against SARS’ (with images of what SARS did in our hotel), asking for justice and a compensation of N10 billion from Nigeria Police. That petition is there,” Akinlade said.
THEWILL contacted the Head, Corporate Communications of AMCON, Mr Jude Nwauzor to comment on these issues – ranging from wrongful categorization of NPLs to the case of Suru Ventures Worldwide, and the press conference by Mr Edward Akinlade late 2020. Mr Nwauzor did not respond to the messages sent to his e-mail, his WhatsApp and through SMS. Calls made on his mobile telephone (080332266xx) were not answered.
A finance expert and legal practitioner who would not want his name published because of his relationship with the authorities, told THEWILL that AMCON is doing a good job. He commended the establishment for restoring sanity in the financial sector by clearing the toxic assets of banks in 2010, in a manner that depositors’ funds were protected.
He also said AMCON is teaching some unscrupulous Nigerians a lesson: those who benefited for Central Bank of Nigeria (CBN) intervention funds and other government support programmes but mismanaged the facilities. He, however, regretted the wrongfully categorized NPLs, arguing that no system can be perfect.
AMCON was created in July 2010 with an intended 10 years lifespan. The body acted as the buyer of banks for the Nigerian Government by acquiring the non-performing loan (NPL) assets of banks. The coming of AMCON brought stability and helped in reviving the financial system. Over N2.2 trillion was injected as financial accommodation to 10 commercial banks.
This was part of the consolidation exercise to prevent systemic failure in the banking sector. According to AMCON at the time, the exercise helped in protecting about N3.66 trillion of depositors’ funds during the 2008/2009 global financial crisis, while approximately 14,000 jobs were saved as a result of AMCON’s intervention in the banking sector.
The 2019 AMCON Amendment Act extended its lifespan by another five years – 2023/2024. The Senate recently confirmed the reappointment of Ahmed Kuru as the managing director of AMCON
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
