ALLEGING accounting irregularities and improper disclosures in Stanbic IBTC Bank’s 2013 and 2014 financial statements, the Financial Reporting Council of Nigeria (FRC) has withdrawn its certificate which validates signatory to financial reports from the Chairman of the company, Atedo Peterside, and the Chief Executive Officer, Mrs. Sola David-Borha.

The hammer also fell on two KPMG’s officials–Arthur Oginga and Dr. Daru Owei– over what may be termed as complicity in the alleged “cooking” of the bank’s financial statements. FRC declared that Oginga and Owei will remain sanctioned “until the investigation as to the extent of their negligence in the concealment, accounting irregularities and poor disclosures in the said financial statements is completed in accordance with Section 62 of the Financial Reporting Council of Nigeria Act No. 6 of 2011.”

With the development, the affected persons are no longer allowed to, and cannot vouch the integrity of any financial statements issued in Nigeria henceforth.

But in its reaction, the bank has described the FRC’s allegations as inaccurate and unfortunate. It faulted the way FRC is handling the matter, just as it refuted reports in some sections of the media that its directors have been ousted.

Already, FRC has directed the directors of the bank to withdraw the financial statements of Stanbic IBTC Holdings Plc for years ended 31st December 2013 and 2014 and restate them in accordance with the law.

In a statement, the FRC noted that “Pursuant to Provisions of the Financial Reporting Council of Nigeria Act No. 6, 2011 and Regulation 3 of the Financial Reporting Council of Nigeria– Guidelines/Regulations for Inspection and Monitoring of Entities 2014, some matters came to the fore from the review of the financial statements of Stanbic IBTC Holdings Plc (Stanbic IBTC) and major subsidiaries of the holding company for the years ended 31st December 2013 and 2014.

“Material irregularities of the said entities were also brought to the attention of the Council by some minority shareholders of Stanbic IBTC relating to the financial statements of the said entity for years ended 31st December 2011, 2012, 2013 and 2014.”

According to FRC, the development had started with issues raised by the minority shareholders of the bank, which were also addressed to some other regulatory agencies, including the National Office for Technology Acquisition and Promotion (NOTAP), Securities and Exchange Commission (SEC) and Central Bank of Nigeria (CBN).

The alleged scam is being anchored on irregularities in sale, purchase and assignment agreement (software); statutory audit and auditor independence (fees for other services); presentation of information (contravened the presentation requirements of taxes in IFRS); and concealment of information. Others are discovery of “other operating expenses” contained in line items that require further explanation, which include “professional fees” to the tune of N6.08 billion in 2014; N4.46 billion in 2013; N6.05 billion in 2012; and N4.04 billion in 2011.

“The schedule submitted to our Council by Stanbic IBTC revealed that professional fees which was simply a line in the financial statements contained several expenses that are unrelated to professional fees and which required separate disclosures on their own to give users of the financial statements good understanding on the transactions and events of the bank,” FRC said.

Among the controversial fees are Franchise Fee for 2014 and 2013 (N2.3 billion and N1.9 billion respectively); Tax Advisory Fee and Provision for Tax Liability Assessment (N711million); Provision for Litigation in 2014 (N752 million); Provision for Contingent and Other Known Losses (N972 million); and another N340.8 million for “Provision for Litigation.”

Stanbic IBTC Holdings, a member of Standard Bank Group, headquartered in South Africa, with a controlling stake of 53.25 per cent, is made up of eight subsidiaries- Stanbic IBTC Bank (including Stanbic Nominees Nigeria Limited); Stanbic IBTC Pension Managers Limited; Stanbic IBTC Asset Management Limited; Stanbic IBTC Stockbrokers Limited; Stanbic IBTC Trustees Limited; Stanbic IBTC Ventures Limited; Stanbic IBTC Capital Limited; and Stanbic IBTC Investments Limited.

In its reaction, the bank described its directors as reputable individuals from Nigeria and elsewhere, who uphold the best corporate governance practices and whose credibility, integrity and proven track record are impeccable.

In a statement yesterday, jointly signed by the Chief Executive Officer, Mrs. Sola David-Borha and the Company Secretary, Chidi Okezie, the bank said although the matter is in court, “we are constrained to respond to certain aspects of the report for the benefit of our stakeholders and the general public.”

The statement reads in parts: “FRC’s allegations are inaccurate and unfortunate, and the manner in which it has chosen to make them is procedurally defective. Whilst FRC takes refuge in Regulation 21 of the Directorate of Inspection and Monitoring Guidelines Regulations 2014 for the wide publicity that it has given to its regulatory decision, Regulation 21 only applies ‘Where the Panel and the entity agree that accounts are to be rectified by way of revision or restatement’.

“That is not the case here, because Stanbic IBTC does not agree that its accounts are defective or require rectification.  Moreover, Regulation 27 makes clear that where a reporting entity does not accept FRC’s position, FRC ‘shall institute a legal action against the entity’. FRC has ignored this laid down process in preference for self-help and media publicity.

“The matters that FRC alleges to be wrong are not wrong in any material respect and many are in any event not matters of financial reporting at all, but matters of business decision and judgment for Stanbic IBTC and its board of directors. For example, the decision whether to enter into a sale and lease back, whether in relation to intellectual property or any other asset, is a business decision and entirely a matter for the board of directors of Stanbic IBTC and certainly not a matter for FRCN.

“In the same vein, NOTAP’s refusal to register a franchise agreement does not render the agreement null or void, or indeed relieve Stanbic IBTC of its liability. It merely means that any foreign currency payment due to the foreign counterparty under the unregistered agreement cannot be remitted. Stanbic IBTC has not and will not make any remittance, which is subject to NOTAP approval without obtaining such approval.

“Stanbic IBTC is a very responsible organisation and fully complies with all extant laws and regulations in Nigeria and international best practices applicable to the conduct of its business. It is the only Nigerian bank that is AAA rated by Fitch. It has met the disclosure requirements of Nigerian law and international financial reporting standards applicable in Nigeria. Contrary to the media reports, the books of Stanbic IBTC have been fully disclosed and provide a true and fair view of its assets and liabilities, profits and losses, and its overall financial position.”