'Agongo’s criminal prosecution makes him ‘not fit and proper’ to own a bank'

After explaining that Heritage Bank’s license was revoked due to a suspicious stated capital, as well as their inability to meet the new 400 million minimum capital requirement, the Governor of the Central Bank also suggested that, the involvement of the bank’s majority shareholder, Mr. Seidu Agongo in the ongoing alleged fraudulent Cocobod fertilizer contract trial, means he’s unfit to hold a banking license.

Addressing a press conference after completing reforms in the banking sector on January 4, 2019, Governor of the Bank of Ghana, Dr. Ernest Addison, announced that “the bank’s capital appears to have come from sources which are suspicious”.

Mr. Addison explained that in the application for a banking license, each shareholder of Heritage needed to demonstrate their “ability to subscribe to the shares” of the bank, however, the Bank of Ghana was not satisfied that the original sources of the bank’s capital are acceptable, in terms of section 9 (d) of the Banking and the Anti-Money Laundering Act which requires acceptable capital to be obtained from lawful and transparent sources.

Seidu Agongo and COCOBOD

Recounting how the bank obtained its licenses, Dr. Addison said the promoters of Heritage bank provided evidence to Bank of Ghana at the time of the application for a banking licence to the effect that an amount totalling GHC 120.6 million was lodged with a local bank.

“The amount of GHC 120 million was transferred to the bank from Agricult, a company wholly owned by Seidu Agongo, a promoter of Heritage, which funds appear to have been derived from contracts awarded to Mr. Agongo by COCOBOD, and are currently the basis of criminal prosecution in the High Court of Ghana. Meanwhile, it has come to the notice of the Bank of Ghana that the bank has yet to respond to two High Court orders for disclosures relating to these and other contracts affecting the significant shareholder Mr. Agongo.”

“While Mr Agongo claimed that his sources of capital for the bank included proceeds of a USD 19.25 million contract with COCOBOD, Bank of Ghana’s subsequent investigations have shown that there was no such contract between COCOBOD and Mr Agongo. One or more contracts executed, however, existed between COCOBOD and Sarago Limited (“Sarago”). Documents submitted to the Bank of Ghana for licensing of the bank made no mention of the contract between COCOBOD and Sarago nor the fact that Sarago (also a shareholder of the bank) was owned by Mr. Agongo”.

The Governor continued that one or more contracts executed however existed between COCOBOD and Sarago Limited, even though documents submitted to the Bank of Ghana for licensing of the bank made no mention of the contract between COCOBOD and Sarago or the fact that Sarago— also a shareholder of the bank was owned by Mr. Agongo.

“From its 2017 audited financial statements, an amount of GHc15.8m was transferred to the bank from an unnamed investor which was attributed to unpaid called-up share capital, calling into question whether the minimum capital of the bank had been fully paid up at the time of licensing”.

Dr. Addison observed that from the same financial statements, an operating loss was booked resulting in a shortfall of GHC 20.6 million in the bank’s capitalization.

Unnamed financiers

Making more revelations, Dr. Addison stated that certain shares of the bank were held by nominee shareholders whose ultimate beneficial shareholders were not disclosed to the Bank of Ghana.

When asked by journalists if the the BoG’s action was not premature, since the COCOBOD court case was still ongoing, Dr. Addison said, “The issue of Heritage Bank, I wanted to get into the law with you, I don’t know if I should, but we don’t need the court’s decision to take the decisions that we have taken. We have to be sure of the sources of capital to license a bank, if we have any doubt, if we feel that it’s suspicious, just on the basis of that, we find that that is not acceptable as capital. We don’t need the court to decide for us whether anybody is fit and proper, just being involved in a case that involves a criminal procedure makes you not fit and proper.”

Background of Cocobod case

Mr. Agongo is currently in court with the state over the COCOBOD saga based on which the central bank Governor revoked Heritage Bank’s license. The case, in which he and former COCOBOD CEO, Dr. Stephen Opuni, are alleged to have fraudulently secured several contracts totaling GHS271 million to supply fertilizer to the Ghana Cocoa Board, is yet to be determined.

In March 2018, the Attorney General charged the two of them with 27 counts of willfully causing financial loss to the state.

It is the contention of the AG that Dr. Opuni, during his tenure as COCOBOD CEO (November 2013 to January 2017), breached laid-down procedures in procurement and other laws that led the state to lose GHS271.3 million in the alleged fertilizer scandal and the distribution of substandard fertilizer to cocoa farmers.

The two accused persons have denied any wrongdoing, and have pleaded not guilty to all the 27 charges. They have each been granted a GHS300, 000.00 self-recognizance bail by the court.

Find below the full details of the reasons based on which the central bank revoked Heritage Bank’s license:

Heritage Bank Limited (Heritage) was incorporated on 31 January 2014 and was licensed by the Bank of Ghana as a universal bank on 4 October 2016. The promoters/shareholders of the bank were specified as Mr Seidu Agongo, Ms Fatima Adamu, Sarago Limited, and Mr Sylvanus Kotey, who, together purportedly met the minimum paid-up capital of GHS 120 million.

As part of its efforts to clean up the banking sector, the Bank of Ghana has recently examined the affairs of Heritage and discovered a number of anomalies relating to its licensing, the sources of its capital, and related party transactions.

The Bank of Ghana has consequently revoked the license of Heritage Bank. Under section 16 (1) (a) (7) and (8) of Act 930, the Bank of Ghana may revoke a license and appoint a receiver under section 123 of the Act where it is satisfied that an applicant provided false, misleading or inaccurate information in connection with the application for a license or suppressed material information, and may, in cases of emergency, or in the public interest, revoke the license of the bank without notice. Further, sections 9 and 12 of Act 930 authorize the Bank of Ghana to revoke a license if it considers that significant shareholders of a bank are not suitable.
The grounds for revocation of the license are as follows:

The bank’s capital appears to have come from sources which are suspicious. In the application for a banking license, each shareholder of Heritage needed to demonstrate their “ability to subscribe to the shares” of the bank. The Bank of Ghana is not satisfied that the original sources of the bank’s capital are acceptable, in terms of section 9 (d) of the Banks and SDI Act, 2016 (Act 930) and section 1 of the Anti-Money Laundering Act of 2008 (Act 749), which requires acceptable capital to be obtained from lawful and transparent sources. Specifically:

The promoters of Heritage provided evidence to Bank of Ghana at the time of the application for a banking license to the effect that an amount totaling GHS 120.6 million was lodged with a local bank. The amount of GHS 120 million was transferred to the bank from Agricult (a company wholly-owned by Seidu Agongo, a promoter of Heritage), which funds appear to have been derived from contracts awarded to Mr Agongo by COCOBOD and are currently the basis of criminal prosecution in the High Court of Ghana. Meanwhile, it has come to the notice of the Bank of Ghana that the bank has yet to respond to two High Court orders for disclosures relating to these and other contracts affecting the significant shareholder Mr Agongo.

While Mr. Agongo claimed that his sources of capital for the bank included proceeds of a USD 19.25m contract with COCOBOD, Bank of Ghana’s subsequent investigations have shown that there was no such contract between COCOBOD and Mr Agongo. One or more contracts executed, however, existed between COCOBOD and Sarago Limited (“Sarago”). Documents submitted to the Bank of Ghana for licensing of the bank made no mention of the contract between COCOBOD and Sarago nor the fact that Sarago (also a shareholder of the bank) was owned by Mr. Agongo.

From its 2017 audited financial statements, an amount of GHS15.8m was transferred to the bank from an unnamed investor, which was attributed to unpaid called-up share capital, calling into question whether the minimum capital of the bank had been fully paid up at the time of licensing. From the same financial statements, an operating loss was booked resulting in a shortfall of GHS 20.6 m in the bank’s capitalization. This was expected to be repaid by an unnamed shareholder through a transfer of fixed assets (branches) to the bank. Despite attempts by the Bank of Ghana to confirm (i) the identity of the unnamed shareholder, (ii) the basis of valuation of the fixed assets, and (ii) whether the terms of the transactions were at arms’ length, and, otherwise acceptable, the bank and its shareholders, directors, and management have failed to clarify matters.

Certain shares of the bank were held by nominee shareholders whose ultimate beneficial shareholders were not disclosed to the Bank of Ghana. The shareholder on record for Sarago is one Ruth Leena Abazerri, although the Bank of Ghana has reasonable grounds to believe that it is owned by Seidu Agongo. This is in breach of section 9 of the Anti-Money Laundering Act, which requires the disclosure of beneficial ownership of shares, as well as regulation 9 of the Anti-Money Laundering Regulations (L.I. 1987) which require that beneficial owners are not fictitious.

Several related party transactions were entered into between the bank and entities owned or controlled by its significant shareholder Mr. Agongo such as Sassh Alliance, Moor Company Limited, and Kedge Company Limited, on terms and conditions that remain unclear and/or not transparent.

The Bank of Ghana has determined, pursuant to sections 9 and 12 of Act 930, that the majority shareholder of the bank, Mr. Agongo, does not meet the “fit and proper person” test.

The bank failed to meet the GHC 400 million capital required as of 31st December 2018.
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By: Ebenezer Afanyi Dadzie|citinewsroom.com|Ghana