A Nigerian financial class action suit

By | February 21, 2010

A Lagos High Court has given nod to 80 aggrieved investors, bonded in a class action suit, to seek legal remedies against a Lagos asset management company, BGL Ltd., for an alleged N30 billion financial fraud in a private placement offer.

In the nation’s first class action lawsuit in the margin loan crisis, Justice Charles Archibong of the Federal High Court, Ikoyi, Lagos, certified the suit and appointed two investment houses, EP Staff Investments Ltd. and Gold and Gate Resources Ltd., to act as representatives for “all the investors” who subscribed to BGL’s PP.

How did it happen?

In November 2007, BGL Limited (now Plc), a registered broker and capital market operator, advertised a Private Placement offer of 4.3Billion Ordinary Shares at N7 per share to raise N30.1Billion ($250million).

BGL approached some staff of Shell Petroleum Development Company (SPDC) in Port Harcourt whom they considered “a select list of potential investors” with the capacity to subscribe to “a minimum of 1,000,000 shares and multiples of 100,000 shares thereafter”.

After only few of them purchasing the minimum N7million share units, BGL encouraged others to form a Special Purpose Vehicle (SPV) in order to avail them funds it had obtained from First Inland Bank (now Finbank), the lead underwriters for the Private Placement.

BGL promised them that “within the next 18-24 months”, it would be listed on the Nigerian Stock Exchange via an Initial Public Offering and that the value of the shares would increase to between N15-N30 by December 2008. It also said that allotment of shares and share certificates would be issued soon after the placement.

BGL’s stock broking subsidiary, BGL Securities Ltd., said it would provide an Over the Counter (OTC) market on “Bloomberg” and “Reuters” for shareholders seeking liquidity, while it was promised that an Annual General Meeting (AGM) would hold after the placement.

But

By August 2009, Finbank Plc. was found guilty of excessive non-performing loans. BGL with Finbank officials then decided to shift its debt unto BGL shareholders who received margin loans, by allegedly forging documents authorising a facility from the bank to them.

To achieve this, a staff of BGL’s Corporate Treasury, Bolaji Oyemade, said “there is urgent need for BGL to provide Finbank with the passport photographs of our shareholders who took advantage… to invest in BGL PP.” The photographs were said to be needed to update KYC (Know-Your-Customer) requirements with Finbank.

Mr. Oyemade scheduled a meeting between BGL, its shareholders and Finbank at the bank’s head office in Lagos on August 31 and September 2, 2009 where EFCC operatives led by Wakili Mohammed, an Assistant Commissioner of Police, allegedly intimidated, harassed and detained the shareholders so as to force them sign documents and issue post-dated cheques showing their perceived indebtedness to Finbank.

Read the whole story here. Have to keep my eye on this.

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