Alleged N76bn fraud: No forensic audit was carried out over Arik’s debt, says witness
By Onyewuchi Ojinnaka
After a fairly lengthy adjournment, the ongoing criminal proceedings involving former Managing Director/CEO of Asset Management Corporation of Nigeria (AMCON) and others, resumed on Tuesday April 28 before Justice Mojisola Dada at the Special Offences Court sitting in Ikeja, Lagos State, with the 4th EFCC prosecution witness Mr Bawa Usman Kaltungo, concluding his testimony.
The trial which involved Mr Ahmed Kuru, the former Managing Director/CEO of the Asset Management Corporation of Nigeria (AMCON), is being tried alongside Kamilu Alaba Omokide, Captain Roy Ilegbodu, Union Bank Plc, and Super Bravo Limited over an alleged fraud involving N76 billion and $31.5million, linked to Arik Air (in receivership).
Upon the conclusion of Kaltungo’s testimony on Tuesday, counsel to the first and third defendants, Prof. Taiwo Osipitan (SAN), commenced cross-examination of the Economic and Financial Crimes Commission witness, by putting it to Kaltungo that he may not have done a thorough job in his assignment as an EFCC investigator.
Osipitan while cross examining the witness, put it to him that most of his testimony was based on assumptions, and not proper documentation of due processes.
Under cross-examination by Prof. Taiwo Osipitan (SAN), counsel to some of the defendants, the EFCC witness was challenged on the methodology of his investigation and the conclusions drawn from available records.
Osipitan questioned whether the EFCC conducted a forensic audit of the transactions in dispute.
Responding, Kaltungo admitted that no forensic audit was carried out, adding that he did not consider it necessary because, in his view, the transactions were not complex.
He also told the court that his investigative findings were based on available documents, despite being confronted with concerns about gaps in the financial records used in reaching conclusions.
When asked about his understanding of receivership arrangements, Kaltungo distinguished between a receiver and a receiver-manager, stating that a receiver has no authority to manage a company’s operations, while a receiver-manager is empowered to run the affairs of a company under receivership.
However, when confronted with a court order establishing the appointment of a receiver-manager over Arik Air, he confirmed that such an appointment was indeed made and recognised by law.
Further cross-examination also revealed that the witness acknowledged there was no documented nexus between the first and third defendants in the alleged sale of Arik Air’s loan from Union Bank to AMCON.
He similarly confirmed that no connection was established between those defendants in relation to the sale of Arik Air’s shares in Zenith Bank used to liquidate part of the loan.
The defence counsel also drew attention to gaps in the EFCC’s investigation, particularly the absence of forensic accounting analysis, raising questions about the strength of the conclusions being relied upon by the prosecution
Furthermore, Kaltungo sought to tender a Legal Opinion from the Office of the Solicitor General, which he noted corroborated his findings as an Investigator. The cross-examination, however, revealed that the Legal Opinion was obtained long after the defendants had been charged and the trial commenced in the matter. The disclosure appeared to have indicted the evidence as an afterthought and a desperate attempt to source a legal opinion to back an unfounded allegation
The witness had earlier told the court that Union Bank “illegally converted” a performing foreign loan obtained by Arik Air into a non-performing loan (NPL) and subsequently sold it to the Asset Management Corporation of Nigeria (AMCON).
Kaltungo maintained that Union Bank of Nigeria Plc was not the original lender to Arik Air, but rather participated in the transaction as a guarantor for foreign lenders.
According to him, the arrangement was later “mischaracterised” when the facility was converted into a non-performing loan (NPL) and sold to AMCON.
Kaltungo told the court that Arik Air had already repaid approximately 38 per cent of the foreign loan before Union Bank allegedly reclassified the facility as non-performing.
He further alleged that the classification enabled the bank to package and sell the loan to AMCON for about N51 billion, on the basis that the airline had defaulted entirely on its obligations.
The EFCC official, however, insisted that this representation was inaccurate, stating that Arik Air’s partial repayments were not reflected in the transaction structure.
He argued that Union Bank subsequently retained the N51 billion proceeds from the sale instead of applying it to offset the outstanding foreign loan exposure, adding that this created a financial imbalance that left the bank indebted to Arik Air to the extent of funds already repaid to foreign lenders.
The witness also gave detailed testimony on the disposal of Arik Air’s assets, including shares and aircraft, which form part of the broader allegations of mismanagement and fraudulent conversion of the airline’s assets.
He told the court that Arik Air’s shares in Zenith Bank were sold for over N2 billion, while three aircraft belonging to the airline were also disposed off for approximately $105.7 million.
According to him, the proceeds from the aircraft sale were converted at an exchange rate of N360 to the dollar, amounting to over N32 billion.
However, he alleged that only about N9.2 billion of the proceeds was applied to the airline’s loan obligations, leaving more than N28 billion unaccounted for.
Kaltungo described the disparity as part of what investigators considered significant gaps in financial accountability in the handling of Arik Air’s assets.
After the testimony of the 4th prosecution witness, the matter was adjourned to May 18 and 19 for continuation of trial.
