The EFCC and the 10% Game

Rather than arguing that transactions between customers and banks are contractual and that the security agencies should not term those in the transaction as criminals on mere imputation, and arresting alleged debtors without clarity, an issue that the NBA should address is the allegation that the EFCC is collecting 10 percent of all the monies recovered from debtors on behalf of banks.

The Nigerian Bar Association, NBA, has condemned the Economic and Financial Crimes Commission (EFCC) and other security agencies for hiding under the guise of banks’ predicament to turn itself into a debt recovery agent. (See the next story)

But a NEXT report below highlights the unethical practice of the profiting from their extra-statutory endeavours. NEXT Reports:  

The EFCC, which energetically jumped into the banking crisis and whose chairman moved over 100 agents to Lagos at the height of the financial sector meltdown, is collecting 10 percent of all the monies recovered from debtors on behalf of banks, according to industry and EFCC sources.

This legally dubious and ethically questionable practice means that the EFCC has now profited to the tune of N17 billion from the total of N171 billion it says it has helped collect from some of the biggest debtors in the land, a list that is a who is who of Nigeria’s business and political elite.

We have no evidence to suggest that senior EFCC officials, including its chairman, Farida Waziri, are personally benefiting from the windfall. But the practice suggests that the EFCC now sees itself as a debt collector rather than a crime buster. And the law setting up the commission, clearly written to avoid a potential moral quandary, does not allow it take such self compensation from targets of law enforcement.

The ten per cent charge

This revelation introduces a new dynamics to the banking crisis, the role of the EFCC, the current ethical complexion of the agency, and the integrity of regulatory agencies in the country.”We of course collect 10 per cent administrative charges for all our labour” an EFCC operative told NEXT, on condition of anonymity, in Abuja at the weekend insisting that “it is not a bribe, it’s just administrative, and it’s done everywhere in the world, even the police do it here.”

Spokesman of the Commission, Femi Babafemi who announced to reporters on Monday, November 2, in Abuja that it had so far recovered N171 billion from the debtors of the banks, vigorously denied that a portion of this had gone into the private pockets of EFCC officials.Mr Babafemiasked: “How can that be? There is absolutely nothing like that. The money is paid into the banks directly. EFCC has agents in those banks and they only co-ordinate the payment directly into the banks. Most of these transactions are not cash based. Whether formally or informally, it is not possible. Anyone who does that in this agency will go to jail. It is an allegation that we have heard and it is an allegation that we have investigated. There is no law allowing us to do that so how will the EFCC do that?” Mr. Babafemi stated.

Scripted Muteness:

NEXT received hostile responses from officials at the distressed banks when this question was posed to them. However, independent investigations confirmed that the practice is widespread.”We pay them 10 percent of whatever they recover for us. But it is not only us, go and find out from other banks, we all pay the 10 percent,” a spring bank official told NEXT.

Francis Barde, the of Head corporate affairs of Union Bank, however, claims that Union bank does not pay a commission to the EFCC or the Nigerian police. “No charge has been sent to Union Bank for payment by any of the law enforcement agencies.

Therefore, we have paid nothing,” Mr. Barde told NEXT in response to our enquiries.

Jude Nwauzor, a corporate communications officer at Spring bank failed to respond to repeated enquiries via text messages, email, and phone calls after an initial pledge to respond to our questions, if we would send them to him by email.

While official Spring Bank response was not forthcoming, inside sources insisted that “this is not the first time we are paying 10 percent to government agencies, we have always paid 10 percent to the police force at any rate, if they help us recover our bad loans. We don’t ask questions because what is more important is to recover the money,” the bank official told us.

NEXT has documentary evidence of these transactions.In a deal that occurred on October 28, 2009, Spring Bank paid a commission of N50,000 for a 500,000 recovery. The money was paid to the police. This practice, bank officials confess, has been going on for years, even though they are aware that the practice is illegal. They also explain a preference for law enforcement recoveries over those of attorneys. “If we go to recovery agents, we will still pay the 10 percent, so why not give it to the police or the EFCC since they will still help us get our money albeit in a shorter time,” a bank chief told NEXT.

While the EFCC denies that they collect the commission, the police, speaking through its public relations chief, Emmanuel Ojukwu, confirmed that they sometimes get paid for their services, though he declined to state the percentage they collect. “Police can collect money for some services rendered, and such is receipted for and paid to the Police Reward fund,” he said but distanced the police from debt recovery business. “The police is not employed to collect debts,” Mr Ojukwu stated in response to our enquiries.

Mr. Babafemi of the EFCC said he was unaware of police culpability. “I don’t speak for any other agency but I can speak for the EFCC. If any other agency is collecting 10 percent, not the EFCC,” Mr. Babafemi stressed .

The Spring Bank headache

An indication that the stressed banks are not comfortable with paying a 10 percent commission to the EFCC and another 10 percent to their recovery agents emerged at a meeting the new chief executive of the troubled Spring Bank Plc Olusola Ayodele, had on Wednesday, October 28,in the board room of the bank at its corporate headquarters in Lagos. In attendance were other top executives of the bank and senior management aides. “The mood was typically uneven between our spring bank old hands and the Bank PHB arrivals who we call gold diggers,” recalled a senior bank aide who spoke to NEXT in strict confidence, “top on the agenda was how the bank would debrief its recovery agents, law firms, that help us recover our bad loans.”

Since she arrived at Spring Bank, sources at the bank told us, Mrs. Ayodele has been gingely finding her way through the vestiges of institutional landmines that line all the operational pathways of the bank since the banking consolidation exercise of 2006.

The 2006 exercise sought to fuse sometimes radically dissimilar institutions into one healthy family but the Spring Bank experiment consistently proved to be a poster-child of institutional chaos. The peak of the turmoil came with the 51 per cent acquisition of Spring Bank by Bank PHB shortly before Christmas last year. The new banking crisis that came with the sacking of the board and management of eight banks including Spring Bank and PHB, racheted up the troubles of the bank,

Faced with a staggering N96 billion debt profile, Mrs. Ayodele thought, according to aides, that the bank was overly haemorrhaging, trying too hard to service her 15 or so debt recovery agents, all of which are major law firms who took 10% of all debt recovered.

“At the end of the meeting, the decision was reached” according to a source at the table, that the bank could not afford to pay this ten per cent agency fees twice, since the Economic and Financial Crimes Commsissions [EFCC] would also receive 10 percent of the recovered sum.””Madam has asked us to stay all our relationships with our recovery agents. You know they were initially helping us on some of these loans. But so as not to make double 10 percent payment, to the agent and the EFCC, we had to terminate all our agreement with the recovery agents,” a top bank chief told NEXT.

Lawyers disgust:

Commercial, and criminal lawyers moved swiftly to condemn these charges being collected by the anti-graft agencies. Jiti Ogunye, a Lagos human rights lawyer described the police spokesman’s statement as ill advised, and asked a series of question. “Why must you reward the police? Does it have a legal or statutory backing? It is only calling an act of corruption by another name. A police reward fund? Who utilises the fund, what do the police use the money for? Do they use the money to buy guns, or buy vehicles or run their police stations or what? Do they use it to pay their salaries?” Mr. Ogunye asked rhetorically stating that “our superior courts, particularly the court of appeal has said that the police is not a debt recovery agency.”

Nevertheless, Mr. Ogunye stated that it was illegal for the EFCC or any agency to collect such funds. “There is no law in Nigeria today that allows security agencies or anticorruption agencies to take any percentage of the money that is recovered in the course of their investigation or in the course of their work” adding that “it is just an act of corruption.”

Charles Musa, a criminal law expert speaking from Abuja, said “If it is true, it is most unfortunate. They have no legal basis. It is a flagrant breach of the police act and that will be a very corrupt practice, for the police to collect any money out of money it covers for banks.”

Mr. Musa said “the police should not be involved in recovering money because it is a civil matter. If there is a criminal aspect to the case, it is the duty of the police to prosecute that criminal aspect, and leave the negotiation and recovery of money. No money should even be paid to the police or paid to the police station, or even to EFCC.”

Regarding the police reward fund, Mr. Musa admitted that “I’ve not done any research into police reward fund, and I don’t know the legal basis” thinking “maybe it is an NGO registered with the CAC” but adding that “If police collect police reward fund, do they give you receipt, and on what basis, is it voluntary. I still think it sounds like a corrupt practice.”

Speaking specifically of the EFCC, Mr. Musa said he hoped they were not collecting such money. “EFCC or any law enforcement agency has no basis to collect any such money. No basis to collect any money at all. That is why the EFCC probably denied it. They are aware of that, I will be surprised if they will ever admit to such a thing,” he stated.

A case of growing rot in the system

Shortly after arriving back from a trip to the Unites States, the executive Chairman of the agency, Farida Waziri, on Monday November 02, huddled with her operational chiefs in a meeting at the EFCC’s training and research Institute in karu, near Abuja. Mrs Waziri complained bitterly about corruption in the ranks.She threatened to get stern on future reports of corruption but insiders say she has given a veil of protection to operatives found guilty but who are from the police ranks. “There is a blatant rank polling here. If you are from the police you are okay but if you come from other institutions, you are held to impossible standards,” said a bitter seconded staff. The case of an operative who collected a N13 million bribe who was merely shuffled from one department to another was offered to NEXT an illustrative example of the systemic rot now in the ranks of the agency.

How bad loans were recovered

Prior to the CBN wielding its axe on the management of five banks which it considered “stressed”, banks in the country employed law firms as ‘recovery agents’ to recover bad loans or non-performing loans from debtors.

Typically, law firms would seek to take debtor companies into receivership (a situation where the bank appoints a new management usually the law firm for the company), asking the court to declare the company bankrupt and thus not able to meet its financial commitments and thus sell the company among others.

These recovery agents, as part of their agency fee, were paid 10 percent of any money they helped the bank recover. However, since the EFCC was called into the case of the troubled banks, the recovery agents have had less to do.