Scandal will do little to help Nigeria's reputation
The Cadbury Nigeria had been caught in a scandal on October 2006. The company is losing a lot of money and will continue lose money again in next year since the scandal. Moreover, Cadbury Nigeria shares immediately dropped 5% of their value and writing the shares down over 26% since the scandal broke. The company shares have been hit hard on the Nigerian Stock Exchange. This scandal will do little to help Nigeria's reputation as a risky place to do business, as the country is known to suffer from widespread corruption, lack of transparency, political instability and the arbitrary enforcement of trade and investment regulations which limits its growth potential and deters foreign investors (loss public confidence). More than 300 shareholders are suing the board of Cadbury Nigeria and its auditor for breach of duty. They are also suing for access to a review carried out by Pricewaterhouse-Coopers. The shareholders claim that they “suffered a huge loss" as a result of the overstatement of Cadbury Nigeria’s financial position and that the defendants failed to act in their interest. Cadbury Nigeria will likely record a loss of $15 million on the year.
The Nigerian chief executive officer (CEO), Bunmi Oni, who was named as Nigeria’s ex “most respected CEO" and the finance director, Ayo Akadiri the report of misstatements in the account of Cadbury to the tune of approximately N13 billion. Therefore, they were quickly sacked because of their roles in the scandal. Cadbury had actually made a loss totaling N5 billion during the period but they overstatement the account and reporting huge profits to shareholders and the general public. Since year 2002 ,The CEO of Cadbury in concert with the company’s Board used stock buy backs, trade loading ,cost deferrals, and false suppliers’ stock certificates to manipulate its financial reports that were issued to the public and filed with the Commission. Both Ayo Akadiri and Bunmi Oni, stated that the use of the sale, issuance of false stock certificates schemes and stock buy-back were motivated by profit management desire and that off-shore payments were made to Executive Directors to cushion the devaluation of their pay by increasing inflation. An undisclosed and undocumented offshore account was operated and maintained by the company from which Ayo Akadiri , Bunmi Oni and other executive directors were paid offshore remunerations without the approval of the Committee responsible for fixing remunerations of Executive Directors and not recorded in the company’s financial report and account. Bunmi Oni, Ayo Akadiri, and a senior financial accountant, a sales operations and development controller as well as a head of internal audit were the master minds of the financial malpractices perpetrated. This was done through the over statement of profits, falsification of sales figures, besides false suppliers certificates to control its financial reports.
The company’s chairman stated in the an annual report and account that the company had taken over the payment of dividend .The heads of accounts, internal audit and sales operation were also involved in the preparation of the false report generated incorrect data and statement filed by the company with the Commission. The members of the Audit Committee of the company failed to discharge their statutory responsibilities. They failed to make proper recommendations thereon to the Annual General Meeting and failed to examine the auditor’s report to review and make proper findings on management matters in conjunction with the External Auditors. Besides, they also neglected to keep under review the effectiveness of the company’s internal control system and accounting. Furthermore, they failed to ensure that appropriate investigations are carried out by the internal auditors into some aspects of the company’s activities. The Head of Internal Audit, Audit Committee Members did not follow up available leads which ought to put them on enquiry in respect of the company’s accounts. However, other board members and the other management staff of the company used cost deferrals, trade loading ,stock buy backs, as well as false suppliers’ stock certificates to manipulate its financial reports.
Therefore, Cadbury Nigeria need to pay a fine in the first instance and a penalty for filing with the Commission, financial statements that contained untrue/misleading statements; failing which trading on its shares will be suspended. In the result of the scandal, the CEO and finance executive are banned from operating in the Nigerian capital market, being employed in the financial services sector and holding directorship positions in any public company in Nigeria. The others are suspended from operating in the Nigerian capital market, being employed in the financial services sector and holding directorship positions in any public company in Nigeria for a period of 5 years from the date of the decision. Finally, Akintola Williams, Deloitte is ordered to pay a fine of twenty (20) million Naira within 21 days of the decision for its failure to handle the accounts of the company with high level of professional diligence failing which its registration with the Commission shall be cancelled. Some action had been taken to the public which is strongly warned an reprimanded to desist from engaging in acts that may affect the investing public’s confidence in the capital market and strongly advised to be more diligent in carrying out its assignments in capital market related issues. Further directed to sign an undertaking to be diligent and of good behaviour in its future dealings in the capital market.
In conclusion, this is a good example of Enron cases in Nigeria. Hence, all companies must practice good corporate governance to avoid this scandal repeated. The directors should comply the code of corporate governance in order to generate the trust of shareholders and provide them the best interest of value shared.