FCMB Loses N2.5b Debt Case after 10-year Legal Battle

By Modupe Gbadeyanka

The 10-year legal battle between First City Monument Bank (FCMB) Plc and Valueline Securities and Investments  (VSI) Limited has been finally settled by the Investments and Securities Tribunal (IST).

In 2008, VSI Ltd, a stockbroking firm in the Nigerian capital market, bought shares worth N2.5 billion during the initial public offering of Finbank, which FCMB later acquired in 2012, but unfortunately, the shares were not allotted to the company and the money not refunded by the defunct Finbank.

Angered by this, the stockbroker petitioned the Securities and Exchange Commission (SEC) to force a refund.

The apex capital market regulator, after looking into the matter, directed the bank to refund the N2.5 billion to the company with 18 percent interest per annum, but the lender failed to adhere strictly to the ruling.

As a result, SEC sought the intervention of Central Bank of Nigeria (CBN), the agency that regulates activities of financial institutions in the country, and FCMB promised to offset the debt.

This was when Finbank and FCMB were planning to merge into a bank and an All Parties Meeting (APM) was convened where the FCMB undertook to repay the indebtedness of Finbank and for its account with the CBN to be debited at source by CBN provided the merger of the two banks was approved by SEC to succeed.

But when things were not looking too good, VSI Ltd approached the IST, claiming FCMB had not fully adhered to its promised.

However, FCMB, in its defence, said it paid back the sum of N4.6 billion made up of the principal N2.5 billion and N2.1 billion accrued interest and believes it had liquidated the debt.

This was disputed by VSI Ltd, which alleged that the CBN and SEC had set up another joint investigative team that met and changed the original SEC computation formula for the repayment following a petition by FCMB Plc and without informing or involving it (the claimant).

In his judgement on the matter, according to a statement issued yesterday by spokesman of the IST, Mr Kenneth Ezea, Chairman of the Tribunal, Mr Siaka Isaiah Idoko-Akoh, held that FCMB was liable to pay the claimant an outstanding debt of N988,533,205.86 plus further accrued interest calculated at 18 percent in the manner earlier directed by SEC pursuant to her statutory powers listed in Section 96 of the Investments and Securities Act (ISA) 2007.

He also ordered FCMB to pay a penalty of N500,000 to the claimant as cost of the legal action and a further 10 percent interest on the judgment debt from the date of the judgment until final defrayment.

According to him, “The failure/refusal of CBN to pay the entire sums from FCMB to VSI Ltd under it joint extant directive and subsisting authority/mandate of FCMB to do so on its behalf is wrongful.”

It was also disclosed that the Tribunal nullified the decision of the CBN and SEC to vary the payment computation formula and clarified that the payment of 18 percent interest was from August 22, 2013 until the date of judgment and thereafter at 10 percent post judgment until the final liquidation of the debt.