Strive
Masiyiwa, CEO and Founder of Econet Wireless, recently took to his blog to
reveal his side of the story behind the company’s downfall in Nigeria. An
extract from the blog post:
It’s
time to play by a different (ethical) set of rules
Sometimes
the price can be very high in the fight against corruption.
I
had the privilege of making Nigeria’s first GSM phone call back in 2001 when I
called the regulator to say, “We’re live!” Who would’ve believed then that
Nigeria today would have more than 167 million mobile phones?!
It
all started out as a very exciting new chapter for enterprise in Africa.
Shortly after President Obasanjo was elected, the new government announced an
incredibly transparent international auction process for three national mobile
phone licenses.
To
participate in the bid, you not only had to raise money, but there had to be a
member of the bidding consortium who was an experienced GSM operator. Econet
Wireless met the requirements because of its experience in Zimbabwe and
Botswana. Our Nigerian partners, which included state governments, local banks
and high net worth individuals, were financial investors. The largest
shareholder had only 10%. That was the written agreement.
I
managed to assemble a consortium of 22 investors to put up the money needed to
bid. Our shareholders were all Nigerian, mostly institutional investors
including leading banks and two state governments, Lagos State and Delta State.
The license cost us $285m and was the most expensive license ever issued in
Africa at the time. This was 2001.
We
considered the investment not only about putting together a network, but also
about building a nation. We knew it had the potential to transform Nigeria’s
entire business and social architecture.
Most
of our investors had between 1-10% shareholding. Econet Wireless Nigeria had
only 5% of the shares, but that was fine because it was 5% ownership of a very
big pie.
As
the “technical partner and operator,” Econet was the company with the expertise
to build and operate such a business. Our financial investors recognized this,
and also allowed us to receive 3% of the turnover as our fees. This was
standard practice in the industry.
We
were one of the winning bidders and they gave us just six months to set up
business and get our network operating. We were under a lot of pressure but our
network was live two days before the others! Customers were pouring in. We were
number one in the market with an estimated 57% market share.
___Then
came the fateful day when I was told that our company must pay a total of $9m
in bribes to senior politicians (in state government) who had facilitated the
raising of the money to pay for the license.
I
refused to authorize the illegal payments. Meeting after meeting was held to
try to get me to agree, but I would not. The money would not be paid as long as
Econet was the operator and I had signing authority.
James
Ibori, the Governor of Delta State, was demanding $4,5m be paid to him in his
personal capacity. He was one of the most powerful men in the country and had a
reputation for violence. When he heard that I was refusing to approve payment
he issued an ultimatum:
_"Pay
or I will chase you and your people out of the country.”
I
refused.
The
shareholders met and voted Econet Wireless Nigeria out of management. They
cancelled our management contract. James Ibori and his colleagues personally
attended the meeting to remove us. After the meeting one of them (a prominent
local businessman even today) came up to me and said: “Unfortunately for you,
God does not have a vote.”
I
had to withdraw all my staff and their families: 200 people in all. We left
Nigeria.
Most
of our people had to be retrenched. The loss of the contract almost drove us to
bankruptcy as a group.
They
invited a big international operator to replace us as technical partner and
operator. They changed the name of the company from Econet to V-Mobile.
Within
days of their arrival, the managers of the new operator signed off the payments
demanded as bribes.
Then
what happened?
A
few noble Nigerians had both the integrity and courage to carefully collect all
the documentation on the movement of the money, and pass it all on to me.
___There’s
a saying worth remembering in uncovering the trail of destruction that is
corruption: “Follow the money”…
I
bided my time… then I wrote a letter to the United States Department of
Justice!
It
was 2003.
As
citizens, we have a duty to speak out to stop the rot
Nigeria
has an agency known as the Economic and Financial Crimes Commission (EFCC).
After we had to leave the country, a few noble people at the company tipped off
not only me but the EFCC about the payment of the bribes, which had by this
time risen from $9m to $13,5m.
I
had never actually heard about this agency myself until I got a call from the
Nigerian Embassy in South Africa to say they wanted to come and see me to
interview me as a witness.
A
team of very senior EFCC officers came to see us in South Africa. They were
solid and professional in their enquiry. It was clear they wanted to do
something about it.
However,
when these officers returned home to Nigeria, they got into very serious
trouble. Their investigations into the irregular payments had been brought to
the attention of James Ibori (Governor of Delta State)…
Soon
thereafter, the most senior officer leading the investigation was demoted and
sent to a remote part of the country as an ordinary policeman!
Agencies
like EFCC in Nigeria sometimes have brave and gallant law enforcement officers.
Unfortunately, as I observed, they’re often let down by their political bosses,
and sometimes even by the courts. This can change if activism from the
citizenry emerges to support their work.
___We
should not only support official efforts to stop corruption but also help these
agencies and organizations in their investigations. If you have relevant
information about illegal activities, passing it on could make all the
difference between impunity and imprisonment.
In
my letter to the US Justice Department, I detailed the full history of the
demands for a bribe. I had dates, times, records. I then reminded them that
since the big international operator had a listing on the New York Stock
Exchange, they were duty-bound to launch an enquiry. Why did I go to them?
The
United States government has a law called the Foreign Corrupt Practices Act.
The United Kingdom has a similar one called the British Anti-Bribery Act.
Whatever you do, make sure you never fall foul of those laws because, if they
ever use them to come after you, you’re a “gonner” my friends.
A
few weeks later, US officials wrote back advising me that an enquiry had been
launched. They contacted the big international company seeking answers to my
allegations. My contacts at the company called to tell me, “All hell has broken
loose at the company.”
The
parent company of the South African-based multinational sent external auditors
and lawyers from London to Nigeria. They immediately dismissed all the senior executives
sent to Nigeria to run the company, and they left in a hurry!
Although
they fled the scene of the crime and returned to their country — after
admitting even to both the US Justice Department and the EFCC that the money
had been paid out – the stolen funds were never returned to the Nigerian
people, even to this day.
Meanwhile,
the departure of the other mobile operator did not mean we could return to
Nigeria. The shareholders found another operator, this time from the Middle
East.
They
sold this new operator the control of the company even though Econet Wireless
Nigeria had the “right of first refusal” over any sale. They simply ignored
that provision in our agreement. This was illegal, both according to our
shareholders agreement and Nigerian Company Law. It was left for us to take up
the fight in another forum, the Nigerian courts.
Beware
the company you keep
The
state government of Akwa Ibom held 15% of the equity in Econet Wireless
Nigeria. This state was not one of the original investors but joined us later.
After
five years, the governor of the state of Akwa Ibom decided to sell its stake.
It had more than doubled in value in dollar terms, which meant it had been a
good investment.
The
state governor, an elderly gentleman called Victor Attah, sent a message
through a friend that he wanted to see me in London to find out if I was
interested in exercising Econet’s right to buy its shares. I agreed to meet him
in London.
“I
want to sell the shares to build an airport before I leave office,” the governor
explained.
The
governor was accompanied to the meeting by a British lawyer who sat quietly
taking notes. His name was Bhadresh Gohil.
With
a wave of his hand, the governor said, “Mr Gohil is our legal advisor here in
London. I have instructed him to handle all our negotiations with you.”
The
meeting did not last more than 30 minutes, as the governor was on his way to
catch a flight to the U.S.
We
agreed with Mr Gohil that we would meet with my own advisors a few days later
to start the process.
A
few days later, I went to his office with a professional banker who advised me
on such transactions. We met in the lawyer’s plush London offices. He was
confident and smooth-spoken as he explained how much we were expected to pay.
Then he explained that our money was to go to a “Special Purpose Vehicle” (SPV)
before it was transferred to Nigeria. It was a sophisticated structure and he
showed me a drawing of how it would work. I wrote it all down very carefully
into my notebook.
___Such
corporate entities as SPVs can definitely have legitimate purposes, but this
one did not!
As
I quizzed him about why such an unusual structure was necessary, Mr Gohil
changed tact and tried to entice me with an offer I could not refuse (or so he
hoped): “I’m also the advisor to the governor of Delta State, Mr James Ibori,
and if you agree to pay for these shares using this structure, we will offer
you shares belonging to all the state governments. In total, you can have more
than 30% additional shares. It will be enough to take control of the company.
My clients just want out, and they are willing to give you what you have always
wanted.”
I
listened to him, quietly taking notes in my small notebook. I did not give away
anything, but inside I was very angry. From the design of the structure, I knew
immediately that it was meant to siphon off money before it reached the state
governments. It was clear there was a conspiracy to steal a lot of money.
___Having
already pocketed $13.5m, now the government officials could easily pocket
probably another $100m through the sale process that they had developed with
the help of Mr Gohil and other clever advisors in London!
When
I left the meeting I immediately contacted the mutual friend who’d set up the
governor’s meeting. The friend was so embarrassed as I explained the corrupt
structure clearly designed to steal money from the state governments. He promised
to raise the issue with Governor Victor Attah. A few days later he came back
and said Governor Attah had claimed ignorance about the proposal put to me by
Mr Gohil. He said he would speak to Mr Gohil and tell him it had to be done
properly without the structures.
We
never heard from them again. Mr Gohil simply vanished. A few months later we
were told that the shares had been offered to a company from the Middle East
who subsequently bought them. I was not privy to how they did it except that
they had violated my right to buy the shares… That is another chapter in the
saga, but not for now.
Fast-forward
three years, long after the sale. Our lawyers in London called me one day and
asked if I could come urgently to a meeting with the Proceeds of Corruption
Unit of the London Metropolitan Police: “You are not in any trouble, but I
think you will find what they have to say very interesting!”
This
special unit was launched by the British to investigate corruption by foreign
government officials who try to launder stolen money to the U.S. and the UK.
The
officers asked me to explain everything I knew about the sale of V-Mobile
shares to Celtel (later Zain).
I
explained the history of the entire transaction and the shareholders disputes
that had led to our departure. After a while, they asked me to focus on
specific events, and, in particular, my meetings in London with the governor of
Akwa Ibom, and also the meetings with Mr Gohil. It became clear to me that they
had a lot of information!
“What
can you tell us about this structure, using a Special Purpose Vehicle?”
I
explained my understanding of it. Later on, I gave them my diary in which I had
recorded the details of my meeting that day with Mr Gohil.
Below
my drawing of the structure, I had written in bold letters:
“This
is corrupt!!!”
Not
long after my meeting with the Proceeds of Corruption Unit, Mr Gohil was
arrested together with one of his partners and several others. I later learned
that when the Middle Eastern company bought the shares, some of the proceeds
had been diverted using the Gohil structure. Some of the money was sent to a
bank in London. This large amount of money was enough to alert the British
authorities that money was being laundered through their banking system.
Their
investigations led them to Gohil and his associates. They raided his offices
and found stashes of documents, including details of the structures. Now they
were looking for witnesses to help prosecute them for corruption and money
laundering.
The
British authorities tried without success to get other parties, including the
governor of Akwa Ibom, to come out and clear their names but they refused.
Officials of President Umaru Musa Yar’Adua’s government successfully thwarted
all extradition requests.
I
was asked to be a witness in the trial of those who had been arrested in
London. I willingly accepted. Next I will tell you about my role as a ‘Witness
to the Crown” on behalf of the people of Nigeria whose money had been stolen.
It would be the first time that someone big went to jail (in a foreign country)
for stealing money from Africans.
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