Status Update/Report on the Investigation of the Affairs ofthe Nigerian stock Exchange
29 September 2010.
Authors:
KPMG + Aluko Oyebode & Co.
Commissioned by:
The Securities & Exchange Commission of Nigeria
Administered by:
The NSE Council & Interim Administrator
Nigeria Stock Exchange Status Update/Report
29 September 2010 KPMG + Aluko Oyebode & Co.
www.proshareng.com 2
1. Background
1.1 The Securities and Exchange Commission (hereinafter referred to as “SEC”) received allegation which suggest that the affairs of the. Nigerian Stock Exchange (hereinafter referred to as "NSE" or "the It Exchange") may have been managed in a manner that is detrimental
to the interest of the investing public"). These allegations derive principally from two sources that include
(i) the issues raised by a team of SEC Inspectors in a report to SEC following the annual investigation of' the NSE carried out between 14 to 18 September 2009; and
(ii) allegations against the NSE received from industry stakeholders in general and notably the former President of the Council
1.2 Based on the gravity of these allegations and the necessary investigative steps that would be needed to verify the allegations, the allegations requiring further investigation were narrowed down to a little over 20 (twenty), namely:
a) No evidence of meetings of the committees of the Council
b) MEMART of NSE was altered by resolution of 11 Nov 2006, the alteration was not approved by the SEC and copy cited was not certified by CAC;
c) No evidence of disciplinary action taken on the 2,715 complaints (involving the unauthorized sale of shares, withholding of proceeds of sale) reported to the NSE;
d) Lack of effective oversight mechanism of quoted companies/ineffective surveillance and appraisal of the internal structure and operations of dealing members (some members had liquidity ratios of zero and negative values in breach of Article 15(e) and section 32 of the ISA; Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 3
e) No evidence/report indicating the existence of a risk assessment system for members as required by Article 15(d) of the Exchange Rules;
f) All the contributions to Investors' Protection Fund were placed in fixed deposit. account with FBN with average interest rate of 8% p.a;
g) Moribund Companies were still on the Daily Official List of NSE;
h) Absence of policy and procedure on listing and delisting of quoted companies and absence of written policy on technical suspension and failure to notify the SEC when companies are placed on technical suspension;
i) Exorbitant charges in the form of 10% management fees; professional audit fees of the Exchange were also too high;
j) Total expenses of the NSE are too high 2006 to 2008 expenses consumed more than 80% of income/undisciplined spending and financial imprudence;
k) Present share capital of the exchange is not in tandem with SEC requirement of N500, 000,000.00 (Five Hundred Million Naira) as the share capital of the Stock Exchange.
l) Wrong classification of Assets in the financial statement. For example, there was no distinction between office equipment, plant and computer/software. These classes of assets were lumped together into one class of assets;
m) Despite the fact that the sum of N 1, 615,000,000 (One Billion, Six Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 4 Hundred and Fifteen Million) has been expended on the Coral Properties Project, the project has come to a halt;
n) Failure to implement an effective succession plan for the senior management team of the NSE;
o) Failure of NSE to present audited accounts for the year ended December 2009 and failure to produce interim and financial statements for the first and second quarters of 2010 for consideration of the Finance and General Purpose Committee;
p) That NSE has substantial liability in its pension scheme
q) That there has been sharing of money among council members;
r) That false returns have been made to SEC
s) That the sum of N400, 000,000 (Four Hundred Million Naira) was paid to the past president of the Council;
t) That members of the Council were receiving money from companies for listing;
u) That there was an illegal requirement by the Exchange that certain specific companies must be used for printing of listing documents; and
v) That wages, training and IT expenses were overstated.

1.3 Following a high level review of the financial records of the NSE by a team of experts from KPMG, the following expense classifications were flagged for further consideration/investigation: Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 5
[i.] Salaries & Allowances
[ii.] Staff training costs
[iii.] Medical allowances
[iv.] Public enlightenment
[v.] Vehicle maintenance
[vi.] Business travel
[vii.] New ATS/CSD
[viii.] General Exp & Diesel
[ix.] Software upgrade
[x.] Market Dev. Expenses
[xi.] Maintenance - Staff quarters
[xii.] Website Hosting Expenses
[xiii.] Gratuity & Pension Fund
[xiv.] Long Service Award
[xv.] Conversion of Shares
[xvi.] NSE Consult

1.4 Our current investigation is therefore focused on the areas itemized above in addition to the following areas which were gathered from the allegations made against the NSE:
[i.] The Investors Protection Fund
[ii.] The Pensions Contributions ~
[iii.] The Coral Properties Project.

1.5 As at date, we have begun consideration of all the above listed areas but our current findings relate largely to the following expense classifications:
[i.] Long Service Award
[ii.] Overseas Business Travels
[iii.] Maintenance of Staff Quarters (iv) Staff training Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 6
[iv.] Salaries & Allowance
[v.] NSE Consult

1.6 In relation to investigations regarding the above mentioned expense classifications we have interviewed the following members of staff:
[i.] Fidelis Imiehiakhe, a Principal Manager in the Accounts Department of the NSE
[ii.] Josephine Helen Igbinosun, an Assistant General Manager in the Legal Department of the NSE and Secretary to the National Council.
[iii.] David Oleka, a Manager in the Accounts Department.

1.7 We have also conducted searches at the Corporate Affairs Commission (CAC) on some of the companies which had dealings with the NSE in the period under review and our observations from the searches are contained in the latter part of this update. We are also reviewing relevant legislation/regulation to determine the specific areas of contravention if any.

1.8 Our investigation so far has revealed certain questionable transactions which seem to suggest that some of the allegations made may have merit; we have thus below provided a general overview of the expense classifications to which our current findings relate, our finding on questionable transactions: and immediate steps to be taken in further investigation.

1.9 Our investigation so far reveals that the following allegations may have merit:
[i.] Total expenses of the NSE are too high, 2006 to 2008 expenses consumed more than 80% of income/undisciplined spending and financial imprudence;
[ii.] That there has been sharing of money among council members. Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 7
[iii.] That the sum of N400, 000,000 (Four Hundred Million Naira) was paid to the past president of the Council.
[iv.] That wages, training and IT expenses were overstated.

1.10 Our findings on some of the expense classifications reveal that:
a) There were questionable payments of productivity bonuses to Council members and members of staff.
b) Questionable business travel expenses which were in some instances reclassified to other expense lines;
c) Questionable staff training expenses which were in some instances reclassified to other expense lines;
d) Questionable market development and public enlightenment expenses which were in some instances reclassified to other expense lines;
e) Questionable contracts awarded to companies owned by members of staff (or companies in which members of staff owned shares);
f) Duplication of payments;
g) Purchase of assets by the NSE which either disappeared from the books of 'the company or were subsequently written off the books under questionable circumstances;
h) The use of funds belonging to the NSE for the personal use/maintenance of staff members and their residences. Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 8

1.11 Questionable Transactions
(I) The Long Service Award
The Long Service Award does not appear as a budget item in 2007 and 2009. The documents reviewed indicate that the Long Service Award ("the Award') took place in the year 2008. Our review indicates that the sum of N397, 974,573.82 (Three Hundred and Ninety Seven Million, Nine Hundred and Seventy Four Thousand, Five Hundred and Seventy Three Naira and Eighty Two Kobo) was reported as the actual expenditure in respect of the Award. However, upon reviewing the ledger we observed that contrary to NSE's report, the sum of N592,974,573.82 (Five Hundred and Ninety Two Million, Nine Hundred and Seventy Four Thousand, Five Hundred and Seventy Three Naira and Eighty Two Kobo) was actually expended prior to reclassification of N195,000,000.00 (One Hundred and Ninety Five Million Naira) to market development expenses.
The Corporate Affairs Department of the NSE led by Yinka Idowu was responsible for organizing the Award.
Our review also indicates that the sum of N342, 378, 428 (Three Hundredand Forty Two Million, Three Hundred and Seventy Eight Thousand, Four Hundred and Twenty Eight Naira) was received by Candy Floss Limited. This sum represented the budget of the NSE for the Staff Long Service Award and was paid as sundry expense in respect of the Long Service Award. Our search at the CAC reveals that Candy Floss Limited is owned by Yinka Idowu.
Our review further shows the following: Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 9

a) That a boat (yacht) shown in the accounts of the NSE to have been purchased for the sum of N37, 000, 000.00 (Thirty Seven Million Naira) for the stock exchange in early 2008 was written off the books at the end of the same year by its allocation to the Long Service Award account as a gift. Currently we have not seen any documentation which shows who was presented with the said boat. Our review of the Award Ceremony documents shows no boat presentation, we enquired from Mr. Fidelis Imiehiakhe and Mr. David Oleka (both of whom attended the ceremony) if there was such a presentation they had no recollection that a boat was awarded during the ceremony. There are however indications (which we are currently investigating) that either Yinka Idowu or the former DG was presented with the boat.
b) That at the beginning of 2008 the NSE expended the sum of N45, 000,000.00 (Forty Five Million Naira) in purchasing 64 Rolex watches for presentation to employees who had served the NSE for 10 years, that later in the same year Candy Floss Limited was given N95, 000,000.00 (Ninety Five Million Naira) for an additional purchase of 91 Rolex watches and subsequently after the award ceremony another 10 Rolex watches at the cost of N46, 000,000.00 (Forty Six Million Naira) were purchased.
We observed that the Award Ceremony document shows that only 73 out of the 1 65 Rolex watches purchased were actually presented to the awardees which means that 92 Rolex watches valued at N99, 500,000.00 (Ninety Nine Million, Five Hundred Thousand Naira) are unaccounted for.
We further observed that the 'schedule containing the list of staff members eligible for long service awards only contains 63 names' suggesting that 10 additional and unauthorized people received presentations.
c) In the same vein Candy Floss Limited was given N100, 000,000.00 (One Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 10 Hundred Million Naira) for the purchase of 14 cars to be presented to employees who had served the NSE for 25:- 30years, at the same time 3 cars purchased by the NSE in January and March 2008 far the total sum of N59,000,000.00 (Fifty Nine Million Naira) (1 land cruiser jeep purchased for N30,000,000.00 (Thirty Million Naira) and 2 Lexus cars purchased for N29,000,000.00 (Twenty Nine Million Naira) were written off the books at the end of the same year by their allocation to the Long Service Award account as part of the gifts given during the ceremony.
However, the Award Ceremony document shows that only 7 people were presented with cars compared to the 14 cars which were to be purchased by Candy Floss Limited and the 3 additional cars written off, meaning that 10 Cars valued at approximately N66, 142,857.00 (Sixty Six Million, One Hundred and Forty Two. Thousand, Eight Hundred and Fifty Seven Naira) are unaccounted for.
d) It was again noted that although Candy Floss Limited was given the sum of N50, 000,000.00 (Fifty Million Naira) for the special presentation to employees who had worked with the NSE far 25 - 30 years, another sum of N55, 000,000.00 (Fifty Five Million Naira) was again disbursed in respect 0f the special presentation which was to include a luxurious jeep and a special gift of the former Director General's choice.
This suggests that there was a duplication of payment and a double purchase of a luxury car for the former Director General's choice.
e) It was further noted that although Candy Floss Limited was given N6, 000,000.00 (Six Million Naira) for the purchase of 20 plasma televisions, only 13 plasma televisions were awarded whilst although Candy Floss Limited was also given N5, 400,000.00 (Five Million, Four Hundred Thousand Naira) for the purchase of 45 deep freezers only 33 were awarded thus 7 televisions Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 11 and 12 deep freezers valued at N3, 540,000.00 (Three Million, Five Hundred and Forty Thousand Naira Only) are unaccounted for.
f) Also noted is the fact that Articles 52 of the Employee Handbook for Management and Senior Staff as well Article 55 of the Employee Handbook for Junior staff limits the value of gifts/cash that can be given to employees for the long service award. We observed that the gifts awarded/presented far exceeded the value stated in these handbooks.
g) These Articles further stated that these awards should be presented to only members of staff, but we observed that former members of staff were also given awards.

Further investigations to be carried out in respect of the Long Service Award will focus on determining the following among others:
(i) Whether any payments were made by Candy Floss Limited or its agent/officers to the accounts of officers of NSE including the former D.G, ADG e.t.c;
(ii) Whether the amount received by Candy Floss was justified when compared with the market value of services rendered at the time under reference;
(iii) Whether there was council approval for the purchase and subsequent use of the boat as a long service award gift;
(iv) Whether the writing off of the boat in this manner by the NSE was in contravention of corporate governance principles, the code of conduct in operation at the NSE and/or other rules, regulations or legislation; and Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 12
(v) Whether the transaction was in contravention of corporate governance principles, the code of conduct in operation at the NSE and/or other rules, regulations or legislation;
(vi) Whether the 74 Rolex watches were actually purchased by the NSE and if there is any relationship between the NSE and the companies from whom they were allegedly purchased;
(vii) What formed the basis for the amounts spent on purchasing each of the gifts presented?
(viii) Why former staff members were awarded gifts in breach of the provisions of the Staff Handbook;
(ix) Confirm whether the presented items were ever purchased and if they were where they are presently; and
(x) Possible causes of action, if any, against Yinka Idowu and other associated persons.
(II) Business Travels Overseas
In the year 2007 the reported expenditure for the expense classification, Business Travels Overseas ("BTO") was N450, 000,000 (Four Hundred and Fifty Million Naira) as against an annual budget of. N60, 000,000 (Sixty Million Naira) indicating that the sum of N390, 000, 000: 00 i.e. 650% was expended in excess of the annual budget. We were unable to verify the actual expenditure reported for 2007 as we were informed by officers of the IT department that the ledger accounts had not been computerized in 2007. Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 13

In the year 2008, the reported expenditure for BTO was stated to be N615, 736,301.62 (Six Hundred and Fifteen Million, Seven Hundred and Thirty Six Thousand, Three Hundred and One Naira, Sixty Two Kobo) after reclassification.
Our investigations reveal that the total sum expended on BTO in 2008 prior to reclassification was, N 1, 900,000,000 (One Billion and Nine Hundred Million Naira). The sum =N=l, 300,000,000 (One Billion and Three Hundred Million Naira) was reclassified under different expense description/classes. For instance, the sum of N953, OOO, OOO (Nine Hundred and Fifty Three Million Naira) was moved to the expense classification "Software Upgrade" and immediately expensed as opposed to being capitalized. In the year 2009 the reported expenditure for BTO was stated to be N297, 000,000.00 (Two Hundred and Ninety Seven Million) after reclassification as against the actual budget of N321, 000,000.00 (Three Hundred and twenty One Million). Our investigations reveal that the total sum expended on BTO in that year prior to reclassification was N782, 135,835.40 (Seven Hundred and Eighty
Two Million, One Hundred and Thirty Five Thousand, Eight Hundred and Thirty Five Naira, Forty Kobo) The sum of N485, 034,833.74 (Four Hundred and Eighty Five, Thirty Four Thousand, Eight Hundred and Thirty Three Naira, Seventy Four Kobo) was reclassified under different expense heads. One of the questionable transactions we observed in the 2008 ledger was that the lump sum of N65,670,360.00 (Sixty Five Million, Six Hundred and Seventy Thousand, Three Hundred and Sixty Naira) was paid out from NSE's First Bank of Nigeria account on two separate occasions but in respect ofthe same purpose.
The first disbursement was made on 29 April 2008 while the second disbursement was made on 14 May 2008. Upon reviewing the documentation in support of the two disbursements we noted the following: Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 14
(i) The disbursement of 29 April 2008 was approved by only the ADG while '"that of 14 May 2008 was approved by the DG alone. Our inquiries reveal that although each disbursement may have been approved by only one of the two approving authorities, it would have been impossible to issue a cheque in respect of either payment without the signature of both the DG and ADG on the cheque. Our inquiries also suggest that at the time of signing the cheques, each of the signatories would have had the opportunity of sighting/reviewing documents supporting the request for payment.
(ii) The disbursements were in respect of the same event i.e. an international road show held between June 22 and 3 July 2008
(iii) The internal memoranda by which the request for each of the disbursement was made was issued by the same person - Yinka Idowu.
(iv) The same staff members were listed as attendees on both occasions.
(v) While the first disbursement was supported by handwritten document detailing the sums to be paid out to each attendee of the road show, the second disbursement was only supported by a photocopy of the initial documents used to support the first disbursement
We intend to conduct an interview with one of those nominated to attend the international road show and with the officer that was responsible for collecting and disbursing the funds on one occasion.
The immediate steps which we intend to take in further investigation of this transaction are to schedule an interview with Yinka Idowu and conduct a
search on her accounts. Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 15
(III) Maintenance of Staff Quarters
In the year 2007, the reported expenditure for Maintenance of Staff Quarters ("MSQ") was N 127, 000,000.00 (One Hundred and Twenty Seven Million Naira) as against an annual budget of N126, 000,000.00 (One Hundred and Twenty Six Million Naira) indicating that the sum expended was N1,000,000.00 (One Million Naira) below the annual budget. We were unable to verify the actual expenditure reported under the expense classification in 2007 for the same reason stated in respect of the BTO in 2007.
In the .year 2008 the reported expenditure for MSQ was reported to be N239,521,403.16 (Two Hundred and Thirty Nine Million, Five Hundred and Twenty One Thousand, Four Hundred and Three Naira, Sixteen Kobo).
In the year 2009, the reported expenditure for MSQ was stated as N70,781,874.79 (Seventy Million, Seven Hundred and Eighty One Thousand, Eight Hundred and Seventy Four Naira, Seventy Nine Kobo) after reclassification as against the actual budget of N 113,000,000 (One Hundred and Thirty Million Naira) suggesting that actual expenses were N39,000,000 (Thirty Nine Million Naira) below budget.
Our investigations reveal that the total sum expended on Maintenance of taff Quarters in that year prior to reclassification was N 135, 067,773.39 One Hundred and Thirty Five Million, Sixty Seven Thousand, Seven undred and Seventy Three Naira, Thirty Nine Kobo), the sum of N64,285,898.60 (Sixty Four Million, Two Hundred and Eighty Five Thousand, ight Hundred and Ninety Eight Naira, Sixty Kobo) was reclassified under different expense heads. or instance, the sum of N45, 250,000.00 (Forty Five Million, Two Hundred and Fifty Thousand Naira) was reclassified to website hosting expenses ledger.
We have conducted a detailed review of major expense items under the MSQ Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co.
www.proshareng.com 16 ledger for the years 2008 to 2009. We have also conducted an oral interview with an officer of the NSE in respect of this ledger account. Our inquiries to date reveal the following:
(i) Contrary to the title of this ledger, expenses recorded in this ledger relate to private residences of the DG, ADG and senior management;
(ii) Sometimes, the expenses (especially in respect of diesel supplies) were for houses of persons who were not officers of the NSE. Several supplies were made to houses of former staff of the NSE.
(iii) The sums expended and recorded in this ledger were not deducted from the allowances due to the DG or ADG or other staff members on behalf of whom the expenses were incurred.
(iv) The alleged justification for these purchases is that in the DG's remuneration package, utility is "FREE". It is however questionable whether the expenses incurred can be classified as Utility. Our review of the actual expense vouchers reveals the following in summary:
(i) In the month of January 2008, diesel expense under this expense classification was in the sum N 10, 433,000.00 (Ten Million Four hundred and Thirty Three Thousand Naira). During one of the interviews conducted, we were informed that the diesel expenses in respect of the NSE building are not recorded in this ledger and that the ledger only contains supplies made to private residences. There is nothing in the NSE records so far reviewed that indicate the actual residences to which the supplies were made. We have requested to speak with the person contracted by the NSE to supply diesel to these "quarters"; Nigeria Stock Exchange Status Update/Report29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 17
(ii) In the same month, the sum of N2, 200,000.00 (Two Million Two Hundred Thousand Naira) was spent- 01.1 purchasing a glass cabinet for the quarters. We sighted an invoice in respect of this expenditure indicating that the kitchen cabinet purchased was for the DG's house. A treadmill was bought at the cost of N347, 500.00 (Three Hundred and Forty Seven Two Hundred Thousand Naira) was spent- 01.1 purchasing a glass cabinet for the quarters. We sighted an invoice in respect of this expenditure indicating that the kitchen cabinet purchased was for the DG's house. A treadmill was bought at the cost of N347, 500.00 (Three Hundred and Forty Seven
Thousand Five Hundred Naira) from Mega Plaza and we sighted the invoice to this effect and same was authorised by the DG.
(iii) In February 2008 the ledger reveals that personal items such as duvets, bathroom accessories were purchased on this account and in March 2008 the sums of N3, 300,000 (Three Million, Three Hundred Thousand Naira) and N2, 513,140 (Two Million Five Hundred and Thirteen Thousand One Hundred and Forty Naira) were expended on the purchase of furniture from Heroes Furniture and Leatherworld respectively. We were furnished with the invoices for the expenditure but we have not been able to confirm who the furniture was purchased for or if they were delivered.
(iv) In April 2008, an additional sum of N25, 000,000.00 (Twenty Five Million Naira) was spent on furniture for the "quarters". There are no documents to support this expense. A Generator was also purchased for the sum of N5,040,000.00 (Five Million and Forty Thousand Naira). We sighted an invoice issued by the Company that supplied the generator ("Etco"). The invoice reveals that the generator was purchased for the residence of the Assistant Director-General ("ADG"). Diesel purchases for the "quarters" in the month of
April totalled N4, 771,500.00 (Four Million Seven Hundred and Seventy One Thousand and Five Hundred Naira).
(v) In the month of June, Mercilia Limited was paid the sum of N2, 063,375.00 (Two Million, Six Three Thousand, Three Hundred and Seventy Five Naira) for the renovation of the ADG's house in Omole Phase II. In the same month, Mercilia Limited supplied the ADG's new 81 KVA generator for the sum of N3, 861,600.00 (Three Million Eight Hundred and Sixty One Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
18 Thousand Six Hundred Naira). There is however no indication of where the generator was supplied and installed. Mercilia Limited was again paid the sum of N2, 388,360.00 (Two Million Three Hundred and Eighty Eight Thousand Three Hundred and Sixty Naira) for the renovation of a building.
However, the description and ownership of the building in respect of which the renovation was made is not yet known.
Furthermore, certain items were purchased from Adam and Eve to the tune of N2, 087,400.00 (Two Million and Eighty Seven Thousand Four Hundred Naira). These items include beddings, toilet items and window blinds.
(vi) In the month of November 2008, Mercelia Limited was paid the sum N5, 440,320.00 (Five Million Four Hundred and Forty Thousand Three Hundred and Twenty Naira) for the "electrical installation and repair of generator".
(vii) In the month of December, Adam and Eve was paid a total of N7, 300,230.00 (Seven Million Three Hundred Thousand Two Hundred and Thirty Naira). We sighted the invoice for purchases totaling this amount. The invoices relate to household items and were approved by the DG. We also sighted an invoice from Liiyaz Qee Ventures for the sale of Panasonic air conditioner for the sum of N8, 500,000.00 (Eight Million Five Hundred Thousand Naira}.
We have not been able to verify where this air conditioner was supplied.
Overall, we note that Mercilia Limited featured prominently in expenses relating to this MSQ ledger. We are currently conducting a search on the said Company at the CAC and will also review movements to and from its accounts. Further investigations will focus on ascertaining the actual persons to whom these items were delivered, where not already ascertained. Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 19

(IV) Staff Training
In the year 2007, the reported expenditure on staff training was N463,000,000.00 (Four Hundred and Sixty Three Million Naira) as against a budget of N80, 000,000.00 (Eighty Million Naira) indicating that the sum of N383, 000,000.00 (Three Hundred and Eighty Three Million Naira) was expended in excess of the annual budget. We have not been able to verify the actual expenditure stated for 2007 for the same reason stated above.
In the year 2008, the reported expenditure for staff training was stated to be N523, 864, 125.30 (Five Hundred and Twenty Three Million, Eight Hundred and Sixty Four Thousand, One Hundred and Twenty Five Naira, Thirty Kobo) after reclassification as against the actual budget of N 123,864, 165.30 indicating that the sum of N400, OOO, OOO.00 was expended in excess of budget.
In the year 2009 the reported expenditure for staff training was stated to be N283, 000,000.00 (Two Hundred and Eighty Three Million Naira) after reclassification as against the actual budget of N212,000,000.00 indicating that the sum of N71,000,000.00 was expended above budget.
We have reviewed all staff training expenses above the sum of N5, 000,000.00 (Five Million Naira) within the year 2007 to date. Some of these expenses include the following:

(l) ASEA Exeo MEETING:
In a memo dated 5 February 2009, captioned "Re ASEA Exco Meeting" the following people were proposed as delegates to attend the ASEA Exco Meeting scheduled to take place in Cairo, Egypt on 23-24 March 2009: Prof Ndi Okereke Onyuike, Mr. Musa Elakama; Mrs. Yinka Idowu and Mr. Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
20 Farooq Oreagba. The following endorsements were made on the memo as representing expenses for the trip:
DG/CEO - R/Ticket $10,500
- Estacode $10.000
- Warm clothing - $5,000
ADG - R/Ticket $10,500
- Estacode $8,000
- Warm clothing - $3,000
Rate of conversion used was N155 to $1
Total expenditure for this trip was N11, 687,000.00 (Eleven Million Six Hundred and Eighty Seven Thousand Naira).
The sum for the return ticket for the delegates appears to be high especially in view of the fact that it was in respect of a trip to Cairo, in view of this, further investigation will focus on the following
(I.) Requesting for evidence of attendance of this meeting
(II.) Interviewing the officer in charge of NSE's protocol/travels at the said time; and
(III.) Conducting a general survey to determine the rate of air tickets to Cairo, Egypt for the period of this trip.
(2) Financial Training 15th - 19th March, 2009, Dubai
A memo written by the GM/Head of Corporate Affairs dated 2 February 2009 captioned "Financial Training 15th - 19th March 2009, Dubai, states that the DG/CEO approved the following to attend the attached training in Dubai in March 2009: DG/CEO; Asst. DG, GM (Corporate Affairs and GM Compliance). The figures expended on each person including R/Ticket; Estacode (and Misc for the DG) totalled $56,505.00 (Fifty Six Thousand, Five
Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co.
www.proshareng.com 21
Hundred and Five Dollars) converted at the rate of N 170 -$1. We note that the training was organized by Terrapinn Financial with the following contact information www.TerrapinnFinancial.com; tel: +44(0)20 7698 7062; E-mail: mail.cook@terrapinn.com
In further investigation of this expense, we intend to contact Terrapin Financial for a list of delegates that attended the training particularly delegates from the NSE and for confirmation that the persons listed above attended the training.
(3) 19 Feb 2010 transfer - Public Private Partnership: - N5, 989,865.60
In the training and development voucher file covering the period of this payment we sighted a Sterling Bank Debit Note No 0047339 dated 19 February 2010 evidencing the transfer of EUR 27,859.84 (EUR 27,809.84 plus EUR 50 surcharge) at N215/EUR 1 to Class Construction and Property Limited and the NSE's Account No: 211/2111/212/110 was debited for the said amount. We also sighted copy of a letter dated 18 February 2010 from the NSE to Sterling Bank Plc authorising the latter to transfer EUR 27,809.84 to Class Construction and Property Limited and debit the NSE's account. During an interview with the Principal Manager of NSE's Accounts Department we were informed that the said Class Construction and Property Limited is a b0reau de change and that the sum of EUR 27,859.84 paid to the said company was meant for onward transmission to the organizers of the training, Terrapin Limited. We did not sight any document in NSE's records which indicates that there was onward transmission to Terrapin Limited.
An internal memorandum dated 16 February 2010 from the Head, Strategy & Business Development Directorate (Farooq Oreagba) to the DG titled:
"World Exchange Congress - Barcelona attached with a Tax Invoice from Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 22
Terrapinn Limited, indicate that the following persons were nominated for the Congress: Mr. Lance Musa Elakama, Dr. Onyewuchi Asinobi, Mr. Henry Onyekuru, Mrs. Yinka Idowu, Mr. Binos Yaroe, Mr. Farooq Oreagba, Mr. Bayo Egunbiyi and Mrs. Onyenwe.
In further investigation of this expense our approach will be as follows:
a) Conduct a search of Class Construction Property Limited to determine the nature of its business. and whether any member of the NSE has an interest in the company;
b) Confirm from Terrapin that it received the sum of 27,809.84 Euros from Class Construction Property Limited on behalf of the NSE and in respect of the World Exchange Congress held in Barcelona in the year 2010.
We will alongside this, also request for a list of attendees/delegates at the conference. Terrapin's contact details are as follows: Telephone number is +44 20 7092 1000. Email: gina.geldenhuys@terrapinn.com; enquiry.uk@terrapin.com;
c) Require the nominees to provide evidence of attendance of then training.
(4) 18 February 2010 FBN 1352689 - Training at Washington, DC, United States - N10, 514,350.00 (Ten Million, Five Hundred and Fourteen Thousand, Three Hundred and Fifty Naira)
We sighted a copy of a leaflet for the above referenced training. The leaflet indicates that the training was organised by the Institute of Public Private Partnerships, was titled "Designing Legislative, Institutional, and Regulatory Frameworks for Successful Public - Private Partnerships" and was scheduled to hold on March 1 - 12, 2010.
The DG, an AEM (Mr. Momoh) and a Principal Manager (Mrs. Ogambe) were nominated to attend the training as shown in the endorsements on the leaflet. The total sum approved for disbursement was US$68,275 at N154 to $1 (i.e. N10, 514,350.00) Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 23
Further investigation on this expense will focus on the following:
(i) Contacting the organisers of the training to confirm that the above nominees attended the training /obtaining a list of attendees. The contact details of the organisers are as follows: (e-mail: traininq@ip3.org; tel: 1 202 466-8930
(ii) Requesting for evidence of attendance from the nominees. There was another disbursement of the sum of N 1 0, 514,350.00 in respect of a training scheduled to take place in Washington DC between 9th and 20th August 2010. The disbursement was approved by the DG on 25 January 2010 and reference was made to the leaflet for the training scheduled for March 1 - 12, 2010 as per the endorsement dated 16 June 2010. The document used in support of the disbursements made for this training was a copy of the document used to support the training of March 1 -12 March in Washington. Further steps which shall be taken in investigating this training will be largely the same as those which will be taken in respect of the March 2010 Washington DC training. The document used in support of the disbursements made for this training was a copy of the document used to support the training of March 1 -12 March in Washington. Further steps which shall be taken in investigating this training will be largely the same as those which will be taken in respect of the March
2010 Washington DC training.
(5) 9 July 2008-ACCESS BANK 345-ORACLE TRAINING USA N17, 500,000.00
We sighted a copy of Progenies' letter dated 11 June 2008 to the DG titled: "Technical User Training for System Administrators: Oracle lag". In the said letter, the training was expected to run for a period of nine working days at the sum of N3~5 Million per delegate. From the said letter, we note that the following names were endorsed by the DG to attend the training. They include: Obaseki; Chinyere: Ezeju; Mohammed Aliko N: and Lawrence. We Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
24 also sighted a Payment Voucher No. 0024467 dated 9 July 2008 indicating that the sum N 17, 500,000.00 (Seventeen Million, Five Hundred Thousand Naira) was paid to Progenies in respect of this training.
We have already conducted a search on Progenies at the CAC and the outcome of this investigation will be discussed later in this update. Further investigation of this expense will focus on requesting for evidence of attendance from the nominees. We shall also be reviewing the accounts held in the name of Progenies to determine sources of inflows and persons to whom payments were made.
(6) 9 July 2008-STERL 1658- ORACLE OPENWORLD CONFERENCEN10, We sighted Progenies letter dated 11 June 2008 to the DG, NSE, titled:
"Technical User Training for System Administrators: Oracle lag". In the said letter, the training was expected to run for a period of nine working days at the sum of N3.5 Million per delegate which will cover tuition fees, course materials, tea and light refreshments, lunch and transport between the hotel and the training centre. From the said letter, we note that the following names were endorsed by the DG to attend the training: Obaseki; Chinyere; Ezeju; Mohammed Aliko N; and Lawrence.
We sighted disbursements to Godwin Obaseki, Chinyere, Ezeju, Mohammed Aliko for the Oracle Training in USA; in the sum of US$228,200 (at N120/US$1) with the Naira equivalent as N27,384,000.00 added to the course fee in the sum of N3,500,000 per delegate. The total sum expended was N44,884,000.00; this was approved on 9 July 2008.
We also sighted disbursements to the DG/CEO, ADG, GM (RIT), GM (Q), AGM (RIT), Consultant Tong Udo in the total sum of N27, 936,000.00 representing the costs of return tickets, estacode, miscellaneous, and course Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
25 fees. This was approved on 9 July 2008.
We also sigl1ted a Progenies letter dated 11 June 2008 to the DG, NSE titled: "Oracle Open World Conference - San Francisco 2008. This event was scheduled to hold in San Francisco, USA on 21 - 25 September 2008 and the cost of the conference was US$15,000 per participant. The DG, ADG, GM (RIT), Yaroe, Obaseki and J. Udoh were endorsed on the letter on 10 June 2008 by the DG to attend the event.
(7) 5 March 2008-FBN 1089041- ASIA 1RADING CONVENTION - N25, 715, 400
We sighted a Payment Voucher dated 5 March 2008 in the sum of N25~ 715,400.00 representing payment for the Asia Trader & Investor Convention. The Convention was held in Malaysia between 22 and 23 March 2008. The delegates nominated to attend the event include: President of the Exchange and spouse (Conference fee USD950 (Le. USD475 for each delegate), Cost of Ticket USD44,200); DG/CEO (Ticket - US$31,940); ADG (Ticket USD22,100); GM (CIA), GM (EM/SP), GM (RIT) (Ticket - USD15,200 each); Dr. (Mrs) Ogamba (Ticket - USD9,600); One Council Member (Ticket - USD22,1 00); Okezie Pascal (Ticket ¬USD 11,430). The total sum expended on conference fee and tickets were USD5, 225 and USD209, 070 respectively, and the naira equivalent totalling the sum of N25, 715,400.
Further investigation of this expense will focus on the following:
(I.) Determining the average cost of tickets to Malaysia around the period in which this convention was held.
(II.) Determining the actual participants
(III.) (iii) Confirming through interviews that these sums were in fact paid to the nominees.
(IV.) (iv) Requiring evidence of attendance from those nominated to attend Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
26 and/or from the organisers of the conference.
(V) 2004 Audit
We sighted documents which indicate that certain tax consultants from the Lagos State Government came to audit NSE's account in 2008. The tax consultants came to the conclusion that NSE had been under remitting taxes including P A YE and VAT. Following the audit conducted by the government consultants, NSE's tax liability was revised to about N90, 000,000.00 (Ninety Million Naira).
We also sighted an internal memorandum seeking approval for payment of the sum of N 14,000,000 (Fourteen Million Naira) to these tax consultants for PR for their agreement to reduce NSE's tax liability from over N90, 000,000 to N 12,970,000.
During an interview with the Principal Accountant of the NSE we were informed that the sum of N14, 000,000.00 was given to the government consultants in cash. We were also informed that the cash payment was made to the leader of the team, Bamidele Nasiru. We are currently making attempts to contact the said Bamidele Nasiru.
(VI) Contracts
We obtained a list of contractors from the Administrative Department of the NSE. We came up with an additional list of Contractors based on contract documents reviewed. Our approach in respect of these contractors is as follows:
(I.) Conduct searches at the CAC to determine whether there are any Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 27
related party transactions. Our searches will focus on the shareholders and directors of the company.
(II.) Where the search indicate that the shareholders or directors of such companies comprise of any Council Member, NSE Management or Staff, we shall check the bank accounts of the NSE to determine the frequency and quantum of payments to such company and the purpose fair which the payments were made particularly where such payments exceed the sum of N5,000,000
(III.) As an alternative or in addition to the above we shall also trace the company accounts of those companies.
To date, we have conducted searches on the following companies
(I.) Progenics Corp Limited
(II.) Harris AIB Associates Limited
(III.) Pathway Communications Limited
(IV.) Sonex Clinics Limited
(V.) AD Consulting Limited
(VI.) Coral Properties Limited
(VII.) Dimension Data Limited
(VIII.) Candy Floss Limited
(IX.) Avrosyn Data System Limited
(X.) Global Outdoor Systems
(XI.) Kingdom Securities Limited
(XII.) KSL Consultants Limited
Searches are still ongoing in respect of the following Companies/Business names:
(I.) Mercilia Electromech Limited
(II.) Centric Industries Limited
(III.) Ingita & Co.
(IV.) Primonsong Petroleum Limited;
(V.) Hailsham Nigeria Limited
Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 28
(VI.) Class Construction and Property Limited
(VII.) Dialink Limited
(VIII.) Progenies Enterprises
(IX.) Liiyaz Dee Ventures
(X.) Tahail Crystal Ltd
(XI.) Hadassa Investment Security Nigeria Ltd
(XII.) Quantum Classic Limited
As at date, our search at the CAC reveals the following:
(i.) That only Mrs. Yinka Idowu and Mr. Emmanuel Adekoyeju Idowu are the owners and directors of Candy Floss Limited. Mrs. Yinka Idowu was the former head of the Corporate Affairs Services of the NSE and she was principally responsible for the international road shows, the merits award, long service award e.t.c. The said Candy Floss Limited received the sum of over N342, 378, 428 (Three Hundred and Forty Two Million, Three Hundred and Seventy Eight Thousand, Four Hundred and Twenty Eight Naira in respect of the Long Service Award organized by the Exchange in 2008. We understand that Mrs. Yinka Idowu was also Head of Corporate Services and was responsible for organizing the long service award.
(ii.) Progenies Corp Limited: One of the subscribers to the Memorandum and Articles of Association of this Company and Director as at incorporation was the former DG, Ndi-Okereke Onyuike. At the time this company was incorporated in 1996 she owned 250,000 shares of the 4.4m share capital of the company. However, her name does not appear in the FORM CAC 2 for 2007 as one of the shareholders of the company and CAC records also indicate that she ceased to be director till 1997. We however note that Progenies Enterprises appears as owning 651,000 shares. We intend to conduct a further search to determine the owners of Progenies Enterprises. Nigeria Stock Exchange Status Update/Report
29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 29
(iii.) That Kingdom Securities Limited and KSL Consultants Limited are owned by Mr. Uzoma Henry Onyekuru former General Manager of the NSE's Compliance Unit. The said company was responsible for the reactivation of the 2nd tier and creation of the 3rd tier market project between 2006 and 2007 and received the sum of N 125,7 50,000.00 (One Hundred and Twenty Five Million, Seven Hundred and Fifty Thousand Naira) from the NSE. We are currently reviewing the contract and investigating whether the said services were rendered by the company in question.
(VII) Surplus Sharing
In the year 2006, a total sum of N402, 000,000 (Four Hundred and Two Million Naira) was paid out of which both staff and management were paid N241, 200,000 (Two Hundred and Forty One Million Two Hundred Thousand Naira) while Council members were paid N 160,800,000 (One Hundred and Sixty Million Eight Hundred Thousand Naira).
We sighted the position paper which is attached as part of the supporting documents for the payment. Although the position paper was not signed, we were informed by the Principal Accountant that the same was prepared by the ADG. This position paper provides in part as follows:
"POSITION PAPER ON SURPLUS SHARING FOR 2006
The Management wishes to recommend to the Council the payment. of N402 million as surplus sharing for the year ended 31st December, 2006. This amount represents 20% of the pre-tax surplus already reported to the Finance and General Purpose Committee of the Council. If this is approved by the Council, the reported pre-tax surplus will come to N.1608billion."
.................
Management is therefore seeking the Council's approval to make the above Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
30 payment and to reflect same in the Management accounts hereby presented for your kind consideration and approval."
The journal entry however recorded the payment to council as "council expenses" and credited sundry creditors.
In the year 2007, the sum of N 1, 171,837,486 was paid to Staff Members of the NSE as productivity bonus. While the sum of N71 0,000,000 was shared among 15 Council members with Oba Otudeko, the former President of the General Council and the DG getting the highest i.e. Nl15,000,000 and
N75,000,000 respectively.
In 2009, the sum of N720, 000,000 was paid to Staff members while the sum of N480, 000,000.00 was paid to Council Members. The details on the voucher for payment dated 04/03/2009 of the sum of N720, 000/000.00 in 2009 read as follows: "Being payment of surplus sharing to Council Members and staff in respect of 2008 financial year"
The payment voucher dated 27 February 2009 of the sum of N480, 000,000 details of which read "Payment for surplus sharing, Council Members for the year 2008 as per the attached" was approved by the DG and ADG and received by Josephine Igbinosun, the Secretary to the Council.
Although, these sums were paid as part of staff remuneration they were not reflected as a line item in staff costs but were included in the Sundry expenses.
In a memo prepared by the ADG, Lance Musa Elakama, dated 4 March 2009 and written to the DG/CEO stated as follows:
"2008 Surplus Sharing
You will recall that at the National Council Meeting of 27 February 2009, Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
31approval was given for the following provisions to be made in the Unaudited
Management Accounts for the year ended 31st December 2008 as follows:
(i) Management & Staff 720,000,000.00
(ii) Council Members 480,000,000.00
(iii) Others 500,000,000.00
1,700,000000.0
Please approve to enable us effect the accruals in the account.
Signed
Lance Musa Elakama."
At all relevant times to this sharing of surplus, the NSE was registered as a company limited by Guarantee. Thus, the said surplus sharing appears to be a contravention Sections 26 and 27(4) of CAMA and the clauses 6 of the Memorandum and Articles of Association of the NSE.
During an interview with the Company Secretary, Josephine Igbinosun, she stated in summary as follows with regard to the surplus distributions:
(i.) That the sums shared were productivity bonuses for staff and formed part of staff remuneration;
(ii.) That sums paid to Council Members was not productivity bonus.
(iii.) That although the minutes of March 2009 refer to productivity bonus, she had simply recorded the deliberations wrongly and the term productivity bonus was only in relation to staff members. In respect of Council Members, the sums they received were for training and the letter accompanying the cheques forwarded to the Council Members stated so explicitly.
(iv.) That she had never advised the Council that the distribution of surplus was a contravention of the provisions of CAMA because she was never consulted and even if she had, it would not have changed their Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
32 decision to make the distribution.
The position paper and other supporting documents attached to the schedules of payment of the bonuses/surplus do not support Josephine's position. First, the letters she refers to as explicitly stating that the sums were meant for training/visitation of other stock exchanges were written and forwarded to the Council Members before the meeting in which she alleges that the productivity bonus was approved.
800,000.00 productivity bonus was approved.
Secondly, the said letter refers to a meeting of Council held in February where it was decided that Council members be given money for training/visitation of stock exchanges. We have reviewed all the minutes of meetings covering this period, and there is no record that such
deliberations/resolutions were made. There is nothing in the compensation/remuneration package of staff members of the exchange which states that they may be paid bonuses. The records so far reviewed therefore suggest, contrary to Josephine's assertion, that the sums distributed to staff and council members was a distribution of profit contrary to clear provisions of statute.
With regard to the above, further investigation will focus on the following areas:
(i) Determining whether the t distribution made to staff/council members was subject to tax. If it was not, it further buttresses the position that the distribution was a sharing of profits;
(ii) Conduct interviews with Council Member
(VIII) NSE Consult
NSE Consult is a wholly owned subsidiary of the NSE and is the investment Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
33 and private sector arm of the exchange which takes proprietary trading positions on behalf of the NSE.
It was observed that the NSE transferred money to NSE Consult for the purpose of trading and investing on the stock exchange on its behalf.
Investigation is ongoing as to whether NSE Consult was used as a tool for insider trading in contravention of Section 112 of the Investment and Securities Act. Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 34
Possible areas of contravention
In order to determine the possible charges and cause~ of action against the former/current officers of the NSE and what form of jail term, compensation/ restitution, if any, that the NSE would be entitled to we are reviewing the following legislation:
(i.) The Investments and Securities Act;
(ii.) Companies and Allied Matters Act;
(iii.) The Corrupt Practices and Other Related Act;
(iv.) The Economic and Financial Crimes Commission (Establishment) Act;
(v.) Miscellaneous Offences Act Cap. M 17 Laws of the Federation of Nigeria, 2004;
(vi.) Advance Fee Fraud and Other Fraud Related Offences Act; and
(vii.) The Criminal Code Act. Subject to our final findings on .the transactions being reviewed, some sections of these legislations which may form the basis of prosecution are as
follows:
[i.] Section 1 of the Advance Fee Fraud and Other Related Offences Act and Section 419 of the Criminal Code which respectively provide for the offence" of obtaining by false pretence/ felony and obtaining by false pretence/cheating;
These provisions could be used with respect to the following questionable transactions highlighted above:
Transactions under the Long Service Award;
Receipt of money for the purchase of items (Rolex watches, cars e.t.c) for the Long Service Award, which items are unaccounted for/were not used for their purpose of purchase/ seem not to have Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
35 been purchased; Duplication of money paid for the payment of the special presentation to employees who had worked with the NSE for 25 30 years.
Transactions under Business Travels Overseas:
Duplication of the payment of the sum of N65, 670,360.00 (Sixty Five Million, Six Hundred and Seventy Thousand, Three Hundred and Sixty Naira) for an international road show.
Transactions under Maintenance of Staff Quarters
Use of the NSE funds to purchase diesel and other products for officers of the NSE under the false pretence that they are official residences;
Use of the NSE funds to purchase diesel and other products for non members of staff of the NSE. Receipt of money for purchase of products which were never supplied
Transactions under Staff Training
[i.] Inflation of the ticket Cost
[ii.] Receipt of Money for training and not attending the said training
[iii.] Duplication of payments in respect of one Convention/ training seminar
[ii.] Section 8 of the Advance Fee Fraud and Other Related Expenses Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 36
Act and Section 422 of the Criminal Code which respectively provide for the offence of conspiracy and conspiracy to defraud. Aside from those who actually committed the offences all those who were involved in various aspects of the offence can be charged under these sections.
[iii.] Section 18 and 46 of the Economic and Financial Crimes "Commission (Establishment) Act which provide that offences involving financial crimes such as fraud, bribery, looting, embezzlement, tax evasion and any form of financial malpractices.
These provisions are very encompassing and thus cover all the questionable transactions highlighted in this report.
[iv.] Section 8 and 9 of the Corrupt Practices and Other Related Offences Act, Section 427 of the Criminal Code and Section 17 of the Economic and Financial Crimes Commission (Establishment) Act (EFCC Act) respectively provide for the offence of corruptly receiving or giving cash or kind, receiving" property stolen or fraudulently obtained and retention of proceeds of criminal conduct.
These provisions cover the following questionable transactions highlighted above.
Transactions under Maintenance of Staff Quarters
Use of the NSE funds to purchase diesel and other products for officers of the NSE under the false pretence that they are official residences; Nigeria Stock Exchange Status Update/Report
29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 37
Use of the NSE funds to purchase diesel and other products for nonmembers of staff of the NSE.
Receipt of money for purchase of products which were never supplied
Transactions under Staff Training
a. Inflation of the ticket Costs
b. Receipt of Money for training and not attending the said training
c. Duplication of payments in respect of one Convention/ training seminar
Transaction under the 2004 Audit
The approval and payment of N 14, 000,000.00 PR to officials of the
Lagos State Government for their agreement to reduce NSE's tax liability.
[v.] Section 37 f the Investment and Securities Act places an obligation on the NSE to keep and maintain proper books of account and records relating to its operations, Section 303 places a penalty on any person who violates or contributes to the violation of any provisions of the ISA and Sections 436 and 438 of the Criminal Code make it an offence for an official of a company to engage in fraudulent /false accounting;
These provisions cover the clear false accounting/ improper book keeping in respect of the accounts of the NSE.
[vi.] Section 33 of the Value Added Tax Act and Regulation 19 of the PAYE Regulations 2002 state that tax evasions, failure to remit taxes, submission of false and incorrect statements or returns are Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com
38 offences. These provisions cover the clear false accounting/ improper book keeping in respect of the accounts of the NSE, the false returns that were made regarding the remuneration of staff and the failure to pay tax with respect to the bonus payments made.
In addition to the above, possible civil claims include the following:
(i) conversion
(ii) negligence; and
(iii) Breach of the employment obligations & duties imposed by the.
In each of these causes of action possible reliefs that can be sought by NSE include restitution of the monies that were converted, monetary compensation for damages and loss that the NSE may have suffered as a result of the breach of employee obligations negligent conduct. The NSE Codes of Conduct for Council Members, Senior & Junior Staffrequires Council Members and employees not to put themselves in positions where conflict of interest would exist and not to corruptly give or receive cash/kind.
Where their conduct has breached these obligations, civil actions for breach of employment obligations as well as negligence could be instituted.
29 September 2010. Nigeria Stock Exchange Status Update/Report 29 September 2010 KPMG + Aluko Oyebode & Co. www.proshareng.com 39
PRODUCTIVITY/SURPLUS PAID TO MANAGEMENT STAFF
Names 2008 2007 2006 TOTAL %
1 Prof. Ndi-Dkereke-Onyiuke 150,000,000 259,453,488 36,300,000 445,753,488 49%
2 lance Musa Elakama 90,000,000 149,385,606 13,625,000 253,010,606 28%
3 Mrs Yinka Idowu 50,000,000 45,522,918 7,700,000 103,222,918 11%
4 Mr Henry Onyekuru 50,000,000 50,403,178 8,200,000 108,603,178 12%
340,000,000 504,765,190 65,825,000 910,590,190
37% 55% 7%
Total Productivity/Surplus Sharing Paid to Management
Year 2006 to 2008
S/N Name DESIGNATION '06 (N'm) '07 (N'm) '08 (N'm)
Demand Total
'06 - '08 (N'm)
% of
Demand
1 Prof. Ndi Okereke-Onyuike, OON Past Director General/CEO 58.10 334.45 200.00 592.55 52%
2 Alh. Lance Elakama Asst. Director General 19.63 174.39 115.00 309.01 27%
3 Mrs Yinka Idowu GM 7.70 45.52 50.00 103.22 9%
4 Mr Henry Onyekuru GM 8.20 50.40 50.00 108.60 10%
5 Mrs. Josephine Igbinosun Secretary to the Council 1 10 10 21.00 2%
94.625 614.765 425 1,134.4
Source: Nigerian Stock Exchange Review of Accounts REPORT(September 2010) 8% 54% 37%
Productivity/Surplus Sharing Paid to Council Members
Year 2005 to 2008
S/N Name Institution/Status '05 (N'm) '06 (N'm) '07 (N'm) '08 (N'm)
Demand Total
'06 - '08 (N'm)
% of
Demand
1 Apostle (Dr.) Hayford I. Alile, OFR Past Director General 2 0%
2 Alh. Mohammadu Koguna Past President 2.5 12 55 67 5%
3 Dr. Raymond Obieri Past President 4.5 15 60 35 110 8%
4 Oba Otudeko, OFR Past President 2.5 28 115 95 238 17%
5 Alh. Aliko Dangote Past President 40 40 3%
6 Erastus Akingbola Vice President 50 30 80 6%
7 Reginald Abbey Hart Vice President 30 30 2%
8 Alh. Umaru Mutallab, CON Council Member 2 0 40 40 3%
9 Alh. Aliko Mohammed, OFR Council Member 2 0 0%
10 Chief (Dr.) Bayo Kuku, CON Past President 2 0 0%
11 Mr. Pascal G. Dozie, OON Council Member 2 0 0%
12 Mr. Goodie M. Ibru, OON Past President 2 0 0%
13 Alh. Abdul Rasaq, (SAN), OFR Past President 2 0 0%
14 Chief (Dr.) Ebitimi Banigo, OFR Council Member 2 0 0%
15 Alh. Aliyu Alkali NNDC 2 10 40 50 4%
16 Mr. Oseni Elama NSITF 2 0 0%
17 Rev. Olu Odejimi Clearview Investment Co. Ltd 2 0 0%
18 Mr. Uche Ogbu Eurocomm Sec. Ltd 2 0 0%
19 Mr. Albert Okumagba BGL Sec. Ltd 2 7 7 1%
20 Mr. J. Faromoju Forthright Sec & Inv Ltd 2 7 7 1%
21 Mr. Emeka Madubuike ISS/Compass 2 7 7 1%
22 Mr. Kaduma AAA Stockbrokers Ltd 2
23 Alh. Ariyo Olusekun Capital Assets Ltd 2 10 40 5 55 4%
24 Mr. Chidi Ajaegbu Mutual Alliance Inv & Sec. 2 10 40 5 55 4%
25 Ms. Hauwa Audu Amyn Investment Ltd 2 10 40 5 55 4%
26 Mr. Godwin Obaseki Afrinvest W.A. Ltd 4 40 20 64 5%
27 Babatunde E. Sobamowo Global Assets Ltd 4 40 20 64 5%
28 Alh. Abubakar Lawal GTI Capital Ltd 4 40 20 64 5%
29 Nduka Nwonye LB Securities Ltd 4 40 20 64 5%
30 Admiral Alison Madueke Council Member 25 25 2%
31 Dr. Chukwujama Unex Capital Ltd 15 15 1%
32 Eniola Anako Phronesis Sec. Ltd 15 15 1%
33 Emmanuel Ocholi Lighthouse Asset Mgt. Ltd 15 15 1%
34 Prof. Ndi Okereke-Onyuike, OON Past Director General/CEO 4 21.8 75 50 146.8 11%
35 Mrs. Josephine Igbinosun Secretary to the Council 0 1 10 10 21 2%
36 Alh. Lance Elakama Asst. Director General 0 6 25 25 56 4%
Source: Nigerian Stock Exchange Review of Accounts (September 2010)
51.5 160.8 750 480 1,390.8
LEGENDS:
Nigeria Stock Exchange Status Update/Report
29 September 2010 KPMG + Aluko Oyebode & Co.
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