Forte Financial Limited, an approved capital market operator yesterday filed a lawsuit against Starcomms Nigeria Plc, Stanbic IBTC Plc, and Chapel Hill Advisory Partners Limited at the Federal High Court, Lagos, Nigeria.
The company, in its writs of summons obtained by Proshare NI avers that the entire Private Placement transaction was a vehicle of fraud and illegality perpetrated on hundreds of Nigerian investors. They aver that the Defendants wilfully conducted the Private Placement in a manner contrary to statute and the Plaintiff was induced to enter into it under false representations.
In the suit referenced FHCN/CS/900/12 of Thursday, August 02, 2012; Hawkes Legal, acting for Forte Financial Limited sued for itself and on behalf of its clients who were the beneficiaries of the Starcomms Plc shares purchased in the Private Placement of 2008 joined ten (10) other persons:
1. CHIEF MAAN LABABIDI
2. MR. MAHER QUBAIN
3. MR. NAVAID BURNEY
4. MR. OMAR LABABIDI
5. MR. AFOLABI WILLIAMS
6. MR. ATEDO N.A. PETERSIDE
7. MRS. SOLA DAVID-BORHA
8. MR. YINKA SANNI
9. MR. BOLAJI BALOGUN
10.MR. WALE EDUN
The Plaintiff further avers that the Defendants’ action has occasioned loss to itself and its clients as the funds realised from the Private Placement were never used for the purposes stated in the Private Placement memorandum but were shared among the 2nd – 13th Defendants thus leading to the decline and near collapse of the 1st Defendant and the devaluation of its clients’ investment.
Specific Claims
1. The 1st Defendant Company had obtained the approval of the Nigerian Communications Commission (NCC) on the ground that a strategic investor, Circle-Tel, would be allotted preferential equity in the 1st Defendant Company. The Plaintiff pleads the approval letter dated 21.04.08 from the Nigerian Communications Commission (NCC) and more specifically the following paragraph of the approval letter “Approval is hereby granted to Starcomms Plc to offer part of their shares to selected investors by way of a Private Placement including the proposed Preferential Allotment of its shares to a new strategic investor (Circle-Tel) and the listing, by way on introduction of its shares on the floor of the Nigeria Stock Exchange.†The 1st Defendant is hereby put on notice to produce the original of the NCC approval letter.
2. Neither the 1st Defendant nor the 7th & 11th Defendants who, as joint Issuing Houses, prepared the Private Placement Memorandum, made mention of this letter of approval, nor the proposed allotment to Circle Tel in the Private Placement Memorandum.
3. The Preferential Allotment was never effected to Circle Tel because Circle Tel’s name is conspicuously missing on the list of 43 investors submitted to and approved by the Securities and Exchange Commission (SEC).
4. The entire Private Placement Memorandum contains material statements that are false, deceptive and misleading primarily because the entire transaction was not a private placement.
5. The Plaintiff has also recently discovered that the entire private placement transaction was carried out as a public offer for shares, a transaction for which the Defendants had no authorisation or approval from the SEC to conduct.
6. The 7th & 11th Defendants as issuing houses, despite their good reputation in the Capital Market and presumed knowledge of applicable regulations, together and separately, marketed the Private Placement to members of the Public exceeding the 50 persons stipulated by law.
7. As early as May 2008, even before the Defendants had sought the approval of the SEC for the Private Placement, the 7th and 11th Defendants had marketed shares in the 1st Defendant to members of the public who had been made to execute so called “irrevocable†Forms of Commitment.
8. The Plaintiff avers that not only did the 7th & 11th Defendants market the Private Placement to members of the public beyond the 43 persons they presented to the SEC, they also collected sums of money running into billions of Naira from these people for allotment of shares in the 1st Defendant on the false premise that those members of the public would be investing in the Private Placement. The Plaintiff pleads a list of some the members of the public who deposited money in the trust account held by FCMB Plc. The Defendants are hereby put on notice to produce the TRUE and AUTHENTIC statements of the transaction accounts kept by Stanbic IBTC PLC, FCMB Plc & Fidelity Bank Plc respectively.
9. Instead of refunding the monies deposited by the unsuccessful applicants at the Placement as directed by SEC, the Defendants converted this money and proceeded to effect a mass assignment of shares to these people.
10.The 7th and 11th Defendants, with the active connivance of the 1st – 6th Defendants, then caused First Registrars Limited, the Registrars to the Private Placement, to issue share certificates to several persons outside the SEC approved 43 on the basis of a spurious transfer of shares from the 7th & 11th Defendants to those unsuspecting persons. The 2nd Defendant personally signed all the Certificates that were issued.
11.The Defendants deliberately set out to conduct a Public Offer and not a Private Placement. In furtherance of this purpose, the 7th Defendant, during the Private Placement transaction, hurriedly sent out e-mail notices to those it had collected money from, to come and fill share transfer forms and submit same to the 7th Defendant before the 01.07.2008 to enable such persons obtain share certificates.
12.The Share Certificates dated 09/07/2008 issued at the end of the Private Placement were in excess of 1000 and the Plaintiff’s Certificate is numbered 538. The Plaintiff avers that the Private Placement should have produced only 43 new shareholders to the two shareholders whose names were disclosed in the Private Placement Memorandum.
13.None of the Defendants made any disclosures to SEC regarding the purported share transfers during the Private Placement Memorandum.
14.The Defendants did not disclose to SEC that they received hundreds of applications. Only 43 applicants were reported to SEC.
15.The Plaintiff shall contend at the trial of this case that the 7th & 11th Defendants, in collusion with the 1st – 6th Defendants, offered themselves shares in the 1st Defendant on the condition that they would assign the benefit of those shares to other persons after the Private Placement was approved by SEC.
16.The Plaintiff’s contract to purchase shares in the 1st Defendant was strictly limited to a purchase via Private Placement.
17.The Plaintiff avers that over 1,000 share certificates were issued after the purported Placement and that many of these persons are named on a ledger kept by the 1st Defendant entitled “Subsequent Transactions.†The Plaintiff puts the 1st Defendant on notice to produce this document.
18.The Plaintiff shall contend at trial that deposits for shares were taken from a good number of the persons named in the document entitled “subsequent transactions†and these investors’ deposits were received into the trust accounts opened for the purported placement rather than a subsequent transaction.
19.The Plaintiff shall at the trial of this suit contend that all the Defendants took the benefit of the Plaintiff’s money, in that whilst the 1st Defendant took the major share, the 7th & 11th Defendants earned commissions on it. The Plaintiff further avers that part of the money was used to fund the purported Private Placement.
20.The Plaintiff avers that the Defendants worked in tandem in making the false representations that led to its parting with money and that the Defendants also collaborated in conducting a Public Offer under the guise of a Private Placement.
Class Actions and Growing Investor Agitations
Hawkes Legal has filed this action as a template for investors on the list of 43 persons approved by SEC for the transaction. Daily, new disclosures are received that promises to throw more light on this stain on the market’s integrity and professionalism.
Recall that a previous class by persons not on the SEC Approved list of 43 was filed on Friday, June 22, 2012 in addition to a private suit against the issuing houses involved in the contentious Starcomms ‘private placement’ offer of 2008; which the SEC has not acted on till now.
Source: Proshare
