Connect with us

INVESTIGATION

How LG, Samsung, Fouani, SIMS defrauded Nigeria of over N25bn

Published

on

Four companies, two with foreign ownership, that deal in importation of electronic and household appliances have exploited a defective import tariff waiver policy of Nigerian government and special forex allocation to manufacturers by Central Bank of Nigeria (CBN) to make billions of naira through fraudulent claims.

One of the companies, Somotex Nigeria Limited, is a shadow business of an offshore company registered in British Virgin Islands, a well-known tax heaven. The other three companies are Sims Nigeria Limited, Fouani Nigeria Limited and Dee Kay Nigeria limited. These companies have exclusive dealership into the importation of global brands, such as LG and Samsung electronics.

A joint investigation by OrderPaperNG and The ICIR shows that while these companies enjoy the status and privilege accorded to manufacturers that import raw materials, they are mere traders. Nevertheless, they are given forex concessions at CBN rate for manufacturers. They also get duty waivers, normally given to manufacturers that import raw materials.

The import duty waivers involve Completely Knocked Down (CKD) and Semi Knocked Down (SKD) goods, a controversial policy that gives tax concessions to importers who are willing to import products in parts to be assembled locally in Nigeria. By this policy, government aims to create jobs through manufacturing as well as accelerate transfer of technologies. An initial investigation by OrderPaperNG published in July 2018 had exposed this import waiver fraud involving same companies which have continued according to impeccable sources, to engage in the scheme.

Those who import goods in CKD/SKD obtain tax waivers from the ministry of finance and pay lesser import tariff. Instead of the usual 20-35 per cent duty on such products, they pay just 5 per cent with the belief that the importers have assembling plants where they couple the items, and employ Nigerians and create opportunity for transfer of technology.

The federal government justifies these waivers based on the provisions of the Customs and Excise Tariff Act and the Finance Miscellaneous Act 39 of 1990, among other legal and administrative instruments. Import waivers are issued by the Ministry of Finance and implemented by the Customs Service.

But investigations show that the four companies import fully built products and still claim duty waivers as if they brought in CKD/SKD. Customs documents obtained by OrderPaperNg and also analysed with The ICIR revealed that the four electronic dealers defrauded Nigeria of over N25 billion in CKD/SKD waiver claims between 2010 and 2018.

THE PANAMA PAPERS LINK

Curiously, Somotex Nigeria Limited is owned by an offshore company, Conifer Holdings Limited, a company registered in British Virgin Islands with Mossack Fonseca as the agent.

A trove of papers leak from Mossack Fonseca, a Panama-based law firm, revealed astonishing web of individuals and businesses that hide their wealth in tax haven through shell companies. The gigantic leak obtained by the International Consortium of Investigative Journalists, ICIJ, became known as Panama Papers.

Conifer Holdings Limited was registered in British Virgin Islands in 1995. Two years later, the company incorporated Somotex in Nigeria with 99.9 per cent shares belonging to the offshore company. The individuals behind the offshore company – Ram Udharam Mohiani, Ramchand Mohinani Ashok, and Anil Ramchand Mohinani – are also three of the four directors of Somotex Nigeria Limited.

The fourth director, Nkiru Nzegwu-Danjuma, not associated with the offshore company, was not a shareholder in Somotex. Findings showed that Nkiru was the wife of Musa Danjuma, younger brother to Theophilus Danguma, former Nigerian Army chief of staff and Minister of Defense. Nkiru, a lawyer, died in 2016 at the age of 57 after protracted illness.

Last year, when OrderPaperNG contacted Somotex to respond to the official documents that revealed how the company’s false declaration of its imported products deprived Nigeria of hundreds of millions in revenue, the company threatened that it would take retaliatory action if the story was published.

But further digging into the company by The ICIR uncovered a mischief in its incorporation in Nigeria. While it appeared that Somotex had not broken Nigerian laws by being incorporated by an offshore company, the owners used the discredited Mossack Fonseca to register the parent company in British Virgin Islands, two years before incorporating Somotex in Nigeria.

Such obscure parent company in a tax heaven is usually used to engage in money laundering. However, Peter Ubani, a lawyer, said Somotex has to still operate under the Nigeria’s financial regulations despite being owned by an offshore company.

“Irrespective of the status of one of the offshore companies, the one in Nigeria is subject to the laws of the country. It is subject to the company income tax law, even if the majority ownership belongs to the offshore company. As long as it does business here, it will pay tax. It has to pay company income tax,” he explained.

But the problem, Ubani said, is that such offshore company can be used to hide the real owners of the company in Nigeria and launder money. “They shield their owners, and they can repatriate the profit offshore. The profit will not be subject to Nigeria laws. Sometimes they use it for slush fund, such as laundering.”

Frank TieTie, another lawyer, activist and executive director of Citizens Advocacy for Social and Economic Rights (CASER), said even the repatriation of profit by foreign company must be within the Nigerian regulations. “Section 54 of the company allied matters act makes it mandatory for any company, whether it’s a Nigeria company or not, to be registered in Nigeria before it commences business in Nigeria,” TieTie said, adding: “Repatriation of profit is subject to Nigeria law. Such law as Foreign Exchange Monitoring Act, and other financial laws are applicable to foreign ownership and other repatriation of legitimate proceeds.”

TieTie added that “cash inflow and outflow, must be monitored by the institutions such as EFCC, which oversees the Money Laundering Act. At that point, the concern to anyone who is worried about tax evasion should be in regard to illicit financial flow.”

TOP SECRETS ON ASSEMBLY PLANTS 

Uzodinma

On March 15, 2018, the chairman of the senate committee on customs and excise, Hope Uzodima, accused the importers of defrauding the government billions of naira through false declarations on CKD/SKD, adding that the companies had no assembling plants, a major criterion to qualify for the import duty waivers.

Uzodima said that during oversight visit to the supposed assembling plant of Somotex, his committee discovered that the so-called plant was just a warehouse.

When a reporter was first sent to the head office of Somotex in Lagos last October, he could not immediately ascertain whether the company had an assembling plant or warehouse as claimed by the senator. While there appeared to be lots of activities around the complex, the organisation refused to allow him entrance into the premises.

The receptionist claimed that everyone in the department that ought to give approval to receive a visitor into the purported assembling plant were on leave. After lengthy persuasion, a call was placed to the head of the legal team, Erhuanga Odion Erabai, who said that the company was not given enough notice before visiting. He said that the company could only welcome the visit the following week.

“This is not how things are done,” Erbai said. “You cannot just come in to our organization without informing us and be demanding for answers. This is a private firm. You have to give us enough advance notice and we will decide if we want to give you information or not.”

Yet on follow up visit to the company, the reporter was again denied access into the premises. Somotex imports brands such as Midea home appliances, Havells electricals, Bruhm home appliances, and Su Kam inverters and batteries.

The brands declined to respond to inquiries on whether their products are exported to Nigeria on CKD/SKD.

Although two staff of Somotex who spoke to the reporter said the company assembled television and other electronics. But there was no evidence of such activities during the two-time visit to the company.

Official documents show that Somotex had been importing fully built products and still claimed CKD. On January 6, 2014, the company imported twelve 40 feet containers of fully built television sets as CKD with Customs Reference C674 through the Apapa Port. It paid 5 per cent import tax of N17, 757,486.00, instead of 20 per cent for the consignment valued at N146.12 million. By claiming CKD on fully built television sets, Somotex made N24.6 million on that particular transaction.

Again on September 9, 2013, Somotex imported fully built television sets as CKD and paid 5 per cent import tariff, instead of 20 per cent, depriving Nigeria of N3, 614,809.27 in revenue.

The fraud of underpaying import duty for fully built products under the guise of CKD/SKD is dubbed “wrong classification” within Customs. Wrong or false classification occurs when the nature of the goods indicated in the manifest before shipment is different from what arrives in the country.

Billions in waivers to generate N15, 200 a month menial jobs 

Fouani Assembly Plant

Along the untarred road leading to Irede community in Amuwo Odo, lies the LG assembling plant managed by Fouani Nigeria limited. Fouani is a major beneficiary of CKD/SKD duty waivers and the teenagers assemble electronic parts imported by the company. Most of the workers in the plant are secondary school leavers without requite knowledge to acquire technology transfer through the process of assembling as envisaged in the import tariff waiver policy.

They work from 7:30am to 5pm Monday to Saturday on monthly salary of N15, 200 for new entrants and N17, 500 for line supervisor. They do not have any insurance and they do not run shifts.

LG and Hisence are the two major brands that are purportedly being assembled at the plant. Products such as television, refrigerator, gas cooker and washing machine are the major products that were claimed to be assembled at the plant.

Fouani workers said the core staff are foreigners (Lebanese), with few Nigerians to complement their work. Munirat, a former worker in Fouani said, “in terms of pay, it’s not that great. If you resume by 7:40am, you are late, and you close by 5pm, Monday to Friday. I cannot really tell on the number of persons working in the plant, but maybe like 300 or so.”

The reporter was prevented from entering the premises, but from outside, some of the workers could be seen playing during the lunch period. A Fouani staff took extra measures in checking the credential of the journalist. His picture and ID card were taken and sent to an unknown person for verification, and he was asked to wait. After two hours, the Lebanese man in-charge came out to ask the journalist to leave.

In June 2018, Fouani, the sole distributor of LG products in Nigeria imported goods worth billions of naira, including refrigerators, air conditioners, LCD TVs and washing machines. These goods which normally should attract import tariff of between 20-35 per cent, the company paid just 5 per cent tariff on the fully built products through false classification.

With its Form M application MF20180041207 to import air conditions worth $2,204,132 (N674,464,392), Fouani’s goods with Container Tracking Number MAEU576853985 were conveyed through MAERSK COPENHAGEN shipping line and cleared at the Apapa Seaport. While the air conditioning machines were fully built units, the company got import duty waivers for CKD.

Fouani also imported $1,512,000 worth of fully built LCD television sets from China with Form M number MF2018004142 and falsely classified them as CKD. Instead of paying 20 per cent import duty, the company paid just five per cent.

On the same Vessel Maersk Copenhagen Voyage 1805, Fouani claimed CKD for importing 910 fully built sets of refrigerators with tracking number MAEU964879324 and Form M number MF20180041306. The company also claimed CKD for another 3870 sets of fully built refrigerators with Form M number MF20180041299. The products had combined value of $891,750 (N272, 875,500).

Under the same shady importations were 324 sets of refrigerators, 1150 sets of fully built refrigerators and 1100 sets of washing machines at the value of $229,680, $227,090 and $65,850 respectively that the company claimed CKD.

DELIBERATE WRONG CLASSIFICATION

Sims Nigeria Limited, on May 5, 2018, got forest under the CBN rate to import air conditioning machines valued at $308,471 and paid through Fidelity Bank with Form M number MF20180030886.

According to Costco Shipping Lines’ manifest, the cargo arrived Tin Can Island Port from China filled with air-conditioning machines. Sims claimed that the goods were CKD, but the merchandise was fully built products. Nevertheless, Sims paid 5 per cent import tariff instead of 35 per cent for the refrigerators.

With its head office in Victoria Island, Lagos, Sims declined to respond to email inquiries. On the day that the reporter visited the company, the person in charge of public relations who might have been receiving previous emails from the reporter was said to have been sacked a week earlier. The person that spoke to the reporter claimed that no one else was in charge of public relations at the company.

The reporter was later introduced to a man, who said he was responsible for logistics at Sims. He claimed that the company has an assembling plant.

“For me in my own capacity, I only liaise with agents who deliver products. But if you want to see our factory, we have a big factory at Amuwo Odofin industrial estate. That is where they manufacture all these items you are seeing,” he said.

He insisted that Sims has an assembling plant. “Customs should know the people they are referring to. Most of the times, they make those wild allegations. They should improve. We have our factory at Amuwo Odofin. You can go there; we couple TV there. We do refrigerators, and ACs. You people should work from there and see who are those who have factories, and those who do not.”

When the reporter asked to see the factory, the man said: “they just want me to find out what you want.”

Another staff of Sims who works at the human resource department of the company and who introduced himself as Chuka declined to answer questions. “You cannot just come and tell us something and expect us to act on it, even if you are journalist,” he said. “You cannot just bring your ID card, and expect us to just give information. Bring valid paper work.”

SECRETIVE ASSEMBLING PLANTS

Posing as a prospective customer could not get the reporter into the purported assembling plant of Dee Kay Nigeria Limited. All conversations around having access to the building was quickly turned down.

A marketing representative of Dee Kay told the reporter that the company’s assembling plant is located within the premises, but there was little or no significant activities to suggest that the work of such magnitude was going on.

With head office in Ikeja, Lagos, Dee Kay described itself as a “leading importer of all types of finished goods into Nigeria”. Yet, the company made over 153 importations under wrong classification between 2015 and 2018. By importing fully-built fridges, freezers and other electronic products, the company claimed CKD for these importations and shortchanged Nigeria of over N800 million in revenue.

In 2010, Customs issued a circular that ordered all units at the ports to charge full tariff for any import that fails to meet the CKD/SKD standard, regardless of import tariff waivers from the Ministry of Finance. Despite the directive, the importers have continued to underpay import tax on fully built products under the pretense of CKD/SKD.

Terminal operators at the Lagos port said that the importers could only have succeeded in defrauding Nigeria with the connivance of Customs officials. A terminal operator who preferred anonymity pointed out that certificate of waiver is not a ground for false declaration, adding that it is impossible to get away with false declaration if there are no connivance with Customs.

“Look, the Customs is under the Ministry of finance, so the chances of collusion on waiver certificate and under declaration is very slim,” he said. “If there are any form of under declaration going on, it’s either they have collected bribe or some powerful people are involved.”


*This investigation was made possible with financial support from the Ford Foundation and the International Centre for Investigative Reporting 9(ICIR). The report first appeared on Order Paper and ICIR

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

INVESTIGATION

Ex-staff fights embattled billionaire Onajite Okoloko‘s Notore Chemical Industries, wins in court

Published

on

Ex-staff fights embattled billionaire Onajite Okoloko‘s Notore Chemical Industries, wins in court
Embattled billionaire, Onajite Okoloko, CEO - Notore Chemicals Industries

The National Industrial Court, Lagos Division, has ordered Notore Chemicals Industries Plc, owned by embattled Nigerian billionaire Onajite Okoloko’s, to pay Mr. Ayodele Balogun, a former employee of the company the sum of N20, 525, 999 (Twenty Million, Five Hundred and Twenty-Five Thousand, Nine Hundred and Ninety Nine Naira, Sixty Kobo only) as outstanding balance of his gratuity payment due to him since 2013.

The court also awarded in favour of the ex-staff the sum of N1, 000,000.00 (one million naira) cost of action within one month, failing which it attracts 10% interest rate per annum until fully liquidated.

In a judgement monitored by The Witness, and delivered by the presiding judge, Hon. Justice Nelson Ogbuanya, the court held that the company action credited to external advice which prompted the defence of ‘mistaken payment’ was not justified, and cannot override the obligation to pay outstanding balance due to the claimant.

The claimant- Ayodele was employed on 1st October 2008 as Chief Marketing Officer, that by a letter dated June 14, 2013, sent via e-mail on Wednesday June 19, 2013 he tendered resignation, and indicated that it would take effect on 1st October 2013, that as a result of his service to the firm spanning 5 years, that he has become entitled to payment of gratuity upon successful exit from the Company that a total settlement package was communicated to him via e-mail out of which only 50% was paid and all effort to get balance proved abortive.

In argument, the firm submitted that Ayodele did not attain the threshold of ‘continuous service greater than 5 years and up to 10 years’ to be qualified for monetary payment in addition to ‘Testimonial of Service’, which is the only package available for those who were in ‘continuous service up to 5 years’, under the company gratuity that the payment already paid to the Claimant was a mistake and it was because of the discovery of the error that the Defendant refused to pay the balance and also seeks refund of it.

Counsel to the firm further argued that the Claimant’s resignation becomes effective on date of receipt of the letter of resignation by the employer, and as such, the correct effective date of the Claimant’s resignation is June 14 2013 (submission date), and not the 1st October 2008 contained in the resignation letter that the Claimant’s case lacks merit and should be dismissed while upholding the counter-claim for refund of the sum already paid to the Claimant in error.

Counsel to the claimant U. U Njoku, Esq contended that the Defendant failed to tender its payroll to disprove that the Claimant was no longer in its pay roll as at 1 October 2013 urged the court to so hold and grant the reliefs sought.

Delivering judgment after careful evaluation of the submissions of both counsel and the processes filed, Justice Ogbuanya held that where date is not provided in the resignation, it takes immediate effect upon receipt of resignation, but when effective date is provided, it becomes effective on the last day of the notice period.

“I also note that it is part of the court’s equitable jurisdiction to preserve earned benefits, particularly those of pecuniary nature, and court usually tilts towards resolving such emerging controversy in favour of the beneficiary rather than in favour of one trying to take away or expropriate the benefit.

“From the tenor of the above provisions of the company Gratuity Policy, I find that once an employee attains 5 years of continuous service with the defendant, such an employee shall/must be entitled to not only cash payment as gratuity but also other testimonials and certificate of appreciation and or asset gift.

“In the circumstance of the claimant, I find that he has attained 5 years of continuous service with the defendant and there was no evidence disputing that he resigned willfully and there was no evidence of any skirmish of probe or low performance tainting his voluntary resignation. I so hold.” Justice Ogbuanya ruled.

In all, the court dismissed the counterclaim for lacking merit.

Continue Reading

INVESTIGATION

Lagos commissioner, Ajibola Ponnle’s rising profile

Published

on

Lagos commissioner, Ajibola Ponnle’s marriage crumbles
Ajibola Ponnle

Ajibola Yewande Olufunke Ponnle is the Lagos State Commissioner for Establishments, Training and Pensions.

Until her appointment,  she was the Registrar and Chief Executive Officer of the Chartered Institute of Personnel Management, the industry regulator of the profession of Human Resource Management in Nigeria.

Born on the 9th of September, 1973, she has 25 years uniquely diverse professional experience. Building on her B.Sc. in Economics from the University of Ibadan and a M.Sc. in Organisational Psychology from the University of London, she gained key skills in the fields of finance, strategy, organizational development and human resource management, with a specialisation in executive/leadership and team coaching.

She is a Fellow of the Institute of Chartered Accountants of Nigeria, Member of the Chartered Institute of Personnel Management of Nigeria, Associate of the Chartered Institute of Taxation of Nigeria and an International Coach Federation Accredited Professional Coach.

Mrs Ponnle started her career in 1994 with Arthur Andersen (now KPMG), thereafter, joined British American Tobacco as one of the founding pre-merger staff and left as a member of both the Finance and Marketing Senior Management teams. In 2004, she became an entrepreneur, setting up a series of companies including TeamBuilding Africa Consultancy, the regional representative of Team Building USA where she was at the forefront of shaping the experiential team development industry in Nigeria, serving also as visiting faculty on the Executive Management Programme at Lagos Business School. In 2015, she pioneered the establishment of the Nigeria Chapter of International Coach Federation (ICF) and served as the Founding Chapter President, a Trustee and a member of ICF EMEA regional leadership team.

She became the first Nigerian to earn the ICF Professional Certified Coach accreditation and also the first Core Energy Coach and Energy Leadership Master Practitioner in the country. In recognition of her contribution to the development of professional coaching in the region, she was selected as one of five founding members of the Africa Executive Coaching Council.

In January 2017, Ajibola launched the Centre for Core Coaching, dedicated to certifying professional life and corporate coaches, becoming the first programme in West Africa developed to meet the International Coach Federation accredited coach training standards. Ajibola is a seasoned learning facilitator and international speaker. A visionary, change champion and consummate professional who is fully committed to pursuing the ‘Human Agenda’ in the nation.

Continue Reading

INVESTIGATION

Ecobank Nigeria partners Lagos govt to clean up waterfronts

Published

on

Ecobank Nigeria to host Regional Trade Forum 2020

Ecobank Nigeria is partnering with Lagos State Ministry of Environment on Waterfront Clean Up Program to enhance the preservation of marine Ecosystem and effectively facilitate socio-economic activities such as transportation, power generation, irrigation and habitat to aquatic life.

The exercise, tagged “Cleaner Waterfront Our Pride”,  was flagged off on Thursday at the Lagos State Government, Ferry Jetty, Amuwo-Odofin.
In his comment, Engr. Joe Igbokwe,  Special Adviser to the Governor of Lagos State on Drainage and Water Resources, said the project was dedicated to cleaning Lagos waterfronts and educating people on ways of disposing plastic waste properly rather than dumping them into the gutter and how to preserve the Ecosystem in general.

Igbokwe who profusely commended Ecobank for its continual support on environmental sustainability issues noted that each and every one of the citizens and corporate bodies are stakeholders and must be involved in helping to preserve the environment, as it is a call to action for all.

Also speaking, the Managing Director, Ecobank Nigeria, Patrick Akinwuntan said the partnership to clear up Lagos waterfronts is part of the Pan African bank’s Corporate Social Responsibility (CSR) policy to support environmental sustainability initiatives with a view to making the environment safer for living.

According to him, the partnership with Lagos State Government and other non- governmental organisations across the continent was in that direction.
He noted that the water bodies are priceless gifts of nature with huge aesthetic, tourism and economic values.

He lamented that these, however, had been subjected to all forms of abuse and degradation, including dumping and littering with solid wastes and all forms of debris.

The Managing Director who was represented by Tunde Dawodu, a General Manager in the bank, pointed out that there should be a culture change on the way we dispose of our garbage.
This he noted starts with every one of us. He noted that it was in recognition of this fact, that  Ecobank in May this year launched a campaign tagged: ‘Plastic Bottle for Cash’ to pick up four million bottles from Lagos drainages.

Under the initiative, Lagos residents were informed and encouraged to exchange plastic bottles for cash at designated locations across the State.
Of the 4 million target set, over two million used plastic bottles have so far been removed from the streets as the project continues to the end of the year.

According to him, “this initiative is part of our sustainability week for 2019, designed to create awareness on environmental sustainability and to buttress the fact that as a bank, we take time in helping to protect the environment where we operate. Ecobank is an environmentally friendly and socially responsible entity in alignment with the expectation of the Nigeria Sustainability Banking Policy of Central Bank of Nigeria.”

He noted that the 2019 campaign centered on cleaning Lagos and its environs of used plastic bottles along streets, drainages and waterways by collecting and recycling four million plastic bottles. “We hope to reduce this menace affecting our ocean marine life and threatening the food chain. As a responsible corporate organization, the bank will do all it takes to check the trend to ensure a safer living environment for every one of us”.

Continue Reading
Advertisement

Facebook

Advertisement
Advertisement

Trending