MONDAY Column
ALSCON’s impending confiscation
First a warning! The article you are about to read is not a
fiction. It is real and if you don’t have nerves of steel
you may find it disgusting enough to throw up. For all you ever knew about the corruption credentials of the current Nigerian government, there is now a new low. Time was when we thought the involvement of Pentascope in NITEL (which by the way has just requested for $11 million bonus from the Nigerian government for doing such a good job) and the surreptitious attempts to sell off the government telecommunications company to a particular group linked to certain members of government were the most crooked thing ever to be conceived by any government in the history of the country. Well, that was before the ongoing lousily designed stratagem to take over (actually the right word should be confiscate) the Aluminium Smelter Company of Nigeria (ALSCON) through a process that should make Dr Oby Ekwesileze, Madam Due Process, to keep quiet forever and go look for some other job elsewhere. But the silver lining here is that the Obasanjo government appears to have met a fitting match as the American government has taken a national security interest in the matter.
On April 2, 2004, following the assessment of applications from interested core investors to acquire 77.5% of ALSCON, two companies were shortlisted, the BFI Group, of the United States and Russian Aluminium (Rusal) of Russia.
The BFI Group parades a gamut of heavy weights for all season. Dr Rueben Jaja, Scion of King Jaja of Opobo who is well connected to the business and security communities of the United States–having lived there for several years – is chairman and CEO of the group. He painstakingly assembled 38 Americans in different areas critical to the rehabilitation and commissioning of the smelter plant, which has been a conduit pipe of corruption for many successive Nigerian governments. The group also has Thomas Crehan, a well respected retired judge of the United States as its legal counsel and other top experts in the field who have had extensive and intensive cognate working experience at the Reynolds Group and also Alcoa, the world’s largest producer of primary aluminium. The group is also in a working relationship with Deawoo International (America) corp. and this was substantiated by a signed document from Daewoo since July 19th, 2002.
Rusal on the other hand, though the world’s second largest producer of primary aluminium (after Alcoa) was suffering from the negative effects of a series of unfriendly takeovers and was running low on cash. This has been copiously reported in the world’s media. Currently there is considerable anxiety among Western banks with liabilities with the company. But all this is not even the problem. At issue is the fact that Rusal is only a front in this whole calculation. The actual organization that is bidding to “seize” 77.5% of ALSCON is a shadowy company known and called Dayson Holdings Ltd registered in the British Virgin Islands (BVI). Now, anytime you hear of a company registered in BVI and attempting to get involved in any big business in Nigeria, you should take your guards; someone probably in government is about to swindle you.
But this one is even worse. Dayson Holdings is further hidden in a blind trust in a company called Commonwealth Trust Limited also located at the British Virgin Islands. So we are dealing with a double whammy here.
Regardless. Having short-listed the two companies, the technical subcommittee of the Bureau of Pubic Enterprise (BPE) then recommended that the bid process move to the next step – the financial bid stage. Prior to this, there was a financial bid conference on May 20th. At this gathering, the Director-General of the BPE, Dr Julius Bala outlined the guidelines and requirements and emphasized clearly that conditional bids were not acceptable. He proceeded to enumerate the guidelines for the bid bond which consisted of (i) a list of preferred banks in Nigeria and overseas where the bond could be procured. (ii) The date of submission (iii) the language of the bid bond and (iv) the court notarisation of the bid bond. All parties were admonished to adhere strictly to these guidelines, failure of which will lead to instant disqualification.
From what can be confirmed, BFI group complied to the fullest and supplied its bid bond on May 27. Rusal submitted a bond written by a bank in Romania. This bond was deemed unacceptable ab-initio based on the guidelines outlined and that should have instantly disqualified the group, especially as it obdurately refused to change the bond. By June 4th, the deadline for the submission of bonds, Rusal had not replaced its bond, so technically it did not submit any bid bond.
The process continued on June 14th with the opening of the financial bids. The opening ceremony was scheduled to commence at 10.00am. Mr Akin Kekere-Ekun, Managing Director of Habib Bank and Chairman of the Technical Subcommittee served as chairman. After the initial ceremonies, the chairman called for the financial bid of the two bidders. At this point, a member of BFI Group’s legal team called for a point of order and insisted that the certificates of compliance needed to be reviewed before the opening of the bids. That would have confirmed if both bidders had met the requirements. And since Rusal’s bid bond was in default, it should have been dropped. The chairman objected to the call based on the information supplied by the DG, BPE. The DG had earlier confirmed to the chairman that all parties had met the requirement as specified by the DG himself on May 20th. However, BFI Group requested that its objection be noted. Thereafter, the opening of the financial bid commenced and Rusal’s bid was opened first. The Russian company submitted a bid of $205 million. $5 million would be paid within five days, it said, and the balance will be spread through 20 years. This was not only conditional, but also an insult on the nation. But at this point, Rusal had become arrogant if not conceited. All its other conditions and proposals were detailed in a 4-page letter to the BPE. Based on this, Kekere-Ekun disqualified the Russian group forthwith declaring that its bid proposal violated the bid rules and regulations of the Nigerian government. The chairman then called on the BFI Group bid. The America group offered to pay $280 million. At this point, BFIG, as has been the practice, was asked to increase its bid proposition since its price was said to be below the Reserve Price. Its officials were given half an hour to decide. At the end of 30 minutes, BFI Group upped its offer to $410million. This was accepted at once by Kekere-Ekun, who now declared BFI Group the winner of the bid contest.
He also declared openly as is the norm, that preferred bidder status would be accorded BFI Group by the National Council of Privatisation (NCP) within 48 hours. Inexplicably, this did not occur.
Soon after the announcement of BFI Group as the winner, which was captured by the major Tv networks across the world, the Nigerian government, without rhyme or reason decided to set aside the preferred bidder’s status for the BFI Group and recalled Rusal for renegotiation. At this point Rusal further downgraded its bid price to $160 million. The world watched with horror. The international community reacted and condemned the crude action of the Obasanjo government.
The United States Department of Commerce dispatched a searing letter to the Nigerian government in which it insinuated corruption on the part of the government. The American government said the process was not transparent and a shame seeing Nigeria had just signed the Anticorruption and Transparency Treaty with the G8 countries at a summit at Atlanta, Georgia. This international outcry led to the reversal of the government decision to allow BFI Group to continue as the preferred bidder. That was done on June 17.
Needless to say, this confusion frightened and created enormous doubt in the minds of the core investors. This inexorably would affect its meeting the deadline for the payment. Consequently, the BFI Group wrote to BPE on 28th June asking for clarification and extension of time for the payment of the initial 10% bid price. This request was unusually denied by BPE. The BPE had severally in the past extended such deadlines. On July 6th, BFIG submitted a second request for an extension and also the creation of an escrow to assuage the legitimate concerns of the international investors who were yet to recover from the trauma of the uncivilised conduct of the Nigerian government in initially setting aside the winners. This request was also denied.
On July 8th, the top officials of BFI Group visited BPE to discuss the execution of the Sales Purchase Agreement (SPA). That was supposed to be the last day but officials of BFI Group were told to come back in the evening of that day. They returned in the evening and were told again to return the next morning (9th July). On the 9th, they were told once more to come back in the evening. But by 3.00pm BFI Group officials were called in and told that the deadline elapsed 12.00 midnight the previous day. BFI Group was therefore in default of the payment of the requisite 10% and no extension would be granted. The method was crude, even barbaric. Even on such matters of deviousness, there should be some style.
While all these were going on, BPE maintained an incestuous relationship with Rusal. It was all along in active discussion with the Russian firm whose officials were already in Abuja. This clearly means that BPE was not negotiating with BFI Group in good faith. The negotiation with Rusal was said to be authorised by the highest level of the presidency. It still continues to this day.
BFI Group has submitted an appeal to the Nigerian President citing grievous irregularities and discriminatory action against American companies. In the appeal, BFI Group cited numerous extensions granted to other bidders, including the most recent one granted to Folio Investment Ltd, the preferred bidder for Daily Times, which even took place on the same day as ALSCON (June 14th). It is on record that the Obasanjo government has granted extension to several other preferred bidders. Apart from Folio Investment (Daily Times), Ikeja Hotels Ltd was granted two extensions before it eventually paid for Abuja Sheraton Hotels and Towers. African Properties Ltd got two extensions to pay for NICON Hilton Hotel, which it failed to meet, and Sino Africa was also given extension on three occasions to pay for NAFCON.
Again, another riveting aspect of the entire melodrama is the defence of BPE for its action, which in this case takes the raps for the privatisation chicaneries of Obasanjo and company. Hanging a dog would be a lot easier if you first give it a bad name. First, the BPE said BFI Group did not substantiate its claims of a working relationship with DAEWOO. That is not a smart lie because there are at least two documents in the BFI Group’s proposal that effectively controvert BPE’s assertion. One of the documents was even signed 2 years ago (June 29th 2002) and another one on April, 16th 2004. When that did not appear to wash, stories within the BPE started flying around that Dr Rueben Jaja, BFI Group’s chairman was an ex-convict. But that is laughable because Dr Jaja who works as a consultant of sorts for the government of the United States has been closely associated with the United States Department of Justice and the Federal Bureau of Investigation (FBI). He has also been endorsed by the Department of Commerce for the acquisition of ALSCON, which was why 38 experts in different fields could repose confidence in him and follow him to Nigeria inspite of the terrible image of the country and its government. An ex-convict does not go around hobnobbing with agencies of governments such as that of the United States.
When the ex-convict story failed, then someone did something dangerous and criminal. Someone whose identity I am told has already been unravelled called in disguise as a staff member of Chase Manhattan Bank calling to transfer funds belonging to BFI Group to the group’s account. When the officials of BFI Group were informed, and apparently confused about what was happening since no transfer of funds was being expected, they told their bankers to provide the “enquirers” with their company’s imprest account, which had a credit balance of $1,500.00. BFI Group’s officials were on their guard because of the frequency of the calls and the suspicion it created. The following day, BFI Group requested its bank to trace the call since no payment was eventually made but the particulars of the account were provided. The identity of the callers is now known and the BFI Group immediately filed a criminal referral for unauthorised and criminal access to its bank account in violation of the United States consumer privacy laws.
BPE officials, including its DG it must be said, are simply being used sometimes against their better judgment in some of these schemes. Dr Bala only needs to be more assertive as many of us know he cannot be part of what is clearly a crime against the nation.
The BFI Group has also reported the whole charade to the World Bank and the relevant agencies of the American government are now busy trying to unravel the real owners of Dayson Holdings Ltd, which, all said, is the crux of the matter.
As I averred at the beginning, Dayson Holdings is where the matter lies and not even Rusal. By the time the sh*t hit the fan, there will be a lot of smell. This is obviously only the beginning. Stay tuned!
Sam Nda-Isaiah is the publisher of Leadership Confidential.
