Fraudulent Transactions: Otedola, Zenith Bank agrees to an out-of-court settlement

The Federal High Court of Nigeria, Lagos Division, dismissed the lawsuit on Thursday after receiving a notice of discontinuance from the plaintiffs.

Femi Otedola, chairman of FBN Holdings and principal stakeholder in Geregu Plc, and other of his firms have reached an out-of-court settlement with Zenith Bank plc.

Mr Otedola was involved in a legal dispute with the bank over alleged “fraudulent transactions” on his company’s accounts.

Court papers obtained by News Men showed the Federal High Court of Nigeria, Lagos Division, where Mr Otedola and his companies filed the suit against the lender on 12 March, dismissed the case on Thursday, 13 June, on receiving a notice of discontinuance from the plaintiffs.

Zenon Petroleum & Gas Limited, Seaforce Shipping Co. Limited, Luzon Oil & Gas Limited, Garment Care and Mr Otedola were the plaintiffs, while Zenith Bank, Quantum Zenith Securities & Investment Limited, Veritas Registrars Limited and Central Securities Clearing System Plc were the defendants.

According to a court document, Justice A.O. Faji discontinued the lawsuit after the counsel for the first to third defendants and the counsel for the plaintiffs asked for the matter to be dismissed, with the “counsel for the fourth defendant not objecting.”

Details

Mr Otedola and his companies initiated legal action against Zenith Bank and the other defendants in March, claiming that the lender disposed of his shares in the bank without authorisation, manipulated the companies’ bank accounts and fabricated some documents to conceal the alleged crimes.

He accused the lender of wrongfully calculating his debts before selling them to the Asset Management Corporation of Nigeria (AMCON), which the bank set up to buy the non-performing loans in the books of banks with the intention of recovering them thereafter.

Zenon had claimed that the letters of credit that led to the bad loans AMCON acquired were opened before the corporation took over the debt in December 2011. The company stopped operating the account after AMCON’s intervention.

According to a document seen by our correspondents, the overdue on Zenon’s account at the point AMCON took over the liabilities was N39 billion. Zenon said Zenith Bank offered the debt to the corporation at N49 billion. AMCON ended up paying the bank N44.1 billion for the debt.

Sources with knowledge of the matter told our correspondents in May that Mr Otedola chose to take legal action against the bank after several failed reconciliation attempts. During the month, both parties held three meetings, none yielding the desired results.

“It is clear that Zenith Bank Plc is not sincere in resolving this issue out of court and as such a time-wasting exercise,” one of the sources said.

“At this juncture, we have resolved to pursue our claims via the judiciary, law enforcement, the CBN and the court of public opinion as we know that our claims are very genuine.”

According to a document detailing the deliberations of both parties at a meeting held on 20 May, Zenith Bank agreed to refund the N205 million it wrongfully debited to Zenon’s account with compounded accrued interest using a bankdraft.

Seaforce Shipping Company Limited, owned by the billionaire tycoon, said Zenith Bank presented some statements of account claiming that it owed the bank N5.9 billion as of February 2024. It added that Zenith Bank abandoned the claim after the company showed proof that Seaforce’s account was in credit as of 2018.

A source said Zenith Bank sold the 415 million shares that Zenon held in Zenith Bank for N4.9 billion in December 2010, noting that the shares were repurchased in the following month for N5.4 billion, triggering a net loss of N142.9 million.

He further disclosed that related transactions were carried out on Mr Otedola’s account, causing a net loss of N61.5 million and a combined loss of N205.4 million in both cases.

Isyaku Mohammed, the commissioner of police in charge of administration at the Force Criminal Investigation Department, summoned the managing director of Zenith Bank on 16 May over what he described as an alleged unauthorised debit to Zenon’s account.

“This office is investigating an alleged case of fraudulent misrepresentation, wrongful debit and unauthorised transactions referred from the assistant inspector general of police, FCID Annex, Alagbon Close, Ikoyi, Lagos, involving your financial institution,” the letter.

“A precis of the petition at disposal reveals that sometime in 2011, an unauthorised withdrawal was carried out on the account of Zenon Petroleum Gas Limited with number 10110385211 to the tune of Two Hundred and Five Million, Three Hundred and Forty-six Thousand, Five Hundred and Seventy-Three Naira (N205,346,573.00) without justification.”

The letter stated that Zenith Bank wrongfully opened some letters of credit after AMCON acquired the debt in 2011, which led to unsolicited loan disbursement that further plunged Zenon into indebtedness.

(Premium Times)