The Association of Local Governments of Nigeria is haunted by allegations of a N2.5 billion scandal, part of funds approved for an American hospital project
Although the Association of Local Governments of Nigeria, ALGON, is the umbrella body for all the 774 local governments in Nigeria, it is still saddled with the challenge of internal democracy. Following wranglings among its members, the association only managed to elect an interim management committee, until recently when an election was held on March 23, 2012, to run its affairs. It is said that the election, which ushered in the new executives, was hurriedly put together to prevent the release of funds proposed for a project by the association from getting into ‘wrong hands’. But what the association was trying to avoid is already developing into a scandal involving the sum of N2.5 billion allegedly transferred into some accounts not belonging to the association or its registered contractors.
The project which the presidency reportedly approved following a plea from ALGON, had to do with providing world-class health facilities and medical manpower in the country. It came as a proposal for building sustainable capacity in the primary health care of all local governments, LGs, in the country. The proposal was prepared by the American Hospital Limited, AHL, Abuja, and endorsed by ALGON, and was presented to President Goodluck Jonathan. AHL through its representative in Nigeria, Ifeanyi Obiakor, a medical doctor, offered to build a five-star world-class hospital and a topmost university, the American University of Medical Sciences, AUMedSc, dedicated solely to the training of manpower in the medical and allied health professions in order to build and sustain capacity in the health care industry in all LGs in Nigeria. This, it hoped would boost the production of doctors by an additional 1, 000 per annum to make a total of 3, 000 per annum to match the country’s population growth. Under the arrangement, at least, one doctor and two allied health professionals will be trained per year from each of the 774 LGs, with provisions for higher numbers for LGs with a doctor/patient population ratio higher than the national average. Also, AUMedSc will produce 2,000 PhDs holders per year in allied and basic sciences to build capacity in Nigerian academia. A large percentage of students for the programme would be nominated by LGs. In the agreement signed between AHL and ALGON, on July 30, 2010, the latter would participate in the collaboration through a subsidiary company, ALGON Healthcare Development Company Limited.
To be able to contribute its own equity to the project, ALGON, in a letter to Jonathan dated August 23, 2010, and received in the office of the chief of staff to the President on August 31, 2010, titled: Re: Local Governments Withholding Taxes, WHT, and VAT Liability: An Appeal for Waiver on Penalties and Request for Audience, signed by Chikwe Udensi, then secretary of the association, brought the attention of the President to a letter of July 7, 2009, in which ALGON had prayed for the President’s approval of “a waiver of all penalties on the tax liabilities” of its members, stating that “our savings on the waiver will be invested on the attached investment profile.” It also asked for an audience with the President “for further clarification on this matter”.
After series of correspondences, the much sought after approval came after another letter dated December 6, 2010, and signed by Udensi, was received in the office of the principal secretary to the President on December 7, 2010. In the letter, titled: Re: Outstanding Local Government WHT and VAT Arrears, ALGON sought the approval of Jonathan in paragraph two that “the honourable minister for finance and the accountant-general of the federation be directed to effect the total payment of N11,456,967,099.16 to Bank PHB for the benefit of FIRS (Federal Inland Revenue Service) for N6,939,587,147.84 and the sum of N4,517,379,951.32 being the amount of penalties and interests to ALGON medical development fund for building capacity in the primary health care system from the Federation Account as requested by ALGON.” These requests obviously got the blessings of the presidency going by the minute on the same letter: “HMF, prayers in the annotated paragraphs 2 & 3 approved,” and signed on December 9, 2010.
The ALGON letter emphasised that savings from the waivers would be invested in the primary health care system by training one medical doctor and two allied health personnel yearly for the next 10 years to alleviate the current acute shortage of medical personnel for primary health care delivery in the rural areas. An extract from the minutes of the National Executive Council, NEC, of ALGON held on October 24, 2009 stated that, “all funds from the savings of the downward review (of the penalties) should be invested in the primary health care capacity building.” Udensi signed the extract.
Thus it was quite understandable when President Jonathan on September 10, 2010 approved the request. The amount, totalling N4.5 billion, represents part of the expected payment approved on outstanding 2001-2006 established LGs WHT and VAT, and was to finance the 30 per cent equity of ALGON in the proposed AHL and AUMedSc project. Specifically, ALGON will have 30 per cent shares of the university and 30 per cent share of the hospital in paid-up equity shares, with the share capital calculated on pro-rata basis. Other shareholders in this public-private partnership, PPP, arrangement include Abuja Investments Company Limited, AICL, First City Monument Bank, FCMB, Nnamdi Azikiwe University, AFAM Comprehensive Healthcare Group, a United States-based largest minority owned medical practice; Tunde Ayeni, Ifeanyi Uba, Chike Chikeluba, Tom Adaba, and Umar Faruk.
But Udensi and Felix Akhabue, then chairman of ALGON, in separate interviews with the magazine maintained however, that the N4.5 billion approved for ALGON by the President through the Central Bank of Nigeria, CBN, was not money for the AHL project. They said ALGON asked that the minister of finance and the accountant-general be directed to release the sum of N6,939,587,147.84 for payment to FIRS and the sum of N4.5 billion to ALGON for “Medical Development Fund for building capacity in the primary health care system.”
Even then Obiakor of the AHL alleged that ALGON never paid the money into the project’s account as agreed. “But did they pay the money into that account? Did they pay the money into the account for which it was meant?,” Obiakor, in anger asked TELL rhetorically, using unprintable words to describe some ALGON officials involved in the deal. Now, what happened to the money if it was not used for the project intended? This is the subject of the controversy among all the parties.
On July 4, 2011, CBN, on the instructions of the accountant-general of the federation, AGF, paid N3.8 billion of the approved N4.5 billion to ALGON from the Federation Account into Bank PHB (now Keystone Bank) account number 1001172005. This account was allegedly opened and operated by Udensi and Akhabue in spite of the existence of an Interim Management Committee, IMC, for the association. This, it was alleged, contravened a federal high court order in suit number FCH/ABJ/CS/538/2010 that all decisions of ALGON shall be made by the ALGON IMC with at least, two-thirds majority support. Besides, it was alleged that the process of opening the account contravened the association’s constitution, which stipulates that the treasurer and secretary general shall be co-signatories with the President as supervising signatory to all ALGON bank accounts.
Sources said that as soon as the money got into the supposedly illegal account, the disbursement began. The sum of N1.32 billion was paid into Aso Savings and Loans account number 0022190883, with sort code 063080779, for the benefit of AHL. The payment was allegedly made on the directive of Udensi and Akhabue vide a letter to Bank PHB manager, Asokoro branch, Abuja, dated July 23, 2011, titled: Authority to Transfer from ALGON Account Number 1280016493. The letter advised the bank manager to “please take this letter as a further instruction to transfer all further sums that comes (sic) in the account for this project to the account as stated.”
Prior to this date, on July 15, 2011, Udensi and Akhabue were alleged to have illegally transferred N2.5 billion into Bank PHB Asokoro (B02) branch account number 1002807679 in favour of Impecca Services Limited. The opening balance in this account as at July 1, 2011 was N2,821. 25. The magazine’s checks at the bank last week however revealed that contrary to the account number on the statement of account of Impecca Services Limited obtained by the magazine, the last two digits read “77” instead of “79”. From this account, the money was subsequently drawn down within a week through various individuals and companies who were paid for purportedly rendering undisclosed services to Impecca. For instance, one John Okoro, listed by the Corporate Affairs Commission, CAC, as a director of Impecca Services, who is said to be a childhood friend and former personal assistant to Udensi, was allegedly paid N65 million. Also, from this account, about 63 cash and cheque withdrawals were made although the CBN limit of N10 million per withdrawal was observed in most cases. In the bank statement released to the magazine, N785,165,000 was paid to some individuals; N453, 100, 000 to some bureaux de change companies for the purchase of foreign exchange; N434,000,000 transferred by National Electronic Funds Transfers, NEFT, and N837, 800,000 in account transfers to unnamed places. Also, through Edfe Global Business, N625 million was allegedly transferred to Akhabue using the firms’ BankPHB Benin (A18) account 1000102545, an allegation Akhabue denied. The magazine’s check at the bank revealed that this account is now dormant. It was also discovered that Edfe Global Services, which was allegedly paid millions of naira was not registered at the CAC.
However, checks by the magazine revealed that the transfer of N2.5 billion to Impecca Services was based on a court ruling made on Wednesday, July 13, 2011, by Justice M.N. Oniyangi of the High Court, Abuja, while delivering judgement in suit number FCT/HC/CV/5059/2011 between Impecca Services Limited, HRN Eze Samuel Ezekwo, operating under the name and style of Chuks-Samuel & Company, as plaintiffs, and ALGON, as defendant. The court had ruled that, “consequent on the adoption of the said memorandum of settlement by the respective counsel representing parties and their request thereto, judgement is hereby entered as per terms of the memorandum of settlement dated and filed on 12th July, 2011.” Tony Ogbulafor Esq of Ogbulafor & Company, represented the plaintiff, while Onyeka Nwokolo Esq. of Rolls Law firm, represented the defendant. Chucks-Samuel & Co is also not registered with the CAC. But Impecca Services Limited is registered with two directors: John Okoro of 13 Jejelaiye Street, Apapa, Lagos and Iheanyi Chukwu Okoro of the same address. It was registered in 2001 with a share capital of N100,000. However, when the magazine visited the address of Impecca at Olodi Apapa, Lagos, no company like that was sighted. In fact, the address, a twin storey building of four flats each, is residential. A female occupant in the building told the magazine that, “no company uses this building; and I don’t know of any Chief John Okoro in this compound.” Further attempts to trace Impecca, particularly on the Internet, was unsuccessful.
Tony Ogbulafor, legal practitioner and counsel to the company, could not offer any address of his client as well. When contacted by the magazine, he angrily said, “they don’t have any office in Abuja” and drove off albeit not before disclosing that Impecca was his client and had an agreement with ALGON. “We went to court to enforce the right of our client to claim money that was due to it. We had a court settlement and you can go to the court to find out yourself,” he said. He however could not explain the type of services rendered by his client to warrant being paid N2.5 billion, neither did he explain why his clients paid several companies and individuals from the money within 13 days. “Look, I don’t know any other company. I only know Impecca because it is our client,” Ogbulafor retorted.
A breakdown of the bank statement of the company indicated that between July 15 and July 28, 2011, 52 cheque transactions of about N487 million took place with such individuals (names withheld) drawing between two and five times from the account. About 31 cash withdrawals in the sum of N298.88 million were made from the same account. Cheques for bureaux de change (names withheld) drawn on this account amounted to 46 transactions all in the sum of N453,1 million with some of them paid between four and 16 times. From the same account, NEFT transfers amounted to several millions in about 15 transactions to several individuals and companies including Edfe Global Business, N625 million; Chuks Samuel Company, N80 million; and one Ibrahim Mohammed Abdul-Aziz, N132.8 million via a transfer from the account in Bank PHB Asokoro, Abuja, to the latter’s personal account number 1003137683 domiciled in Bank PHB, Zakirai (A99) Branch, Kano. Abdul-Aziz was named as the branch manager, Bank PHB Asokoro (B02), at that time; but when the magazine visited the bank’s branch in Abuja, a senior official of the bank said that nobody with such name ever headed the branch since its inception. Besides, the account number of the alleged Abdul-Aziz, checks revealed, did not exist. Still, from this Impecca account was N3,532, 245 allegedly transferred to FIRS, while bank charges on funds transfers and cheques to bureaux de change amounted to N25,490. Akhabue explained that the alleged transactions by Impecca to some companies and persons, if any money was shared, must have been the auditors who paid companies it claimed assisted it in carrying out the due diligence on tax debt owed the FIRS, because the only company ALGON paid was Chuks-Samuel & Co, its external auditors. He stressed that the company had been ALGON’s external auditors before they took over the leadership of ALGON. Curiously, at the time of payment, rather than pay into Chuks-Samuel & Co account, ALGON paid into Impecca’s account, whereas ALGON claimed it did not do any business with Impecca.
According to Udensi, an external auditor of ALGON, Chuks-Samuel-& Co,was hired to carry out due diligence on tax debt owed FIRS, by all the 774 LGs in the country. FIRS had stated that all the LGs owed N37 billion in WHT and VAT, leading to the hiring of Chuks-Samuel & Co to do a proper audit to determine the exact amount owed FIRS, following which an audit was carried out over a period of two years, from Sept 2009 to 2011. ALGON was to pay the auditors 30 per cent of whatever they were able to recover from the N37 billion FIRS claimed they owed. After carrying out the due diligence on tax for all the LGs, the auditors found that the total amount due to FIRS was only N11.5 billion. The auditors also found that out of this total sum, N4.5 billion amounted to penalties and interest. The auditors suggested to ALGON that it could apply for a waiver on the penalties and interest, which amounted to N4.5 billion.
But a top staff in the ALGON secretariat, who pleaded for anonymity because he is a civil servant, reliably informed TELL that he was not aware of any agreement between ALGON and any company to audit the 774 LGs over tax claims by FIRS. The source however disclosed that he was aware that a certain Chief Samuel at one time or the other audited ALGON accounts between 2000 and 2004. “But beyond auditing ALGON account I don’t know of any other one. If there was anything like that, I’m not officially aware of it. The truth is that he never did any such work. All those things are just concoctions. Tell him (Udensi) to bring documents to prove what they’re claiming. Let them show you some documentation. At least if you do work as an auditor, you must have piles of documents that you must have gathered over that period,” said the source.
Umaru Ibrahim, chairman, Board of Trustees, BoT, ALGON, said those contractual agreements were not done with the knowledge of the association’s BoT. “We’re ceremonial heads. We’re the custodian of the assets and liabilities of the organisation, according to the constitution. But unfortunately, our functions do not involve contracting a firm. At the time the thing happened, it is the executives who must have contracted him if there was any contract. No member of BoT authorised anything. We were only made to know after a court judgment was flashed to us that there was a court order on ALGON to pay such money. But we were not involved in it. You should ask Chief Udensi because he was the engine house and he has all the documents,” Ibrahim said.
Extracts from the memorandum of settlement between ALGON and Impecca and one other dated July 12, 2011, reads: “Kindly enter judgement in this suit on the following terms of settlement as agreed upon by between the parties in this suit: (1) That the amount of N7,722,827,257.64 claimed by the plaintiffs is discounted by 10 per cent by the deduction of the sum of N772,282, 725.76 leaving the balance of N6,950,544,531.88 as the agreed sum due and payable by the defendant who represents all local governments in Nigeria in the FIRS transaction subject matter of this case to the plaintiffs. (2) That the payment of the sum of N6, 950, 544, 531.88 shall be made to the 1st plaintiff who financed the project. (3) That the above payment shall be made from the bank account of the defendant first before any other payment or deduction is made outside of the defendant’s bank account number 1280016493 with Bank PHB. (4) That the defendant shall make immediate payment of the sum of N2.5 billion to the 1st plaintiff and the balance of N4,450,544,531.88 be paid within 90 days from the date of this judgement. (5) That the defendant shall issue a post-dated cheque for the outstanding payment to correspond with the instalmental payments as ordered hereof from the date of this judgement. (6) Settlement of all professional fees and payments arising from the due-diligence and this lawsuit shall be jointly handled by the 1st plaintiff and defendant including sizing (sic) of all instruments for that purpose. (7) That the Honourable court shall enter the above terms of settlement as consent judgement between the parties in this suit.”
Confirming the court process, Udensi told the magazine that out of the N4.5 billion paid to ALGON, the auditors went to court to obtain judgment that they must be paid 30 per cent of the money they reduced from ALGON’s tax debt. “But we said we don’t have that kind of money. Eventually the matter got to the court and there was a judgment that we should pay them N2.5 billion, which is actually less than 10 per cent of the money they reduced for us. We paid this money to the auditors after advice from the attorney general’s office. That was the only money ALGON paid, and we are not aware of any other payment into anybody’s account,” Udensi explained.
So, was AHL not given part of the money? “We have paid N1.3 billion to American Hospital account, but instead of using the money for what it is meant for, the man (Obiakor) went and bought a huge house in Wuse 2, Abuja. We were shocked to hear that he spent out of the money we paid him to buy a house and paid N200 million in legal fees. He claimed to have used the balance on contingencies. But that was not acceptable to us. We said we were not going to give him a kobo again until we see evidence of the project on ground. But since then he has been going around telling people that the President approved money for his project and ALGON had shared the money,” Udensi alleged. Akhabue told the magazine that ALGON would not pay any other money to American Hospital until other equity holders also pay up. “If the President approved the money for American Hospital, why was the money paid into ALGON’s account?” he asked, stressing that Obiakor was deliberately dishonest. According to Akhabue, ALGON’s 30 per cent equity amounted to N5.5 billion, out of which N1.3 billion had been paid. An obviously furious Akhabue asked rhetorically: “How much have others paid to the project? ALGON has paid N1.3 billion but we have not seen anything from the money we paid. Until others also pay up and we see evidence that something is happening on the project, we will not pay further.” When the magazine contacted Faruk, one of the shareholders in the project, he disclosed that though it has been a while that he has been briefed about the project, he believed that after the initial hiccup, the project was now on course. Faruk holds 50,000 units of shares in the AHL, which he said at that time was valued at N2 million. FCMB did not respond to the magazine’s enquiry on its equity in the project.
When contacted, Obiakor told the magazine that both Akhabue and Udensi went with him to the project’s site and agreed with him before buying the house. “Ask them if they can put their hands on the Bible and swear that they neither saw nor knew about our plan to purchase that property,” he charged. The AHL promoter explained that the reason for buying the house was to use it as a temporary site or a satellite site because AHL would use the building permanently, “so that Nigerians can within six months begin to have access to international standard. This is because if construction started at the permanent site, it would be three years before Nigerians can avail themselves with good quality health care. We thought it was in the interest of the nation that we start quality health care right away at the satellite site while we build at the permanent site. So what I want you to ask them is if they can put their hands on the Bible and swear that they didn’t know before the payment was made. If they had not stolen the money, we would have gone very far by now,” Obiakor alleged. He recalled that he gave Udensi a compendium of documents showing the contributions of every other private investor before ALGON agreed to join. But Udensi told the magazine that the decision to buy a property for a satellite campus was never discussed with any member of ALGON executive, stressing that it was the personal decision of Obiakor. He challenged Obiakor to produce any document or agreement showing that ALGON approved plans to buy a house for use as satellite site of the American Hospital. He also denied having any agreement with Obiakor on having any joint fund on capacity building.
For now, without funds, the fate of the project hangs in the balance. “What is delaying the project is the money we need to buy equipment to start operations at the satellite site. So that is why I’ve been moving around talking to investors, including South Koreans, to get these equipment,” Obiakor said. Though Udensi said ALGON still had N700 million in its accounts, it had resolved not to give any money to American Hospital until the others pay up. This, according to him, is premised on the agreement that ALGON is supposed to be a part owner and not sole financier of the project for everybody to own. He regrets that ALGON was misled into believing that Obiakor had the capacity to execute the American Hospital project. “We saw the project as good for the country that was why we were eager to be part of it. And I must admit that we did not do due diligence on it,” Udensi told TELL, while Akhabue regretted that, “we were misled into believing that the American government has link with the project because of the American logo on the letter head of the hospital. Now we know that it’s just some boys who came together.”
The AHL and AUMedSc project now appear to have been stalled, and ALGON may be the bigger loser for it. This is because in the agreement entered into by both parties which became effective on July 30, 2010, Section 8 (IV) categorically states that “in the unlikely event of cancellation, default or breach of this contract, ALGON shall forfeit all funds from its WHT and VAT waiver and or any other investments already made into this collaboration to AHL and AUMedSc.”
Kinsley Chinda, a member of the House of Representatives, has tabled a motion on the matter before the House, which subsequently mandated the House Committees on Health and States and Local Government Affairs to immediately investigate the matter and report to the House within four weeks.
AHL is fashioned after American Hospital Consortium, LLC, AHC, a State of Delaware, United States, US, corporation, formed in 2002, by a number of health professionals, leading collaborating hospitals, medical informatics professionals in the US and around the world. Collaborating stakeholders of AHC claim to have experience in setting up joint venture medical services in the US, South America, Middle East, China, Hong Kong and Bangladesh. The magazine contacted the AHC through an electronic mail to confirm AHL’s affiliation to it, but the response was still being awaited as at press time.
Additional Report by TAJUDEEN SULEIMAN