First Citizens said last night that its board took a decision to dismiss its chief risk officer Phillip Rahaman, as the board, which met until late Tuesday night, had “lost confidence” in his ability to carry out his duties. The statement by the majority state-owned financial institution came after a day of mixed messages and followed weeks of raging controversy over Rahaman’s acquisition of 659,588 First Citizens shares worth $14.5 million at the company's Initial Public Offering (IPO) last year.
Rahaman sold 634,588 of his block of shares on January 14, netting a profit on that transaction of over $12 million. He would also have received $718,950.92 in dividends from the initial purchase of shares, which would have pushed his total profit on the transaction close to $13 million.
The purchase of the $14.5 million block of shares by the former senior executive of the bank enraged some members of the public, many of whom had their own application for shares in the heavily over-subscribed issue reduced. The Government offered 48,495,665 shares in First Citizens at $22 a share.
It expected to raise $1 billion, but received total subscriptions of $3.32 billion from 12,435 applications. Employees were allowed to buy up to 5,000 shares in the IPO at a ten per cent discount, but they only took up half of their allocation or 3,780,716 shares.
Rahaman’s application alone accounted for 17.4 per cent of the shares allocated to the employees and was more than three times the 215,000 shares acquired by Larry Nath, the bank’s CEO.
Initial reports out of the bank on Rahaman’s departure, citing an internal memo from the CEO’s office, referred to Rahaman “demitting office”, which some on a popular radio station interpreted to mean he had resigned. This language was even picked up by the Minister of Finance, Larry Howai, who issued a statement yesterday saying he had “been advised that Mr Rahaman had demitted office.”
In its statutory disclosure to the Stock Exchange, First Citizens used neutral language: “Mr Hassan Phillip Rahaman, the chief risk officer of the Bank, is no longer employed with the Bank with effect from March 25th, 2014.” But in a statement issued to the Guardian last night, First Citizens said: “As a result of an extensive internal investigation carried out by First Citizens Bank, the chairperson and the board of directors reached a determination that they have lost confidence in its chief risk officer’s ability to carry out his duties.
“Consequently, he has been dismissed from his position. First Citizens Bank is committed to maintaining the trust of the public and providing appropriate updates to its stakeholders.” While the precise reason for the termination has not been disclosed, a highly placed First Citizens source told the Guardian that the company's internal audit of the transaction uncovered some evidence that the board felt required an official response from Rahaman.
In a short interview with the Guardian yesterday, Howai said there was a “possibility” that the investigations into the purchase and sale of the shares by Rahaman “could become a criminal matter.”
In a statement from the Ministry of Finance following the interview, Howai noted that enhanced powers had been conferred on the Securities and Exchange Commission (TTSEC) under the Securities Act 2012 and that the TTSEC “has employed the services of experienced Canadian investigators to do a detailed audit of certain transactions to determine whether criminal liability may exist, in relation to this and subsequent transactions.”
Guardian sources have confirmed that investigations by the TTSEC, Stock Exchange, Central Bank and by the company's external auditor, PwC, who were commissioned by the Ministry of Finance, were all ongoing. In his statement yesterday, Howai said he expects to receive the PwC audit today, which he will take to Cabinet tomorrow. “The actions to be taken consequent on the report will be determined thereafter.”