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Howai to get final FCB audit Wednesday
International accounting firm PricewaterhouseCoopers is in the final stages of the audit into the $14.5 million purchase of First Citizen shares by its dismissed chief risk officer H Phillip Rahaman. The company is expected to hand over the report to Finance Minister Larry Howai on Wednesday. This report comes even as the Securities and Exchange Commission (SEC) commissioner Patrick Watson confirmed that the SEC too was investigating the matter of the purchase and resale of shares on the T&T Stock Exchange (TTSE).
The Sunday Guardian learned that the yet-to-be-delivered audit highlighted a “legal loophole” in the allocation policy that permitted Rahaman to take advantage of the large bucket of undersubscribed stocks. The allotment, according to a February 14 statement by Howai was formulated under the guidelines that employees could purchase a total of 8.3 million shares “if each employee exercised the right to purchase the maximum of 5,000.”
Howai had noted that “for a variety of reasons, a number of employees did not participate in the IPO, thus creating room for the other employees to purchase shares in excess of the discounted availability of the 5,000 shares.” Rahaman, who was dismissed by the bank’s board last week, sold 634,588 First Citizens shares on January 24 for a total profit of close to $13 million.
According to the bank’s 2013 financial report, other senior members also purchased stocks including chief executive officer Larry Nath whose purchase of 215,000 under his own name and an additional 12, 016 shares linked to him through “connected parties,” stands at the second largest block of shares purchased internally. Chairman Nyree Alfonso purchased 5,422 shares under her own name and a further 33,959 was through “connected parties.”
Howai: Public concerned with people around the institution
Howai, who was attending the Eastern Credit Union’s 40th Annual General Meeting (AGM) at the La Joya Sporting Complex Facility in St Joseph, yesterday, was asked if the controversy had taken a toll on the bank’s reputation. He said First Citizens remained very strong as it is very well capitalised and highly profitable.
Howai said, “I don’t think people are concerned with the institution itself. I think they may be concerned with people around the institution, which clearly we as the Government and one of the shareholders now—I am one of 12,000 other shareholders—I have to be also cognisant of the implications of that as far as the overall governance of the institution is concerned. “While I may still have a majority interest, there is a wide cross-section of the population now to whom we all have to account.”
He also confirmed that the final PwC report will be ready this week. He said, “The auditors had told me I would have it by Wednesday, they advised that it was still in draft and just wanted their lawyers to go through it. “It may not have any significant changes, but we just wanted to be certain and I should have that final report by Wednesday, so I’m working with that timeframe now.”
Howai said the preliminary report was in the possession of Attorney General Anand Ramlogan, who said that it was important that the attorneys look at it with a view to determining what could be released without compromising the DPP’s role. Howai said if there were changes in the final report, the AG will be notified before any advice is given on how to proceed. Alfonso had initially defended Rahaman’s $14.5 million purchase.
Howai dissected the allocation policy and the distribution of shares last month when he first raised a red flag regarding the current shareholdings by senior officers and directors at the bank. In that document, Howai noted that he was concerned about the statements in the 2013 annual report which detailed the stocks purchased by directors and senior level staff. In that document, he noted that on July 15, 2013, the Government offered 48,495,665 “of no par value in First Citizens Bank” at $22 per share.
Employees were allowed to buy a 500 minimum allocation of shares and could purchase as much as 5,000 at a ten per cent discount. Any purchase after that would be at the sale price. In this IPO, 15 per cent of the shares on offer were allocated to the 1,664 employees, Howai stated.
• Rahaman joined FCB in January 2012 (he would have been hired by the board chaired by Nyree Alfonso. Larry Howai was CEO at the time)
• Offer opened on July 15, 2013; closed on August 9
• Shareholders were notified of their allotment on August 30
• Rahaman acquired 659,588 shares in the IPO
• Rahaman sold 634,588 shares on January 14
• Howai announced that he is instituting an external audit of the IPO on February 14
• FCB informed the Stock Exchange of the sale on February 20
• Stock Exchange posted the sale on its Web site on March 12
Asked if the chair of the bank, attorney Nyree Alfonso, had the confidence of the Government, Howai said he wanted to have further discussions internally with Cabinet before making a statement on the Government’s position on her.