First Citizens’ recent press notice says, “as soon as the board of directors became aware” of Philip Rahaman’s purchase of “significant shareholdings” in the bank, it requested the board’s audit committee to investigate the matter. The board has not said when it “became aware” of Rahaman’s 659,588 shares, but the evidence suggests that by December 16, 2013 that investigation should have started. If it did, then why did it take three months for Mr Rahaman to be fired for loss of confidence? How many audits were actually conducted and what were the different findings? And, if that investigation was underway up to March 24, on what basis was First Citizens chairperson Nyree Alfonso defending Mr Rahaman’s share purchase before that date?
The First Citizens investigation should have been underway by December 16. Without saying so in the recent notice, there’s evidence the board knew about Mr Rahaman’s “significant shareholdings” since December 2013. What date in December is debatable, but this may jog everybody’s memory. While the 2013 annual report published around February 14, 2014 disclosed Mr Rahaman’s 659,588 shares, the board knew months before.
Several components of the report must be prepared months in advance and approved by Ms Alfonso and the board for publication. For example, the statement of management responsibility is dated December 16, 2013 and signed by the CEO and head of finance. It appears on page 14 of the report. The financial statements are also dated December 16, 2013. And the critical directors’ report signed by all 12 directors appears on pages 16 and 17. That report had to be prepared around the same time as the statement of management responsibility in early December.
So why is the undated directors’ report critical? In that report, four inches above the signatures of Ms Alfonso and her other directors, the breakdown of the shareholdings of each First Citizens director, senior officer, and their connected parties appears. Ms Alfonso’s name and shareholding are at the top of the table, Mr Rahaman’s ten rows lower. Mr Rahaman’s shareholding with a market value of $24.4 million on December 16, 2013 was 60 per cent more than combined shareholding of all directors, senior officers, and connected parties, putting him in the same league as of the bank’s institutional investors.
It could not be missed and therefore raises questions about the timing of the chairperson’s and board’s awareness of his significant shareholding, which the First Citizens notice describes as the trigger for the board’s audit committee review, its loss of confidence, and dismissal of Mr Rahaman. So, did Ms Alfonso and her board sign this directors’ report in December 2013 and know about the 659,588 shares two months before the Minister of Finance found out?
The answer lies in the signature of Cindy Bhagwandeen. Ms Bhagwandeen is a former board member whose signature appears to the right of Ms Alfonso’s in the undated directors’ report on page 17. Ms Bhagwandeen resigned from the board effective December 31, 2013 so that her signature confirms the board knew about Mr Rahaman’s 659,588 shares no later than December 31, 2013 and more likely by December 16, 2013. It means weeks before Mr Rahaman’s sale of 634,588 shares an investigation should have been underway, but was it?
Maybe the investigation did not begin “as soon” as the First Citizens statement says. Maybe it began later. So, is this the internal investigation referred to in the bank’s statement on Mr Rahaman’s dismissal on March 24, 2014? If it is, then why did the Minister of Finance’s media release of February 14, 2014 refer to his request for a detailed audit by First Citizens? If the board became aware of the 659,588 shares in December 2013 and as soon as it did it requested the investigation, by February 14, 2014 Minister Howai should have been able to get an audit report. Did the board’s investigation clear Mr Rahaman? Did the detailed audit requested by Minister Howai condemn him? Did Ms Alfonso rely on the board’s investigation to defend Mr Rahaman, until the detailed audit concluded differently? Did the bank’s press notice deliberately omit the date the board became aware of the 659,588 shares? And why has First Citizens failed to explain Ms Alfonso’s two stoic defences of Mr Rahaman, followed by his swift dismissal?
The bank’s board may also have known about Mr Rahaman’s 659,588 shares before December 2013. It would help Ms Alfonso and her board to retrace the steps through their approval of the components of the annual report. The drafts of the directors’ report including the breakdown of shareholding of directors, senior officers, and connected parties would have been approved by the board’s audit committee and then the board. Before meetings, drafts would have been circulated to committee and board members. And even before that, early drafts should have been seen by Ms Alfonso and Anthony Mohammed, as board chairperson and chairman of the board’s audit committee respectively. When did they know about the 659,588 shares and conduct their investigation?
These questions are material since Ms Alfonso’s media comments around February 14, 2014 also conflict with the CEO’s reported concerns about Mr Rahaman’s source of funds disclosure, with Ms Alfonso suggesting that the bank reviewed his source of funds both at the application stage and subsequently, and was “satisfied itself about the sources of funds”. Who reviewed this at the application stage? Who was satisfied? And how does this February 14 statement fit into the reasons for Mr Rahaman’s dismissal? If his source of funds disclosure is at the heart of his dismissal, what changed between the CEO’s concern on January 14 and Ms Alfonso’s satisfaction on February 14?
The bank’s eight-paragraph press notice does not help. With many questions and few answers the board’s writing could be on the wall.
* Clarence Rambharat is a lawyer and a university lecturer