Thursday, January 18, 2018

AG: Rahaman faces possible charges

...refers report to DPP, top cop


“Suspicious transaction”: Phillip Rahaman

Mark Fraser

Attorney General Anand Ramlogan has referred former First Citizens executive Philip Rahaman’s purchase of 659,588 shares during the State bank’s initial public offering (IPO) last year to the Director of Public Prosecutions (DPP) and acting Commissioner of Police for possible criminal investigation.

“The PricewaterhouseCoopers report (commissioned by Finance Minister Larry Howai in February) will be referred to the DPP and Police Commissioner for them to consider whether there is justification to lay several criminal charges, arising out of violations of the Securities Act,” Ramlogan said. 

He addressed the post-Cabinet media conference yesterday at the Office of the Prime Minister, St Clair, adding he will also immediately refer the matter to the Securities and Exchange Commission (SEC) which, through its extended powers under the 2012 Securities Industry Act, is mandated to ensure “fair and equitable dealings in securities, protect the integrity of the securities market against any abuses arising from market manipulation practices and improper practices”. 

In particular, Ramlogan said the SEC should investigate possible breaches under Section 91, 94 and 95 where a person who commits an offence is liable on conviction to a fine of $2 million and imprisonment for five years. Consideration should also be given to Sections 100-101, which deal with insider trading and which carry a fine of $5 million and a term of imprisonment of seven years.

Rahaman subsequently sold 634,588 of his First Citizens shares in January for a profit of close to $13 million; the Express exclusively reported those shares were sold to his cousin Imtiaz Rahaman, his aunt Alia, and five companies owned by the Rahaman family. The transaction was brokered by Bourse Securities Ltd. The managing director of Bourse, Subhas Ramkhelawan yesterday resigned from his positions as chairman of the Trinidad and Tobago Stock Exchange and as an Independent senator. 

The report, Ramlogan said, did not provide details of Bourse’s involvement and as such, it was up to the SEC and its investigation to determine the facts. 

Ramlogan detailed the reasoning behind his recommendations: 

“The circumstances surrounding Mr Rahaman’s purchase of this very large block of shares are highly suspicious and raise serious questions as to the bona fides of the purchase and sale transactions and, indeed, whether the purchase was made not on his own behalf but on behalf of his family members.”

He said aspects of the transaction include the fact that Philip Rahaman’s application was submitted on the last day of the IPO, on August 12, 2013; on that same day, he entered into a loan with Imtiaz Rahaman (his cousin), signed by Imtiaz Rahaman or Raffia Rahaman, both his cousins, to the extent of $13,999,942 to finance the purchase of the shares; he sold all the shares—except 25,000—a few months later to the same five lenders, plus two other related parties.

“There appears to be sufficient material to raise at least a prima facie case that the elaborate series of tran­sactions…may have been a device to allow Mr Rahaman’s family and companies to purchase a large block of First Citizens shares, which they would not have been able to acquire, in accordance with the allocation methodology set out in the prospectus,” he said. 

The issue, Ramlogan said, was not the purchase of a large number of shares by an employee but rather that the official ownership would appear to have belonged to another. 

“If (Philip) Rahaman had purchased his shares for his own right, no issue could arise. And any employee would be free to do that. The issue is whether non-employees were able to access a shares category that was reserved expressly for employees,” he said.

As such, there is no limit or cap as to how many shares an employee can purchase. 

The next largest employee shareholder is First Citizens chief executive Larry Nath, with 215,000 stock units.

“In relation to Nath’s purchase, his application was submitted through the lead broker (First Citizens Investment Services) and was in conformity with the requirements of the prospectus. His purchase was financed by loans from Scotiabank and First Citizens. (He) has not to date disposed of any of his shares,” Ramlogan said.

He added while comments made prior to the completion of the investigations by First Citizens chairman Nyree Alfonso were “injudicious and premature”, and generated much public consternation and disquiet, the information suggests and confirms that she and rest of the board, being non-executive (except for Nath), were not intrinsically involved in the IPO process and so there was no evidence of misconduct on its part.

Ramlogan said the issue of remo­ving and replacing the board “does not arise”, for the simple reason one cannot find any evidence of misconduct on its part. 

“There is no case for asking any board member to resign,” he said.

Management, he advised, however, will now need to look at the short­comings and “take a hard, clinical look to improve control mechanisms”. 

The transaction, he added, cannot be reversed. 

“At this stage, it would not be possible to reverse the transaction because the bank suffered no loss. He did not in fact purchase the shares at an undervalue, he purchased it in accordance with the rules and practices of the prospectus that guided this matter. So from that perspective, the civil law will not support any cause of action where there is no loss sustained...the bank would not be in a position to really launch any civil action; the realm of criminal law is where they should be pursued,” he said. 

Calls to both Philip and Imtiaz Ra­haman for comment yesterday were unanswered.

Messages left seeking comment were not immediately returned.