Monday, September 21, 2009

What do you say about Ololo?

"Ololo's firms emerged the highest debtors to three of the troubled banks- Finbank, Afribank and Oceanic Bank – with a combined total non-performing loan of N88.3 billion. His indebtedness (or rather that of his companies), raised eyebrows. Not a few wondered how he could have used his companies to secure such massive loans from the banks without making a mark as an entrepreneur with manufacturing concerns and businesses that create wealth and employ thousands from the labour market. The recurring question was how did he manage to instill so much confidence in the banks to get them to extend his companies such massive facilities.
The official, in defense of his boss said Ololo borrowed the loans in good faith and has every intention of paying. He said, Ololo could never had thought that things will go bad in the stock market and blamed the banks for egging him on and getting it wrong. "If you want to borrow money from the bank, the practice is that you provide something that is equivalent to the amount you are borrowing. But in this case, it was the share certificates that were used to collaterise the loans, so when their prices fell, he could not repay the loans. It is largely the systemic failure that is responsible for this crisis. He acted in good faith in accordance with the dictates of his enlarged clientele. He is a reputable stockbroker and portfolio manager who used his ingenuity to create liquidity in the capital market." (...Read More)

Although he's a defendant in a civil suit relating to fraud, I would pay to learn from the guy. About the markets, about ethics and the vulnerabilities of the market, about where he screwed up, about how to keep up (or come out tops) as a country/continent in the hypertraded, hyperleveraged world.
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t said...

You could almost say the same thing about Bernie Madoff, that we should learn from him, but apparently Madoff did a Ponzi scheme which has a long history, is nothing new. Madoff came out as a little darker grey than his peers on the Street. Ololo, conversely, comes out looking lighter grey than the other movers and shakers. Yikes, moral relativism.

DonCasiragi said...

Well, lessons learned can be found in the first paragraph of the article: "Managing Director/Chief Executive Officer of Falcon Securities Limited and a director of Petosan Property and Dev Co. Ltd, Petosan Oil and Gas Limited and Resolution Trust and Investment Company Limited"

Sounds like an overstretched cat to me...well, Lords of capitalism...the story generally ends the same.

t said...

It's true o. I noticed that in Nigeria you could be managing partner in a law firm, be ahigh-ranking elected official, be on the board (or even MD) of a few companies...all at the same time. It's like, how can the governor manage three companies and forty lawyers? Cause basically, you end with too much, let's call it politely, synergy.
Thanks for bringing this up.

I just saw a half-decent related piece on Business Day. It raises the major issues even if it doesn't expertly tackle them.

t said...

Jail everybody. Well, not everybody, but...

"...impunity is not the American way. After the savings and loan crisis of the late 1980s, more than 3,000 bankers went to jail. Well, this global crisis stemmed from dishonest bankers writing bad loans, and selling and securitizing them in the knowledge they were fraudulent, while ratings agencies collected big fees for giving triple-A ratings to garbage. And who’s gone to jail? Just about nobody."
-from a New York Times Op-Ed today

This is interesting in showing a way out of the moral quandary of celebrating (successful) fraud as we capitalists often do:

t said...

Source BingBlog@Fortune
by Stanley Bing

USA Today reports this morning that "Federal prosecution of serious financial crime plummeted as the nation headed toward one of the worst economic meltdowns in U.S. history." The story then goes on to note that, according to government records, between 2003 and 2009 "the number of federal corporate fraud cases plunged 55%; securities fraud charges dropped 17%; and bankruptcy fraud cases fell by 44%."

This, of course, on the heels of prior reports that the SEC had investigated Bernie Madoff and instead of prosecuting him ended up inviting him in for tea and crumpets and a little consultation when he was in town.

The mind boggles. What could be the possible reasons why the government, charged with prosecuting white collar criminals who exploit our sacred financial institutions and the people they serve, would fail so egregiously to pursue their brief with aggression and verve? I'm considering several possible reasons:

* They were very busy making sure that the corporate annual reports of legitimate enterprises were properly formatted and all footnotes in order;
* The Administration during the period in question made sure to staff all Federal regulatory agencies with senior officers who were hostile to their core functions;
* Nobody in Washington at that time considered making a lot of money by any means possible to be a crime;
* The cat ate their homework.
* People at the agencies correctly saw that if they started prosecuting anybody for a variety of crimes, they'd have to go after most of the people then doing business in certain portions of the market;
* There was no perceived institutional upside in going after certain types of criminals;
* Everybody forgot what a crime was.

These are just a few possibilities. Students of the situation will note that the number of new cases prosecuted for corporate fraud took an immediate hockey stick upward in 2009. Studies are now underway to ascertain the cause of this increase.

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