A Review of the Nigerian Energy Industry

Afren suspends 2 directors over unauthorised payments

Afren-logo02 September 2014, News Wires – United Kingdom-listed Afren Plc has suspended two Associate Directors, Iain Wright and Galib Virani, for receiving unauthorised payments for the benefit of the company’s Chief Executive Officer, Mr. Osman Shahenshah and the Chief Operating Officer (COO), Shahid Ullah, who had earlier been suspended.

According to the company, the suspensions are part of an ongoing investigation by Afren’s board into the receipt of unauthorised payments.

The company, which is listed on the London Stock Exchange, said it identified three unauthorised payments of $135.1 million on its balance sheet, including $93.3 million paid for an agreement for field extensions related to the Okoro field in Nigeria.
The company announced the temporary suspension of Shahenshah and Ullah following the Board engaging lawyers Willkie Farr & Gallagher (UK) LLP (WFG) to carry out an independent review, a development, which delayed the release of the company’s 2014 half year results..

The original scope of the review was to determine whether three transactions that took place in 2012 and 2013 should have been classified as class 2 transactions under the Listing Rules and disclosed as such to the market at the time of the transactions.
During this review Willkie Farr & Gallagher identified evidence of the receipt of unauthorised payments made by a third party for the benefit of the CEO and COO, which led to their suspension.

The company at the weekend announced the temporary suspension of Iain Wright and Galib Virani, associate directors of the company, who had also received unauthorised payments made by a third party.

The review is ongoing and expected to conclude in September 2014.
In addition, WFG have engaged KPMG, at the request of Afren, to undertake an independent review of the accounting for the three transactions.
Iain Wright and Galib Virani told the board the associate directors had received payments connected to previously identified unauthorised payments to benefit the CEO and chief operating officer, the company said.
The board said neither the suspensions nor the review would affect the company’s results, which were later released at the weekend.

The company said it suspended output at its Barda Rash oilfield in Iraqi Kurdistan, the first field to shut in the region as Islamist militants advance closer.
Afren’s shareholders had in 2013 rejected a £3.4m pay deal for the suspended CEO in one of the largest shareholder revolts yet seen.

About 80per cent of shareholders voted down Afren’s remuneration report during the company’s Annual General Meeting (AGM).
The Chief Executive Officer of the proxy voting agency Manifest, Sarah Wilson was quoted by agency report as saying it was the third biggest shareholder revolt since it began tracking AGMs in 1996.

Afren’s shareholders were also said to have shown their wider discontent with the oil company’s leadership as non-executive director, Peter Bingham, who collects £60,000 a year for attending board meetings, was only re-elected to the board by a whisker.
About 30per cent of shareholders were said to have voted against the Chairman, Mr. Egbert Imomoh.

However, the shareholders were actually disgusted at the generous pay package for Shahenshah.
Afren has come under scrutiny since a year ago after it was alleged that its top managers personally own shares worth $24million in First Hydrocarbon Nigeria that Afren itself invested in.

The Financial Times had reported that Afren’s chairman, chief executive, chief financial officer and chief operating officer did not declare their personal interest in First Hydrocarbon Nigeria at the time of the original purchase in 2010.
But Afren said in response to the report that “complete due process was followed” at the time and that it was guided by its “counsel and financial sponsor”.


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