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Diversion, conversion and breach of trust – The Amadi case

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The Federal High Court sitting in Lagos on January 30 sentenced a businessman, Kenneth Amadi, to 18 months imprisonment over a fraud of N2.9 billion. The court found, among others, that Amadi, while an employee of Eunisell Ltd owned by a businessman Chika Ikenga, abused his position and diverted the proceeds of sale of Eunisell’s goods to a company operated by him and his wife. The case highlights the growing problem of trust deficit among highly-placed employees handling sensitive employer business, …… reports.

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In the year 2000, seven years after Chika Ikenga set up Eunisell Limited in Victoria Island, Lagos, he hired Kenneth Ndubisi Amadi – an ambitious university graduate fresh out of the National Youth Service Corp (NYSC) programme – as a salesman. As Eunisell’s chemicals importation, distribution and manufacturing business grew, so did Ikenga grow the welfare and work conditions of his employees, including Amadi, who soon rose to the position of Chief Executive Officer (CEO) with a salary of N2.5million plus $4,000 monthly (according to his employer), an official Lexus SUV, business class tickets for travels, and free medical care abroad, all paid for by Eunisell, as of October 2016.

But on January 30, 2023, almost seven years after he left the firm, Amadi was on his way to jail for some of his actions while working for Eunisell. His company IDID Nigeria Limited was also about to be liquidated.

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Justice Ambrose Lewis-Allagoa of the Federal High Court in Lagos convicted and sentenced Amadi to 18 months imprisonment over an alleged fraud of N2.9 billion belonging to Eunisell.

Justice Alagoa arrived at the decision, after finding Amadi guilty of counts 4 and 5 of the criminal charge FHC/L/355C/2019 filed against him by the Federal Government through the office of the Attorney General of the Federation (AGF).

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The court held that the conviction was without an option of a fine. It equally ordered that IDID Nigeria Limited be liquidated with immediate effect.

Amadi was, however, discharged of counts 1, 2 and 3.

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The charge

On October 2, 2019, the Office of the AGF filed a five-count charge against Amadi and IDID for allegedly obtaining Eunisell’s N2.9b by false pretence and with intent to defraud from A-Z Petroleum Ltd and AMMASCO International Ltd. He was also accused of forgery of invoices and waybills, as well as suppression of data concerning financial transfers to Eunisell “with intent to confer economic benefits” on himself

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Counts four and five of the charge read in part: “That you Kenneth Ndubisi Amadi and IDID Nigeria Limited, sometime in 2016, in Lagos, while being trustees of the sum of N2.9b belonging to Eunisell Ltd did convert same without authority to create sufficient deposits to promote the credibility of your own company (IDID Nig Ltd) and you thereby committed an offence contrary to Section 434 of the Criminal Code Act, 2004 and punishable under the same Section of the Act

“That you Kenneth Ndubisi Amadi and IDID Nigeria Limited, sometime in 2016, in Lagos, while serving as the Chief Executive Officer of Eunisell Ltd, at Lagos, did receive the sum of N2.9b belonging to Eunisell Ltd and with intent to defraud, omitted from making full and true entry thereof in the books and accounts of the company and you thereby committed an offence contrary to Section 435 of the Criminal Code Act, 2004 and punishable under the same Section of the Act.

The Federal Government arraigned Amadi on June 25, 2021.

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He pleaded not guilty.

Trial

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The trial commenced on October 15, 2021, with the government calling Ikenga as Prosecution Witness 1 (PW1). Ikenga said he was the Managing Director of Eunicell Limited, a firm into importing and distribution of chemicals, which are used to manufacture lubricants, like engine oil used in cars and oil and gas, to manufacture drinks and also used in the food industry. He said he had been in business for 25 years and that his company was incorporated in 1993. PWI stated that Amadi was his employee, who was hired in 2000. PWI said that Defendant started as a Salesman in 2000 after his NYSC, grew to become an Assistant Manager and was promoted to a General Manager and in 2012 was made Eunisell’s CEO.

PWI said, among others, that customers make payment for goods purchased directly into the company’s account and Eunisell’s customers included Shell, Total, ExxonMobil, Cando, A-Z Petroleum, Conoil etc.

Ikenga testified that Amadi’s responsibilities as CEO included growing the company, day-to-day operation of the company, promoting the company and its products to the customer and also serving as an account manager for big customers.

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Betrayal

He also stated that 1st Defendant Amadi left Eunisell on October 28, 2016, as CEO following an enquiry by one of Eunisell’s foreign suppliers and partner Lubrizol which manufactures lubricant used in manufacturing engine oils and other types of lubricant used in vehicles. Lubrizol wrote to Amadi and copied Ikenga in July and told Amadi Defendant that their competitor called Oronite had appointed a distributor in Nigeria and they wanted him to find out about this local distributor called A.B.D. Energy Solutions Ltd.

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Ikenga said Amadi did not get back to them with the information and gave no reason for that. PWI stated that he then asked his lawyers to find out from the Corporate Affairs Commission (CAC) the particulars of the company so that he could furnish the foreign firm with the information.

According to PWI, the search from the CAC revealed that his CEO Amadi was the owner, shareholder, promoter and director of A.H.D. Energy Solutions Limited.

Ikenga said he was shocked, as Amadi’s salary at Eunisell was N2.5m plus $4,000 monthly, his official car was a Lexus SUV and he was flying business class which the company was paying for. “Also, the defendant had all his medicals abroad and the same was paid by PWI’s company.” However, PWI did not produce a document showing that the said $4000 was part of the 1st defendant’s salary.

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Ikenga further stated that Amadi had been going to the Research Development and Technology of his company’s suppliers in the United Kingdom for training. He stated that the research centre “was the heart of his business and it wouldn’t be difficult for an American company to accuse somebody, therefore the defendant would have been sharing market information with Oronite.” PWI also said that when Amadi was confronted, he resigned on October 28, 2016.

How defendant’s alleged fraud was exposed

According to PWI, upon the defendant leaving, an audit was carried out to reconcile the account of the big companies he was managing. Ikenga stated that the audit revealed that payments that had been coming into PWI’s Company bank account were from the 1st and 2nd Defendants. PWI said he wrote to the bank on why the payment coming into his company’s account did not have a narrative or details of the buyers. The bank (Diamond Bank now Access) wrote back to PW1’s Company, giving the details of the payer, who were Amadi and IDID.

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“On further search at the Corporate Affairs Commission, it was revealed that the 2nd Defendant (IDID Nigeria Limited) was owned by the 1st Defendant and his wife being both directors and shareholders.”

“PWI said he reported to the Police and the Police investigation revealed that the 1st Defendant was receiving PW1’s company payment from A-Z Petroleum and Ammasco International for the goods that PWI’s Company sold to them.

“PW1 said the company sent goods to A-Z Petroleum and Ammasco International via waybill and the company gave the Defendant the invoices to send to them, of which the 1st Defendant would give the customers his own bank account and retain the money paid into it for a while before remitting it. PW1 said that the Defendant’s duty as Chief Executive officer did not empower him to pay this money into his account as he has no mandate to do so.”

Ikenga testified that he wrote to his bankers because the payment was coming without details of the payer and it was discovered that the persons paying money into the bank account were Amadi and IDID who received the money from his two main customers A-Z. Petroleum and Ammasco International, totalling over N2.9b.

According to Ikenga, Amadi left the Company when the audit of the company was conducted, because of the first conflict of interest. Based on the letters from the bank, other customers and investigation, PW stated that the defendant had betrayed their trust, as he used his position and information of PWI’s business to the benefit of Eunisell’s competitors.

Ikenga told the court that Amadi used Eunisell’s funds to operate IDID. He alleged that Amadi altered the invoices to Ammasco and A-Z Petroleum to enable him to receive Eunisell’s payment “without authority, mandate and approval and diverting funds to build up the profile and credibility of the Defendant. PW1 also testified that the Defendant forged documents in order to carry out fraudulent activities.”

Ikenga further testified that Amadi made payments into the company’s account without narratives from 1 January 2016 to 28 October 2016, and from January 2012 to 31 December 2015, which were discovered during the police investigation. He stated that what was reflected in the bank statement as manager’s cheque MC/Ammasco and also MC/A-Z Petroleum were not from A-Z Petroleum as they were paid in by Amadi and IDID. He alleged that N2.9b was diverted from his customers by Amadi.

He further testified that the firm did not really audit its banking activities because “they trusted the 1st defendant who will always inform them whenever a customer will make payment.”

The Federal Government also called several other witnesses who corroborated some of PW1’s testimony.

They included Eunisell’s Finance Manager Phillip Odekina, who had worked with the firm for 10 years, who testified, among others, that no one had the right to nominate any account details, other than Eunisell’s, to a customer, except with the approval of the firm’s board of directors

Defence

But in his defence, Amadi through his lawyers prayed the court to hold that he had no case to answer.

He contended that no document said to be in possession of the prosecutor was tendered to show that he defrauded Eunisell Ltd “of the bogus amount of N2.9b…”

He also submitted that the charge was an abuse of court process, adding that PW1 and PW2 gave contradictory testimonies, regarding the auditing of Eunisell’s banking activities.

The defendants also submitted that Ikenga claimed N2.9b at a time, “but later claimed that N103million was unaccounted for…”

They said that based on the evidence of PW1, 2, 3 and 4, “the prosecution’s evidence is replete with contradictions which resulted in the prosecution’s failure to prove its case beyond reasonable doubt.”

The defendants urged the court to hold that the prosecution failed to prove essential ingredients of the offences beyond a reasonable doubt.

They were opposed by the Federal Government, which prayed the court to convict the defendants.

Judgment

In his judgment, Justice Allagoa agreed with both the prosecution and the defendants in part. He held that the prosecution did not prove counts 1, 2 and 3 beyond reasonable doubt, He however convicted Amadi and his firm of counts 4 and 5.

Justice Allagoa held: “I am in agreement with the submission of counsel for the prosecution in paragraph 9.1. of his final argument that the position of the 1st Defendant occupied as the Chief Executive Officer of EUNISELL, that he is in a position of a trustee even if he is not expressly so appointed.

“He owes the company the duty of care to discharge his duties honestly and conscientiously and not to act in a dishonest manner by receiving the company’s invoices but concealing them and instead deciding to transact with the companies customers via telephone and also without authorization nominating the account of another company IDID Nigeria Ltd owned by himself and his wife as shareholders to the customers to make payments due to his employer EUNISELL for goods supplied.

“More particularly, the evidence of the accountant of AMMASCO International is demystifying to the Defendant’s case when he testified that since they started doing business with Eunisell represented by Kenneth Amadi, they never saw the invoice of EUNISELL LTD, they only received EUNISELL’S waybills without invoice while all negotiation about the price of goods supplied was unilaterally negotiated by the 1st Defendant with word of mouth on the telephone.

“The mere act of diverting the proceeds of the sale of Eunisell’s goods (his employers) and as Executive Officer to a company where he is the alter ego different from his employers account constitutes conversion.

“I have therefore come to the conclusion that the 1st Defendant and his company IDID Nigeria Limited are guilty as charged in Count four, the prosecution having proved its case beyond reasonable doubt.”

The judge held further that there was evidence that Amadi was an officer of Eunisell, “he had diverted the company’s monies to the account of IDID NIGERIA LIMITED, wherein he was a director. He caused payments meant or due to the company EUNISELL to be paid to IDID from where payments due to EUNISELL was being paid to EUNISELL ACCOUNT with Diamond Access Bank; the payments made to EUNISELL’s account had no narratives so that the company will have complete information of the payment. It was only on the query to the bank that the bank now released the narratives of the payments to the company wherein EUNISELL now discovered that payments to its accounts were coming from IDID company whose alter ego was EUNISELL Executive officer.

Therefore, the 1st Defendant as an officer of EUNISELL omitted or is privy to omitting a material particular from the accounts of EUNISELL with Diamond Bark, the 1st Defendant and by extension the second Defendant have done or committed an offence contrary to SECTION 435 (2) (C) OF THE CRIMINAL CODE ACT, CAP C38 LFN 2004.”

The judge added that there was an obvious “intention to defraud. Consequently, count five is also proved beyond reasonable doubt by the prosecution and the Defendant is accordingly guilty as charged.

Sentence

“I have heard counsel for the Defendant plead allocutus, I have also taken cognizance of the fact that the Defendant is a first-time offender and all the other circumstances of the case.

“Ordinarily, the Defendant is supposed to serve seven years imprisonment in each of the two-count charges in court four and five, but I have looked at the side of mercy and the Defendant is hereby sentenced to 18 months imprisonment in Count four (4) and five (5) respectively. All the sentences run concurrently and there shall be no option of fine. As for the 2nd Defendant, I hereby liquidate that company having been found guilty of the offence,” the judge said.

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