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Economic Crime Analysis: Ghana’s 2.2B Bond Sale May Be Criminal!

Background

Ken Ofori-Attah..Minister of finance : conflict of interest ?

The government has raised $2.2 billion from a sale of long-dated domestic bonds on the 31st of march.
A Finance Ministry statement issued in Accra said it successfully issued 15 and 7-year bonds with the same coupon of 19.75%, raising a total amount of $1.13 billion. In addition, the Ministry of Finance raised the cedi equivalent of $1.12 billion in 5 and 10-year bonds via a tap-in arrangement.
These activities raised a total of $2.25 billion and resulted in the lengthening of the maturity profile of the instruments available on the domestic market. This issuance represents the largest amount issued by a sub-Saharan African country in a day.

The Positives

Boosted central bank reserves by a third, the Finance Ministry said.
Helped reduce the pressure on the Cedi. It was also a cedi-denominated government bond issue. Which means that the government will not be under pressure to secure dollars in the future in order to make necessary coupon payments.
This cash inflow was just what the government needed to help it discharge its duties to the people.
This issuance represents the largest amount issued by a sub-Saharan African country in a day.
According to the Minister, ”this is an indication of the markets’ belief in our commitment to building an effective public financial management system, improve the country’s debt sustainability outlook and mitigate the crowding out of the private sector. It is imperative that we re-profile our total debt stock of $30 billion which should help put us on a path of ‘Ghana beyond Aid’, Ken Ofori-Atta added.

Problematic Approach

A company called Templeton bought 95% of the bonds issued through Enterprise Group (an alleged business interest of the current Finance Minister).
Seeing that The Enterprise Group is mainly markets itself as an insurance company, it is likely the insured the deal for Templeton.
It is important to note that, if enterprise group was paid any fees for their services in this transaction, it could violate US, International as well as even local Ghanaian investment laws.
The Templeton guys have as their shareholder, a guy who is the principal shareholder of Enterprise Group.
His name is Trevor G. Trefgarne, and the Chairman of the Enterprise group.
The Enterprise Group belongs to Ken Ofori Atta, his wife, Dr. Angela Ofori Atta, and Keli Gadzekpo.
Franklin Templeton Investment Limited is an American global investment management organization founded in 1947. It has an extensive global presence, including offices in 34 countries and clients in more than 170 countries.
The firm has renowned investors as it Board of Directors. In an unedited semi-annual report of Franklin Templeton Investment limited dated December 31, 2016; Honorable Trevor G. Trefgarne was named as one of the five Board of Directors of the firm. He was described in the report as Chairman of Enterprise Group Limited (a Ghanaian firm).
Enterprise Group Limited also has a picture of Honorable Trevor G. Trefgarne on its website as Chairman of the Board of Directors of the company. Enterprise Group has 10 Board of Directors. Principal among them are Mr Keli Gadzekpo, Group Chief Executive of Enterprise Group; Dr Angela Ofori Atta, wife of Finance Minister Ken Ofori Atta who doubles as Director of Enterprise Insurance, a subsidiary of Enterprise Group etc.
Enterprise Group also has Minister of Justice and Attorney General, Gloria Akuffo and Dr Angela Ofori Atta as non-executive members of the firm. Hon Gloria Akuffo is/was Director of Enterprise Life, a subsidiary of Enterprise Group (it is not clear whether he has resigned or not).
In 1990, Finance Minister Ken Ofori Atta together with Mr Keli Gaadzekpo (CEO of Enterprise Group) and others founded Data Bank. It is now emerging that a firm that Hon Trevor G. Trefgarne works as a member of Board of Directors took substantial position in the April 3, 2017 bond issued by the Finance Minister.
Seth Terkper’s last bond was issued at 9% coupon rate for 10years. It was well publicized and discussed at least 3months prior to issue. The NPP said the bond was too expensive for Ghana. Now Ken Ofori Atta issues a 15year bond at a coupon rate of 19%. It was issued in secret. Nobody knew who were prospecting for Ghana’s bond. Usually, the higher the tenure, the lower the coupon rate. But with Ken in the center, the opposite happens.
It is also alleged that; complete due diligence was not followed in the execution of this transaction. Apparently the Finance ministry was very tight-lipped about the sale even after it was completed, the Finance minster only mentioned on Friday that, one of the biggest global investors was involved without disclosing the name.
It may seem to the learned eye that proper due diligence, investment disclosure laws, and ethical behavior guidelines were violated.

Types of Economic Crimes

Conflict Of Interest: According to Merriam Webster, “a conflict of interest is a set of circumstances that creates a risk that professional judgement or actions regarding a primary interest will be unduly influenced by a secondary interest.” Primary interest refers to the principal goals of the profession or activity, such as the protection of clients, the health of patients, the integrity of research, and the duties of public office.

Secondary interest includes personal benefit and is not limited to only financial gain but also such motives as the desire for professional advancement, or the wish to do favors for family and friends. These secondary interests are not treated as wrong in and of themselves, but become objectionable when they are believed to have greater weight than the primary interests. Conflict of interest rules in the public sphere mainly focus on financial relationships since they are relatively more objective, fungible, and quantifiable, and usually involve the political, legal, and medical fields. [source: wikipedia]

Organized crime: The term “organized crime” refers to the unlawful activities of members of criminal organizations that supply illegal goods and services.

Political crime: The political‐crime category contains both crimes by the government and crimes against the government. Political goals motivate political criminals.

Victimless crime: Consensual acts (in which people are willing participants) and violations in which only the perpetrator is hurt, such as the personal use of illegal drugs, are called victimless crimes.

White‐collar crime: White‐collar crimes are offenses that persons commit while acting in their legitimate jobs and professions. White‐collar criminals behave in unethical ways for self‐gain (for example, embezzlement) or for the benefit of a business (for example, corporate price‐fixing). Victims of white‐collar crime include the economy, employers, consumers, and the environment.

Financial Crimes: Some financial crimes do not target a specific person or business, but they are considered criminal because they have an overall negative public impact. Insider trading, for example, is considered an unfair advantage in the market, which is damaging to investors who do not have access to inside information.

Securities Fraud (18 U.S.C. Section 1348): Securities fraud covers a broad range of illegal activities, all of which involve investor deception or the manipulation of financial markets. Examples of securities fraud include Ponzi or pyramid schemes, investment schemes, broker embezzlement and foreign currency fraud.

Insider Trading: “Insider trading” is a term that most investors have heard and usually associate with illegal conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders—officers, directors, and employees—buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC. For more information about this type of insider trading and the reports insiders must file.

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include “tipping” such information, securities trading by the person “tipped,” and securities trading by those who misappropriate such information.

Examples of insider trading cases that have been brought by the SEC are cases against:

Corporate officers, directors, and employees who traded the corporation’s securities after learning of significant, confidential corporate developments;
Friends, business associates, family members, and other “tippees” of such officers, directors, and employees, who traded the securities after receiving such information;
Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;
Government employees who learned of such information because of their employment by the government; and
Other persons who misappropriated, and took advantage of, confidential information from their employers.
Because insider trading undermines investor confidence in the fairness and integrity of the securities markets, the SEC has treated the detection and prosecution of insider trading violations as one of its enforcement priorities.

High yield investment scams typically involve:

Promises of high rates of return with little or no risk. Many different forms of investments (for example: stocks, bonds, commodities, real estate, precious metals).

Money Laundering (18 U.S.C. Section 1956): Money laundering is the practice of making proceeds from a crime appear to have been legitimately earned. You can be federally prosecuted for money laundering whenever you:

Conduct or attempt to conduct a financial transaction which involves the proceeds of an illegal activity, knowing the funds involved represent proceeds from unlawful activity;

With intent to promote furtherance of the illegal activity; or
With intent to defraud the Internal Revenue Service; or
Knowing the transaction is intended to:

Conceal or disguise the nature, location, source or ownership of the unlawfully obtained funds; or
Avoid a transaction reporting requirement under state or federal law.

Conclusion:

For the record, will like to note that i have always personally admired Ken Ofori-Atta quite a bit for all his hard-work and accomplishments. However, citizens of the country need to be informed of the facts. Seeing that i am just beginning my Forensic Economics investigation into this incident, the most profound observations that immediately occur to me are:

Conflicts of interest: The company that represented the single largest investor in this transaction was also personally affiliated to the current Finance minister through his wife and personal business partner.
Political crime: An argument could be made that the actors involved in this transaction, who are all mostly affiliated with the current administration, engaged in this ruse, in order to help them strengthen their political interests, at the expense of the citizens and other parties.
Insider trading: Considering the fact that this bond transaction doesn’t seem to have been fairly valuated as per current market conditions and comparable valuations, it is likely proper due diligence might not have been conducted.
Financial crime and malpractice: And since it it likely that Enterprise Group made money from this transaction, that will in itself, constitute a textbook case of Financial crime and malpractice.

Kindly note that this is a working draft. I will continue to add evidence as time goes on. I will expand upon it as time permits.

Cheers.
Source:anangtawiah.com

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