KPMG's Full Report on Pension Fund Fraud (Part 1)

The below report was extracted from BusinessDay newspaper, it shows how Nigeria's Senior Citizens have been robbed by few people.                     

                      

                            Abdul Rasheed Maina, Chairman Pension Task Force

Scope and nature of assignment

1.1 Objective of our investigation

By a Letter of Engagement reference number HMF/FMF/2011/19 dated September 2011, which was issued by Dr Ngozi/Okonjo-Iweala, in her capacity as the

CME/HMF, the FGN (acting through the CME/HMF) engaged KPMG to assist the Government with an examination and review of the public service pension scheme, with particular reference to the operations of the current police pension scheme. The Government wanted us to perform the assignment in phase, ultimately leading to the transformation of the public service pension system. In the initial phase, the Government wanted us to assist with the following tasks:
• Identification of the current constraints in completing the mandate of the Task Team directed to
restructure the current police pension system, as set out in the terms of reference to the Task Team;

• Advice on a roadmap to ensure adequate completion of the reforms in these sector to ensure adequate accountability by all the active players in the reforms in reform process

• Examination of the bank account into which police pension funds were deposited to ensure the strictest accountability and integrity of the accounts; and

• Advice to the Minister of Finance on policy reform and the governance structure in the operation of the bank accounts associated with the police pension scheme.

Some allegations had been made in respect of the police pension scheme, which the Government has requested KPMG to assist to investigate.

Allegations by Maina

• The fund received, on a monthly basis, from the Federation for the payment of police pensions was about =N=1.5 billion, whereas only about =N=500 million was required, thus resulting in excess of about =N=1 billion per month, which excess had accumulated to about =N=28 billion over time. This accumulated amount was lodged in various bank accounts

• The HOSF (Afolabi) appointed his first cousin as Director of PPO in order to enable Adeyemi to assist Afolabi in diverting (part of) the above mentioned excess funds from the police pension accounts.

• Afolabi succeeded in fraudulently withdrawing =N=119,979,952.85 from the account of PPO with First Bank, allegedly for payment of police pensions, even though Afolabi was not a signatory to the account;

• ARPON claimed that the person on the payment schedule, whose person arrears had been allegedly paid with the sum of =N=119,979,952.85, were not member of ARPON, implying they were ghost pensioners

• Afolabi directed Maina, in August 2011, to had over the affairs of PPO to Adeyemi who had been appointed as the Director of PPO even though the three (3) month tenure of Maina at PPO had not expired; and

• The reason why Afolabi directed Maina to had over the affairs of PPO to Adeyemi before expiration of his three (3) tenure was because Maina had frustrated the attempts by Afolabi to divert funds from the police pension accounts.

Allegations by Afolabi

• Afolabi only appointed Mina to restructure the PPO but Maina exceeded his mandate

• Maina had opened several bank accounts without proper authorisation into which Maina had transferred funds from the police pension bank accounts

• Maina and two other individuals selected by him were signatories to the police pension bank accounts and

• Maina had authorised payment of estacode and DTAs from the police pension accounts to various individuals.

The objectives of our investigation was to independently verify and substantiate the veracity or otherwise of the above allegations and report our finding and issues identified during the course of conducing the assignment. This report reflects the work done and the findings by KPMG in respect of the allegations.

We were not required to, and did not perform an audit of the records in accordance with generally accepted auditing practice. We have performed the procedures we considered appropriate in the circumstances. We also were not required to, and did not conduct a trial and/or inquiry in the course of the assignment. We are not required to and did not act as a tribunal , commission of inquiry or in judicial or quasi-judicial role. We were not required to and did not perform, any adjudicatory function whatsoever in the course of the assignment.

The scope of our work involved and analysis of the documentation and information provided to or obtained by us during the course of our assignment. We limited our investigative efforts to the legitimate acquisition and collection of admissible evidence. We have not tested the authenticity and/or completeness of any of the documents, which were made available to us in the course of this assignment except as indicated in this report. Should further evidence be availed to us, we may need to amend our finding after having considered such evidence.

1.2 Period under review

The procedures performed by us are relevant to events/documentation covering the period from 1 January 2009 to 15 September 2011, unless otherwise indicated in this report.

1.3 Limitations and subsequent events

We have attempted to include all information relevant to the specific transactions. However, it is possible that documents and information exist which were not made available to us, or which we were unable to locate. We did not conduct search and/or seizure of records in the course of our assignment. We have relied on the records and information voluntarily made available to us by the providers of such records and information in performing our analysis and reporting our findings. Any documents or information brought to our attention subsequent to the date of this report, which would affect the finding reported herein below, will require our findings to be adjusted accordingly.

We draw attention to the inability of PPO to provide us with the records relating to its operations in 2009. PPO staff claimed that the 2009 records were difficult to sort where they had been keept.

1.4 Restriction on distribution or report

This report has been prepared on the basis that it is for the exclusive us of the CME/HMF who has agreed to the procedures performed by us and for the purpose set out herein. No other parties that the CME/HMF to whom the report has been addressed, or person expressly authorised by the CME/HMF in writing may rely upon the report for any other purpose whatsoever.

KPMG does not assume any liability whatsoever to any third party recipient of this report or any other person or authority whomsoever under any circumstances whatsoever, irrespective of whether KMPMG has consented t the disclosure of this report to such a third party. The FMF shall fully indemnify KPMG for any loss, cost and/or damages suffered by KPMG in consequence of submission of this report to third parties.

1.5 Legal advice

Although this report may contain references to relevant laws and regulations, we do not provide legal opinion on compliance with such laws and regulations. Our findings in this report are not to be construed as providing legal advice.

Our discussion on the relevant laws and regulations is intended solely to facilitate the determination of applicable facts, which may be relevant to the interpretation and/or application of such laws and regulations should such interpretation require legal advice, we recommend that independent legal advice be obtained.

1.6 Procedures performed by KPMG

The purpose of this report is report on the finding resulting from the procedures performed by us as described below. The procedures were performed based on those facts supported by documents and records and where so specifically indicated, consultations/interviews conducted in the course of the assignment. The general procedures performed by us included the following.

• Conducting a brief meeting with the CME/HMF to clarify the scope of work, responsibilities and expectation for the assignment;

• Holding consultations with Afolabi, Adeyemi and Maina as well as several Government and non-Government officials in order to understand the applicable operating environment relating to the allegations made by Afolabi and Maina;

• Obtaining and analysing available records and information, which were considered relevant to the subject matter of the investigation;

• Updating the CME/HMF on the progress of the assignment as well as challenges encountered in the course or the assignment; and

• Preparing this report of findings for easy understanding and reference, we have outlined the section dealing with out findings on each allegation, the specific procedures performed by us in connection with investigating each allegation.

2. Executive summary

2.1 Introduction

The FGN appointed KPMG to assist the Government with investigating some allegations and counter/allegations made by Maina and Afolabi in connection with the operations of the police pension scheme.

Our work entailed an examination, analysis and reconciliation of documents, schedules and electronic data maintained by FGN as well as third parties with a view to ascertaining the veracity or otherwise of the allegations. We have summarised below the key highlights of our findings. These findings should be read in conjunction with the detailed report and the exhibits in order to fully understand the nature of the findings

2.2 Allegations by Maina

2.2.1 Allegation of ulterior motive in appointment of Adeyemi as Director

Adeyemi is Afolabi’s uncle, not cousin Afolabi appointed Adeyemi as Director of PPO on 6 June 2011. On 8 June 2011, Afolabi also appointed Maina (effective 9 June 2011) to oversee and restructure PPO for three (3) months and thereafter, hand over to the Director of PPO.

We have reflected in the detailed findings the response by Maina to our reminders to him to provide us with evidence in his possession in support of his allegation that Afolabi appointed Adeyemi as Director of PPO so that Adeyemi could asisst him (Afolabi) in diverting funds from PPO. Maina could not provide us with any such evidence, neither were we able tolocate/identify any such evidence.

Afolabi stated the he obtained positive, albeit informal recommendation from a former SGF before appointing Adeyemi as Director of PPO. He also stated that his choice of Adeyemi for the post was informed by his desire to appoint a reliable and credible person to the office in view of the malpractices alledged by Maina himself to be going on at PPO. Prior to his appointment as Director of PPO, Adeyemi had been a Director in the office of SGF since 2009.

2.2.2 Allegation of ulterior motive in HOSF directive to Maina to handover the operations of PPO before expiration of his tenure

Afolabi appointed Adeyemi as Director O ppo on 6 June 2011. Two (2) days laster, that is on 8 june 2011, he appointed Maina to oversee and restructure the operations of PPO. The appointment of Maina was with effect from 9 June 2011 and for three (30 months, implying that the tenure was to expire on 8 September 2011 Maina was required to hand over to the Director of PPO after the expiration of his tenure.

However, on 19 August 2011, Afolabi directed that Maina should hand over to the Director of PPO effective 22 August 2011, that is before expiration of the three (3) months. We have reflected in the detailed findings the response by Maina to our reminders to him to provide us with records in his possession in support of his allegation that the reason why Afolabi directed him (Maina) to had over the operations of PPO to Adeyemi before the expiration of the three (3) month tenure previously granted him by Afolabi was because he (Maina) had frustrated attempts by Afolabi to divert funds from the police pension accounts.

Afolabi stated that his directive that Maina should hand over on 22 August 2011, before of his three (3) month tenure was Maina exceeded the mandate give to him in respect of PPO.