Doctoring the Books, what you will not be told.
One of the first things I realized in my discussion with Bunmi, which I didn’t hesitate to tell him, was that it would take a lot of business education to explain things to the average employee. How would you ever explain some things to people. Well, maybe that’s why some of us are passionate about educating people, else how will you explain what I’m about to do. Somehow I felt I could only relate to some of those things because, first I had worked in a manufacturing company, and now own a business. Irrespective of why I feel I understand however, I’ll do my best to be as explanatory as possible.
I’ll like to say as well that I am not biased. This is the first time I’ll ever speak with the man for more than 2 minutes. In previous times, all that I have ever done, had been to walk up to him and greet him, like I have done to many other MDs that have crossed my path. Where there is smoke, there is certainly fire, I’ll try as much as possible to share my perspectives about the smoke as well.
Again, these are merely my perspectives, the impressions I got when i spoke with the man. They in no way form the court’s discoveries or 100% of Bunmi’s views as I did not hold a recorder when speaking with him. I’m not his lawyer as well, so be easy on judgment 🙂 And of course, measure based on your measure. I expect that the cleanest people are usually the most intolerant of any spec of dirt.
Bunmi Oni became the MD of Cadbury by his own records in 1995. When he came in, he set a 5yrs goal for the company together with top management. By the year 2000 they exceeded their goals, both for profit and company growth and he was very excited about it. He went ahead to set a 10yrs goal for the company, knowing also that the goal would outlive him, as he would have handed over to a successor. The goal was to build Cadbury Nigeria into a $1Billion company by 2010. He this was a very stretch goal, considering their size at the time, but he and his team were passionate it could be achieved. Confirmation came for them in 2003, when to the amazement of the onlooking world, MTN came to Nigeria and achieved beyond their 10yrs goal in their second year, without bringing a dime of foreign money into Nigeria. It reaffirmed his fate in the possibilities of growth in Nigeria as all that money was inside the system. At this time they reviewed how they were doing as well, and reviewed the plan to achieve the goal latest by 2012.
In line with this stretch goal, one of the things he knew would have to change were some of the machines they were working with. There was no way they could build a 21st century $1Billion business using the current equipment. The machines they used for making Bournvita were old technology plant that used a coal oven. He believed they needed a machine with better throughput. He realized that they were not skilled enough to design what they needed, and decided to seek help from Cadbury Schweppes UK. These agreed to design the plant, that would give them their required results. Cadbury Schweppes designed but where not willing to pay for the development, but recommended another company in Europe that was great in implementing designs. This company developed to specification, the machine was transported to Nigeria, set up, powered, but refused to work! An investment of £4.8Million Pounds was not working, this created a lot of concerns.
It took quite a lot of back an forth convincing the development team that it was not due to operational competency. They finally came down to operate it themselves with some of their consultants, only to finally open up to Cadbury Nigeria that the design was faulty. This was a shocking revelation which they took up with Cadbury Schweppes UK. Cadbury UK, switched to denial. They kept denying until after a while they decided to concede without committing it to writing, and agreeing to help fix the line. Because it was a line with a continuous automated process, they had to fix each module before they discover the issues with the next module. They also had to waste a lot of cocoa and other raw materials testing the line. This gulped some other millions of pounds and 18 months! The machine was finally fixed but with a capacity only 60% of initial design specifications requested. This also gave Cadbury a liability of 300 extra staff that were supposed to be replaced or redeployed to other sides of the business with the coming of the automated line.
Here is where the misstatements started…
Bunmi out of no fault of his own, save a desire to grow the business, is left with a messy situation. About N2billion had been expended on a line project that he went into with the full alignment of the board, but that Cadbury UK had fouled on. He decided to take responsibility for it, and work with his team to progress inspite of the shortfalls. Since the entire process took 18 months, he and his team ( I believe with the boards approval) decided to depreciate the costs incurred in procuring the machine and the entire design exercise over 2yrs+. They recorded a part of it in 2006, were going to do the rest in 2007 and if there was any excess capture it 2008. IMO, this is allowed in accounting. I say this not as an accountant, but as one who has seen many books and worked closely with a good number of highly rated financial analysts and accountants. Multinationals that score number 1 in integrity globally do these things, and I have worked with one of them. This however is the case that looks most like it can win a case for miss statement. But I’m open to expert views from accountants on this, particularly those familiar with the manufacturing environments.
When the investigations were done, the people who had the brief (PWC UK) decided to look for other opportunities to position for miss statement… and found some interesting ones. Due to regulatory changes for example, many companies had a gratuity liability that was huge. A number of companies in the Manufacturers Association of Nigeria and many others not in, decided to approach the body in charge to negotiate for an opportunity to clear the liability over 3yrs. They agreed and gave Cadbury Nigeria, together with a number of companies this waiver. The investigators got the letter, reported that the decision of the body was wrong and that the full amount for 5yrs be taken out of the companies books in 1yr. This accounted for a few billions of Naira in the eventual 13 Billion Naira misstatement.
They went through he books, and even though they had just cleared their income tax liabilities with the Tax bodies, they said that the staff had still underpaid tax and they had an exposure of over N1billion.
They also discovered that Cadbury distributors were only rewarded for their performance and given their bonuses in the next year after they had done the work. Experts (Gamaliel Onosode for example) says this is typically the same way dividend is done. The consultants decided against it and said is should be charged into the books in the same year. In their zeal, they decided to charge for 2005 and for 2006 all in 2006. This accounted for a few billions miss statement as well.
They also went through the books and reviewed some of their policies. In Nigeria for example, they defined a bad debt from their clients to any amount that was not paid in 180 days. the consultants (PWC UK) came, and said it should be 90/60 days (sorry I didn’t write it down, just listened hard), and counted everything above these number of days as bad debt and captured it, also a few billions as miss statement.
They found or invented, a number of these type of things, pulled them together and called it N13billion miss statement. I’m an HR specialist and business man, I need the help of an accountant here to let me know if what I have watched done all my multinational career was actually wrong. If they are, then is there any clean? Before you jump into attack mode, please find out what your accountants are doing, find out what’s keeping them in the office late at night. I’ve worked somewhere before when if you make a forecast, it must never be wrong! In fact you must not even make much more profit that you forecasted. Wrong forecast they say is an indicator to your investors that you are not on top of your business, and if good mistakes can happen bad ones can too, and a process of creative, yet ethical (I’m made to believe) accounting occurs and it’s never missed, at times, we sell of things whose book values have reached zero for profit, pressure a few of our receivables to come in, initiate projects that make our distributors buy more e.t.c.
I’m sure there are some fine lines that have been crossed here, and if anybody decides to witch hunt the cleanest of CEO’s in the world, we’ll find some of these things. If we look closely at clean water, we might see micro-organisms. Scientists even say that there is no liquid water without life. Is Bunmi Oni being measured by the same standards by which we measure all the companies on SEC? Are the punitive measures taken against him not tantamount to using bullets to kill ants? Are we inventing another measure for him for no reason? When I heard him, I felt that going the length they went to prove a point, and clear evidence of motive says to me, was this a routine check? Did SEC check Cadbury out indpendent of the report PWC UK submitted to it?
Before I start sounding like a lawyer before a jury trying to establish the presence of reasonable doubt. Let me restate the facts of this matter. No money was made. Something questionable was done, Bunmi took accountability for it and asked that his team be spared of any punitive measures due, as it happened under his watch. Bunmi Oni did not act based on the motivation of personal gain, security, survival or sex (the human motivations), he acted according to him, in the integrity of his heart. Cadbury UK pounced on him, perhaps before the issues blew in their face. Why would you miss state? Why? Just for the fun of it? To defraud the shareholders? To get people to buy and dump your shares? Or to steer the company carefully into your dream for it? And was it really a miss statement? And why are they making it so big by making other things miss statements? Would it have made a super star out of the Next MD if the previous year had taken a big deep of amounts that were supposed to be spread? Would the next MD not make profit already from day 1? Was it planned that the next MD would be… let me guess from UK? Now it has all become a matter of yam pepper scatter scatter…
Please forgive my errors… I’m in the office after 10pm and need to rush home.