By Boluwatife solomon Oshikoya
INTRODUCTION
This thesis was motivated by Femi Otedola’s stunning resignation from Transcorp Hilton after only one week of investing in the business. Nigeria’s corporate world responded to the news in different ways. The main complaint is that the billionaire’s entry and leave were questionable transactions. The study explores illegal transactions as well as the legal system. Corporate fraud is the phrase used for these actions.
OVERVIEW OF CORPORATE FRAUD
The company’s agents utilize their corporate personalities to commit fraud. Any illegal, immoral, or dishonest activity committed by an organization or by a person working in their official capacity as an employee of the corporation is referred to as corporate fraud. Corporate fraud strategies are frequently extremely complex and difficult to detect. A team of forensic accountants must work for months to expose a corporate fraud scheme thoroughly. Losses amounting to billions of dollars frequently result from corporate fraud committed by top executives of huge corporations. Corporate fraud hurts consumers or clients, creditors, investors, other companies, and eventually the offending company and its staff. The fraudster’s business is frequently left in ruins after being exposed and forced to file for bankruptcy.[1]
FORMS OF CORPORATE FRAUD
Both the employee and the employer can commit corporate fraud, although they do so in different ways. There are many other sorts and variations of corporate fraud, but for the purposes of this study, I will only be focusing on four.
1. PUMP AND DUMP: The artificial inflating (“pump”) of the price of a security through false, deceptive, or inflated comments regarding the security’s price is referred to as a pump and dump scheme. The rapid sale of the securities at a premium price (also known as a “dump”) allows a fraudster to profit from price inflation. At the same time, the security’s price will drop significantly, which means the new owner of the shares will probably lose a significant portion of their capital. The pump and dump scheme is thought to be unlawful.
2. INSIDER TRADING: Insider trading is the act of buying and selling investment products from publicly traded companies while in possession of crucial information that is not yet widely known. Any information that is not generally known is referred to as material information. Details known as “material information” can have a significant impact on whether a product is purchased or sold. By publicly traded information, we mean that the information is not legally out to the public and that only a few people possess such information.
3. PONZI SCHEME: A Ponzi scheme is one in which existing investors are paid with funds from new investors. Ponzi scheme developers typically promise that by investing your money, they would profit handsomely with little to no risk. However, the scammers don’t use the money in many Ponzi schemes. Instead, they invest it, maybe keeping part for themselves, in repaying previous investors. Ponzi schemes have little to no genuine income. Thus, they depend on a continuous supply of fresh funds to stay afloat. When it becomes difficult to recruit new investors or when many current investors withdraw their money, these schemes typically fail. Charles Ponzi, the con artist behind the postage stamp speculating scheme that defrauded investors in the 1920s, is credited with giving the term “Ponzi scheme” to financial fraud
4. MONEY LAUNDERING: Money laundering is the process of making illegally obtained proceeds appear as though they were obtained legally by concealing or masking their original sources. Oftentimes, it takes place with more serious offences like drug trafficking, robberies, or extortion. Criminal gangs move illegally acquired monies throughout the globe using banks, sham firms, middlemen, and money transmitters in an effort to integrate the funds into legal economies and businesses. Money mules are increasingly a major factor in this scenario. Where one may least expect it, such as in the environmental crime industry, money laundering is prevalent and can be found there. This issue has gotten worse since cryptocurrencies like bitcoins emerged.
REGULATORY FRAMEWORK
Numerous laws passed by the national legislature in Nigeria combat, prevent, and outlaw corporate fraud. Extortion of any kind is forbidden by the Federal Republic of Nigeria’s constitution. The Constitution’s enabling law gives the government the authority to pass a law outlawing certain behaviors. The criminal code and the criminal legislation of Lagos State were created as a result of this power. These laws set the legal framework for the outlawry of all sorts of fraud. Offspring of these laws included laws that were offense-specific. The Investment and Securities Act, the Money Laundering Act, the Economic and Financial Crimes Commission Act, and others are examples of these. Furthermore, The Economic and Financial Crimes Commission (EFCC) Act of 2004 also allowed the EFCC, National Drug Law Enforcement Agency (NDLEA), and Central Bank of Nigeria (CBN) the authority to look into allegations of money laundering and to examine bank accounts in order to assist in tracking the proceeds of crime. The principal organization for the nation’s intelligence gathering, analysis, and distribution about money laundering and the financing of terrorism is the Nigerian Financial Intelligence Unit (NFIU), a unique, independent unit of the EFCC.[3]
CONCLUSION
Greed is the driving force behind all fraud schemes, which is why corporate fraud happens frequently. It can occur for numerous reasons in the highly competitive global corporate climate of today. Many corporate fraud schemes use dishonest accounting techniques to make a company appear to be more profitable than it actually is. The need to attract or retain investors is the driving force behind these programs. Therefore, it is safe to say that these criminal acts are still common in Nigeria despite the strong regulatory framework put in place to combat them. I strongly advise investors to hire a lawyer in the near future in order to conduct a thorough investigation into any potential investments.
References
1.https://corporatefinanceinstitute.com/resources/esg/corporate-fraud/
2.https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme
3.https://www.mondaq.com/nigeria/money-laundering/756494/company-fraud-and-money-laundering-in-nigeria
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