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Forte Financial Sues Starscomms/Atedo Peterside for Fraud; Claims N6 trillion Damages

Source: huhuonline.com
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Nigeria's telecom giants Starcomms Plc. face a N6 trillion class action suit over shares it sold to investors in a 2008 Private Placement, which Forte Financial now alleges was a public offer Starscomm made without the requisite statutory approvals. Forte; suing

for itself and on behalf of its clients who were the beneficiaries of the Starscomms Plc. shares purchased in the Private Placement of 2008 named 12 other co-defendants in the writ of originating summons filed in the Federal High Court in Lagos.

Also named in the suit filed by Temitayo Ojeleke Esq. of Hawkes Legal, lawyer for the plaintiff are: Chief Maan Lababidi, Maher Qubain, Navaid Burney, Omar Lababidi, Afolabi Williams, Stanbic IBTC Bank Plc, Atedo N.A. Peterside, Mrs. Sola David-Borha, Yinka Sanni, Chapel Hill Advisory Partners Ltd, Bolaji Balogun and Wale Edun as 2nd to 13th co-defendants respectively.

According to the statement of claim; a copy of which was obtained by Huhuonline.com, the Plaintiff averred that he was invited to participate in the Private Placement in the 1st Defendant which was meant to be restricted to only 50 people; subsequent to which Plaintiff, acting on information in the investor letter, commitment form and private placement memorandum applied to purchase shares on behalf of its clients to the tune of N445, 770,000.00 and was accorded 34, 290,000 shares. The shares were duly paid for.

The Plaintiff avers that it was induced to participate in the private placement transaction by the good reputation of the 1st, 7th, 8th, 11th and 12th defendants and the statements in the private placement memorandum which it believed; not the least of which was that the necessary regulatory approvals had been obtained from the requisite statutory bodies such as the Securities and Exchange Commission (SEC). But the Plaintiff has recently discovered that there were material misstatements that were false, deceptive and misleading made by the defendants and is seeking relief from the court.

Amongst other reliefs being sought from the defendants jointly and severally is a declaration that the entire Starscomms Private Placement Transaction carried out in June 2008 was not a Private Placement but a Public Offer of shares; a declaration that the defendants did not have the requisite statutory approvals to conduct a public offer as at the time they took the Plaintiff's money in June 2008; an order that the Plaintiff is entitled to rescind the contract for the purchase of shares in the 1st defendant; an order directing the defendants to refund to the Plaintiff the sum of N445,770,000.00 being the money paid to defendants by the plaintiff for its private placement shares purchase.

The Plaintiff is also praying the court for an order directing the defendants to pay the plaintiff interest on the sum at the rate of 21% from the 3rd of June 2008 until judgment; general damages of N1,000,000, 000.00 for all losses suffered by the Plaintiff by reason of the defendants breach of contract and exemplary damages of N5, 000.000,000.00 and post judgment interest on the judgment sums at the rate of 10% per annum from the date of delivery of judgment until payment.

The Plaintiff explained that Starscomm Plc. in a letter, dated April 21, 2008, secured the approval of the Nigerian Communications Commission (NCC) on the ground that a strategic investor, Circle-Tel would be allotted preferential equity in the 1st Defendant's company. But the private placement memorandum neither mention the NCC approval letter, nor the proposed allotment to Circle-Tel, whose name was conspicuously missing from the list of the 43 investors submitted to and approved by the SEC. In effect, the defendants deliberately set out to conduct a public offer without any authorization or approval from the SEC, noted the statement of complaint.

Additionally, the complaint averred that whereas the private placement should have produced only 43 new investors, the share certificates issued at the end of the exercise were in excess of 1000 and the plaintiff's certificate is number 538. This information was not disclosed to the SEC. The plaintiff further avers that even before the purported private placement was complete; the 11th Defendant transferred sixteen billion naira from the placement proceeds account to its own corporate account domiciled at Access Bank Plc. in breach of Section 91 of the 2007 Investment and Securities Act.

The Plaintiff argues that at the time of packaging the transaction, the defendants knew it was grounded on lies, deception and falsehood and in violation of market regulations and statutory requirements. This has occasioned considerable loss to the Plaintiff and its clients as the funds realized from the private placement were diverted and the plaintiff has suffered additional loss arising from legal fees as it has been forced to seek legal redress to recover its investments. These are the legal basis on which the plaintiff is asking the court to grant it relief.

No date has been fixed for the hearing, but one thing is certain: this lawsuit can open the floodgates of a class-action suit against Starscomms Plc. as many investors who bought shares during the purported private placement could join the case.

Starcomms Plc. is the largest CDMA operator and the 4th overall in Nigeria. The only "Triple-Play" provider of fixed & mobile voice and broadband services in Nigeria with over 2.4 million subscribers. It is the only public listed telecommunications company on the Nigeria Stock Exchange. As of December 31, 2010, the Company operated through its distribution network located in 22 states, 31 cities and 175 town of Nigeria, according to information from the company's website.