Just How Blind is Transcorp's Blind Trust?

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-  "Please Speak to the Nation,  Ejoo Sir!" -
By Henderson Johnson-Agba
Enugu State
August 2006
Last week, THISDAY exclusively reported the President's ownership of 200,000,000 shares in Transcorp, the conglomerate which has of recent, been buying up national assets. A Blind Trust pertaining to those shares was said to have been put in place. HENDERSON JOHNSON-AGBA explains just what a blind trust is and raises legal and ethical issues about the presidential blind trust in Transcorp.............................
I read with interest and concern Samuel Famakinwa's article in THISDAY of August 9 2005 titled, "Transcorp: Obasanjo's Shares in Blind Trust." The gist of it was that "The 200 million shares owned by President Olusegun Obasanjo in Transnational Corporation Plc (Transcorp) are being held in a blind trust on behalf of the President by Obasanjo Holdings, THISDAY authoritatively reports. According to information, the President's shares which are being held in a blind trust, in line with international best practice and it is being run by some prominent Nigerians and a foreign national. THISDAY also gathered that the President, through Obasanjo Holdings Blind Trust subscribed to 200 million shares in Transcorp when it was incorporated November 2004. The shares were fully paid."
Any inquisitive mind (of which I am one) would like to know if the shares where actually purchased in the name of Obasanjo Holdings Blind Trust and so registered at the Corporate Affairs Commission. However beyond the inquisitiveness are several interesting legal issues that this concept throws up. Chief amongst them are: What exactly is a blind trust? Does Nigerian Law recognize the concept of a blind trust?
The American Heritage Dictionary defines a blind trust as "A financial arrangement in which a person, such as a high-ranking elected official, avoids possible conflict of interest by relegating his or her financial affairs to a fiduciary who has sole discretion as to their management. The person choosing the trust also gives up the right to information regarding the status of the assets."
Three major components of this definition are:
(a) It is intended to avoid conflict of interest
(b) The trustee assume full powers - 'sole discretion' - for managing the assets
(c) the public officer loses the right to information on the assets during the tenure of the trust.
Do we have any law that provides for a blind trust in Nigeria ? Who regulates it?
We would come back to this later after we have seen how a blind trust actually operates in the United States . The story of U.S Senator Bill Frist is a good example. Senator Frist inherited a company HCA Inc from his late father and was a major shareholder before he became a Senator. In keeping with existing U.S regulations by virtue of the Ethics in Government Act 1978 (as amended) the Senator created a blind trust and duly informed the Senate Ethics Committee and filed all the necessary forms included a trust deed drafted in accordance with the laid down regulations. Under the statute Senator's Frists' trust agreement is not recognized as creating a blind trust for whatever purpose unless it has been approved by the Senate Committee on Ethics prior to execution. The standard Trust agreement contains clauses to the effect that the tenure of the trust shall be for the period that the Senator (or other public officer) continues in public office. It also lays down rules on interested parties which are defined as "the Grantor, spouses, any minor or dependent child, and their representatives".
Additionally, the Senator had to furnish information to relevant agencies on the proposed Trustee and Investment Adviser for their consideration by the Senate Committee to ensure that these persons are truly independent. By the Statute the Trustee has a long list of obligations which include reporting to the Senate Committee on Ethics, Office of Public Records and the Secretary of the Senate whenever "a particular asset transferred to the trust by an interested party have been completely disposed of or when the value of the asset becomes less than $1000" and on and on goes the laid down procedures.
The Senator supposedly complied with all these provisions as laid down by statute. So what do the accusers of the distinguished Senator have to say? Here is what happened. Senator Frist was asked during an interview whether he would not have a conflict of interest in voting for or against health care legislation despite his ownership of stock in HCA, a hospital chain which his family founded and asked whether he would sell his shares, to which he responded: "I really think viewers should know that I put this into a blind trust. So far as I know, I own no HCA stock. I have no control. It is illegal right now for me to know what the composition of those trusts assets. So I have no idea? It was later found out that Senator Frist actually received regular updates of transfer of assets to his blind trusts and sales of stocks. He also was able to initiate a stock sale of HCA with perfect timing because shortly after he sold the stock price dived.
Apart from the issue of having knowledge of the affairs of the blind trust, the US Attorney-General's office and the Securities and Exchange Commission began to investigate whether the Senator sold his stock based on insider information about earnings report. The level of 'blindness' expected of a grantor of a blind trust in public office in the US is total impaired vision NOT partial impaired vision. He is expected to take his hands and eyes off the asset entirely, leaving it to the Trustee for the tenure of the Trust. Indeed an onerous task, I think so too! But that is the character of a blind trust.
Now that we have a good idea of the essence and workings of a blind trust we can go back to the earlier question on whether any law or regulation exists on blind trusts in Nigeria. I would rephrase that question to read: Would any Nigerian Senator have run foul of any Nigerian Law pertaining to public office if he acted as Senator Frist did? NOT likely. Our situation and jurisprudence is totally different! The major portion of our laws that deal with conduct of public officers is as contained in Schedule 5 of the Nigerian Constitution.
Permit me to quote some relevant sections which provides inter alia: Section 1 - "A public officer shall not put himself in a position where his personal interest conflicts with his duties and responsibilities? Section 6 (1) A public officer shall not ask for or accept property or benefits of any kind for himself or any other person on account of anything done or omitted to be done by him in the discharge of his duties. Section 7 (b) The President or Vice-President, Governor or Deputy Governor, Minister of the Government of the Federation or Commissioner of the Government of a State, or any other public officer who holds the office of a Permanent Secretary or head of any public corporation, university, or other parastatal organisation shall not accept any benefit of whatever nature from any company, contractor, or businessman, or the nominee or agent of such person.
Section 8 - No persons shall offer a public officer any property, gift or benefit of any kind as an inducement or bribe for the granting of any favour or the discharge in his favour of the public officer's duties. Section 9 -   A public officer shall not do or direct to be done, in abuse of his office, any arbitrary act prejudicial to the rights of any other person knowing that such act is unlawful or contrary to any government policy.
Section 11 (1) Subject to the provisions of this Constitution, every public officer shall within three months after the coming into force of this Code of Conduct or immediately after taking office and thereafter (a) at the end of every four years; and (b) at the end of his term of office, submit to the Code of Conduct Bureau a written declaration of all his properties, assets, and liabilities and those of his unmarried children under the age of eighteen years.
Section 11 (2)   Any statement in such declaration that is found to be false by any authority or person authorised in that behalf to verify it shall be deemed to be a breach of this Code. Section 11 (3) Any property or assets acquired by a public officer after any declaration required under this Constitution and which is not fairly attributable to income, gift, or loan approved by this Code shall be deemed to have been acquired in breach of this Code unless the contrary is proved. Section 13. A public officer who does any act prohibited by this Code through a nominee, trustee, or other agent shall be deemed ipso facto to have committed a breach of this Code.
This is the gist of Nigeria's code of conduct for public officers. I have searched our statute books and regulations I fail to see any 'Blind Trusts Miscellaneous Regulations Law' or any piece of legislation that regulates the operation of blind trusts for public officers. Someone suggested a resort to Common law and the answer to that is what happens where Common Law conflicts with the clear prohibition on conflict of interest in Section 1 of Schedule 5 of the Nigerian Constitution?
I submit that our jurisprudence is blind to the concept of a blind trust and where same exists the regulations governing its workings are not in place. One is not in a position to adjudge the truth in the reports of Mr. Famakinwa of THISDAY.
However since it has become an issue then it is a worthwhile intellectual discourse to raise questions that may arise in judging the propriety or impropriety of blinds trusts in relation to this transaction and generally. The questions that agitate my mind in this regard are:
ONE: Can a public officer create a blind trust for shares held in a company which was created and nurtured by him during his tenure in office?
To put this in perspective Senator Frist had the controversial stock in HCA before he became a Senator. He did not acquire them in the course of his duty as a Senator. He did not set up the company during his tenure as a Senator or use his official powers and statutory powers as Senator to set up a company to which he became a shareholder. TWO: Can the act of a public officer become legal (or ethical) by importing the 'blind trust' concept which is alien (and therefore not subject to regulation) to Nigerian law?
Would Senator Frist for example borrow our Code of Conduct in Schedule 5 of the Nigerian Constitution to defend himself of any impropriety in the United States? Mr. Famakinwa's article says that the blind trust is set up according to 'best International practice' to which I ask: Can we apply any 'best' international practice (no matter how well versed) to a transaction that is not in tune with domestic laws?
THREE: Where the act in question clearly runs against the omnibus Conflict of Interest provisions in Section 1 of the Code of Conduct (above quoted) would the niceties of a blind trust erase or negate the duties of an elected officer as a public trustee? One major pillar of our inherited Anglo-Saxon jurisprudence is the underlining concept of 'equity and good conscience'. As we continue in this discourse we should ask ourselves whether in all good conscience a grantor of such a blind trust - a shareholder in a company - can remain a major player (or the major player) in determining the fortunes of the company and through the instrumentality of his public office.  
Just how blind can this blind trust be?
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