Accra, Aug. 23, GNA - The Bank of Ghana has decided to extend the period of moratorium on the operations of CDH Discount Company Limited and its affiliates for two more weeks.
A statement issued in Accra on Monday said this was "to enable a comprehensive report to be obtained from the Auditors". The statement said the extension of the moratorium had become necessary "because of the difficulties encountered due to the poor state of record-keeping".
The Central Bank said objectives of the regulatory action is to assist the companies to update the accounting and transaction records to prepare credible financial statement and reports and establish the finical position and viability of each member of the group as well as the financial position of the group.
The Central Bank early this month said the operations of CDH Discount Company Limited and its affiliates were in critical financial state.
The Central Bank noted that the financial house required supervisory intervention, but the Management and Board of Directors of the Company had not been able to implement any credible remedial measures to address the situation.
Mr Emmanuel Asiedu-Mante, First Deputy Governor of the BoG, told reporters early this month "various on-site-examination reports on the Company revealed serious weaknesses, instances of mismanagement, misapplication of clients' funds and non-compliance with basic legal and regulatory requirements".
Consequently the BoG commissioned PricewaterhouseCoopers to conduct a comprehensive audit into the entire operations of the CDH Discount House Limited and the CDH Financial Holdings and all its subsidiaries. Mr Asiedu-Mante said the exercise was to assist the Company to update the records and produce credible accounts.
Reacting to the measures, the Solicitors of Mr Fred Apaloo, Managing Director of Consolidated Discount House (CDH) Limited, accused BoG of arbitrariness and high handedness in its dealings with CDH Financial Holdings Limited.
The Solicitors, Law Associate Incorporated, said: "We have our client's instructions to point out to the Bank, respectfully, that the same (reasons given for the action) are untenable, wrongful and most arbitrarily.
In a letter to the Governor of the Bank of Ghana, a copy of which was made available to the Ghana News Agency, the Solicitors said: "Certainly, the Constitution and the Bank of Ghana Act, which your letter relied on vaguely, cannot provide justification for your Bank's actions.
"On the contrary, the very provision in the PNDCL 328 cited and relied upon, have exposed the illegality of the Bank's actions and directives."
The Solicitors were reacting to "Bank of Ghana Directives to the Board of Directors and the Managing Director of Consolidated Discount House Limited"
The letter to Managing Director of CDH said: "The Bank of Ghana has observed with much concern the gross mismanagement of Consolidated Discount House Ltd., which has contributed to the erosion of its capital base to a state of insolvency.
"To ascertain the exact extent of the state of affairs and mitigate further deterioration in the value of assets in the interest of depositors and other investors the Bank has decided to take over direct control of the company for two weeks beginning Monday, August 9, 2004.
"In pursuance of this decision it has become necessary to issue the following directives:
" The Board of Directors is hereby suspended until further notice.
" The Managing Director is to cease carrying out his duties as Chief Executive Officer and proceed on leave indefinitely.
"All other officers of CDH Discount Ltd. are to subject themselves to the directives and instructions of the Bank of Ghana and its designated officers.
"All Directors including the Managing Director and key management staff are to make themselves available to the Bank of Ghana, its designated officers and agents as and when required during the period of the take over. They are required to leave reliable contact address with the Banking Supervision Department of the Bank of Ghana.
" The Board of Directors, Managing Director and all officers of CDH Ltd. are required to cooperate in this without fail.
"These directives apply equally to CDH Holdings Ltd. and all its subsidiaries.
"These directives have been given in accordance with powers conferred on the Bank of Ghana by the Constitution, The Bank of Ghana Act, 2002 (Act 612) and Section 5 and 6 of the Financial Institutions (Non-Banking) Law 1993, PNDCL 328."
The Solicitors said; " at dawn of yesterday (August 9 2004) about 20 uniformed Policemen wielding guns and accompanied by scores of some known senior executives of the Bank of Ghana ("the Bank") and other persons unknown, invaded the Head Office premises of the Group. The invading force initially prevented any other person from entering the premises.
"Eventually they allowed in the staff of the Group's tenants and employees of the Group but stopped the Group's staff from working; installed themselves in the premises; and took over cash tills and cheque-books etc.
" By early afternoon, the invaders had produced no Police warrant nor any letter of authorization from any source despite repeated demands - even though they had taken over the group's premises and operations.
"However, later in the afternoon the invaders produced the Bank's letter dated 9th August 2004 to our client."
The Solicitors said: "The legal position is well known: where a public authority has power to act by way of acquisition, sanction or otherwise, i.e. in a manner which affects the rights of a person, body or institution, it must act according to law. In other words, it must operate within strict parameters of powers granted it by some law or regulation and all conditions precedent should be mandatorily fulfilled and seen to have been strictly fulfilled."
The Solicitors accused the BoG of not notifying the CDH in writing as required by the Law adding: "The Bank is now directly meddling in the management of private financial institution- over the heads of the owners of that institution."
They said: "Besides, by purportedly making your letter/directives therein contained applicable to all the other institutions, which are neither Non-Bank Financial Institutions nor Banks (as defined by related statutes) the Bank has clearly acted ultra vires."
The Solicitors explained that the Bank of Ghana had usurped the powers of the Security Exchange Commission (SEC) by roping in the CDH Securities and that of National Insurance Commission (NIC) by involving CDH Insurance Company Ltd. in its arbitrary action.
The Solicitors said: " The Bank knows, surely, that the main cause of CDH's challenge is the problem with Ghana Airways. Already CDH Discount House Ltd. has a judgement debt in excess of 15 billion cedis plus interest to enforce against the Airline.
"The CDH had been exploring ways which are non-confrontational towards the government and least deleterious to the Airline of recovering the judgement debt given Government's plans to raise foreign investment into the Airline.
" Alongside side this, the Group's Board and shareholders had decided upon and were implementing far-reaching measures to address CDH's challenges.
"These are well known to the Bank and are in line with your Bank's own prescriptions. By what the Bank has now purportedly done all these initiatives have been greatly undermined - quite apart from the Bank's acts being illegal and arbitrary."
The Solicitors demanded that the Bank should within the next 24 hours withdraw its letter and reinstate the Managing Director of the CDH "as well as cause the withdrawal and reinstatement to be given the same publicity as the Bank's ultra vires and wrongful letter/acts aforesaid". They gave notice that "should the Bank fail to comply with the just demands" they would commence legal action against the Bank. However, Mr James Ahwireng Odei, Secretary of the Bank of Ghana, told the Ghana News Agency that the Bank acted under the laws that it operated.
" For now I would not like to answer word for word. All that I want to say is that the Bank acted under the laws it operates," he said.