As the big stinking onion called the Franklin Templeton scandal peels down layer by layer and stings the eyes of President Akufo-Addo and his Finance Minister, Ken Ofori-Atta, interesting déjà vu is in the air.
The same Franklin Templeton, which was secretly sole-sourced to buy over 95% dominant share of the GoG’s $2.25billion 15-year bond, was accused of mutual fund fraud in the US barely two years ago.
In 2014, Massachusetts regulators accused the firm which is parent company of Franklin Templeton Investments, of allowing a Las Vegas based Securities Broker, Daniel Calugar, to make $45million worth of improper mutual-fund trades.
And the Calugar dalliance is just one of a number of high profile investment scandals that have attracted suits against Franklin Templeton in the US. Other suits against the global investment firm include one by a certain Anthony P. Miele lll of Manhattan, who is litigating for $130million in a San Francisco Federal court.
According to the pertinent allegations, Templeton fraudulently concealed information about investment by an earlier investor – late father of the plaintiff.
Another is an August 2016 suit by employees of Franklin Templeton itself, in a US District Court for the Northern District of California, alleging that funds form a Franklin Templeton retirement plan for the employees were invested in funds offered and managed by the company, despite the fact that “better-performing and lower-cost funds were available.”
The plaintiffs, employees of the company, also accuse the fund group of investing in Franklin Funds to benefit its own investment management business rather than the employees.
In November 2004, California Attorney General, Bill Lockyer, secured an $18 million settlement with a leading distributor of Franklin Templeton Investments (FTI) to resolve a lawsuit alleging the distributor violated state securities laws by not adequately informing investors about agreements to pay brokers to recommend and sell mutual funds.
The various suits, which Templeton had been beleaguered with, had conspired to paint a picture of the firm in the US as a major-scale bond cartel when Ghana’s Finance Minister apparently privileged it with insider information to buy 95% of the $2.25billion 15-year bonds.
With Templeton currently in the news in Ghana for that apparent dubious trading, the more relevant of the US suits that beleaguer the scandal-prone investment firm is the dalliance with Daniel Calugar.
According to the suit by the Massachusetts regulators, the compelling lure for Franklin Templeton in that alleged sinister transaction with Calugar was that Mr. Calugar had made a $10million investment in a Franklin hedge fund.
In a civil complaint that the Massachusetts Securities Division had filed against Mr. Calugar, who was then already under accusation by the US Securities and Exchange Commission of earning $175million through shady trading in mutual funds managed by another firm, Alliance Capital Management and Massachusetts Financial Services, the investor billionaire was alleged to have had similar shady investments with Templeton.
The complaint at the time had only named Franklin Resources, a subsidiary of Templeton, which was based in San Mateo, California. However, it had also stated that top management in the parent company, including William Post, who was previously President and Chief Executive of the California region of Templeton/Franklin Investment Services, had been in on the dalliance with Calugar.
“Senior Franklin Templeton executives had knowledge of and furthered the activity and were reluctant to pass up the profits generated by courting multimillion dollar hedge fund clients,” the statement had said.
However, the firm had released a statement saying that Calugar’s proposal had not been approved by its Management.
At the time Franklin Templeton was a juggernaut worth $337 billion in assets. The business has nearly $900 billion under management and a market value of about $34 billion.
“The Franklin case is another example of a mutual fund having one standard for the ordinary investor and an entirely different for someone able to move millions and millions of dollars through in market-timing trades,” Massachusetts Secretary of State at the time, William Galvin, had said.
Fast forward to April 2017 and William Galvin’s observation about Templeton’s questionable style of transaction would become topical in Ghana; only this time Franklin Templeton is the one moving the millions and millions of dollars to buy advantage in GoG’s bond issue, while Ghana’s Finance Minister himself is the source of privileged insider information.
The trending Templeton scandal, which is still unfolding to Ghanaians, looks set to be explosive against Franklin because conflict of interest, involving Trevor G. Trefgarne, one of the Company’s Directors, goes to the heart of the matter.
On April 3, 2017, the Public Relations unit of the Ministry of Finance issued a statement that announced that the Ministry had successfully issued a 15 and 7 year bonds, with the same coupon rate of 19.75%.
In total, the two bonds had yielded $1.13billion. Additionally, the statement announced that the ministry had raised $1.12billion through a 5 and 10 year bonds via, “a tap arrangement.”
Even though the sale of the $2.25 billion bonds by President Akufo-Addo’s cousin of a Finance Minister is the single biggest daily transaction in the whole of sub-Saharan Africa, opposition NDC has said that it did not go through Parliament.
Under the laws of Ghana, international contracts, ie, contracts that the state enters into with offshore companies are supposed to be submitted to Parliament for approval first.
The Finance Ministry’s statement, strangely, did not also state the names of the individuals or companies which had participated in its purchase of the bonds, except to say that, “the issuance attracted a number of global portfolio investors including a very substantial investment in the 15 year bond by a very well respected global financial investor.”
In a report that has since gone viral on social media, international news agency, Reuters, which has mockingly referred to the bond issuance by Akufo-Addo’s Finance Minister as, “a jumbo debt action” reveals that the “well respected global financial investor” in question is US-based Franklin Templeton.
Templeton bought over 95% of the bonds.
According to Reuters, the revelation had been made by a senior government official who had spoken on condition of anonymity.
The opposition National Democratic Congress has also revealed that a company called Estate Street had acquired the remainder of the bonds which is believed to be less than 5%.
Based in the US, Franklin Templeton is a global investment management organization with very serious international cachet. Its global assets are worth more than $337billion.
Reuters reported that the firm’s bond fund Manager, Dr. Michael Hasenstab, had taken dominant position in the bonds issued by President Akufo-Addo’s cousin and Finance Minister. The firm’s dominant participation in the purchase of the bonds is curious because of Hon. Trevor G. Trefgarne.
While Hon. Trefgarne is reported as having been listed in a December 31, 2016 unedited semi-annual report of Franklin Templeton as one of the company’s five Board of Directors, a compilation of his credentials, in the same report, also named him as the Chairman of Enterprise Group Limited, based in Ghana.
The dominant shareholder in the Enterprise Group is Data Bank, which is partly owned by the Finance Minister, Ken Ofori-Atta.
Among the Board of Directors chaired by Mr. Trefgarne at the Enterprise Group are Keli Gadzekpo, Group Chief Executive of Enterprise Group, and Dr. Angela Ofori-Atta, who doubles as a Director of Enterprise Insurance, a subsidiary of the Enterprise Group.
Dr. Angela Ofori-Atta is the wife of the Finance Minister, Ken Ofori- Atta.
Also, Akufo-Addo’s Attorney General and Minister of Justice, Gloria Akuffo, is listed along Dr. Angela Ofori-Atta as non-Executive members of Enterprise Group.
Selfsame Gloria Akuffo is a former employee of the Enterprise Group, having worked as a Director of Enterprise Life, a subsidiary of Enterprise Group.
As the writing on the wall indicates that Enterprise Group has bought a domineering amount of the bond that was all but secretly issued by the Finance Ministry, it is a fact that the Finance Minister, Ken Ofori- Atta, partnered with the Group Chief Executive of Enterprise Group, Keli Gadzekpo, to found Data Bank in 1990.
Currently, Data Bank owns 39% majority share in Enterprise Insurance.
The Minority in Parliament has demanded a full-scale Parliamentary enquiry into the matter with threat that if Parliament does not investigate, it will petition the Commission on Human Rights and Administrative Justice (CHRAJ)
In a press conference on Tuesday, Casiel Ato Forson, former Deputy Finance Minister, also announced plans to petition the International Financial Services Authority.
Source : TheRepublicNewsPaper