CEO of Nigerian airline indicted for bank fraud and money laundering

A friend explained, the Air Peace saga below.

I was Banker and still a finance man so I know the game. This is what played out here.
This may not be what it seems at all. It seems like a "normal " Nigerian business man practise.
Many people will be indicted if this is considered a fraud.
It is essentially a deception of the Nigerian banking system but which even bank executives are aware of and get their share and the bank loses nothing at the end of the day. The american system is not defrauded by a single penny .This is how it works.

1. Mr x wants to buy 6 airplanes for his business. The cost of air planes is $1m each so total of $6m.
2. He approaches the bank for a loan but says the planes are $12m
3. He cannot get an invoice from the airplane manufacturer for that value, so he gets his own registered company abroad to issue an invoice to his company in Nigeria for the $12m . He does not claim his company abroad is an aerioplane manufacturer, but rather an aviation trading company who will supply the planes
4. Bank gives him a properly executed loan for the naira equivalent of $12m which he has to pay back and will probably also provide some guarantees and additional security and provides the fx either by transfer or by letter of credit.
5. The $ 12m is released and transferred abroad to his company ( the seller) , the company pays the $6m to the manufacturer and actually does aquire the airplanes and $ 6m balance is sent to his own personal account.
The result is that the company in Nigeria which he owns is now obligated to pay back a loan of $12m instead of $6m and as long as they pay, everyone is happy including the banks who have given out a hefty loan and make thier interest,the senior bankers who approved it without the due diligence of insisting the invoice should be from a manufacturer and also checking international prices for such, the manufacturer who has sold airplanes and been paid and the businessman who has made a $6m dollar advance profit on his business before it even starts.
The real problem is that the business case for the airline may not be able to support the repayment of $12m in the loan period but would have done so if the loan was only $6m. The business then fails as a result, goes into liquidation, the bank has only the asset to fall back on which is in reality on the open market below the loan value, but the biz man has his $6m and is enjoying life.

Its essentially called " over invoicing" and at least 80 perrcent of business people here do it. The main difference however is that most times , the invoice comes from the manufacturer directly and the amount on top is probably about 2 to 5 percent of the real value , which after the manufacturer recieves payment, they now pay out as comission to the businessman.

I assure you many childrens FX school. fees were paid like this.
Its just that "big boys" want to take control of the whole chain and slap up hefty margins that no sane manufacturer would allow or invoice for.
He has technically not laundered any money. It is a victimless "crime" except upon himself who may have compromised his own business and saddled himself with future large loans to repay just to live large immediately,and of course bank shareholders who have to write off the bad loan if the business fails. The executives will then be called to answer how they approved such a loan.

Another failsafe option is that he takes the fx which was aquired at bank rate and then resells it on the black market for a hefty margin. Pays the bank the equivalent of $6m at bank rate imeediately reducing the naira loan to $6m and pockets the spread on the fx sale.!! This way, he has even made money ( not nearly as much as keeping the $6m) through the system without exposing his co to excessive loans !!!
This is why you see so many rich Nigerians without any real operating businss with large business that have totally failed but they are still able to live the good life with ease.

American govt will probably indict him on a technicallity of moving fumds but not really of a crime as such within their system.

So you see he is already denying it and he is right logically and legally.

Ctorch:
CEO of Nigerian airline indicted for bank fraud and money laundering

A friend explained, the Air Peace saga below.

I was Banker and still a finance man so I know the game. This is what played out here.
This may not be what it seems at all. It seems like a "normal " Nigerian business man practise.
Many people will be indicted if this is considered a fraud.
It is essentially a deception of the Nigerian banking system but which even bank executives are aware of and get their share and the bank loses nothing at the end of the day. The american system is not defrauded by a single penny .This is how it works.

1. Mr x wants to buy 6 airplanes for his business. The cost of air planes is $1m each so total of $6m.
2. He approaches the bank for a loan but says the planes are $12m
3. He cannot get an invoice from the airplane manufacturer for that value, so he gets his own registered company abroad to issue an invoice to his company in Nigeria for the $12m . He does not claim his company abroad is an aerioplane manufacturer, but rather an aviation trading company who will supply the planes
4. Bank gives him a properly executed loan for the naira equivalent of $12m which he has to pay back and will probably also provide some guarantees and additional security and provides the fx either by transfer or by letter of credit.
5. The $ 12m is released and transferred abroad to his company ( the seller) , the company pays the $6m to the manufacturer and actually does aquire the airplanes and $ 6m balance is sent to his own personal account.
The result is that the company in Nigeria which he owns is now obligated to pay back a loan of $12m instead of $6m and as long as they pay, everyone is happy including the banks who have given out a hefty loan and make thier interest,the senior bankers who approved it without the due diligence of insisting the invoice should be from a manufacturer and also checking international prices for such, the manufacturer who has sold airplanes and been paid and the businessman who has made a $6m dollar advance profit on his business before it even starts.
The real problem is that the business case for the airline may not be able to support the repayment of $12m in the loan period but would have done so if the loan was only $6m. The business then fails as a result, goes into liquidation, the bank has only the asset to fall back on which is in reality on the open market below the loan value, but the biz man has his $6m and is enjoying life.

Its essentially called " over invoicing" and at least 80 perrcent of business people here do it. The main difference however is that most times , the invoice comes from the manufacturer directly and the amount on top is probably about 2 to 5 percent of the real value , which after the manufacturer recieves payment, they now pay out as comission to the businessman.

I assure you many childrens FX school. fees were paid like this.
Its just that "big boys" want to take control of the whole chain and slap up hefty margins that no sane manufacturer would allow or invoice for.
He has technically not laundered any money. It is a victimless "crime" except upon himself who may have compromised his own business and saddled himself with future large loans to repay just to live large immediately,and of course bank shareholders who have to write off the bad loan if the business fails. The executives will then be called to answer how they approved such a loan.

Another failsafe option is that he takes the fx which was aquired at bank rate and then resells it on the black market for a hefty margin. Pays the bank the equivalent of $6m at bank rate imeediately reducing the naira loan to $6m and pockets the spread on the fx sale.!! This way, he has even made money ( not nearly as much as keeping the $6m) through the system without exposing his co to excessive loans !!!
This is why you see so many rich Nigerians without any real operating businss with large business that have totally failed but they are still able to live the good life with ease.

American govt will probably indict him on a technicallity of moving fumds but not really of a crime as such within their system.

So you see he is already denying it and he is right logically and legally.

Expository!

Summarily, the banks are to be blamed for lack of due diligence but then, a local entrepreneur will apply for N1m loan even with best possible documentation and sensible financial projections and still get denied.

It is well.

So who get wiped when the airline fails.He should have been smart enough to put the airline in the stock market, hereby increasing its valuation and covering up for the short falls rather than try to hide under a foundation to enjoy tax avoidance.He obviously doesn't understand financial engineering, anyway still proud of him at least he saved us from the South African public shaming ,so I hope the Nigeria government got his back.