Mobile operator Robi now finds itself deluged with allegations of financial discrepancies surrounding the 2021 resignation of former chief executive officer Mahtab Uddin Ahmed.
The resignation at first appeared to be a routine affair, with the company's board accepting the letter from its chief executive three days after its submission on August 2 of that year. Two months later, when a show-cause notice was served accusing Mr Ahmed of financial misconduct, it unleashed an episode of internal probes and regulatory scrutiny, only heightening concerns about the company's own financial integrity and governance.
The show-cause notice said operating expenditure was capitalised and profit inflated in 2019 and 2020 under the leadership of Mr Ahmed. Operating expenses are costs shown in the income statement, deducted to get yearly income, but capital expenditure is treated as assets in the balance sheet, which are amortised or depreciated over a span of several years.
The alleged misconduct was claimed to have been carried out to achieve higher performance targets and increase bonuses for the chief executive.
Mr Ahmed subsequently wrote to Axiata Group and the Robi Board, saying that the disciplinary proceedings were part of a conspiracy by Robi Chairman Thayaparan S. Sangarapillai.
An internal inquiry committee was then formed to examine allegations against Mr Ahmed. Before the issue was resolved, two independent directors - Akhtar Sanjida Kasem and Kamran Bakr - exited the committee. They were replaced by the chairman himself, who was accused of bringing false allegations against Mr Ahmed.
In May 2022, Robi issued a dismissal order with retrospective effect from October 31 of the previous year, resulting in the forfeiture of gratuity, provident fund and bonuses.
Although the Bangladesh Securities and Exchange Commission (BSEC) raised no alarm when Robi's board fell short of the minimum number of independent directors following the resignations of Ms Kasem and Mr Bakr, it brought up the issue only after launching an inquiry into the mobile operator in March this year. The non-compliance with the Corporate Governance Code affected both the Board Audit Committee and the Nomination and Remuneration Committee of Robi.
BSEC sources said the investigation into Robi Axiata was initiated following complaints lodged by several current and former employees of the company, including former CEO Ahmed and former acting chief human resources officer Md. Maruful Alam Chowdhury. Mr Chowdhury was quoted as saying that he had witnessed governance malpractices within the company.
Meanwhile, in a management letter dated April 4, 2022, Robi's statutory auditor, Hoda Vasi Chowdhury & Co., described the simultaneous resignation of the independent directors as a "rare and unique event" and identified it as one of the company's most significant governance concerns.
According to the auditors, one of the departing directors described feeling "deeply distressed and uncomfortable with the people [they were] dealing with as well as the overall culture." Hoda Vasi also warned that board decisions taken during that period could become vulnerable because statutory governance requirements were no longer fully met.
Nearly four years after the internal inquiry and audit observation, the BSEC formed a three-member committee and asked it to submit a probe report within 60 working days. The deadline is over. The committee has sought a 90-day extension to complete its work.
Internal inquiry under scrutiny
The regulator is examining the circumstances surrounding the resignations of the independent directors, including reports that they stepped down citing undue interference in board affairs, and whether the board continued to comply with the Corporate Governance Code after their departure from the internal inquiry committee.
Another matter has been given emphasis in the BSEC probe - whether the internal inquiry complied with the principles of natural justice, impartiality and shareholder protection.
Documents reviewed by The Financial Express show that both independent directors were part of the committee to look into the allegations of financial misconduct against the former chief executive, but they resigned before the probe concluded.
Hence, the internal probe recorded its findings under the watch of the chairman, Mr Sangarapillai, who replaced the independent directors in the Robi probe body. The report that the internal committee submitted carries only the signature of its chairman, despite naming multiple members, raising further questions over procedural regularity. Asked why the Robi chairman would conspire against him, Mr Ahmed declined to comment on the matter.
According to sources familiar with the matter, tensions between Mr Ahmed and senior Axiata management date back to 2016 over dealings with EDOTCO, an Axiata Group company that owns telecom towers. They said Mr Ahmed resisted pressure to approve payments that he believed were excessive and not in Robi's commercial interest. The disagreement reportedly strained his relationship with Robi Chairman Sangarapillai, who at the time also held a board position at EDOTCO.
Both Robi Axiata and EDOTCO are subsidiaries of Malaysia's state-owned investment fund, Khazanah Nasional Berhad. It is noteworthy that BSEC itself had raised observations about Mr Sangarapillai's conflicting roles during Robi's IPO approval, which the then CEO cited in advising against his appointment as Robi chairman.
Corporate records show that when the internal proceedings against Mr Ahmed advanced, Mr Sangarapillai simultaneously served as chairman of Robi, a director of Axiata Group Berhad, a member of the Axiata Board Audit Committee, and a director of EDOTCO.
The BSEC is now investigating whether those overlapping roles influenced governance decisions or related-party transactions and whether safeguards against conflicts of interest functioned effectively. In the regulatory probe, investigators will also look into transactions between Robi and EDOTCO Group Sdn Bhd, including lease agreements, infrastructure-sharing arrangements and share transfers, to determine whether they were conducted on an arm's-length basis or resulted in any value leakage to Axiata Group Berhad or its affiliates.
How the probe evolved
From here, it appears that the regulator seeks to delve deeper into what at first looked like scrutiny of Robi's accounting practices after the mobile operator raised the accusations against Mr Ahmed.
The initial questions in the probe were who had authorised the accounting treatment, whether anyone had benefited financially, and whether the company's chief executive officer, chief financial officer and the Board Audit Committee had exercised appropriate oversight.
Documents reviewed by The Financial Express point to a disconnect between the company's public disclosures made before the allegations were brought and the disciplinary proceedings subsequently taken against the former CEO, Mr Ahmed.
Robi's 2021 annual report, directors' report and corporate governance disclosures presented the company as complying with applicable accounting standards and governance requirements. The financial statements received an unqualified audit opinion, and the annual report disclosed neither material accounting irregularities nor governance failures involving senior management. The annual report also contained no indication that the board had identified misconduct serious enough to warrant disciplinary action against its chief executive.
The BSEC is therefore examining whether Robi met its disclosure obligations as a listed company and whether shareholders were provided with complete and accurate information during the period under review. It has directed investigators to evaluate the company's 2021 and 2022 annual reports to determine whether any material information was omitted.
Meanwhile, Mr Ahmed filed a lawsuit with the Joint District Judge's Court seeking about Tk 2.27 billion in compensation and damages against Robi and several current and former Axiata executives.
Although the civil proceedings remain pending, the BSEC investigation is independent of the litigation, though its terms of reference overlap with issues raised before the court.
Court documents filed by the company cited alleged accounting irregularities and governance violations as grounds for Mr Ahmed's dismissal.
Shareholders at annual general meetings raised concerns over legal expenses and forensic audit costs, particularly since the forensic report was not mentioned in the internal inquiry report. These concerns will also be examined as part of the BSEC probe.
The Financial Express sent detailed questions to Robi on the issues under BSEC investigation, including the company's cooperation with the inquiry. Requesting an additional day to respond to the queries, the company ultimately said, "No comments."
BSEC Director and spokesperson Abul Kalam told The Financial Express that the application for time extension remains under consideration. "Once the committee gets the extension, it will continue the full-fledged investigation into Robi," he said. Financial news subscription
The Financial Express previously reported that Robi had advertised for hiring its CEO, CHRO and CIO through a newly registered, little-known website rather than its officially registered corporate domain, raising questions over transparency and corporate governance.
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