Cadbury (Nig.

) Plc 2005
Presented by Group 3

Overview
Introduction, overview, executive
summary
Why did the fraud occur?
What were its key features?
What could have been done to prevent it?
What sources have been used in the
research?

Introduction

Established in the early 1960s as a packaging

operation for exporting cocoa beans and
importing processed goods.
Became a manufacturing firm in January 1965
and a publicly listed company on the Nigerian
Stock Exchange.

EMERGING MARKETS

Executive Summary
Pressures to meet and exceed
internally predetermined goal targets
Overstatement of financial position
from 2002-2005
Sanctions and fines imposed on firm
and executives

Why did the fraud occur?

Bunmi Oni

Ayo Akadiri

PERSONALITY TRAIT
...As reported in the press, if profit was the most
crucial factor in the survey, Oni would not have ranked
that high, nor would his company. But, he is
acknowledged by peers as a CEO who would rather
make less profit than cut corners. In a country that has
been almost completely quartered by corner cutters,
Oni would rather see his company go through tedious
and complex litigation with local and state
governments than pay a simple bribe... ...We salute
the integrity, excellence, industry, innovativeness,
vision, and exemplary leadership of Oni, not only in
Cadbury, but also in the larger society where his
contributions have provided the needed light in the
tunnel...

OTHER ACCOMPLICE
Olusegun AinaSenior financial
Accountant/Head
of Accounts
Akinbode
Gbolahan-Sales
Operations and
development
controller
Tunde EgbeyemiHead of internal
audit

ORGANIZATIONALn STRETCH
GOALS
An organizational goal with an
objective probability of attainment
that may be desirable but is
seemingly impossible given current
capabilities.

DISADVANTAGES
Stretch goals can sometimes lead to
unethical behavior. People might feel under
pressure to do whatever it takes to achieve
the goal, even when their actions go
against the organization's values or
mission.
Team members might also feel pressured
to take excessive risks to meet the goal. In
jobs where mistakes can cause significant
damage, this can jeopardize the well-being
of people and organizations.

CADBURY NIGERIA VISION

2000
Our vision to transform the West African operations of
Cadbury into a $1b enterprise in about a decade
approved by the Board was to be powered by the
Nigeria/Ghana hub, two major acquisitions in the region,
the opening of new territories and strategies to reach
for the fortune at the bottom of the economic pyramid.
That goal, though stretching, was deemed achievable,
and was later validated by the performance in the
telecommunications industry where a single company
achieved over $1b in revenue in 2003 its second year
of operation 98% of which came from prepaid air time,
not from big business packages. The success of many
Bank IPOs was further proof of what we had known
that the informal economy was awash with cash

Efficiency improvement
agenda. 202
a. completely re-building and modernising an archaic
manual and inefficient manufacturing plant that had seen
no major investment for nearly 20 years,
b. rationalising the brand portfolio and constructing a new
brand architecture,
c. designing and implementing a new route to market
configuration and a new structure,
d. creating a new modern work environment, learning
centre and a fitness centre,
e. upgrading the quality of management and staff to raise
talent, as well as
f. building a commensurate IT-enabled business process
platform across the commercial, supply chain and
functional units.

CADBURY TODAY
Mondelez International has a majority
equity-interest of 74.97% in Cadbury
Nigeria through its holding in Cadbury
Schweppes Overseas Limited.
25.01% is held by indigenous
shareholders and publicly traded on
the Nigerian Stock Exchange.

Key Features of Fraud

Undisclosed Offshore Remuneration
Accounts
False Transactions Certificates
Stock Buybacks
Audit failure
Cost Deferalls

Undisclosed Offshore Remuneration Accounts

An undisclosed and undocumented

offshore account was operated and
maintained by the company from which
Ayo Akadiri , Bunmi Oni and other
executive directors were paid offshore
remunerations without the approval of
the Committee responsible for fixing
remunerations of Executive Directors
and not recorded in the companys
financial report and account.

False Transactions Certificates

Stock Buybacks
A stock buyback has an obvious effect on a
companys income statement, since it reduces its
outstanding shares. But it also impacts other
financial statements.
On the balance sheet, a share repurchase will reduce
the companys cash holdings, and consequently its
total assets base, by the amount of the cash
expended in the buyback.
The buyback will simultaneously also shrink
shareholders' equity on the liabilities side by the
same amount. As a result, performance metrics such
as return on assets (ROA) and return on equity (ROE)
typically improve subsequent to a share buyback.

Stock Buybacks

Audit failure
Due Diligence
Failure to make proper recommendations
thereon to the Annual General Meeting
Failure to examine the auditors report to
review and make proper findings on
management matters in conjunction with
the External Auditors
Neglect to keep under review the
effectiveness of the companys internal
control system and accounting

COST DEFERALS
The genesis of the saga was the failed 4.8m continuous plant, designed by
Cadbury Schweppes UK engineers, which was to replace a particular 50-year old
manual operation. As the design errors surfaced one after the other during
commissioning, the UK engineers resorted to denials, and even intrigue
everything to avoid taking responsibility. The only official who dared to
acknowledge the design errors arose from Cadbury Schweppes would only
paraphrase for reasons of censorship. This left Cadbury Nigeria carrying the
can having already committed shareholders money to procure the kit. We
incurred huge additional costs in re-design, replacement plants, wastage of
materials, carrying the 300 people that should have been surplus if the new
plant had delivered its promise, and also trying to maintain the old kits that were
falling apart and for which spares were no longer available. We managed the
challenge by isolating the cost impact of the new plant failure and deferring the
costs momentarily in the expectation of full recovery when the plant came on
stream as assured by the engineers from both Cadbury Schweppes and Cadbury
Nigeria. The deferral was to shield the company and its shareholders from the
effect of this imposed challenge. As it turned out the verdict of the engineers
after 18 months of hard work was that the plant could never attain its rated
capacity economically. At this point it became clear that the cost recovery would
not happen in the time frame we anticipated, and was then reported.

WHAT COULD HAVE PREVENTED THE FRAUD

Effectiveness and independence of audit committee
Non compliance with CAMA regulation: Regulation that not more
than
one executive director should be on the committee.
The audit committees of Cadbury in persons of Messrs Thomas
A. A., Z.
C. Enunwa and S. J. Balogun failed to discharge their statutory duties.

Due diligence by external auditors and change of external auditor after a

specified period of time
Akintola Williams Deliotte (AWD) did not receive confirmation for N7.7 billion
credit to Cadbury and it failed to note it in the audited accounts. It also failed
to note other lapses in the account.
AWD failed to probe further stock certificate of N700million allegedly issued
by JOF Limited, even though it has noticed
lapse in Cadbury internal control
in the management letter.
AWD failed to note lapse of internal control in its report.

WHAT COULD HAVE PREVENTED

THE FRAUD
AWD audited Cadbury for 40years
Compliance and enforcement of regulations
Union registrars prints dividend warranty for Cadbury shareholders.
It neither paid or dispatched dividend warranty to shareholders
It failed to report breach of dividend payment to SEC.
Cadbury failed to follow the directives of SEC in respect of dividend
payment by its registrars.
Union registrar failed to discharge its statutory duties
Compliance with corporate governance code and transparent
disclosure
Offshore payment to Executives Directors
Operations of account that are not included in the books
Coding of account head that has alternative meaning

ACTIONS TAKEN AFTER THE

FRAUD
The CEO and Finance directors were sacked and
banned from operating in Nigeria capital market.
The Chairman, NED and non directors members of
audit committee were disqualified for 1year from
operating in capital market and being employed in
financial service industry, holding position of directors.
Cadbury share was suspended and Cadbury was
required to pay a fine of N100,000 and N8,245,000.
AWD was required to pay a fine of N20,000,000.
Union registrar was required to pay a fine of
N7,615,000

References
www.nigeriaworld.com
www.ukessays.com
Okaro S.C. and Gloria O.O. (2011).
Creative accounting, corporate
governance watch dogs institutions
and systems- the case of Cadbury
(Nig.) Plc