Former Bank President Liable for Non-Performing Loan

Addis Fortune (Addis Ababa)

Eden Sahle

4 April 2011

The Supreme Court’s ruling for Legesse Tickeher, former president of Nib International Bank (NIB) SC, to pay 3.2 million Br in compensation for a loan he approved that exceeded his mandate and lacked collateral, was endorsed by the Cassation Bench on March 18, 2011.

Legesse, who headed NIB for the first six years of its operations until his retirement in July 2006, was president of the bank as well as chairman of the board of directors at the time the loan was granted to Serwat Trading Plc, in October 2008.

Serwat Trading, which was established by Asmelash Hadush and Tsega Kidanu in 2002, was engaged in exporting oil seeds to the Middle East. Asmelash was given power of attorney to head the company by Tsega, who is being sued alongside Asmelash in the Federal High Court, Eighth Civil Bench, for failing to repay the loan to NIB.

Both defendants have absconded without paying the debt and their whereabouts are unknown. A full-scale international search for them has been launched by the bank.

However, in their absence, the bank has sued Legesse, who is the first former or existing bank executive brought to court by the bank, according to veterans in the industry.

“The president individually approved a 2.8 million Br loan without collateral,” read the charge filed by NIB, which was established in May 1999 with a paid-up capital of 27.6 million Br by 717 shareholders.

In October 1999, Legesse was prohibited by the board of directors to approve loans exceeding one million Birr.

The case against the former president was first tried by the Federal High Court which found Legesse, who served as governor of National Bank of Ethiopia (NBE) prior to his appointment at NIB, not guilty.

The president’s authorisation of the loan without collateral and outside his mandate was not necessarily the cause for the debt not to be repaid, the High Court had found.

NIB appealed to the Supreme Court contesting the High Court’s ruling.

Asmelash fled without leaving any property that could be used as collateral for the debt, claimed NIB, which was represented by Getahun Worku, during the hearing at the Supreme Court.

Both the Federal High Court and the Supreme Court accepted that the bank could not collect the repayment of the loan, according to the verdicts given by both courts.

The lower court’s decision was subsequently overruled by the Supreme Court as the president acted outside of the fixed amount, making him liable for the damages caused to the bank, which recorded a 285.2 million Br gross profit during the previous fiscal year.

It ruled that Legesse is to pay the 2.8 million Br as well as an additional nine per cent, based on the stipulation in the Civil Code that an employee must carry out his duties with care and is liable for damages caused intentionally or negligently.

Legesse, through his lawyer Nikodemos Getahun, appealed to the Cassation Bench, which sits to correct verdicts given in error of law.

The High Court freeing the defendant without offering a counter argument to substantiate its belief that the cause and effect were unrelated was not acceptable, ruled the Cassation Bench.

Instead, the Supreme Court’s decision to hold Legesse liable for the non-performing loan (NPL) was endorsed by presiding justices Hagos Woldu, Dagne Meleku, Tesager Gebresellase, Alemaw Wele, and Ali Mohamed.

Legesse’s appeal was rejected due to the absence of an error of law on the part of the Supreme Court, the Cassation Bench found.

Although a judgment executing process was started last week, NIB is yet to collect the money from the defendant.

Legesse had previously been acquitted of criminal charges by the Kera First Instance Court for approving an unauthorised loan for Evergreen Trading Plc, in which Tsega also has shares.

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