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Directors of AIB Fire Leikun

Board of directors vote to hold him responsible for alleged misdemeanour
   happening on his watch

 

   

The board of directors of Awash International Bank have dismissed Leikun Berhanu, the longest serving president of the bank, on Friday, December 31, 2010.

It is the first time a senior executive of a private bank was fired from office. This is contrary to industry practice whereby CEOs who had fallen out with directors are made to go on forced resignation, so as not to undermine their prospects of work with another bank. The country’s regulation on banking, bans those dismissed from a bank not to be employed by another in a similar position.

Leikun, a veteran banker who has once served as governor of the central bank, was under intense pressure to resign, according to sources close to the bank. He did not budge, said a shareholder who declined to be identified due to the sensitive nature of the case.

The former president was sent on forced leave in November 2010, while a five-member committee investigated his role or lack thereof in the alleged misdemeanour of handling letters of credit (LCs) at one of the bank’s branches. The committee was appointed by AIB after National Bank of Ethiopia (NBE) ordered it to investigate the matter.

Following the investigation, the board of directors summoned Leikun to a meeting on Thursday, December 30, but he failed to show up, according to sources. A letter, notifying him of the decision that he was fired, and that he should hand over his office was sent to him on Friday, according to these sources.

Leikun Berhanu

     

It was hardly an easy decision for the directors, who were split on their votes. Before firing him, the board was divided as they debated whether Leikun should be fired; the group that argued he is responsible for what happened on his watch eventually won by a majority vote, according to sources.

The decision comes as the names of the new board of directors are pending approval from the central bank. The nomination of ODA S.C. as the 12th nominee to the new board slowed down the approval of the new directors. Only one term had passed since ODA previously served on the board, instead of the required two, and its nomination was rejected by the central bank.

Among the nominees to the new board is Tsehai Shiferaw, vice president of Credit and Risk Management for AIB, who was temporarily appointed to Leikun’s position during his suspension. He had received the majority of votes (265,342 out of 3,698,430) during the election.

“I’ve no comment at this moment,” Leikun said when approached by Fortune for comment on his dismissal. 

Neither did Bekele Nedi, chairman of the board of directors, want to comment on the issue except to confirm Leikun’s dismissal.

“It’s a sad day for the Ethiopian banking industry,” said a senior executive of a private bank.

Many in the industry indeed concur with  this view, for Leikun is one of the executives in the industry who commands the respect of his colleagues.

A graduate of the Addis Abeba University in the 1960s, Leikun started his career in banking with Addis Abeba Bank, which used to be run by Debebe H. Yohannes. Leikun was a junior banking officer first before he was promoted to a senior position when the military junta nationalised the bank and merged it with the state owned Commercial Bank of Ethiopia (CBE), in the late 1970s. Leikun had also served as a general manager of the CBE before he left the banking industry in the late 1980s, to join the state owned agricultural produces enterprise.

The advent of the EPRDF government, and the return of some of his friends claiming senior positions in the new goverment, had landed him a position as the first governor of the central bank, in post-Derg period. As a governor, he was to sign on the first licence given to a private commercial bank in 1996, the Awash International Bank, where the main promoter, Bulcha Demekissa, was its first president.

Departing the central bank in 2000, after replaced by Dubale Jale, Leikun joined AIB as it second president. During his tenure, he has also been serving the Ethiopian Bankers’ Association as a chairman, before giving up the position to Brehanu Gateneh, who is also president of United Bank.

In his mid-60s, Leikun’s contemporaries in the banking industry include CEOs such as Lulseged Teferi, president of Dashen Bank.

During his years at the AIB, the bank has  prospered making profits throughout the decade; he also oversaw the completion of an ultramodern headquarters recently opened for use on Ras Abebe Aregay Street.

Nonetheless, his reputation has been marred lately with a controversy that caught up Mitiku Abeshu, vice president for international banking, and senior staff members of the branch he had been managing.

Members of the investigating committee included three major shareholders: ODA SC, Omedad Plc, and the Ethiopian Evangelical Church of Mekane Eyesus, represented by Debella Gutema, Getamesaye Degefe, and Girma Boreshe, respectively. The two individual majority shareholders on the committee are Wole Gurmu and Negasa Tumsa.

Among six employees, this committee investigated alongside Leikun, his executive secretary and the head of the logistics department (who is also Leikun’s nephew) were fired, subsequent to the central bank’s decision to dismiss Mitiku.

They were found to have abused their position in the bank to benefit a private business they were running, the committee said. The other four had one month’s salary docked and allowed back to work, two weeks ago.

Despite NBE’s decision to remove Mitiku from his position, he was nonetheless appointed by Leikun to serve as his special advisor. The investigation that led to the firing of the first was launched after NBE wrote a letter of reprimand to the board of directors for events surrounding the alleged misdemeanour.

In a rare move, regulators at NBE ordered Mitiku to be fired, citing that “he did not deserve the appointment after the findings of the investigation following the allegations made against him,” in the same letter.

The central bank also ordered that the role of Leikun in the alleged misdemeanour be investigated and that the board of directors report the findings to NBE by January 8, 2011. Apart from being fined 10,000 Br,  AIB was also ordered to investigate the procedural errors which had contributed to the incidents related to the alleged misdemeanour and to report its findings along with that on the president.

The president’s dismissal comes at the end of three months during which the bank has been mired in controversy, overshadowing the recent inauguration of its headquarters, the first time for a private bank to own the building housing its head office, and the announcement of a 247 million Br net profit after tax during the 2009/10 fiscal year.

The bank is expected to report its decision about Leikun to the central bank this week, according to sources.

“It ought to be a sad decision for the board, for finding a replacement of a person of Leikun’s stature and calibre will be extremely difficult,” said an expert representing an international bank that has working relationship with AIB.

 

By HAILU TEKLEHAIMANOT
FORTUNE STAFF WRITER

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