LUBI Bank and Central Bank of Liberia: Will it be Business as Usual?

The Perspective
Atlanta, Georgia

November 24, 2003

Editor’s Note: After 150 years, can a political system built on patronage and nepotism avoid these practices? Promising to do away with these practices is one thing, and doing it is another. Every government since the founding of Liberia has promised to eradicate corruption but the story is always the same - more corruption. When will this end - patronage and nepotism?

To fight corruption requires the will and commitment to change things. Since Chairman Charles Gyude Bryant came to power, he too has promised to fight corruption and monopolies in Liberia. Upon his arrival from Accra, Ghana, where he was elected Chairman of the National Transitional Government of Liberia (NTGL), he said the comprehensive peace agreement decries monopolies and “…in implementing those provisions of the peace agreement, there shall be no monopolies on rice, petroleum and other commodities, stressing that the market will be free, open and competitive”. We have no reason to doubt his honesty, therefore, we are calling on him to start with Mr. Elie E. Saleeby, Executive Governor of the Central Bank of Liberia regarding among other things, issues raised in the letter dated March 16, 2001 from the CEO of Liberia United Bank, Inc. (LUBI), Mr. Samuel R. Divine, Sr. Mr. Saleeby’s decision affects thousands of depositors.

When contacted by The Perspective for an update on what has happened since his letter of March 16, 2001, sent to Mr. Elie E. Saleeby, Mr. Divine, Sr., the Executive Governor of the Central Bank of Liberia wrote:

“I have not been able to get any official report from the Bank since its closure. However, a confidential source has hinted to me that as of March 31, 2003, a total of 2,417 depositors have been paid to the value of L$14,500,000 (fourteen Million Five hundred thousand Liberian Dollars). Even though Mr. Saleeby admitted having reserves, for LUBI, at the Central Bank, equivalent to 85 per cent of the depositors' claims, when he illegally and unpatriotically closed the doors of Liberia’s most promising indigenous bank, the percentage paid, is estimated at less that 20 per cent. He claimed his action was to protect the depositors’ interest, but it has been three years and he has only partially paid about ten per cent of the customers”.

Carried below is the full text of the letter written by Mr. Divine to Governor Saleeby:


March 16, 2001

Mr. Elie E. Saleeby
Executive Governor
Central Bank of Liberia
Carey and Warren Streets
Monrovia, Liberia

Dear Mr. Saleeby:

This is to record various incidences surrounding the liquidity crisis at the Liberia United Bank Inc., for your perusal and those of the members of the Board of Governors, Central Bank of Liberia, the members of the Liberia Bankers Association, the members of the Board of Directors, Shareholders and Depositors of the Liberia United Bank Inc., and the general public. This action of mine is aimed at enlightening the public on what actually happened at LUBI during the five months immediately preceding its untimely closure. In so doing, I will first of all give a brief history on the formation and initial operational years of LUBI, before I deal with the various incidences chronologically.

Elie E. Saleeby, Governor of Central Bank of Liberia
It was early one morning in the latter part of April, 1992, that the thought dawned on me to start a Bank. I immediately told my wife, and we decided to take this thought to the Lord in prayers. I can still remember a part of my prayer that morning. I asked God, that if starting a bank at that time was his will, and same would be in the interest of the Liberian people, then the first twenty persons that I talked to about it, must all agree with the idea. I also added that if anyone of the first twenty persons had some reservation, of any kind, I would conclude that it was not God’s will and would abandon that idea. The next person I talked to about forming this bank was my Pastor, Rev. Walter D. Richards, who readily and wholeheartedly endorsed the idea. What convinced me that this bank was endorsed by God, was that the first fifty (not twenty) persons I talked to, not only accepted the idea, but endorsed it to the extend of purchasing shares. By our opening date, we had sold shares to at least one hundred fifty individuals and business entities. Mr. Governor, I refer you to the book of Acts of the Apostles, in the Holy Bible, Chapter 5, verses 38 and 39. In short, I am convinced that starting LUBI, was indeed ordained by God and who ever fights against its existence, will be certainly fighting against the will of God, and would therefore suffer His wrath.

Unlike many others that started banking institutions in Liberia during the last twenty years, while you lived in self imposed exile, I did not do it selfishly or for immediate gain. A verse in a favorite hymn of my late Father, Rev. John Love Divine, clearly expresses my dream of LUBI, and I quote same for you, "Not for ease or worldly pleasure, nor for fame my prayer shall be, gladly will I toil and suffer, only let me walk with thee". Again, establishing LUBI, for me, was a way of bringing banking services to the Liberian masses, who are so often ignored, and not to enrich myself.

Mr. Governor, a further manifestation of God’s will in the formation of LUBI was the unprecedented speed at which it was organized. Our letter to the Governor of the then National Bank of Liberia, for permission to organize the bank, was sent on May l, 1992, and by September 15, 1992, just four and a half months later, we were ready to open our doors to the public. You can see Mr. Governor, what we did during a war period in establishing LUBI is still unique in the history of starting banking institutions in this country, even in peaceful or normal time. Another unique characteristic in LUBI’s formation was its initial capital base. If you converted our paid up capital received in Liberian Dollars, and added it to the amount paid in United States Dollars, you will find out that even though we met the then L$1,000,000.00 capitalization requirement, our total initial capital did not exceed US$200,000.00. Even though this amount, compared to those of other similar institutions, was really negligible, we remained opened for a longer period of time (over seven years), than any of the other recently established banks during the past two decades. Additionally, we had more reserves at the Central Bank of Liberia, a more collectible loan portfolio, a much lower cost of operations, a more qualified, sacrificial and competent management and staff, etc. Mr. Governor, I certainly do not hesitate to say, were you a little more patriotic, patient, knowledgeable about commercial banking in Liberia, (your CV submitted to the Senate for confirmation as Governor, CBL can attest to this), sensitive to the plight of the common masses, and had lived in Liberia, during at least five of the last twenty years, you would not have been so hasty in closing the doors of LUBI. Mr. Governor, I am sure you have realized by now that, by closing the doors of this progressive indigenous bank, which rendered so much banking services to the Liberian masses during the worst days or our country (l992 - l997), you made the worst mistake in your entire career. Your frail excuse of protecting the customers’ or depositors’ interest, can certainly not hold, because, during the entire existence of LUBI, when depositors’ interest was not protected by you, they never had to wait this long, eleven months already, even in the worst of our crisis, to receive funds from their accounts.

Mr. Governor, I wish to educate you on some hints of our survival for over seven years, with such negative elements as low capital base, war time, low level of economic activities, high level of uncertainty, high rate of inflation, etc. Knowing our low capital situation, we physically did some of the manual work ourselves instead of contracting same to contractors, we used our personal vehicles, generators, financial and other resources, at little or no cost to the bank, until the bank could afford to buy her own, we accepted reduced salaries of up to 50%; I personally, as President and CEO of LUBI, provided my own electricity (both generator and fuel for the first three years of our existence and waived many of the other usual bankers’ executive benefits I could have received or accrued. We purchased used economical vehicles instead of new ones, and even personally footed the repair bills for same. We purchased and refurbished the used furniture and appliances of the BCCI, instead of yielding to credit offers by vendors, to purchase new and more expensive ones. We paid for our personal international telephone calls through automatic debit to our personal savings accounts, into which, our salaries and allowances were deposited. Had we not sacrificed these benefits initially, LUBI’s life span would have been less than one year. Additionally, we launched a vigorous savings mobilization scheme, offering depositors interest of 8% per annum and accepted a minimum balance of L$100.00 or US$100.00 to establish a savings account. At the time of opening, most, if not all commercial Banks, were refusing savings and time deposits, the banking services most needed by our common masses at that time. We realized the low turn over of such fixed deposits (savings and time deposits), and thought it wise to utilize same as a cushion for our weak capital position. We were sure that this would had lasted until some one wishing to establish a banking institution in Liberia, in some future time, and wanted to avoid the normal bureaucracy and time, could take advantage of LUBI’s offer for substantial portion of its shares, with or without management and board participation. Mr. Governor, it is indeed sad to say that, just a few weeks to the realization of this dream, you closed the bank, even though you had seen demonstrated interest by an investor who made financial contribution of over US$l,000,000.00 in November, l999 to help save the bank. Was it because you, as usual, could not fulfill your promise to me, on several occasions, in getting your friend from Diamond Bank of Nigeria to participate in LUBI, and felt ashamed that some one else, you did not know, would come to our rescue? Your conscience, Mr. Governor, will be your best judge.

During the month of October, 1999, Government of Liberia, (GOL), made substantial draw down on both her United States Dollars and Liberian Dollars Accounts at LUBI, which suddenly reduced her usual average balance by nearly eighty per cent. GOL being our largest customer with the highest balances, certainly created an unusual squeeze. This substantial draw down, coupled with the then National Bank of Liberia, now Central Bank of Liberia’s inability to pay any of the Bank’s deposit balance in excess of L$110,000,000 (One Hundred Ten Million Liberian Dollars), a normal banking procedure in such time, caused the bank to experience a temporary liquidity problem. This problem was indeed considered temporary, as the bank had a substantial portion of its assets, about fifty per cent of our total assets, and ninety per cent of our liquid assets, deposited at the Central Bank of Liberia, the Banker’s Bank. In short, Mr. Governor, had it not been for the illiquid position of the Central Bank of Liberia, LUBI’s liquidity problem would not have even existed.

The Commercial Banks, following some persuasion by you, and knowing fully well that LUBI did have substantial reserves at the CBL, which were indeed recoverable from the CBL, agreed to immediately advance US$300,000.00, to the CBL, in early November, (prior to November 10th), 1999. I was even made to sign a memorandum of understanding on how funds were to be used, same was never signed by the CBL and copy never received. It was the intent of these Banks that these funds would have been immediately made available to LUBI, under the close supervision of the CBL, of course, to abate the situation, which they knew was indeed temporary. To our greatest surprise, disappointment, disgust, and utmost frustration, disbursement of these funds to LUBI was not only delayed, but seemingly used by you, for some other undisclosed reasons. A view of the CBL’s bank statements for November and December, l999, into which the International Trust Company deposited its contribution towards this relief package, will clearly show that portion of these funds were withdrawn and not given to LUBI as intended. To buy time to refund the amount you inappropriately used from the Emergency Relief Funds, intended for LUBI, you imposed an unusual precondition that LUBI should raise twice the amount given by the Commercial Banks, as matching funds, before any disbursement of the Relief Package would be made. Our argument that we had already found an investor who had brought US$1,000,000.00 (One Million United States Dollars), which was indeed more than twice the value of your required matching funds was not acceptable to you. The first disbursement of what should have been an "Emergency Relief Package", was not made until December 17, 1999, in the amount of US$50,000, and up to the untimely closing of the bank, less than two thirds of this relief package was released to us. The decision to make this disbursement was reluctantly made by you following over two hours of pleading with you by members of our Board of Directors. I can vividly remember how you ridiculed us, and said it was foolish on our part to place our funds into the custody of the then National Bank of Liberia, now Central Bank of Liberia. It was at that point that I inquired of you, that if it was indeed foolish for us, as a banking institution in Liberia, to place excess funds into the National Bank of Liberia, the Bankers’ Bank, why did you leave your job at the World Bank and accept to be the Governor of such a bank that was not worthy to be a custodian of a local banks deposit? It was only after this embarrassing question, you finally gave in to releasing some of the Relief Package, nearly six weeks after it was available. Your reason for such an unnecessary delay, at such a crucial time, will certainly always remain incomprehensible to me, for as long as I live.

Admittedly, LUBI had capitalization short coming since its inception. My honest feeling was that, were you a seasoned commercial banker, you would have looked at the following positive factors, which were highly visible in LUBI’s case, and tried to keep its doors opened to the public: 1) with our degree of under capitalization, we were able to keep the doors of the Bank opened for seven years; 2) we were able to mobilize and maintain the highest number and value of Savings Accounts and Time Deposits in the Banking System; 3) we were able to accumulate L$110,000,000 in our account at the Central Bank of Liberia, an amount far beyond our statutory reserves, irrespective of method of calculation; (We are also aware that a certain bank within the system has been granted license even though its full reserve requirement was not fully met). 4)we were able to substantially abate the serious run on the Bank in October through December, 1999, and meet up with our year-end demands without the full relief package made available to us, and any draw down on our excess reserves. We even received your commendation on Christmas Eve of 1999, for the way and manner we abated the situation during this period; 5) this bank was the only bank established within the last two decades that had survived for this length of time, even though its capitalization at inception was less than US$200,000.00. 6) we were called at the last minute, when it was visibly clear, that civil servants would not have got their salary checks cashed for the 1999 X-Mas season, with the stalemate which had developed at LBDI, we opened our doors as early as 7:30 A.M. and served the civil servants without even requesting police officer to control the anxious crowd; 7) even though we only received L$500,000.00 of the new money at the beginning of the exchange exercise, despite our passionate appeals for at least L$5,000,000.00 from our excess reserves to enable us actively participate in this exercise, we exchanged equal amounts, or more than any other bank, who individually received more than L$10,000,000.00 at the inception of this exercise; Our performance despite this odd, was so incredible that you voiced out your suspicion against us for conniving with the money exchangers for a personal fee. This I vehemently denied and challenged you to produce evidence. 8) we catered to the masses of our population , a group you have completely ignored and shown complete insensitivity to, despite their importance to our country. Mr. Governor, as a patriotic citizen, qualified and experienced as expected of one who holds such a portfolio as yours, you would have considered these positive qualities in LUBI and keep the doors opened. Additionally you could have even benefited from finding out how this unique case of LUBI’s survival was possible, when that of Euro Bank, First Commercial & Investment Bank, First United American Bank, Rovia Bank, Dutch Bank, respectively, was not.

Mr. Governor, your action of closing LUBI has enormously contributed to the death of one of our land lords, in person of Mr. Moufid Khoury, whose livelihood depended on his rental income from our building, which could not be paid due the untimely closure of the bank.. It has caused several other deaths of the common people who did not have the opportunity to access their savings to seek medical attention. It has indeed embarrassed, the Liberian Government, which is to your advantage, of course, as an unpatriotic opposition partisan. Many depositors who chose LUBI to exchange their old Liberian Dollars Currency notes to the new ones made substantial deposits on April 5, 2000, only to find the Bank closed the very next day. Mr. Governor, if you knew that LUBI’s closure was pending, why did you allow us to participate in the exchange exercise? Your action Mr. Governor, will prick your conscience for as long as you live, because you have deprived over sixty employees and their dependents of a regular monthly income, you have denied nearly twenty thousand depositors access to their hard earned savings and other accounts. Many of these depositors, who are poor, crippled, blind, jobless, aged, etc., had proceeds of their small businesses in the bank for safe keeping. Most of all Mr. Governor, you have certainly killed the desire of Liberians to participate in the formation of any other banking institution in the future. Mr. Governor, you indicated, immediately following the untimely closure of the bank, that you were protecting the depositors’ interest. One year has almost elapsed and your protection of their interest has not yet been demonstrated by you. You indicated that LUBI’s reserves at the CBL, at the time of its untimely closure, could have paid off about eighty five per cent of its depositors. How can a bank that has reserves to pay eighty-five per cent of its depositors be considered illiquid? We will indeed hold you to fulfill this revelation in the event of liquidation, which you have longed for. Your decision to hold on to our reserves at the CBL for possible liquidation instead of saving the institution, is synonymous to some one having a sick relative and instead of using the money available to take him to a doctor, decides to hold on to funds to help bury this relative, just in case he dies. I am convinced, by the numerous appeals I receive daily, that the depositors prefer receiving eighty five per cent of their deposits now than to wait indefinitely. Your recent attempts to strengthen the Liberian Dollar convinces me that its rapid devaluation is inevitable, and as such, they certainly are indeed exposed to the future loss in value of their Liberian Dollar deposits. Mr. Governor, if you do not know yet when the bank will be reopened or liquidated, I ask that you convert all of our depositors balances to United States Dollars at the rate of exchange of April 6, 2000, in order to preserve their values. If this is done, it will demonstrate the beginning of protecting their interest, even though it’s late.

Mr. Governor, I recognized how insincere you were to our cause, when you vehemently opposed my unanimous election as the President of the Liberia Bankers Association for the year 2000/2001. Your involvement in trying to change a decision made by the members of this Association was unprecedented in the history of the Liberia Bankers Association. When you realized that your position in this stance was not supported by a senior member of Government, you tried to persuade me to secretly resign . I felt this was a serious infringement on my rights as a citizen of Liberia and a founding member of the Liberia Banker Association, and had no other alternative but to refuse your coercion. I, feeling that you were certainly not serious with such request, asked you to put same in writing. You , on February 22, 2000, promised to do same on the following day. As usual, I, neither received your written request for me to resign from the Presidency of the LBA, as promised, on February 23, 2000, nor up to the unprecedented closure of the bank.

Mr. Governor, the records at both LUBI and the CBL will attest to the fact that our management made serious efforts to meet various targets set by you during our crisis, to save our beloved institution. Loan collections of almost 40% within five months, expenses reduction by 65%, deposit mobilization, etc. are few of the demonstrated efforts to convince you that our bank could survive. At a meeting of our Shareholders held in late February, 2000, you personally gave us up to June 30, 2000, to meet some targets in order to save the bank. By March 31,2000, only one month after this ultimatum, we had already met over forty per cent of these targets. Mr. Governor, for God in Heaven sake, why couldn’t you have at least waited until June 30th to convince yourself and others that we were incapable of meeting your targets. Your anxiety to slam an indigenous bank closed was vividly exposed when you unnecessarily recruited one of your so called Nigerian experts in bank closure to work with the CBL. I thought that both you and our frail economy would have benefited much more if these resources were used in getting someone locally, instead, and in the field of new currency infusion. I need not tell you that, the recent exercise conducted by your administration in the exchange of our currency, was the worst we have experienced. It is no doubt that you still have not revealed to the public certain basic facts of this exercise nearly one year after it commenced, and have hastily destroyed the old currency notes to avoid independent verification of amount actually exchanged.

Recent revelations, by an executive officer of the CBL, indicated that you had instructed the Interim President of LUBI to dig up and expose activities of mine that would incriminate me, as I was too frisky and you had to put me in my place. Prior to this revelation and immediately following the untimely closure of our bank, LUBI’s Board Chairman revealed similar concerns, that the authorities of the CBL, especially you, had insisted that I be removed from the presidency of LUBI, because of suspected impropriety on my part, and that my being at LUBI would cover up such impropriety. Unfortunately, Mr. Governor, your executive officer revealed this clandestine plan to individuals who were indeed closer to me than he thought, so I got to hear about it. Let me inform you that I will also dig up information on your past and present activities, and inform you of my findings in subsequent letters to you. My investigation will definitely not exclude your suspected property holdings in the Republic of Ghana, your most visited Country in the West African Sub Region.

I trust that you have something to say to our many customers on April 6, 2001, exactly one year after you hastily came to their rescue, on how well you have protected their interest, and when they can expect to begin receiving funds from their accounts at LUBI.

I have also followed, with keen interest, the unsupervised activities of our bank since its partial reopening in August, 2000. I seriously questioned the rational for such action, especially when it further eroded the solvency and liquidity position you were supposed to restore. I do promise that I will lengthily address this issue in subsequent communication to you.

Mr. Governor, the above described experiences convinced me that you intended to close the doors of LUBI with one of three plans. The first two of these plans would have certainly put the blame on me, and the latter one has now placed the blame on you. Your first plan was to withhold or delay the disbursement of funds to us, especially the emergency relief package, during the heat of our crisis, in order to generate sufficient anxiety in our clients to increase the run, and thereby pressurize us to close our doors to the public on our own. Had this occurred, you would have immediately moved in, taken over our bank, and justify your action by the fact that we closed our doors to the public. Our superb cash generating ability and excellent rapport with our many customers, were able to dislodge this plan. Your second plan was to have our Board of Directors and Shareholders pressurize me to resign, as President & CEO, which would have further inflamed the already precarious situation, and compelled the immediate intervention of the CBL, under the disguise that I was running from a problem I created. Again, this plan was overcome by my firm courage and commitment to hold on, and not abandon our bank at the peak of its crisis. Your inability to succeed with your first two plans, resulted into your adopting your third plan; the sudden closure of our bank, even though your four months deadline (February 28, to June 30, 2000), to meet various collections and other targets, was only one month or twenty-five percent gone, yet over forty per cent of your set targets already met. This plan, of course, put the blame of LUBI’s closure squarely on your shoulders. When you realized that your decision was not the best, you again mounted your pressure on our Board, and even promised that my resignation would speed up the process of reopening our bank. I am convinced that you expected that I would have not resigned, and given you the opportunity to lay your blame back on me. I was certainly, as in most recent cases, smarter than you, and not wanting to stand in the way of my depositors’ interest, tendered my resignation on April 19, 2000. It was my hope that by so doing, you would have, at least this last time, kept your promise, but as a leopard, who never changes its spot, you again did not keep, or have not yet kept it for nearly one year now. I therefore suggest to you that you inform the customers on the status of their hard earned deposits, whether it be reopening or liquidating LUBI.

Kindest Regards,

Very truly yours,

Samuel R. Divine, Sr.


Ezekiel Pajibo is a freelance political commentator.