Links between Charterhouse and Imperial banks unearthed

By: OTIATO GUGUYU

The man at the centre of Kenya’s biggest banking fraud, Abdulmalek Janmohamed, took 23 years to orchestrate the theft of Sh34 billion at Imperial Bank.

But while his death led to revelations of the underhand dealings that brought the mid-tier bank to near collapse, the regulatory action to put it under statutory management has presented new details about the scheme that relates to the infamous Charterhouse Bank scandal.

The 20 firms and individuals involved in the scheme are bringing in other actors which might reveal the wider web involved and how such a colossal sum was stolen in the plain sight of the regulator, the Central Bank of Kenya.

Some of the companies indicated in the fraud made headlines in the past decade during the money laundering claims at Charterhouse Bank when the then Shadow Finance minister Billow Kerrow tabled documents alleging blatant and widespread tax evasion by a string of companies over a period of six years.

The companies include W.E. Tilley (Muthaiga), Primecatch, Mara Fish Packers, J Fish Kenya, Victorian Delight, Ruby Red, Value Pak Foods, From Eden Limited, Aqualite, Marmo E Granito Mines (T), Marmo Marble (U) and Fishways Uganda.

W.E. Tilley (Muthaiga), Primecatch, Mara Fish Packers and Victoria Fish Packers were adversely mentioned in Mr Kerrow’s revelations.

They were being banked by Imperial Bank, Charterhouse Bank and Fidelity Bank.

SECURE LOANS

The businessman who sat at the helm of Imperial Bank is also alleged to have issued unsecured loans to Zulfikar Haiderali Jessa, Nasir Haiderali Jessa, Nargis Jessa, Nadir Azizali Jessa, Firoz Jessa, Salim Jessa, Irfan Shamshadin Jessa and Nashiv Haiderali Jessa implicated in the scam.

Fidelity Bank on Thursday filed to be enjoined in a suit to freeze W.E. Tilley (Muthaiga) and Value Pak Foods assets, saying they used the land to secure loans of up to Sh332 million.

But in a press statement, Fidelity Bank clarified that they made representations to the court to note their interest on the two properties mortgaged to them, and to record the bank as an interested party only.

Further, Fidelity Bank said W.E Tilley was one of their borrowers “with a satisfactory conduct of accounts”.

Mr Kerrow, now Mandera County Senator, said: “If the same companies we identified more than 10 years ago in the Charterhouse Bank tax evasion saga are the same ones involved in Imperial Bank, then CBK and the government have failed to act. CBK has serious questions to answer.”

As the investigations continued, there has been a revelation that shareholders of the troubled Imperial Bank tried to sell it to a tier-1 Kenyan bank, but the deal fell through at the last minute when the prospective buyer suddenly cooled off following its own investigations into the bank’s viability.

According to The EastAfrican, a regional newspaper owned by the Nation Media Group, the tier-1 Kenyan bank, which has subsidiaries in the region, appointed one of the country’s top law firms to conduct a due diligence — a fact-finding audit of the processes, undertakings and other procedures and policies of the business it intended to take an interest in, so as to determine its value, assess risks and ascertain compliance with the law.

The tier-1 bank is said to have appointed a leading law firm that is owned by a member of the Asian community. After the due diligence, Imperial Bank shareholders never heard from the prospective buyer, the insider said.

The law firm would not comment on its findings, citing client confidentiality, while the bank declined to discuss the matter with The EastAfrican.

However, revelations from court documents last week that billions of shillings had been irregularly lent to businesses by Imperial Bank’s former managing director are an indication of what the law firm may have found in its probe, which prevented the Kenyan bank from making a bad investment decision.

“The owners of the leading bank have been keen to get the Asian community on board and this presented a perfect opportunity,” an insider in the transaction said.

Accountants are still trying to establish how the bank, that looked very healthy, profitable and liquid, got into such a situation.

BANK OFFICIALS

The long-serving bank boss, Mr Janmohamed, became the managing director in December 1992 and remained as its head until he died from cardiac arrest in September 16, this year.

Upon his death, Imperial Bank board chairman Alnashir Popat described the founding shareholder as an able leader with “deeply-held values of integrity and service”.

Details of how the disgraced boss orchestrated the theft of Sh34 billion have now come out revealing an intricate web of collusion and insider fraud that might go beyond the bank.

“CBK does daily, weekly, and monthly returns and conducts audits in keeping with stringent prudential guidelines; it beats logic to move Sh34 billion when CBK is supposed to monitor any movement,” Mr Kerrow said.

Strathmore Business School Accounting and Finance lecturer Geoffrey Injeni says the money was moved over a long period of time so the figure might not have raised the red flag.

“It must have happened over a number of years, probably making fictitious payments or giving loans which are not paid back and are kept out of the balance sheet,” he said.

From court documents filed on Tuesday, it might have taken three senior bank officials including Mr Janmohamed to fool CBK banks supervision department, the Capital Markets Authority, the Nairobi Securities Exchange, audit firm PKF Kenya, and the bank’s investors and shareholders.

SOURCE: DAILY NATION