How Imperial's founders siphoned billions from banks

Influence by top management has come under sharp focus in court as another bank fights for survival after being put under receivership over loss of billions of shillings through dubious deals.

Dubai Bank is also facing liquidation after the Central Bank of Kenya (CBK) declared it insolvent.

Its founder and chairman, Hassan Zubedi, has been accused of running a parallel system that saw the bank lose billions of shillings through shady transactions.

And in the latest banking scandal, senior managers of troubled Imperial Bank say they acted on instructions of the founder and chief executive Abdulmalik Janmohamed to allow selected clients to withdraw huge sums without any loan facilities.

Mr Naim Shah, the acting managing director and a Mr Kaburu, the deputy managing director revealed to the bank’s directors that Mr Janmohamed, now deceased, was responsible for irregular activities.

HANDWRITTEN INSTRUCTIONS

Documents presented in court show that the managers received instructions on handwritten chits.

The revelations came as court starts hearing a case today in which Imperial Bank wants assets of companies and individuals frozen to recover billions of shillings that the bank, currently under receivership, lost through fraudulent dealings.

High Court Judge Fred Ochieng, who last week issued temporary orders freezing accounts of several customers, will also hear Fidelity Bank’s application seeking to join the case.

Fidelity Bank wants to safeguard its interests, claiming it has a surcharge on one of the disputed properties. The bank argued any determination touching on the property would have an impact on its interest.

JANMOHAMED'S NETWORK

Imperial Bank said in its notice of motion that between 2002 and 2015, Mr Janmohamed exerted his influence and directed that over Sh34 billion be transferred to over 20 clients in a fraudulent scheme.

The bank has also claimed the clients, listed as respondents in the case, received the money either in cash or through other accounts to hide their unlawful transactions.

The court papers further reveal that Imperial Bank’s liability to depositors and buyers of the corporate bond it sold to local investors last month stands at Sh87 billion, nearly Sh20 billion more than the Sh58 billion said to have been at risk.

Mr Janmohamed ran an elaborate fraud scheme that robbed the bank of billions of shillings over a period of 13 years. This forced the CBK to shut it down earlier this month, citing risks to depositors’ funds.

He used a network of 20 companies and individuals to execute and cover up the mega fraud that has shaken Kenya’s financial services sector.

Details of the fraudulent scheme have emerged from the courts where Imperial Bank directors have sued 20 companies and individuals related to Mr Janmohamed seeking to recover the colossal amount.

FALSIFIED ACCOUNTS

Imperial Bank, on Tuesday, filed two suits at Nairobi’s Milimani Courts, revealing Mr Janmohammed’s fraudulent scheme, which he kept secret by falsifying the bank’s books of accounts.

Proceeds of the fraud were mainly invested in real estate, offering fresh insight into the role that corruption and crime play in driving Kenya’s ever growing housing market.

Court papers show the firms that owned the sham accounts were mere shell corporations used to embezzle customer savings from Imperial Bank yet they had been presented as companies doing legitimate business.

CBK has hired an American consulting firm to conduct a forensic audit at Imperial Bank. The firm was involved in unmasking  perpetrators of a multi-billion dollar Ponzi scheme.

Imperial Bank, which is associated with the wealthy Popat family, became the second commercial bank to go into receivership since Dr Patrick Njoroge took charge as CBK governor. Dubai Bank had been closed in August.