Ex-envoy’s secret dossier on closed Bank linked to spotlight on Mwau

Kenya Anti-Corruption Commission director Patrick Lumumba displays “evidence” of fraudulent dealings at the Charterhouse Bank presented to him by US ambassador Michael Ranneberger (left) at Integrity Centre last November. FILE

Former US ambassador Michael Ranneberger’s secret dossier on Charterhouse Bank could partly have contributed to the latest spotlight on former assistant minister Harun Mwau.

President Barack Obama has named Mr Mwau as one of seven people who would face sanctions under the country’s Narcotics Kingpin Designation Act.

A secret dossier compiled by the US claimed Sh60 billion was lost through financial malpractices by closed Charterhouse Bank, associated with Mr Mwau.

Mr Ranneberger, whose report contained little evidence, said the money was lost through fraud, tax evasion and money laundering.

In the dossier presented to the Kenya Anti-Corruption Commission (KACC) director Patrick Lumumba, Ranneberger said Sh20 billion was lost in tax revenues alone.

Mr Ranneberger, who visited the KACC director, also claims a further Sh40 billion was lost through other “financial malpractices”.

His report came as past investigations by government agencies, including KACC and Parliament, cleared the bank of possible money laundering and even called for its reopening.

No laundering law

Even then, they argued, there was no money laundering law by the time the bank was closed in 2006 which could be used to punish it.

Mr Ranneberger had opposed the reopening of the bank and petitioned Prof Lumumba to ensure its doors remained shut on claims there were fresh details of malpractices involving the bank.

Soon after, the Finance, Trade and Planning Committee that was investigating the Charterhouse Bank affair under the chairmanship of Nambale MP Chris Okemo, cleared the bank of any wrongdoing.

The diplomat had said key officials who appeared before a parliamentary committee on the issue had indicated there was no evidence to link the bank to any misconduct, money laundering or financial crimes.

“Key agencies are backtracking, contradicting their original statements about clear evidence of malpractice, irregular accounts and violation of the Banking Act,” he said.

Reopening of Charterhouse would send a clear message to the contrary, he stated.

“Powerful forces are pushing for the reopening of this institution,” he said, noting that if nothing was done at the highest level, “this would demonstrate that impunity and ‘business as usual’ prevailed”.

Mr Ranneberger said the US played a key role in protecting the whistle-blowers who provided critical evidence of criminal activity within Charterhouse.

In the letter to KACC, Mr Ranneberger also attached seven reports of different teams that investigated the bank’s activities.
He blamed senior government officials for failing to take a common position on the saga.

Prof Lumumba responded by writing to the envoy assuring him of fresh investigations, despite the commission earlier recommending that the bank be reopened.

“We believe the issues you have raised are within our statutory mandate and we undertake to deal with them expeditiously and in accordance with the law,” Prof Lumumba said.

He said his agency had additional, but not necessarily new, information on the bank, which it had used to re-open the file on its investigation.

The KACC boss said that it would be necessary for the bank to remain closed so that investigations were not interfered with and the chances of evidence being hidden were reduced.

Prof Lumumba said he had looked at the Charterhouse Bank file afresh and perceived it to be a “grave case”.

Some MPs argued it would be wrong for Prof Lumumba to vouch for the bank’s closure despite the fact that it had gone beyond the period stipulated in the Banking Act, which is one year, and a provision to extend by another.

Earlier, investigations by police accused Attorney General Amos Wako of failure to act on criminal charges prepared against directors of Charterhouse Bank.

The Criminal Investigations Department said repeated inquiries on the fate of the fraud case had received no response from the office of Mr Wako.

The Banking Fraud Unit first wrote to Mr James Warui, the State counsel handling the matter, in September 2007 asking for advice on whether to prosecute the directors of the bank that had been placed under statutory management by the CBK.

Mr Warui wrote back on February 25, the following year, that there was sufficient evidence to charge the suspects with various offences over the contravention of the Banking Act.

A senior official in the AG’s office had written to the CBK to advise that the bank be reopened.

Deputy Solicitor General Muthoni Kimani also said in a letter of June 2009 that CBK exposed itself to lawsuits by failing to prosecute anybody in connection with the bank’s dealings.

Previous witnesses from various government departments that have investigated Charterhouse have also disowned the decision to close the bank.

It is argued the charges were in relation to offences under the Banking Act rather than on allegations of money laundering or narcotics trafficking.

Banking Act

Audit firm Pricewaterhouse Coopers had also produced a report outlining the violations of the Banking Act by the directors of the bank.

Among the violations cited by the Banking Fraud Investigation Unit was failure to report to CBK transactions that indicate attempts to conceal the true identity of customers.

PWC found breaches of the Banking Act and the prudential regulations. It then made its recommendations to the Central Bank, the regulator, to act on the recommendations.

The Attorney-General’s office has also faulted the CID for failing to prosecute directors of the beleaguered bank yet they breached 14 clauses of the Banking Act.

Chief public prosecutor Keriako Tobiko and Ms Kimani, the senior deputy solicitor-general, said the bank’s closure had exposed the country to suits of “potential serious liability”.

The two told Parliament’s Committee on Finance, Planning, Trade and Tourism that there was “no legal impediment” to the re-opening of the bank.

Aggrieved depositors

The chief public prosecutor told the team that there was a “danger” that the aggrieved depositors could file a case against government agencies for breaching the Constitution.

According to Mr Rannerberger’s letter to KACC, it has been impossible for the government to deal with the accusations against the bank since there was no anti-money laundering law in Kenya when the bank was closed in 2006.

The Proceeds of Crime and Anti-Money Laundering Act of 2009 only came into force on June 8, last year.