Time running out for millions lost in Euro Bank scandal

Friday September 19 2008

Premises of the now defunct Euro Bank in

Premises of the now defunct Euro Bank in Nairobi. Photo/FILE 

Five years after the collapse of Euro Bank, none of the close to Sh2 billion deposited with the institution has been recovered, inquiries by the Saturday Nation have established.

Some cases over the fraud at the bank have since been dropped following the death of key suspects.

Those who have died are Dr Augustine Muita, a former director of Kenyatta National Hospital (KNH), and Mr Paul Songok, a former financial director at Post Bank Ltd.

One of Euro Bank’s owners, Mr Zachary Kamondo, who initially fled to Scandinavia, also died and had most of his property seized by the Government.

Some suspects arraigned in court over the scandal have been acquitted. They include former Kenya Revenue Authority boss and Euro Bank director John Munge.

Other directors who have been set free are Mr Solomon Muthamia and Mr Jamal Firdosh, who had been sued by Kenya Pipeline Company.

Its obligations

Also cleared was Prof Julius Meme, a former director of KNH and one-time Health permanent secretary, as well as a former Post Bank managing director Isaiah Kiplagat.

The Euro Bank scandal came to light when KNH filed a suit seeking its winding up after it failed to honour its obligations.

It is then that the public and Government learnt that a number of State corporations had deposited millions of shillings in the bank, hoping to make huge profits in interest within a short time.

The Kenya Central Bank’s Deposit Protection Fund stepped in and put Euro Bank in receivership. Today, the Kenya Anti-Corruption Commission, which has been pursuing the cases, is finding its options diminishing.

Most of the remaining cases have been referred to a constitutional court established in January 2004 after the accused challenged the graft watchdog’s legality in the prosecution.

“These are delaying tactics by lawyers of the accused while buying time to work out the possibility of their clients being acquitted,” KACC spokesperson Nicholas Simani told the Saturday Nation.

Cases seeking constitutional interpretation involve former parastatal bosses Francis Chahonyo (Postal Corporation), Joshua Kiptoon (Pyrethrum Board) and Ibrahim Hussein (National Hospital Insurance Fund).

Mr Simani said little had been achieved in prosecuting suspects, arguing that corruption fights back, “making it very difficult to investigate cases”.

Last month’s withdrawal by the attorney-general of a case involving a former Euro Bank employee, Mr Peter Fernandez, whom the commission had accused of stealing from the bank, did not make matters any easier.

Mr Fernandez, alongside former colleagues Isaac Njagi and Jason Mutuma as well as his (Mr Fernandez’s) employee, Mr Rikki Kimani, are facing yet another case filed by NSSF for alleged destruction of exhibits.

The case will be heard on September 30. Other cases involved Mr William Chelashaw (Kenya Tourist Development Corporation), Mr Ben Mtweta (NSSF) and Mr Stanley Chemng’orem (Kenya Wine Agencies).

Colossal sums

About 10 parastatals had deposited colossal sums of money with Euro Bank, most of which could be lost for good.

According to figures obtained by the Saturday Nation, NSSF deposited Sh250 million, National Hospital Insurance Fund (NHIF) Sh490 million, KNH Sh492 million, Post Bank Sh65 million, KTDC Sh60 million, Kenya Pipeline Sh55 million and Kenya Sugar Board Sh55 million.

But Prof Meme’s case, for instance, quotes Sh540 million, while NHIF spokesman Stephen Wangaji says it is Sh300 million.

Whatever the figure, the money remains a debt, according to Mr Wangaji, until cases in court are determined. A source at the Kenya Sugar Board said the receiver manager had been asked to help recover the money.

“This has always been reflected as a debt in our books and has been a contentious audit question for long,” said the source.

When the deposits were made, Mr Chahonyo was at the helm of the institution, a position currently held in an acting capacity by Ms Rosemary Mkok.

Mr Caleb Wanyaga, the Kenya Pipeline finance director, expresses hope that KACC will recover the money on the parastatal’s behalf. “We are aware that chances are slim, but we are hoping the money will be recovered,” he said.

Mr Linus Cheruiyot was the KPC boss at the time, a position currently held by Mr George Okungu.

It’s a bad debt

“Had this money been available for investment, it could have earned us double profit,” Mr Wanyaga said. “It’s a bad debt in the books, kept there according to the provisions of accounting.”

Postal Corporation chief executive officer Fred Odhiambo said if he had the money, he would buy more than 10 trucks to ferry parcels across the country and scores of motorbikes for operations within Nairobi through Posta Dispatch, a product he said he would launch later this month.