Taxpayers could end up paying more than Sh4.5 billion in fines to a defunct micro-finance company associated with a former MP which was shut down by the Central Bank of Kenya 13 years ago.
This is after the CBK failed to reach an out-of-court settlement with Kenya Akiba Micro-Finance Limited Company which is associated with former Imenti Central MP Gideon Mwiti Irea.
In November 2005, policemen, officers of the Banking Fraud Investigation Unit (BFIU) and CBK officials closed the company’s main offices at Lonrho House for allegedly engaging in illegal banking practices.
This was at the height of the pyramid schemes crisis in the country through which unsuspecting Kenyans had lost billions in elaborate con schemes.
Akiba was registered to operate hire-purchase business but CBK claimed that it was illegally operating as a fully-fledged bank when it was closed down. Mr Irea and four other directors were also charged with several criminal offences.
A few days after its operations were halted, Akiba filed a counter suit seeking Sh930 million in damages and interest, alleging that CBK acted unlawfully by closing down its headquarters and other branches in Ongata Rongai, Kitengela and Voi.
After six years, on September 23, 2011, Mr Mwiti and his co-accused were acquitted by Commercial Court Judge Alfred Mabeya who held that the directors did not break any law. Eight months later, in May 2012, the same judge ordered CBK to pay Akiba close to Sh1 billion after he ruled that the regulator acted unlawfully in closing down the business.
The judge said the raid on the company’s head office and branches not only broke the firm’s backbone as a commercial entity but also ruined many businesses of more than 6,000 of Akiba’s customers and affected the livelihood of 300 employees.
CBK then filed for a stay of the ruling pending appeal but this was rejected on February 1, 2013 by then Court of Appeal judges Erastus Githinji, Wanjiru Karanja and David Maraga. The three judges ruled that the appeal ought to go to full hearing, but it is yet to do so more than five years later. Akiba accuses CBK lawyers of stalling the case on flimsy grounds.
“The judges have been ready to hear this case, the plaintiffs' advocates have also been ready … but the CBK have not,” said the company’s lawyer in a letter of complaint to Chief Justice David Maraga dated June 6, 2018. As per a financial forensic report prepared in October 2013, Akiba was claiming Sh2.8 billion for losses incurred since 2005 when its operations were halted.
It is now claiming more than Sh4.5 billion. In January this year, the two parties agreed to settle the case through mediation but these efforts flopped.
“I Eunice Lumallas having conducted mediation between the parties do hereby report that the parties have not reached a settlement,” reads a letter dated May 23, 2018 by Ms Lumallas who had been appointed the sole mediator by the two parties.
The letter was addressed to Ms Elizabeth Tanui, the Mediation Deputy Registrar in the Mediation Registry at the Milimani Law Courts.