Judge, her lawyer and her prosecutor: Three sides of Mwilu case

This summary reconstruction is based on statements of the accused to the police, prosecution allegations, witness statements and other documents all filed at the Constitutional and Human Rights Division of the High Court.

Nine months after she was promoted to be a Judge of the Court of Appeal, Lady Justice Philomena Mwilu wanted to be assisted with a loan “to get a decent home” in Lavington, Nairobi.

“The request was for a loan of Sh80 million to be repaid over a period of 19 years,” said Ms Mehbooba Shamji, the bank’s Business Development Manager, in a statement filed in court.

The property Justice Mwilu was eyeing could fetch a monthly rent of Sh400,000 besides her other properties which fetched Sh600,000 a month. Knight Frank had valued the Lavington house, on LR 3734/205, at Sh120 million.

LOAN APPLICATION

This application was done on the Judiciary letter head, which investigators claim amounted to abuse of office.

Naeem Ahmed Shah, the head of Credit, alleged in court papers that Justice Mwilu’s application was “made directly to the managing director” — the reason why her letter did not have an Imperial Bank stamp of receipt.

Ordinarily, a loan request started at the back office where the client filled the loan application forms before it was taken to the credit committee which also included Mr Janmohammed — “who had the overriding authority” according to Mr Shah.

But Justice Mwilu appeared to have changed her mind on property LR3734/205 and in an undated letter to Ms Shamji, she reduced her request to Sh60 million and now wanted a property on LR 3734/202 and 3734/209 also within Lavington. This was approved on November 3, 2013, according to the court documents.

LOAN FACILITY

A credit support manager with the bank, Jacob Kivindyo, said in a statement to detectives that he was told by Ms Shamji that Lady Justice Mwilu “urgently” wanted to draw Sh12 million and was asked to “prepare a loan booking template” for the same amount to be approved.

In her statement, Ms Shamji said she would not have signed the journal entry without the approval on the request of Justice Mwilu. “I am unable to site the request or the approval in the documents with the investigators,” she says in her statement.

But as Mr Kividyo told investigators, this loan facility with an interest of 12 per cent and a default rate of 35 per cent was cancelled by Ms Shamji, who decided to credit some Sh12 million to Justice Mwilu’s new account with the bank. This amount was to be debited from her loans account and credited to her personal account.

“I created a loan repayment account … made a debit of Sh12 million and credited the same to her (personal current) account,” says Mr Kivindyo.

INTEREST DEDUCTED

Later on, a loan booking was done for Justice Mwilu and the interest rate was reduced from 12 per cent to zero per cent after a meeting between Ms Shamji, who had signed the opening of her account as referee, and Mr Janmohammed, the bank’s managing director on the morning of November 18, 2013.

“This was unique as it was like the bank was giving the facility free of charge when even employees were charged an interest on all loan facilities,” says Mr Kivindyo, in his statement. “From my interpretation, the Sh12 million was advanced without proper documentation but regularised as a loan (later).”

Justice Mwilu told detectives that this was a “personal private borrowing” which was fully repaid. Director of Public Prosecutions, Noordin Haji alleges that Justice Mwilu used her office “to improperly confer a benefit of Sh12 million from Imperial Bank.”

ZERO PER CENT

It is not clear who requested the Zero per cent but on August 30, 2013, the judge had written to Mr Janmohammed, one of the founder shareholders, to thank him for the loan facility. “This is the best thing that has happened to me in a long while,” she says in the handwritten note. “Allow me … to plead with you to kindly consider lowering the offered interest rate from 14 per cent to a rate lower, in your absolute discretion, to make the management of this repayment affordable and smooth.”

Initially, the Sh12 million was to be recalled any time but this was reviewed by the business development manager and replaced with a maturity date of three months ending January 23, 2014. But the first repayment, according to court papers, happened on November 26 when Justice Mwilu made a cash deposit of Sh10 million.

“This amount was given to me in cash by the client,” recalls Ms Shamji in her statement. “However, I did remind Justice Mwilu that the interest on the Sh12 million loan was still a pending matter that she needs to sort out, and she said she would discuss with the MD. On the balance of Sh2 million, I am not aware of when this was cleared, or if it has been cleared.”

AFFIDAVIT FILED

The Directorate of Public Prosecution now says in an affidavit filed in court that “the circumstances under which (Justice Mwilu) received the Sh12 million were clearly illegal” and (that she) “obtained financial advantage of her office” as a state officer “without any letter of offer and with Nil interest.”

“It is strange that a bank would give out loans at nil interest but a more curious observation is that there is no evidence of application or servicing,” says Mohamud Ahmed Muhamud, the chief executive officer at the Kenya Deposit Insurance Corporation, which took over the bank after it collapsed on October 13, 2015 in his statement.

Ms Shamji said she could not remember where and how she got the Sh10 million cash from the judge.

When the Central Bank of Kenya (CBK) placed the bank under receivership, it appointed Kenya Deposit Insurance Corporation (KDIC) as a receiver for twelve months.

By this time, Justice Mwilu had been advanced Sh60 million to purchase the Lavington properties on LR 3734/202 and LR3734/209 initially owned by Mahendra Haria and Ashvinkumar Shah.

BANK COLLAPSED

Also, six months before the bank collapsed, a victim of poor management and theft, Justice Mwilu had applied for another loan of Sh80 million to purchase LR 3734/1129, a property owned by contractor Mohammed Said Chute, the founder of Midroc Water Drilling Company, best known for the tender controversy on Marsabit’s Dadasa Dam. According to Ms Shamji, Ms Mwilu “wanted Nil interest on her short-term request, but I recommended that we charge her at least 11 per cent per annum and for a period of 4 to six months.”

Justice Mwilu had called the bank and offered her five properties in Mavoko to be held as pledge for the “bridging loan” since she intended a swap in securities with the Lavington property she intended to purchase from Mohammed Said Chute.

Although the bank initially held the Lavington title deeds as security for the Sh60 million loan, Justice Mwilu is now being accused of “inducing the receiver manager” to execute a discharge of the Athi River property (charged for the Sh100 million) “in the pretext that a substitute security LR 3734/1129 (Mohammed Chute’s property) would be provided.”

SWAP SECURITY

In a handwritten letter dated July 30, 2015, Justice Mwilu wrote to Ms Shamji, indicating that she wanted to swap the security with LR 3734/1129 “which I am in the process of acquiring … the latter is a much better security with a big double storey house in half acre in Lavington area … once discharged the old security would help me to reduce my indebtedness (again) LR3734/202+209 would sell faster than the property at Athi River …”

One of the bank officials, Jacob Kivindyo, is said to have recommended measures “that would insulate the bank against any exposures.”

“These recommendations were however disregarded by the credit team …(the business development manager) additionally indicated that Justice Mwilu was asking for a moratorium until her Athi River properties sell,” recalls Naeem Ahmed Shah, the bank’s head of credit in the court papers.

Ms Shah would later sign Justice Mwilu’s offer letter of Sh100 million dated June 29, 2015, and counter-signed by Mr Janmohhamed, the managing director.

“It appears that Justice Philomena (was experiencing some difficulties in managing her debts,” says Mr Mohamud, chief executive officer at the Kenya Deposit Insurance Corporation. “The bank only disbursed a total of Sh60 million (and) the facility was to be secured by a simple pledge from the borrower.”

BLUE NILE LIMITED

According to Ms Shah, in her statement to the police, “no other bank official could approve such a facility.”

But rather than purchase LR 3734/1129, Justice Mwilu instructed the bank on July 3 and August 25, 2015 to channel the Sh60 million to Lucy Muthoni Magelo (Sh36 million), Mohammed Chute (Sh10 million), Blue Nile Limited (Sh10 million) and Sh4 million to her Imperial Bank account.

The property that Justice Mwilu wanted to buy from Mr Mohammed Chute was already charged with KCB and on September 9, 2015 Imperial Bank sent an undertaking to pay Sh60 million to KCB within 45 days after the release of this title to their lawyer, Mutunga and Co. Advocates.

This was signed by the MD Mr Janmohammed and Ms Naeem Ahmed Shah.

A week later Mr Janmohammed, the man who was giving Justice Mwilu a hearing at the bank, died. She would later tell the Imperial Bank business manager (Ms Shamji) that “she had attended the funeral to pay her last respects.”

UNDER RECEIVERSHIP

Four weeks later, October 13, 2015, Imperial Bank collapsed and was placed under receivership.

By this time, Justice Mwilu’s attempt to swap the securities had not gone through despite the professional undertaking sent to KCB. That is how her lawyer, Stanley Kiima came into the picture.

It was Mr Kiima, also charged with Justice Mwilu, who wrote to the Receiver requesting for the release of the Lavington property (LR 3734/202 and 3734/209) which was held as security for the long-term Sh60 million loan and undertook to provide the original title of the property the judge wanted to purchase from Mohamed Chute in its place.

“I issued the letter of undertaking in the ordinary cause of my business as an advocate acting for the borrower,” said Mr Kiima in his statement. “To date … I have not received any notice of default of that undertaking … and no proceedings have been commenced under civil law against me.”

Mr Kiima said the undertaking is a “supplementary collateral which is given and taken at the lender or recipient. It is never initiated by the person issuing it and it is issued under the terms dictated by the person calling for it.”

But the investigators say that both Justice Mwilu and her lawyer’s intention was to sell the securities held by the bank and not replace it.

LONG TERM LOAN

The secured property, once released was sold to RAEI Investments Limited for Sh165 million. She paid Sh65 million to Imperial Bank to clear her outstanding short-term loan. Also the title for Mohammed Chute’s property 3734/1129 was also released and she sold the property to Grand Forest Hospital Japan Limited leaving the bank with no security for the long term loan that Justice Mwilu had borrowed.

“The replacement charge over LR 3734/1129 was never returned to the firm for registration. I do not know if there were any negotiations or agreements between the bank and its customer regarding the same,” Justice Mwilu’s lawyer says. “The banks remedies lies in recalling the undertaking and enforcing it as per the clearly set out procedure for that, or seeking the customer to clear the loan forthwith. None of these involve criminal procedure.”

NOTHING FRAUDULENT

On her part, Justice Mwilu said that everything about the sale of the securities “was agreed between myself and the receiver manager and there was absolutely nothing fraudulent. After the sales, the bank received payments of Sh65 million as agreed and Sh35 million towards payment of the long term loan which was now secured by the simple deposit over five Mavoko properties.”

Questions have also been raised on the failure to pay stamp duties on the purchase of the land and Justice Mwilu blames her lawyers: “I paid cash to the lawyers Mutunga and Company Advocates upon their advising me of the payable sums in respect of each transaction. The advocates are the ones who processed all the transactions including valuation.”

The lawyer said the duty was paid and KRA has not complained to him. Prosecutors allege Justice Mwilu and her lawyer forged documents and never paid any stamp duty while purchasing the two plots.