Fresh evidence puts CBK, taxman on spot over Imperial Bank

A recorded telephone conversation between senior Imperial Bank officials adduced in court has further reinforced claims of Central Bank of Kenya’s (CBK) complicity in the Sh34 billion loss.

The conversation, tabled last week through an affidavit of Anwar Hajee, a director at Abdumal Investments Ltd, also ropes in Kenya Revenue Authority officials in the intricate web of cover-up over the years.

Abdulmal Investments Limited is among the six principal shareholders of the bank who moved to court to stop liquidation of the bank and payouts to large depositors.

Evidence adduced earlier indicated that CBK may have been conniving with the fraudsters and was aware of the scam as at April 2012.

In the September 24, 2015 conversation between Chief Finance Officer (CFO) James Kaburu, board chairman Alnashir Popat and Hajee, the CFO confesses to engaging in “creative accounting” to deceive the board. The conversation took place a few days after former Group Managing Director Abdulmalek Janmohamed, the chief architect in the scam, died of heart attack.

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Mr Kaburu also reveals that the late MD asked him to personally bribe KRA and CBK officials. He says he was the “channel” through which the late MD silenced CBK officials.

“Yes. I would go and negotiate. They ask for Sh10 million I tell them no, I come, we agree with the Sh6 million, so I negotiate again Sh6 million, I tell Naeem (Shah). Naeem is told to give him and I deliver the money,” he tells Hajee who seeks to know whether he was the conduit.

Mr Shah was the head of Credit Unit at the bank. He was also appointed the acting MD upon Janmohamed’s death and Kaburu his deputy. The pair could not sustain the fraud after Janmohamed’s sudden death and opted to spill the beans.

In the conversation, Hajee asks about the last time Kaburu bribed CBK and how much he paid out.

In his response, Kaburu shifts to a more interesting discussion of how the bank would get Sh400 million credit for a day or two at the close of quarters to confuse the inspectors.

“The Sh38 billion fraud was brought to the attention of the 1st Respondent (CBK) on October 12, 2015. The 2nd Respondent (Kenya Deposit Insurance Corporation) has conveniently failed to state that the 1st Respondent first got wind of the fraud on April 5, 2012.”

Acknowledging the assistance

“This was acknowledged by the 1st Respondent on April 10, 2012. The 1st Respondent, in a bid to craft a well stage-managed response, wrote to Mr James Kaburu, the then Chief Finance Officer to respond to the whistleblower allegations,” Hajee says in the main affidavit.

In the April 5, 2012 letter, attached in Hajee’s affidavit, a whistleblower writing on alleged Imperial Bank staff email wrote to the Treasury and copied the Ethics and Anti-Corruption Commission, police and media houses complaining of money laundering at the bank.

“This is regardless of threats management continuously issues and acknowledging the assistance I have received from staff in various departments. The CBK inspectors that have condoned these heinous crimes will be named together with the senior management of the bank,” the whistleblower said.

The whistleblower gave out a list of seven account holders whom he proposed be investigated for money laundering and tax evasion: “Some of these accounts have unsecured loans running into billions of depositors funds.”

Towards the end of the mail, the whistleblower made other statements which have since turned out true with shocking degree of certainty: “The MD has secret funds abroad consisting of these embezzled funds.” “This is despite arm-twisting the finance department to report on cooked financials.” “The bank has grossly overstated the figures.”

Immediately the email was received, CBK’s communication’s team sent it to R K Chepng’ar and copied it to M Mugo. A few days later on April 10th, R K Cheres officially wrote to Kaburu seeking detailed information on the alleged accounts as of March 31, 2012.

“Further, please, provide information on facilities, if any, borrowed by companies associated with the aforementioned individuals. Kindly expedite the response.” He asked that the information be provided in the “format provided for in the CBK/PR 4-5 return on top 50 largest borrowers.”

When Kaburu wrote back a day later, he categorically denied all claims of money laundering, tax evasion and strange goings on at the bank.

According to the response, also availed by Hajee, the CFO appears to have given hazy details of the accounts and the responses did not conform to the format requested.

One of the accounts had been closed in 2009, information on two of the accounts could not be provided because they shared names with many others, another was a dollar account with a credit balance of 32,000 dollars, another was not a depositor at all and two others had credit balances of Sh1.2 million and Sh3.8 million.

For the account belonging to Samani Constructions, Kaburu gave out the correct information in the required format, attaching it separately. For the rest of the accounts, he never gave out the PIN and names of directors as required.

“We confirm that we strictly follow the anti-money laundering procedures when opening any accounts and we also confirm that all transactions with our clients are above board hence no tax evasion is envisioned,” Kaburu claimed.

He signed the letter with the hope that the information provided would exonerate the bank from “such malicious and unauthenticated emails”.

On the same day, Cheres acknowledged receipt of the information “with thanks”.

He nevertheless demanded the submission of all account information of accounts bearing the same name as two of the accounts named by the whistleblower. Kaburu gave it out all the following day.

According to Hajee, CBK did not do anything and simply believed the CFO, whom he claims was condoning the fraud together with CBK inspectors.

In the affidavit, Hajee says the “blinkered and opaque” handling of the bank’s receivership is representative of CBK’s desire to close the bank and “bury the evidence of their own involvement in the frauds and their failures of supervision with it”.