How Sh38 million loan scuttled investor’s retirement plans

On Friday, a fortnight ago, Michael Lang’at, 76, entered National Bank of Kenya (NBK) head office along Harambee Avenue. This was one in many of the trips that he had been making to the bank since February 1995.

Being a political scientist, lawyer, ex-soldier and first black national to head National Youth Service, these titles could not stop the transfer and sale of his 300-acre piece of land, sending him into retirement abyss.

When Financial Standard interviewed him recently, the father of seven who at his prime years was a darling of former President Daniel arap Moi, painted a picture of a man whose retirement plan was scuttled by the institutions he had so much faith in.

“I am still disappointed. It is devastating,” he spoke of his feeling ever since he learnt that his plan of setting up a multi-million horticulture farm in Mavoko had hit a snag.

Nothing had prepared him for anything that would scuttle his plan to set up a mega horticultural and floricultural project. In 1992, Lang’at, who was a Major in the army, saw an advert in the newspaper that British American Tobacco Ltd was selling land at Athi River. “I gave about Sh1.8 million as deposit for the land. Then I moved to Postbank Credit and borrowed Sh20 million,” he recalls.

He then registered Berur Enterprises Ltd as a vehicle to manage his project. He wanted to start horticultural farming, thanks to the skills he had learned from Israeli agronomists who frequented NYS training camp.

After acquiring 300 acres, he built two pump houses, a concrete reservoir with a capacity of five million litres, a power sub-station, water pipes and drip irrigation pipes. They cost him about Sh16 million. By early 1993, he was raring to go. According to his estimates, he was to generate Sh10 million every three months, after the first three years of clearing the loan.

On May 20, 1993, Postbank Credit went into receivership. With pressure from Central Bank mounting on debtors to clear the Sh3.61 billion loans that were outstanding at the time of liquidation, Lang’at moved to NBK in December 1993 for help.

Copies of documents in our possession confirm that on February 13, 1995, NBK board, led by the then executive Chairman John Simba, now an advocate of the High Court, agreed to loan him Sh38 million. “We refer to your request for banking facilities and subject to perfection of security documentation, we are pleased to grant the facilities.....,” reads the letter signed by manager K Keter.

NBK was to wire Sh20 million directly to Postbank Credit and charge Lang’at an annual interest of 28 per cent. The bank states that it agreed to loan him Sh18 million to “enable you finance completion of your horticultural and floricultural project”.

The agreement letter shows his three parcels of land of 300 acres were valued at Sh95.9 million by one of NBK’s approved valuers, Kinyua Koech Ltd on July 18, 1994.

The first loan was to be repaid over eight years at Sh187,500 monthly while the second was to be repaid over 66 months at Sh303,030 per month. While Major Lang’at received a letter from the defunct bank confirming receipt of Sh20 million, the wait for Sh18 million to complete his project never ended. “I kept asking for the loan. It became part of my schedule travelling from Gilgil to NBK for inquiries at least twice a week. I even had three appointments with Mzee Moi to help me,” he said.

Farm production

At that time, interest on the loan was piling up, his farm was lying idle and retirement was fast approaching.

His first born who had studied Agricultural mechanics and even travelled to Israel for hands-on experience in farm production and management was sitting idle. Lang’at, who had paid Sh9 million to NBK in a bid to clear the loan, was running out of options and chose to look for a buyer for one of the pieces to clear the debt.

But a bombshell followed. “When we went with the buyer to the bank in 2006, the credit manager informed us that the farm had been sold,” read part of his protest letter to NBK, which the management received on March 5, 2012. Major Lang’at accuses the bank of not having followed clear procedure in auctioning his land. While in 1994 an acre of this land was averaging Sh320,000, the bank auctioned it at Sh90,000. “Selling it at Sh90,000 per acre 12 years later was grossly unfair and disadvantageous to me. The reserve price should have been at least 75 per cent of market price,” he says.

Muigai Commercial Agencies, which bought one of the pieces of land, says in defence of the case filed by Major Lang’at in 2014 that her bid of Sh9 million on April 25, 2006 for one of the three pieces was the highest. The 2014 court papers, in which Major Lang’at had sued the bank along three other defendants quoted NBK saying it relied on several valuation reports, which influenced the reserve price.

“Even if it were to be found that the sale of the suit property to the first defendant (Muigai Commercial Agencies) was irregular, the only remedy that can be available to the plaintiff (Lang’at) in the circumstances is that of damages,” Judge P Nyamweya ruled on December 14, 2014.

Three weeks ago, Financial Standard wrote to NBK asking among several other questions why it did not honour its Sh38 million loan agreement. But in response, it did not address this. “The issues raised by the claimant have been litigated in court before vide Milimani HCC No.238 of 2003- Edward Kings Onyancha Maina, Michael Lagat & Bener Enterprises – vs NBK where the claimant had obtained injunctive orders against sale of the securities.

These orders were discharged on 18/11/2004 allowing the bank to sell the same,” noted Catherine Kageo on behalf of NBK. “The Claimants in that case were given a chance to redeem the properties but they failed to do so and the bank auctioned the properties.” She said the matter was still in court and the bank could not comment on the issues raised.

However, the ruling quoted by the bank was determined in 2014 and no appeal was made to the case. According to the search results from the Lands Ministry, the piece that Muigai Commercial Agencies acquired was transferred to her on October 13, 2012, way before consent had been obtained. Major Lang’at wrote to the chairman of Mavoko Land Control Board, in October 2014 seeking for the minutes that approved the transfer of one of the three parcels of land from NBK to the agency.

In response, Deputy County Commissioner of Athi River sub-county wrote back on November 19, 2014 confirming that the consent to transfer one of the three pieces of land was issued by the board on December 14, 2012. However, his response, also seen by Financial Standard, was silent on the two other pieces.

“I am however not able to provide you with the minutes of the Land Control Board as they are the property of the Ministry of Lands,” added K Makori, the Deputy County Commissioner in the response. Failure by Makori to mention two other parcels, makes Major Lang’at feel cheated about the transfer of the two other parcels to Igainya Ltd, another buyer.

He says Muigai Commercial Agencies applied for consent to get the land on November 16, 2012, the exact date that NBK wrote to Mavoko Lands Board to seek the transfer.

He accuses the two of forgery. In January 2015, he wrote to the Ministry of Lands, then under Charity Ngilu seeking reversal of the transfer before she left office.

He then directed his letter to the Secretary Jacob Kaimenyi in November last year. Lucy Wanja, a legal adviser to the CS this year wrote back: “Your only recourse is the courts of law. We are not the rightful authorities to reverse such action.” Major Lang’at says he is still traumatised by the turn of events.

The vast land, now worth billions of shillings, near Jomo Kenyatta International Airport, in Lang’at’s physical possession, still lies idle despite having been sold.