How NBK lost cash in suspect scheme

NAIROBI, KENYA: The bosses of the National Bank of Kenya made deals  that enabled them siphon  out billions of shillings while hiding from the public the lender’s true state, an affidavit filed in court avers.

The scheme involved fictitious firms drawing blank cheques and back-dating of money from property sales.

This is according to a replying affidavit filed at the High Court’s Judicial Review Division by the head of investigations at the Capital Markets Authority (CMA), Abubakar Hassan, against former NBK boss Munir Ahmed.

SEE ALSO :Why regulators find it tough to tame some sector bullies

Liquidity issues

Mr Ahmed is seeking to be exempted from the CMA punishment. The affidavit says NBK, which had liquidity issues, approached two firms to help it convince large depositors to put their money in the bank.

Edge Capital Consultancy and Advest Company Ltd were selected. Edge was not even a registered company when National Bank contracted it in May 2014. The firm got registered four months later.

“The contract sign-off forms for Messrs Advest Company Ltd and Edge Capital consultancy, who were deposit mobilisation agents, were signed by the applicant (Munir Ahmed), Finance Manager Lawrence Aswani, former chief finance officer Chris Kisire and the former head of Treasury, Solomon Alubala,” Mr Hassan said.

He added that the firms defrauded the bank of Sh991 million, claiming they had brought State agencies on board. However, when pressed, they said they had not met the mobilisers.

SEE ALSO :CBK retains lending rate at 9 percent, says inflation rate to climb

Ahmed was said to have approved the questionable invoices for up to Sh5 million. All this happened under the watch of the Central Bank of Kenya. The lender also hid 11 non-performing loans by claiming they had been restructured.

CMA said NBK overstated its profits by hiding bad loans of Sh2.5 billion in the June and September numbers, and only made good its books at the end of December 2015.

The bank sold off branches and lied to the public that it had made Sh847 million by June, only for the figure to be scaled down to Sh111 million by December. “Other income (which included disposal of assets) reduced from Sh1.23 billion in the September 2015 published accounts to Sh466 million in December 2015,” Abubakar said in his affidavit.

Ahmed has also been accused of using his  influence to have his brother’s firm, Fozi Investment Ltd, to get a loan on friendly terms from the bank while his sister’s firm, Sheikh & Company Advocates, was hired to offer legal services to NBK. Ahmed has disputed the Sh5 million fine slapped on him by CMA.

Central Bank of KenyaNational Bank of Kenya