Former bank boss gets reprieve in case with markets regulator

The National Bank of Kenya (NBK) Managing Director and CEO Munir Sheikh Ahmed (centre) when he appeared before the Parliamentary Investment Committee at the Parliament Buildings, Nairobi. [Elvis Ogina/Standard]

The High Court in Nairobi has declined to expunge parts of minutes by the Capital Markets Authority (CMA) on why it surcharged former National Bank of Kenya boss Munir Ahmed for allegedly cooking the lender’s books.

Justice Pauline Nyamweya in her ruling said the minutes were critical to the case filed by Mr Ahmed as they would give a full picture of how the decision to punish him was reached.

While dismissing CMA’s prayers, the judge said the court required all information regarding the board meetings in order to make a just decision.

“Therefore, any presentations, discussions and decisions made on or in relation to this item will be relevant and provides the context for the respondent’s (CMA) decision against the applicant,” said Justice Nyamweya.

Informed decision

“This will include presentations made by the management to the board, or by auditors and whether or not the applicant is explicitly mentioned or not in the discussions as the said discussions and presentations ultimately informed the decisions made by the respondent.”

CMA had asked the court to remove parts of minutes of meetings held by its board as they did not mention Ahmed and were not deliberated by the board.

But the former NBK boss argued that the minutes that CMA was seeking to suppress were an important part of his case that there was a pre-determined decision.

He told the judge that it would be irrational to expunge the requested parts although they did not concern him. CMA, which regulates the conduct of listed companies, slapped Ahmed with a penalty of Sh5 million last year for ineffective management of the bank and misrepresentation of financial statements.

It also disqualified him from holding a board position in any publicly-listed company or working for a licensed person for a period of three years.

The regulator said Ahmed led the board and other senior managers to overstate profits of the bank for the second and third quarters of 2015 in addition to siphoning about Sh1 billion from the bank’s coffers through an embezzlement scheme.

“The misrepresentation of financial statements was occasioned by premature recognition of sale of assets amounting to Sh800 million and under-provisioning of loan amounts and wrongful recognition of interest income, leading to the overstatement of profit in the respective periods,” said CMA in a statement.

NBK had published unaudited financial statements reporting profits of Sh1.7 billion for the quarter ended June 30, 2015 and Sh2.2 billion for the quarter to September 30, 2015.

However, it subsequently reported a loss of Sh1.2 billion in its audited results for the full year ended December 31, 2015.

Deposit mobilisation

According to the regulator, during Ahmed’s tenure, NBK had a deposit mobilisation programme where commissions were paid to private agents for cash placed by Government agencies in the normal course of business.

The managing director sued CMA, claiming that the regulator made him the sacrificial lamb in a bid to shield other members of the bank’s board, including the Treasury Cabinet secretary, in the Sh1 billion loss.

He also claimed that Central Bank of Kenya acted irrationally in 2016 when it heaped blame on him, saying its members also sit in the CMA’s board.

According to Ahmed, CMA would have arrived at a just decision if it went through all information that would have been disclosed by the bank.

He also faulted CMA, claiming it had delayed the final decision until the tenure of the board members lapsed so that he could not appeal.