Judge directs Imperial Bank owners, CBK to consider out of court settlement

Parties warring over Imperial Bank saga might consider solving the crisis surrounding the financial institution out of court.

The Central Bank and the bank's shareholders were urged to weigh if they can go for mediation in a bid to have the collapsed bank up and running again.

"Consider going for mediation. I do not see any issues of law in the case and there is willingness to inject money to revive the bank. There is something that can resolve the issue," High Court judge Fred Ochieng recommended.

The shareholders of the money lender have reiterated that they would inject in Sh10 billion, but they have time and again accused the bank's regulator of sabotaging the revival process.

They claim that Central Bank is instead demanding Sh20 billion fresh capital injection to bailout the institution.

But the judge recommended they (Central Bank and shareholders) should have a central point where they can come with an amicable solution. "I suggest you give some thought if mediation can give some results. I do not see what legal arguments will benefit the parties," the judge said, adding that the out of court process would give them a better chance of recovering the financial muscle previously held by the bank.

"Mediation will give you real chance to settle the differences between both parties. For the sake of the depositors, the issue can be resolved," the judge said.

A forensic audit by FTI Consulting revealed shocking details of how eight members of one family that largely deals in fish business conspired with the bank's top managers to siphon Sh34 billion from the bank in one of the biggest bank thefts to strike the banking industry.

The scheme orchestrated by the late Mr Abdul Janmohamed who was the bank's chief executive and implemented by the head of credit and finance officers saw depositors cash wired to fictitious accounts without any paperwork.

According to the FTI Consulting forensic, the bank's senior management committed a long-running and systemic fraud by running a hidden 'parallel' bank which disbursed the billions from the bank.

The hidden 'parallel' book and financial statements were never disclosed to the Board or reported, which concealed true underlying position of Imperial Bank.

Court documents contained an affidavits by shareholders claimed that the late Janmohamed concealed fraud from his co-directors.

According to court documents, Imperial Bank is owned by Imaran l Limited (14 per cent), Reynolds & Company Limited (10 per cent), East Africa Motors Industries (11 per cent), Momentum Holdings Ltd (12.5 per cent), Abdumal Investments (14 per cent), Rex Motors Ltd (12.5 per cent), Kenblest Ltd, (12.5 per cent) and Janco Investments taking up a 13.5 per cent stake.

The shareholders alleged the former boss used to issue orders written on chits, directing the then Head of Credit Naeem Shah to disburse loans in the most casual of ways, and at the same time assuring them he would take care of any issues that would arise.

In his affidavit, Abdumal Investments Ltd Director Ghalib Hajee claimed that four days after their respective promotions, the two top officials reportedly opened up to bank Chairman Alnashir Poppet, informing him of the rot.

They were only able to speak after the sudden death of Janmohamed, which occurred mid-September. Upon his death, all his dark secrets began unfolding in quick sequence leading to the closure of the bank by the regulator.