Oriental loses bid to recover Sh122m penalty

Central Bank of Kenya building in Nairobi.

The Central Bank of Kenya will not refund a Sh122 million fine it slapped on Oriental Commercial Bank in 1993 for its involvement in the infamous Goldenberg scandal.

Formerly known as Delphis Bank, Oriental had sued the regulator claiming the punishment was unfair as other banks which played a part in the scam were not punished.

But the Court of Appeal, while affirming the decision, found that the bank did not deny its wrong-doing and that it slept on its right to pursue a legal process as it moved to court 15 years after it was penalised.

Judges Roselyn Nambuye, Daniel Musinga and Patrick Kiage ruled that filing the case was an afterthought and a fishing expedition as the bank did not state what rights were breached.

“The respondent (Oriental) simply stated that the appellant’s act of penalising it was unconstitutional for it discriminated against the plaintiff,” the judges ruled.

 Particulars

“The respondent did not state the specific provisions of the Constitution that were breached by the appellant. Nor did it provide the specific particulars of such discrimination.”

According to CBK’s director of legal services Kennedy Abuga, Oriental was formally informed of the penalties in 1993 but did not object to them.

The Goldenberg scam hit Kenya in the 1990s and became the subject of a commission of inquiry to establish how CBK paid $210 million in fictitious foreign exchange claims.

The money was fraudulently paid to Goldenberg International and Exchange Bank. It was found that Delphis Bank, among other lenders, was used to defraud CBK through cheque kiting.  

The commission in its findings released in 2005 established that Delphis Bank fraudulently obtained from the CBK $19 million on April 23, 1993.