High Court bars CMA from investigating Imperial Bank bosses

The High Court yesterday extended orders barring the Capital Markets Authority from investigation directors of collapsed Imperial Bank.

Judge Joseph Onguto extended the orders until Wednesday next week when parties will appear before him again.
“Orders issued are hereby extended,” said Justice Onguto.

The directors are seeking to stop the CMA from investigating them over information submitted when the bank was seeking to raise Sh2 billion through a corporate bond last year.

In their argument, the directors maintained Central Bank of Kenya was already investigating the cause of the bank's collapse and therefore they should not be subjected to a parallel probe. CMA on its part claims its investigations are on the information submitted in the application for approval to raise  a Sh2 billion bond in April last year.

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CMA boss Paul Muthaura accused the director of collapsed Imperial Bank of actively frustrating investigations by his agency. The authority reckons that the directors have snubbed several invitations by the CMA, which is probing the directors over the false information the bank submitted last year in its application to borrow Sh2 billion from the capital markets.

“The consistent request for adjournment made by the petitioners appeared to have been intended to frustrate hearing to ensure expedient administrative action,” said Mr Muthaura in a petition.
The regulator first sought audience with the bank’s director soon after the lender collapsed last year and subsequent suspension of trading in the corporate bond. A large number of individual and corporate investors bought into the bond – which is essentially a loan.

Imperial Bank directors including former chairman Alnashil Popat had dragged CMA to court seeking to stop the authority from investigating them. Among the reasons given in the director’s petition was that the Central Bank of Kenya (CBK) was already carrying out another probe.

Muthaura however responded that the investigation by the CBK had nothing to do with the Sh2 billion that investors lent the troubled bank. “CBK investigations are on the banking activities, and its findings may not be appropriate to assist the CMA to exercise its regulatory mandate with respect to the public issue,” reads the replying affidavit from the CMA filed in court yesterday.

Pleas that the court bars CMA’s investigation were baseless in law, the chief executive added, cutting that possible findings of the CBK probe would not relate to the conduct and status of the bond issue.
“That the averment by the petitioners that the process commenced by the respondent is in regard of other wider comprehensive investigations by other parties in therefore baseless in law.”

Muthaura further accuses the directors of trying to insulate themselves, which was against public interest.