Nandi Hills MP Alfred Keter risks losing seat over fake Treasury Bills

Plain cloth Police officers arrest Nandi Hills MP Alfred Keter, Madat Chatur and Arthur Sakwa, at Kenya Central Bank on 16th February 2018 after presenting a fake treasury bills worth Sh633,000,000 to Kenya Central Bank(CBK )with intent to redeem them. [Edward Kiplimo,Standard]

 

Controversial Nandi Hills MP Alfred Keter risks losing his seat should he be found guilty of an attempted theft from the Central Bank of Kenya through fraud.

 

He was arrested yesterday morning after he and two others presented forged certificates which they intended to cash for Sh633 million.

Mr Keter alongside Arthur Sakwa and Madat Chatur – not the billionaire ex-husband of former Presidential aspirant Nazlin Umar, purported that the certificates were issued against cash they lent to State in 1990.

Holders of such certificates, technically known as Treasury Bills or simply T-Bills, are repaid upon maturity of the loans which is typically after 91, 182 or 364 days.

The trio entered the CBK premises yesterday and sought a meeting with a top officer who would approve of the settlement, before detectives were called in and pounced on them.

Computer-backed filing

Police officers attached to the Banking Fraud Investigations Unit whisked the suspects to their nearby offices along Harambee Avenue for questioning. The charges could deal a blow to Keter who harbors political ambitions, as he can be banned from holding public office.

CBK’s Director of Communications Wallace Kantai said the suspects presented the forged documents in their claim for redemption.

“The three individuals have been arrested for presenting forged Treasury Bills purportedly issued by the CBK in 1990,” Mr Kantai said.

He added that the CBK was issuing physical receipts until 1997 when investors were given digital certificates that were stored in centralised computer depositories.

There was however, no requirement for investors to return their T-Bill paper certificates after the entry of computer-backed filing.

Before digitisation, investors were given paper certificates indicating the amount of money they would be given after the term of the T-Bill- such as the ones presented by Keter. Little information was forthcoming after the arrest except that they were later transferred to the Directorate of Criminal Investigations Headquarters. The arrest shocked many, specifically because the bills were presented for redemption at least 17 years after they were issued.

T-Bills mature within a year from the date of issue, and were the primary instrument that the Government used to borrow in the 90s as international lenders stayed away.

Investors made huge profits from lending to the then desperate government, earning interest of up to 84 per cent, meaning an investor would nearly double their cash in just one year.

CBK offers the option of investors to present the certificates for redemption on maturity at the face value, but the investors have the option to roll-over the loans considering that the government borrows every week.

Bob Karina, a city-based investment banker and vice chairman of the Nairobi Securities Exchanged, said in an interview that he had never in his career “heard of people cashing fake T-Bills”.

Non-existent

He explains that the investors’ names were printed on the T-Bills, or the longer maturity equivalent instruments called Treasury Bonds.

Should an investor desire to sell part or the entire amount to another before maturity, the certificates would be returned and new ones issued bearing the names of the new owners.

In the only other reported case of fake securities, a brokerage firm was in 2013 accused of selling non-existent bonds to other investors at the Nairobi Securities Exchange.

Fred Mweni, one of the architects, was banned from trading in bonds following the allegations that his firm Tsavo Securities had colluded with CBK staff to create fictitious digital securities.