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Trade Bank caused 'Tax Czar' emotional pain, ulcers

By Wainaina Wambu | Jan 18th 2022 | 3 min read
By Wainaina Wambu | January 18th 2022

Former Kenya Revenue Authority (KRA) Commissioner-General Michael Waweru. [Courtesy]

In a rich accounting career spanning over 40 years in Kenya’s high finance, Michael Waweru’s lowest point was his stint as the Trade Bank auditor.

It was a job that earned the former Kenya Revenue Authority (KRA) Commissioner-General Sh1 million and stomach ulcers.

In a chapter of his recently released memoirs, Waweru recalls this time when he worked for global audit firm, Ernst Young.

“I had helped the firm earn a lot of money from the assignment, which I got a share of as partner. For the first time in my life I was able to write a cheque for Sh1 million to invest in treasury bills,” he writes in Kenya’s Tax Czar.

“But when I remembered all those phone calls from angry, desperate Trade Bank customers who lost money in the bank and how hard I tried to convince the government to find a buyer to save it, a sense of failure engulfed me.

“That tainted the income we had earned from the assignment. Even much later I considered my failure to save Trade Bank as the lowest point in my career at Ernst Young,” says Waweru.

He took over the audit of the collapsed lender in 1985 and 1992 found “very many strange things” when auditing the bank’s financial statements.

“The Bank had borrowed huge sums of money from CBK which it had not repaid. Since there was a general election that year, I suspected the bank’s owners had used some of the money to finance political campaigns. We flagged several suspicious transactions.”

However, matters kept worsening. In April 1993, Waweru returned to work from an Easter break to rude shock. CBK informed him that they had appointed him statutory manager, forcing him to quit as the bank’s auditor to avoid conflict of interest.

Trade Bank customers queueing to recover funds from the collapsed lender at the bank's Valley Road offices in Nairobi, April 1994. [File, Standard]

Eric Kotut, then CBK Governor, promised to provide the funds and other support for Trade Bank and told him he had spoken to Ajay Shah, the owner of Trust Bank, who had agreed to lend Trade Bank Sh200 million. The amount was wiped out in a day, recalls Waweru, forcing him to close the bank in April 1993.

“The results were immediate and dramatic. I received phone calls from desperate customers, some hurling unprintable insults at me, while others who knew me personally tried to ride on the friendship asking for special treatment to get their money out of the bank.”

However, one of the most painful incidents involved a family that had fundraised to get their relative treated in India. Their money got tied up at Trade Bank and the patient died.

“They blamed me for the death. Imagine how that felt when I was working so hard to save the Bank. But I still I felt that it was my duty to save the bank.”

Waweru says that he had received offers to buy Trade Bank from several international banking institutions, but global lenders such as the International Monetary Fund (IMF) wanted CBK to liquidate the bank and shut down other “political banks”.  Kenya had to play ball in the hope that aid taps would resume as a result.

When Micah Cheserem took over from Kotut, the government formed a special committee to investigate bank failures. Waweru put up a case for saving Trade Bank, but the committee voted to liquidate the bank.

“I left that meeting frustrated and disappointed, but I had no choice; the die was cast,” he writes.

The stressful months took a toll on him and when he left the bank on a Friday for a weekend, he started feeling dizzy and couldn’t play his favourite round of golf to relax.

He was suffering from a bleeding ulcer.

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