In his early thirties, Alnoor Kassam had already built a multi-million financial empire. What was lacking was a bank.
One of his multiple businesses was as the local franchise holder of the Diners Club International, the then biggest credit firm in the country.
At this point, he wanted a banking licence and getting one was difficult in those days. They had a finance company licence, thus Diners Finance offered a credit card dubbed Diners Club, where one had to pay off money monthly – known as a charge card in those days.
Between 1986 and 1987, Diner’s Finance was formed and was followed by a merger with Diner’s Club Africa.
“If you want to give credit to people, you need money. The goal was to get deposits and at that point, Diners Club owned a license, but it couldn’t do full banking business. In those days, there were two different types of licenses – banking and a finance company license,” he recalled.
His brother Iqbal had come from the banking sector and the two had been business partners.
Trade Bank had already been formed in 1984 with Israeli tycoon Gad Zeevi and Nicolas Biwott as business mates.
This was the classical example of a political bank formed to loan to the moneyed and powerful on an unsecured basis.
His brother would later become a director with Kassam as a shareholder, but largely uninvolved in the bank’s operations at the time.
Biwott owned 75 per cent shares along with partner Zeevi.
In an interview, Kassam recalls that his brother left Kenya, and at that point, Zeevi and Biwott had problems leading to him buying them out in 1989.
To this date, he regrets this decision. He says he was young and naïve, and didn’t do due diligence to understand what he was getting into.
“There were these huge loans that had been given out from the bank. And it’s like they were hidden,” he said.
Among these loans was one particularly huge one advanced to Biwott.
Kassam had already agreed to keep the loan when he bought the bank by holding on to the security of some of the companies linked to the former minister.
“In my mind, I didn’t think there was a problem because some of the companies were worth much more than the loan,” he said.
He says that later, the bank’s Managing Director Ian Rayner was threatened into releasing the main security, triggering a chain of events that sunk the bank.
“It weakened our security and they stopped paying the loan, so we foreclosed on them on one of the other companies and took over the equipment.”
He says he never wanted Yaya Centre, but it was the only asset that he could take.
At the time, Biwott was being held in police cells to allow for investigations into circumstances leading to the murder of his cabinet colleague Robert Ouko. He was never charged over Ouko's death.
“The Yaya deal happened because Biwott was in police custody. We never had Yaya as our security.”
Information gathered by The Standard reveals that it was in Biwott’s best interest for Trade Bank to remain solvent.
Trouble, however, started when Kassam executed this move of obtaining security on some of Biwott’s assets. Biwott made some repayments, but shortly stopped.
An agreement on the appointment of a receiver had been struck, but they would face armed resistance when they attempted to move into Biwott’s businesses.
Kassam even met with Biwott agreeing to remove the receiver if he (Biwott) paid about 25 per cent of the debt – Sh100 million.
“Biwott was physically intimidating towards Kassam and indicated that if this situation happened again, Kassam would be in trouble. Again, Biwott’s companies made payments for a few months and then stopped,” noted a document by the Canadian authorities inquiring into his immigration status.
During the same period, Biwott was having trouble with Citibank.
“Citibank started to take action on Biwott’s security with that institution. Out of fear of Biwott, employees of Citibank fled Kenya for a short period. The American ambassador intervened in some way,” notes the document.
According to Canadian immigration, Kassam visited Biwott in the cell to discuss the debt.
At this time, the “reasonable solution” became for Trade Bank to take over Yaya Centre as a settlement of the debt.
“After Biwott’s release from police custody, he dropped in unannounced at Kassam’s home, as was his habit. He agreed TB should take over Yaya Centre as settlement of the debt.”
In 1992, The CBK and Deposit Protection Fund oversaw the transaction that led to Trade Bank taking over Yaya Centre.
Biwott would later renege on the deal and what followed was an over five-year legal battle for the shopping complex.
Trade Bank continued to suffer liquidity issues. Even with assets, it had loaned out more than it had in share capital and on deposit.
Having facilitated the Yaya deal, CBK officials wanted to ensure the bank’s survival.
This is when the pre-export finance scheme was suggested as a solution.
“Kassam had no reason to think that it was anything other than a bonafide scheme. Kassam left the mechanics of how it was going to work with Rayner.”
In 1993, Kassam would receive a shocker. Even with the Yaya Centre deal, Biwott’s firms still owed a huge debt at Trade Bank about Sh150 million, which was still unserviced.
The document says that Rayner explained Trade Bank was using his accounts as well as others for the pre-export financing scheme to improve the bank’s liquidity. Kassam was against this.
In 1993, Kassam would plan a business trip that would raise an alarm that he was fleeing. He was going to Canada to discuss with his brother the possibility of Trade Bank obtaining $6 million to boost liquidity.
CBK officials thought he wanted to siphon cash out of the country and also wanted to investigate the pre-export finance matter.
Barely a few days later, he received a message from the director of immigration. He had thought that he was going to be harassed about a work permit for a South African who had been recruited to be the General Manager of the hotel at Yaya Centre, and he ignored the call.
However, two immigration officers would come to his office wanting his passport. He refused to say it was with his wife. They accompanied him to his home.
It’s there he confused them with drinks and slipped away unnoticed to his parent’s home.
After the family discussed the matter, Kassam and his wife and brother left Kenya, travelled by car to Tanzania and then flew to Frankfurt
He fled believing his life in danger. Rayner would also flee to London.
The other businesses would soon fall. Diner’s tried to move its money from Trade Bank, but the Central Bank of Kenya (CBK) blocked the transfer, it became insolvent because the money was tied to Trade Bank.
The document says that the children’s passports were seized at the airport when they attempted to join him. They left Kenya by car and reunited in Canada.
CBK appointed the Deposit Protection Fund (now KDIC) as Trade Bank’s receiver-manager.
Following the flight of Kassam and Rayner, Kenya’s Banking Fraud Unity launched a criminal investigation into their conduct.
Biwott would also seize the chance to launch a legal fight to get Yaya Centre back.
However, he’s proud of what some of the former staff have achieved. One of them was Equity Group boss James Mwangi, who now oversees an over Sh1 trillion asset-rich bank.
“My experience of James is that he was honest at Trade Bank, very sincere and I recruited him. He was one of the auditors of the bank with one of the audit firms and I really liked him and I think I was the one who recruited him at Trade Bank,” he said.
The Standard was unable to reach Mwangi, who worked for Trade Bank as a financial controller, for a comment. Others who worked for the bank include former Kanu era minister and MP Gideon Ndambuki, who was the bank’s managing director.
Trade Bank, then headquartered at what is now EACC’s Integrity Centre on Valley Road, had established itself as one of the most innovative and visionary local financial institutions.
It fashioned itself to attract small depositors. One only required an ID card and a passport photo to open an account in contrast with other banks, which asked for a host of documents such as letters of introduction and payslips.
It lived up to its slogan ‘Hakuna Maneno’ and operated a drive-in banking service allowing account holders to access services, while waiting in their cars and customers could access banking services for 24 hours.