Dubai Bank owner’s case to unravel collapse mystery

What you need to know:

CBK wants the High Court to freeze Mr Zubeidi’s assets after finding that he acquired several prime properties through irregular insider loans.

The Central Bank of Kenya (CBK) has taken Dubai Bank founder and ex-chairman Hassan Zubeidi to court in a case that could unravel the mystery behind the collapse of the lender while holding millions of depositors’ cash.

The banking sector regulator wants the High Court to freeze Mr Zubeidi’s assets after finding that he acquired several prime properties through irregular insider loans.

The CBK has filed a suit against Mr Zubeidi and five companies associated with him. The regulator wants the properties attached and proceeds used to refund depositors of the collapsed Dubai Bank.

Central Bank holds that Mr Zubeidi, Africa Energy Limited, Suleiman Enterprises Company, Kamp General Engineering Company, Kemu Salt Parkers Production Company and Maestro Properties have 334 plots of land that were acquired irregularly using depositors’ funds.

“The defendants have refused to co-operate with CBK or to avail letters to properties acquired following irregular or illegal transactions at Dubai Bank, or to remit monies siphoned out from the bank contrary to the requirements of the Banking Act.

“There is eminent danger of the said properties being charged, wasted or in any other manner interfered with if no order is granted immediately to safeguard them,” the regulator says. Justice Eric Ogola on Friday declined to grant the freeze order until he hears Mr Zubeidi’s response to the suit.

The judge will hear the matter on October 19, and has ordered the bank’s former boss to respond to the suit by then.

READ: How CBK ignored whistleblower redflag on Dubai bank

The Central Bank announced the collapse of the bank in August, citing violations of banking laws and regulations, including failure to maintain adequate capital and liquidity ratios as well as provisions for non-performing loans and weak corporate governance structures.

CBK ordered its liquidation through the Kenya Deposit Insurance Corporation barely two weeks after placing it under receivership.

The regulator begun refunding the collapsed lender’s depositors on September 7. The lender was holding Sh1.7 billion in customer savings at the end of last year as per CBK data, but the amount had dropped to about Sh1.4 billion as at the time of collapse.

Managing director, Binay Dutta fled the country in June this year in the middle of a court battle in which a Turkish businessman, Sevket Tunc, was seeking court orders to wind up the bank for breach of contract.