Imperial Bank shareholders block NIC’s takeover bid

The Central Bank of Kenya’s (CBK) bid to set in motion the process of transferring troubled Imperial Bank’s assets and liabilities to NIC Bank Wednesday suffered a major setback after the collapsed lender’s owners got a court order stopping the regulator’s actions.

High Court judge George Odunga issued temporary orders stopping the CBK and the deposit protection fund from moving on with the deal that Governor Patrick Njoroge announced on Tuesday.

“Pending hearing and determination … conservatory orders do issue barring the respondents (CBK and KDIC) from transferring, assigning, disposing of, dissipating or alienating any of the assets of Imperial Bank,” the judge ordered.

Imperial Bank directors had rushed to court arguing that allowing NIC Bank to take over a portion of Imperial Bank’s loan book and deposits amounted to liquidating the bank despite an earlier order stopping it.

The NIC Bank deal is backed by Kenya Deposit Insurance Corporation (KDIC) who have been the receiver managers of Imperial Bank since October 13, 2015 when the lender collapsed. The matter was fixed for hearing on Friday.

The court also ordered the CBK and KDIC not to implement the joint agreement announced on Tuesday – effectively stopping NIC Bank from making payments to depositors, taking over Imperial Bank branches and staff as stated in the deal with the CBK.

Imperial Bank owners told the court that transferring assets and liabilities to NIC Bank amounted to winding up the lender and would nullify an ongoing court case where they are seeking to stop any actions that may lead to liquidation of the bank.

“This act by the respondents (CBK and KDIC) is an enhancement of the exclusion and transfer process commenced by them, which process ultimately culminates in the liquidation of the bank,” the directors said in an affidavit filed in court.

READ: Imperial Bank owners lose out as NIC prepares to acquire assets

The list of shareholders who are battling the CBK in court includes Imperial bank chairman Alnashir Popat, who controls a 14 per cent stake in the lender through Imaran Ltd, Hanif Mohamed Amirali Somji (10 per cent ), Jinit Shah (12.5 per cent), and Anwar Hajee (14 per cent).

Judge Odunga’s orders nips in the bud NIC Bank’s plans to conduct a due diligence and acquire Imperial’s ‘good bank’, which they planned to separate from the ‘bad bank’.

NIC Bank was to resume disbursements to distraught depositors capped at Sh1.5 million each, subject to the High Court lifting a freeze on payments.

A High Court ruling on the freezing of payments to Imperial Bank depositors is expected on July 4.

Acting KDIC boss Mohamud Ahmed Mohamud, who is Imperial Bank’s receiver manager, responded to the latest suit, saying the bank’s directors were aware of the grand heist at the bank but did nothing to address the situation.

Mr Mohamud says in an affidavit that emails retrieved by FTI Consulting - the American firm carrying out a forensic audit at Imperial Bank - show that the bank’s directors were aware of a whistleblower’s letters which lifted the lid on happenings at the distressed lender but chose not to act.

“The forensic audit has since revealed that the said whistleblowing emails were in March 2012 brought to the attention of inter-alia the following directors, Abdulmalek Janmohamed, Alnashir Popat and Anwar Hajee,” Mr Mohamud says in court papers.

The anonymous whistleblower’s email is dated March 19, 2012 and was addressed to CBK’s bank supervision department boss Fredrick Pere (deceased), Imperial Bank managing director Abdulmalek Janmohamed (deceased) and chief finance officer James Kaburu.

“Facilitating and abetting tax evasion using fictitious accounts, directors using clients deposits to engage in drug trafficking … CBK inspectors have been given huge kickbacks, including and not limited to unsecured loans to keep mum … financial results have been doctored to impress but hide this,” reads the informer’s letter.

Sammy Itemere, currently the principal secretary in charge of Broadcasting and Telecommunications, has also been sucked into the Imperial Bank scandal.

Mr Itemere previously served as head of retail and SME at Imperial Bank between 2011 and 2013 and court papers show that the late Janmohamed (ex-group MD) used him cover up the theft.

“Should you receive any enquires from any of our current or potential customers regarding the same, please advise them that the matter is under investigation and refer them to any of the business heads, i.e. Sammy Itemere or Vishvesh Shah,” said Janmohamed in an email retrieved by FTI Consulting.

Mr Janmohamed is alleged to have fraudulently transferred a total of Sh34 billion from depositors’ cash to his entities and bank accounts between 2002 to September 15, 2015 when he died, according to court filings.

The receiver manager says the regulators turned to separating the ‘good bank’ from the ‘bad bank’ on a legal arrangement technically referred to as “exclusion and transfer process” after the shareholders failed to pump in an agreed Sh10 billion in capital.

“At the last meeting with respondents on Thursday June 16, they failed to come up with tangible and meaningful proposal, let alone confirm the Sh10 billion they had undertaken to inject,” says KDIC in court documents.

“They have now made it worse by proposing to raise Sh5 billion by way of a rights issue.”