Police on the trail of Safaricom IPO refund fraudsters

Police are on the trail of nine fraudsters suspected of having pocketed millions of shillings by cashing out Safaricom IPO refund cheques belonging to investors through forgery of identity.

The Capital Markets Fraud Investigation Unit, which works closely with the Capital Markets Authority (CMA), has issued warrants of arrest for nine suspects, accused of colluding with bank officials to cash investors’ cheques.

Three of the charge sheets seen by the Business Daily indicate that the fraudsters obtained millions of shillings by using fake names similar to those of investors owed Safaricom initial public offering (IPO) refunds.

According to the charge sheets, Patricia Wanjiku Mwaura  stole Safaricom IPO refund cheques worth Sh780,000 in 2008 at Standard Investment Bank.

Ms Mwaura is alleged to have used an alias of Jane Patricia Mwaura in addition to forging an identity card in that name.

“Patricia Wanjiku Mwaura alias Jane Patricia Mwaura…on or about September 3, 2008 at Standard Investment Bank along Kenyatta Avenue…stole a Safaricom refund cheque of face value Sh780,000 property of Citi Bank,” reads the charge sheet of one of the wanted people.

Another suspect is Abraham Kiprotich Langat alias Yussuf Agrippa, who has three pending criminal cases at the Kericho, Milimani and Makadara law courts on 10 counts of forgery of share deposit forms.

The forms are normally used when converting (immobilising) share certificates into electronic accounts.

Six other suspects have been listed as “unknown” in a public notice published Tuesday by the anti-fraud unit and the CMA, having used fake identification documents while carrying out the fraud.

The warrants mark the latest effort to address the issue of theft of investors’ refunds which stained the 2008 Safaricom IPO.

CMA has in the past five years been filing charges against people suspected of theft of Safaricom IPO refunds, some of whom are former employees of stockbrokerage firms.

The Safaricom IPO which was seeking to raise about Sh51 billion attracted more applications than targeted, leaving stockbrokers to process a huge numbers of refund cheques.

The limited capacity to handle the refunds opened the way for fraudsters to move in and take advantage of the ensuing confusion.

About 800,000 investors applied for the 10 billion Safaricom shares on sale during the IPO, many of them local retail investors.

Fraudsters took advantage of the sheer volumes of cheques on issue and colluded with stockbrokers and bank staff to access and cash stolen cheques.

Apart from stolen cheques, the refund process was also marred by unclaimed refunds that led to disagreements between the selling agents and Citibank, which was the main receiving bank for the offer.

Citibank said in 2010 that it was holding up to Sh141 million of investors’ refunds, and insisted that these could only be paid to investors who presented full identification documents. The figure was later revised downwards to about Sh117 million.

READ: Regulators appoint team to handle Safaricom IPO refunds

CMA in a statement had clarified that reasons for the refund delays included lack of support documents by investors, dead applicants, lack of investor awareness, failure to trace the cheques with respective selling agents, long distances to the respective selling agents, wrong or change of applicants’ addresses, and errors on personal identification information on the cheques.

Efforts to reconcile the refund claims between the receiving bank and selling agents were abandoned without completion. This was the case even as several meetings were held between the bank and market intermediaries in an effort to resolve the issue.

Ngenye Kariuki stockbrokers chairman Ngenye Kariuki blamed the Safaricom IPO for the collapse of his firm. He said the IPO left many stockbrokers in debt after the regulator ordered the intermediaries to pay investors’ refund claims running into hundreds of millions of shillings from their own resources.

The CMA has since lifted statutory management for the broker.

In April 2012, a committee comprising of officials from Citibank, the banking sector, and capital markets regulators was formed to find ways of refunding the investors.