Zafrullah Khan, the ousted chairman of Chase Bank, was the chief architect and biggest beneficiary of some Sh11 billion systematically looted from the troubled mid-sized lender, financial consultancy Deloitte has told lawmakers.
Mr Khan is said to have siphoned the cash to entities he co-owned with suspended managing director Duncan Kabui.
He pumped the funds in buying prime real estate and constructing properties in Nairobi and abroad. The huge outflows from Chase Bank peaked in 2012.
When Deloitte probed deeper into the transactions early this year, the duo disguised them as loans disbursed in line with Islamic banking, the auditing firm told a National Assembly committee probing the collapse of the bank.
“These companies are owned by the chairman, over 90 per cent of the ownership of those companies was the chairman and 10 per cent was the group MD,” said Fredrick Aloo, a partner at Deloitte & Touche in charge of auditing Chase Bank’s accounts.
“There was no single documentation to show how the money was advanced from the bank to purchase those properties,” Mr Aloo said in his submissions.
Deloitte was summoned to appear before the National Assembly’s Trade, Finance and Planning committee which is investing the circumstances leading to the collapse of Chase Bank, which had Sh73 billion in deposits and 170,000 customer accounts.
Ms Muthoni Kuria is now the chair of Chase Bank’s eight-member board which also includes CEO Paul Njaga, lawyer Anthony Gross, businessman Rafiq Shariff, Richard Carter, and French PE firm Amethis co-founder Laurent Demey.
Mr Khan, 60, is one of the founding owners of Chase Bank, and was first appointed group managing director in 2009 and later made chairman in 2014.
His interests in Chase Bank are held through Sheghas Ltd, the second-largest shareholder at the SME-focused lender with a 13.9 per cent stake.
Deloitte said that the embezzling of Sh11 billion at Chase Bank had left the lender running on empty as the heist had wiped out the lender’s core capital of Sh9.6 billion as at December 2015.
The Central Bank of Kenya last week disclosed that it had seized assets worth Sh7.9 billion from Mr Khan and Mr Kabui, which allowed the re-opening of Chase Bank on April 27, 2016 after a three-week closure.
The prime assets forcefully seized include a business park in Karen, a three-acre parking lot in Nairobi, some 240 acres of land on Mombasa Road, a three-acre plot next to the German Embassy on Riverside Drive and various high-end properties in Dubai.
Deloitte said a further Sh3.1 billion was stolen from Chase Bank, saying that Mr Khan had pointed a finger at finance manager Makarios Agumbi and James Mwaura, the credit manager.
However, Deloitte said it strongly believes that it is Mr Khan who carried out the heist.
“The Sh3.1 billion we also believe was eventually channelled to the chairman. We are looking for those properties as well,” said Deloitte East Africa chief executive Sammy Onyango in his submissions.
The hefty interest-free loans were taken as insider borrowing and the properties purchased were disguised as Musharakah — a sharia-compliant financing used by Islamic banks —where partners form joint ventures to co-own assets and share profits and losses in a ratio mutually agreed.
Some of these properties were already completed and generating income but none of that income was going to Chase Bank, Deloitte said.
Mr Onyango said the ousted chairman had admitted to irregular borrowing and confided in him as follows: “That is a mistake and we’re going to transfer them immediately.”