Imperial Bank directors win reprieve after court halts Sh2bn bond probe


Imperial Bank’s Upper Hill branch in Nairobi. PHOTO | FILE

Directors of the collapsed Imperial Bank Ltd have won reprieve after the court temporarily stopped the Capital Markets Authority (CMA) from investigating them over a corporate bond issued last year.

High Court judge Joseph Onguto Tuesday certified the application filed by the directors as urgent and directed that it be heard on July 4, with both parties represented.

The directors through lawyer Njoroge Regeru argue that the bank had floated to the public a Sh2 billion corporate bond whose issuance was duly vetted and approved by the CMA.

Dyer & Blair Investment Bank Ltd was appointed the bank’s transaction adviser for the cash call.

The CMA argues that the directors were negligent of their duties in the course of issuance of the bond and has, therefore, commenced enforcement proceedings aimed at holding them culpable.

The authority also seeks to impose wide-ranging sanctions and penalties, some of a criminal nature.

“The process which the CMA has commenced is so fundamentally flawed in law and so prejudicial to the bank directors’ fundamental rights and freedoms that the same ought to be stopped pending hearing of the application,” Mr Regeru argued before the judge.

The directors have also revealed that the bank’s former general managing director Abdulmalek Janmohamed together with the then chief finance officer James Kaburu, were the only people who were involved on behalf of the bank in the bond issue.

They handled all the meetings and correspondence between members of the Transaction Advisory Team (comprising Dyer & Blair, Hamilton Harrison & Mathews and PKF Kenya) with the relevant authorities being Central Bank of Kenya, CMA, and Nairobi Securities Exchange (NSE).

READ: Imperial directors risk CMA penalties over Sh2bn bond

However, at a meeting between the directors and CMA on January 13 the regulator stated that it wanted to establish the facts and the circumstances in the lead up to and after the bank’s cash call.

The bank directors claim that they are being targeted selectively for prosecution, while other parties involved in the bond issue have been left untouched. They say the CMA is also acting as the accuser, prosecutor and judge in its own cause as it is an interested party in the bond issue.

The bank’s directors who include Alnashir Popat, Omurembe Iyadi, Jinit Shah, Anwar Hajee, Hanit Somji, Vishnu Dhutia, Eric Bengi, Christopher Diaz, and Mukesh Patel, also said they are being compelled to engage defence of their actions against a background of inaccessibility of crucial documents which are in the control and custody of the receiver.

“CMA has access to such crucial documents and could also order production of the same to third parties in the interests of a fair hearing but it has failed to do so,” argues lawyer Regeru.

The advocate says that CMA has selected the documents which in its view should be considered in the matter and thus denied the bank directors the right to adduce evidence in support of their case.

He says the process CMA seeks to commence has disregarded other investigations by more “technically qualified” parties namely, CBK, the receiver, Bank Fraud Investigations Department and FTI Consulting.