Imperial Bank’s principal shareholder and chairman Alnashir Popat used ghost accounts to move depositor funds that were then used to pay his foreign currency loans, newly released information on insider dealings that led to the lender’s collapse shows.
FTI Consulting, the US firm that conducted a forensic audit on the bank, says Mr Popat and his co-directors were direct beneficiaries of the scandal that was unearthed upon the sudden death last year of former Imperial Bank managing director Abdulmalek Janmohamed.
Imperial Bank’s receiver manager, the Kenya Deposit Insurance Corporation (KDIC), says in fresh court filing that the directors allowed use of fictitious accounts to facilitate transactions on their behalf and thereafter benefited from the said accounts.
It accuses the directors of allowing “settlement of foreign currency liabilities owed by Alnashir Popat, the first defendant, by way of funds transfer from
accounts linked to the fraudulent activity”. It is not clear from the court papers how much money of the depositor funds were used to settle Mr Popat’s debts.
The directors are further accused of “allowing use of fictitious customer accounts to facilitate transactions on their behalf, and thereafter benefiting from the said accounts and transactions, which accounts were used to conceal fraudulent activity at the bank.”
This is the first time that Imperial Bank directors have been directly linked to the mega theft, which has all along been attributed to Mr Janmohamed.
The KDIC and the Central Bank of Kenya (CBK) have used the forensic audit report, which is yet to be made public, to sue Mr Popat and his co-directors to recover depositor funds lost in the Sh44.9 billion scam.
The list of Imperial Bank directors and their firms who have been enjoined in the suit includes Jinit Shah (Kenblest Limited), Anwar Hajee (Abdulmal Investments), Hanif Mohammed Amiralisomji (Reynolds & Company Limited), Vishnu Dhutia (East Africa Motor Industries), Mukesh Kumar Patel (Momentum Holdings), Rex Motors, Eric Bengi, and Omurembe Iyadi.
FTI Consulting has now placed the exposure of Imperial Bank’s savers at Sh44.9 billion, equivalent to just over half of the Sh86 billion depositors had in the collapsed lender.
Mr Janmohamed alongside the bank’s directors are accused of robbing depositors of Sh42.2 billion or more than half the total deposits.
The directors are further accused of awarding themselves Sh2.7 billion in dividends despite knowing the bank’s true financial standing.
High Court judge Francis Tuiyott has declined to issue temporary orders freezing the shares that Imperial Bank directors own in the 42 companies linked to them.
FTI Consulting also found that an account owned by Mr Popat was used to make payments to the main ghost account named Hanscombe Management Limited as part of a scheme to make it appear normal during audits and inspections.
The court filings show that loan accounts were created in the names of existing customers like fish dealer W.E. Tilley (Sh31.5 billion), Adra International (Sh2.5 billion) and Metro Petroleum (Sh2.1 billion) and the zero-interest loans would then be repaid from the Hanscombe account.
The Hanscombe account would in turn be concealed by making payments to it from existing customer deposits, which made it look regular. At the beginning of every quarter, the transactions would be reversed from the Hanscombe account back to the customer accounts.
FTI Consulting says an account owned by Mr Popat was in one instance used to deposit Sh240 million in the Hanscombe account. The colossal amount, however, passed through an account owned by depositor Amin Manji (Mini Bakeries), as well as other accounts belonging to director Jinit Shah (McNeel Millers and Kenblest Limited).
“In one instance a Sh240 million deposit in the name of Alnashir Popat was temporarily liquidated and used over a quarter end before being reinstated, with the amount passing through Mini Bakeries and posting of entries to transfer funds from accounts connected to directors and shareholders,” the KDIC adds.
Justice Tuiyott will hear the matter on October 17 and 18 before deciding whether to freeze the directors’ shares in the 42 companies they own.
The judge warned Imperial Bank’s directors that disposing of their shares in the companies named in the suit may corner him into issuing drastic freeze orders.