The amount of money that Imperial Bank’s management and directors stole through fish firm W.E. Tilley has risen to a new high of Sh31.5 billion, according to information the bank’s receiver managers have filed in court as part of the effort to recover the lost cash.
The Kenya Deposit Insurance Corporation (KDIC) says in court papers that the money was wired out to the controversial fish firm from ghost accounts that Imperial Bank chiefs created to defraud depositors and in unsecured loans extended to the company.
The new filings are backed by information obtained from the forensic report that US firm FTI Consulting submitted to the Central Bank of Kenya after spending nearly one year reconstructing the architecture of what has now become the biggest insider bank theft in Kenya’s history.
At Sh31.5 billion, the money lost to the fish firm now stands at more than three times the Sh10 billion initially announced.
Imperial Bank’s shareholders in October last year claimed that the fish firm had acknowledged irregularly receiving Sh10 billion and was ready to return the money – a claim that W.E. Tilley has since denied.
The KDIC now says W.E. Tilley received Sh16.1 billion from ghost accounts at Imperial Bank and an additional Sh15.4 billion through loans that were not recorded in the lender’s books.
The forensic audit also discovered that other firms received huge sums of money from Imperial Bank through concealed loans and account transfers.
The list includes Adra International (Sh2.525 billion), the Pankaj Somaia-linked Metro Petroleum (Sh2.1 billion) and Jade Petroleum (Sh698 million).
FTI Consulting’s audit report has now placed the exposure of Imperial Bank’s savers at Sh44.9 billion or slightly more than half the lender’s Sh86 billion total deposits.
Past reports have indicated that former managing director Abdulmalek Janmohammed, working in conjunction with the bank’s senior management and directors, robbed depositors of Sh42.2 billion.
The latest filings also indicate that Imperial Bank directors awarded themselves Sh2.7 billion in dividends despite knowing its true financial standing.
The KDIC last Friday filed a fresh suit against Imperial Bank directors and firms they own in a bid to recover the Sh44.9 billion that the FTI report says was stolen from depositors.
The directors are now accused of “permitting and facilitating fraudulent operation of accounts in the name of W.E. Tilley and its associated companies, exposing Imperial Bank to the tune of Sh31,542,116,508”.
“FTI has established that through their acts and omissions and breach of fiduciary duties, negligence and fraud by way of false accounting, the directors caused the loss of the admitted Sh38 billion -- being the total of fraudulently suppressed loans and overdrafts besides the Sh4.7 billion advances that may not be recoverable due to inadequate security,” Mohamud Ahmed, the receiver manager, says in his filings.
The KDIC has traced 42 companies linked to Imperial Bank directors and says some or all of their assets were acquired using money from the collapsed lender.
The KDIC and the Central Bank of Kenya (CBK) appointed FTI Consulting to do a forensic audit in October last year.
The audit was to verify the exposure depositors faced and whether Imperial Bank could be revived.
High Court judge Francis Tuiyott declined to issue temporary orders freezing shares the Imperial Bank directors own in the 42 companies after the directors told the court that they will not dispose of their shares in the firms until the court has heard their side of the story.
The matter was fixed for hearing on October 17 and 18 when the judge is expected to decide whether to freeze the directors’ shares in the 42 companies.
FTI Consulting says in its forensic audit report that Imperial Bank’s chiefs created loan accounts in the name of existing bank clients and that some of the customers were aware of the irregular loan accounts but did not raise issue.
The forensic audit found that the irregular loans would be concealed by payments from fictitious accounts, mainly one named after Hanscombe Management Limited -- a firm that was liquidated in 2002 as per government records.
The Hanscombe account was in turn kept from detection by crediting it with funds from other customer accounts shortly before financial reporting dates. The funds would then be returned to the customer accounts after the reporting period.
“In respect of specific deposits that were liquidated to conceal the overdrawn balance in the Hanscombe account, the deposits were reinstated after the period end. Post a credit to the Hanscombe account with the corresponding debit being posted to general ledger accounts. The effect of this was to also reduce the balance of fixed and call deposits disclosed to auditors and the CBK,” Mr Ahmed adds.
The KDIC is yet to make the FTI Consulting report public but has used the findings to file three suits against the collapsed lender’s directors, the estate of Abdulmalek Janmohammed who was at the centre of the massive scam, former head of credit Naeem Shah, former chief finance officer James Kaburu, the family of deceased businessman Nurban Jessa and eight firms used to siphon billions from depositors.