Ex-NBK boss loses Sh1bn fraud suit against CMA

Former National Bank of Kenya chief finance officer Chris Chepkoit Kisire in a Nairobi Court on May 23, 2017. PHOTO | PAUL WAWERU | NMG

A court has ruled against former National Bank of Kenya chief finance officer Chris Kisire in a suit where he accused the Capital Markets Authority (CMA) of breaching his rights in a fraud probe that is estimated to have cost the lender close to Sh1 billion.

In the case, Mr Kisire also sought the court to overturn a Sh1 million fine and the ban from holding office in listed companies for three years for cooking of books and Sh1 billion fraud allegations.

He wanted the court to declare that the regulator violated his right to a fair trial for issuing him with a “notice to show cause” in March 2015 without furnishing him with sufficient details of the allegations.

But Justice Hellen Ong’undi rejected and dismissed the suit, arguing the CMA Board’s former chairman James Ndegwa explained to Mr Kisire why he was issued with incomplete documents.

“Secondly nobody stopped counsel for Mr Kisire from calling witnesses for cross-examination. Mr Kisire was investigated and later charged with a criminal offence. The trial court will make a determination on the same,” said Justice Ong’undi.

Mr Ndegwa had admitted that indeed the affidavits and documents served to Mr Kisire had some parts missing.

He explained that affidavits were partly censored for legal reasons because they touched on other persons not linked with the proceedings.

Mr Kisire, who has served other listed firms like Bamburi Cement and Standard Group, is seeking to clear his name and regain his standing in corporate Kenya given the three-year ban lapsed last year.

CMA in 2018 said its investigations had found the officials liable for misrepresenting the bank’s financial statements for the periods ended June 30, 2015, and September 30, 2015.

The markets regulator said it had found that the Nairobi Securities Exchange (NSE)-listed bank’s profits were grossly overstated and Sh1 billion lost through an embezzlement scheme.

Mr Kisire was among eight former senior executives of the National Bank of Kenya, which has since been acquired by KCB, who were fined millions of shillings and banned from holding office in listed companies for up to 10 years over cooking of books and loss of Sh1 billion.

The bank’s former managing director, Munir Sheikh, was banned from holding any position in a public listed company and hit with a Sh5 million fine.

In 2020, he was awarded Sh26.5 million as compensation for unfair dismissal four years ago.

The court said the bank failed to prove claims of gross misconduct and misrepresentation of financial statements against Mr Munir, which formed the basis of his ouster in 2016.

Although the court dismissed the Mr Kisire’s petition, it stated that the manner in which the CMA carried out its proceedings and made a determination may not have met the standards of fairness guaranteed under Article 47 of the Constitution, in turn violating Article 35 of the Constitution.

Mr Kisire had claimed that the March 2015 notice did not disclose sufficient grounds or allegations with to enable him to understand the charges against him.

He also contended that the fraud allegations contained in the Notice were not supported by any evidence and the regulator denied him adequate time and facilities to prepare his defence.

He added that CMA ambushed him with various documents at the hearing including a redacted affidavit, thus violating his right to reasonable access to the evidence to be relied upon.

The misrepresentation of financial statements was linked to a premature recognition of the sale of assets amounting to Sh800 million, under-provisioning for loans, and wrongful recognition of interest income leading to the overstatement of profit in the respective periods.

The alleged loss of Sh1 billion was linked to a deposit mobilisation programme that paid commissions to private agents for funds banked by government agencies.

The CMA says investigations had established that up to 90 per cent of the commissions paid to the private agents may have subsequently been transferred back to NBK officials.

Mr Kisire claimed that the National Bank of Kenya (NBK) board developed and approved a deposit mobilisation scheme through which about Sh991.5 was paid to two consultancies; Edge Capital Consultancy and Advest Company Limited.

He denies having given instructions to Edge Capital and Advest Company to pay any senior executives or having received any kickbacks from the two companies.

Mr Kisire says he was not involved in any way in sourcing the two companies when they were engaged to lead a deposit mobilisation programme.

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Note: The results are not exact but very close to the actual.