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Imperial Bank ex-directors fault Central Bank boss for closure

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Imperial Bank's branch in Likoni, Mombasa County, as pictured on October 14, 2015. FILE PHOTO | NMG

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Summary

  • The former directors and beneficiaries of the estate of the former managing director of Imperial Bank Abdulmalek Janmohamed argue that the decision to place the lender under statutory management was unlawful.
  • CBK Governor Dr Patrick Njoroge and then-Treasury minister Henry Rotich were in Peru and London, respectively, when the lender was placed under receivership on October 13, 2015.
  • They argued that the CBK did not have a fully constituted board when the decision was made and Ms M’Mbijjiwe was incapable of excising such powers under the Banking Act.

Former Imperial Bank directors have accused Central Bank of Kenya deputy governor Sheila M’Mbijjiwe of illegally sanctioning the closure of the bank while her boss and Treasury Cabinet secretary were abroad.

The former directors and beneficiaries of the estate of the former managing director of Imperial Bank Abdulmalek Janmohamed argue that the decision to place the lender under statutory management was unlawful.

This is because CBK Governor Dr Patrick Njoroge and then-Treasury minister Henry Rotich were in Peru and London, respectively, when the lender was placed under receivership on October 13, 2015.

They argued that the CBK did not have a fully constituted board when the decision was made and Ms M’Mbijjiwe was incapable of excising such powers under the Banking Act.

“The plaintiff was, therefore, placed under statutory management of the Kenya Deposit Insurance Corporation on the unlawful orders or instructions of the Deputy Governor of the CBK,” Senior Counsel Ahmednasir Abdullahi submitted.

He asked High Court judge Alfred Mabeya to summon Ms M’Mbijjiwe, Dr Njoroge and CBK chair Mohamed Nyaoga to explain who decided to place the bank under receivership.

“It is material for the court to know who made the decision,” he said.

The beneficiaries of the estate are in court battling multiple cases including a permanent freeze of their assets over claims that they siphoned the funds from the lender. The regulator placed the bank under receivership after the board of the mid-sized lender alerted it about alleged malpractices.

Former executives of the collapsed bank have been charged with involvement in a conspiracy to defraud the institution and depositors of Sh29 billion.

Mr Abdullahi, however, maintained that the lender was solid with a healthy loan book and did not have a history of a financial crisis. However, the regulator chose to place it under receivership for extraneous reasons.

“We should be told who closed the bank, wow many directors were in office on the material day and whether the chairman called a board meeting, deliberated on the issues and passed a resolution calling for placing of the bank under statutory management,” he said.

In September 2016, the CBK sued the directors of the lender seeking to freeze assets worth Sh42 billion held in more than 40 companies.

The regulator also sought to compel the directors and shareholders to pay back some Sh2.7 billion allegedly given to them fraudulently as dividends.

An audit on the bank’s activities later revealed that Mr Janmohamed had been running a scheme of fraudulent disbursements resulting in losses running into billions of shillings.

“It is material and indispensable that Mr Mohamed Nyaoga, Dr Njoroge and Ms M’Mbijjiwe be summoned to give evidence in court,” Salim Janmohamed said in a sworn statement.

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