- The Court of Appeal has dismissed a petition from Jignesh Desai that sought to bar the CBK from recovering the millions of shillings.
- Mr Desai was accused of facilitating the opening of a bank account for Mpesha Ltd – a briefcase company –that was set up as a conduit to siphon millions of shillings from the CBK.
- Under the scheme, proceeds of Treasury bonds worth Sh205 million under CBA Capital and Mumbu Holdings were transferred to Mpesha Ltd in 2003.
The Central Bank of Kenya (CBK) has been cleared in court to recover Sh727 million from a former bank manager at Giro Commercial Bank over theft and fraudulent sale of Treasury bonds.
The Court of Appeal has dismissed a petition from Jignesh Desai that sought to bar the CBK from recovering the millions of shillings that were lost in a scheme engineered at Giro Commercial Bank.
Mr Desai was accused of facilitating the opening of a bank account for Mpesha Ltd – a briefcase company –that was set up as a conduit to siphon millions of shillings from the CBK through the fraudulent sale of Treasury bonds.
Under the scheme, proceeds of Treasury bonds worth Sh205 million under CBA Capital and Mumbu Holdings were transferred to Mpesha Ltd in 2003 and cash shared through a web of transactions.
Justice George Odunga in December 2019 ordered Desai and his associate--Alex Ribero Ngugi—to pay to pay back the Sh205 million plus interest over the 18 years for being at the heart of the criminal scheme.
Mr Desai sought for the freeze of recovery of the millions, through assets seizure, pending the conclusion of the appeal against the Odunga judgment.
The three-judge bench of Justices William Ouko, Aike Makhandia and Patrick Kiage agreed that Mr Desai’s appeal can stand in court, but reckoned that it would not be declared invalid if the CBK recovers the millions.
The judges said that the position of CBK as the banker of the government makes it able of returning the recovered cash and assets should the appeal succeed.
"We find that although the appeal maybe arguable, we are not convinced that the same shall be rendered nugatory if the stay order is not granted. The applicant has failed to satisfactorily establish that the harm, apprehended if any, shall be irreparable if the appeal succeeds, given the circumstances of this case," the judges added.
Mr Desai told the judges that the amount being sought by the CBK has increased to Sh727.7 million including court interest, arguing that the amount is colossal and would cause him untold hardship and damage.
The CBK opposed his petition, arguing that the grounds raised by Desai were not arguable and are merely a delaying tactic to prevent the banking regulator from enjoying the fruits of the judgment.
Court records show that Mr Desai exclusively supervised the opening of the Central Depository System (CDS) account for Mpesha Limited whose beneficiary was Mr Ribero Ngugi who had worked with Barclays Bank from November 3, 1987 to mid-1997 as a cashier before he lost his job.
The account opening did not follow banking rules, including having a permanent address, Kenya Revenue Authority (KRA) PIN and the holder of the CDS was indicated as John Mbuu.
The irregular transfer began on January 28, 2003 when Treasury bonds for CBA Capital valued at Sh175 million were transferred from their CDS to Mpesha’s account.
Two months later, on April 3, Treasury bonds for Mumbu Holdings valued at Sh30 million were also transferred from their CDS account to Mpesha’s account.
The scam would be exposed when Mumbu Holdings attempted to offer their Treasury bonds for sale only to learn that they had been transferred.
The millions were later transferred to multiple bank accounts at Fina Bank and Paramount Bank while others were wired to Blue Sea Forex Bureau and Travellers Forex Bureau besides cash withdrawals.
Mr Desai and Mr Ribero were arrested and charged. Mr Ribero was convicted of forgery and theft and jailed for three years while Mr Desai was acquitted.
The CBK then launched a civil suit against Ribero, Mwangi and Desai in a bid to recover the lost money.
The case dragged for 15 years until December 2019 when Justice Odunga ordered Desai and Ribero to pay back the Sh205 million plus interest.
“The second defendant (Desai) who, if prudent, ought to have made inquiries as to whether the said credits were genuine. By failing to do so, one can only conclude that the second defendant was part of the conspiracy to launder the said fraudulently obtained sums of money and facilitate their being paid out to various avenues,” said Justice Odunga.