CBK turns the heat on former Euro bank director

CBK’s Deposit Protection Fund Board (DPFB) wants reinstatement of its case against Firdosh Jamal arguing that it has evidence against him. The case was dismissed two years ago for lack of prosecution.

If convicted, Mr Jamal could pay more than Sh300 million for his part in collapse of Euro Bank.

“This honourable court be pleased to set aside the dismissal order made by this honourable court on February 8, 2012 dismissing the plaintiff’s suit for want of prosecution,” states an order sought by DPFB.

Central Bank’s bid to hold former directors of collapsed banks to account paid off recently with favourable rulings against former executives of Prudential Building Society and Trust Bank.

READ: Agency puts bank directors on notice over theft of funds

The fund claims that Mr Jamal procured the dismissal order using unfair means, alleging that DPFB lawyers were not served with an application seeking dismissal of the suit against Mr Jamal and only learnt of the ruling it the case had been dismissed.

The agency filed the suit in 2008 seeking Sh43.4 million for an unpaid loan Mr Jamal allegedly borrowed from the Euro Bank in 1998. Inclusive of accrued interest from July 2007, this rises to nearly Sh340 million.

The case against Mr Jamal is one of the latest against former directors as the DPFB seeks to recover cash belonging to the public that was lost in the 1990s and early 2000 following collapse of banks through directors’ fraud.

The DPFB has already won orders allowing it to recover an estimated Sh1.5 billion from Ajay Shah and Praful Shah, who were accused of having been liable for official misconduct that resulted in the collapse of Trust Bank.

Last week the High Court also found former directors of Prudential Building Society personally liable for its woes and ordered them to pay Sh1.2 billion to DPFB.

No debt

The directors, James Kahumbura and Wilson Kipkoti, have appealed against the ruling that required them, together with Lucy Kahumbura, to pay the money.
But Mr Jamal has denied owing the bank any money in his response, arguing that he repaid all that he owed the bank before its collapse.

“Without prejudice to the forgoing, the defendant states that he has discharged any and all outstanding debts with Euro Bank Limited, that the claim against him plaintiff is misconceived and that the rates of interest claimed are exorbitant and in breach of the alleged overdraft, and/or normal banking practices,” said Mr Jamal in the response.

The agency claims that Euro Bank advanced an overdraft facility of Sh4 million to Mr Jamal that was to be paid back in full by December 1998, and in default would attract a 36 per cent per annum interest.  

Mr Jamal was director in the collapsed bank alongside Solomon Muthamia, Zachary Kamondo and former Kenya Revenue Authority boss John Munge. The bank collapsed in 2003 with close to Sh2 billion deposited with the institution. DPFB stepped in and put the lender in receivership.

About 10 parastatals had deposited colossal sums of money with Euro Bank, most of which is unlikely to be recovered.

Some acquitted

The National Social and Security Fund deposited Sh250 million, National Hospital Insurance Fund Sh490 million, Kenyatta National Hospital Sh492 million, Post Bank Sh65 million, Kenya Tourist Development Corporation Sh60 million, Kenya Pipeline Sh55 million and Kenya Sugar Board Sh55 million.

But the recovery of a huge chunk of this cash has slowly diminished with most of the directors and other suspects having died or been set free.

Those who have died are Augustine Muita, a former director of Kenyatta National Hospital, and Paul Songok, a former financial director at Post Bank Ltd.

Some suspects arraigned over the scandal have been acquitted. They include Mr Munge, the former KRA boss and Euro Bank director.