Dubai Bank founder faces jail term in row with CBK

Mr Hassan Zubeidi, former chairman, Dubai Bank. PHOTO | FILE | NMG
Mr Hassan Zubeidi, former chairman, Dubai Bank. PHOTO | FILE | NMG 

Former Dubai Bank chairman Hassan Zubeidi has been cited for contempt of court in a long-standing tussle with the Central Bank of Kenya (CBK) over his refusal to grant receiver managers access to Malindi-based Kemu Salt Packers – a company he fully owns.

Mr Zubeidi’s troubles are rooted in an earlier court battle with the Kenya Deposit Insurance Corporation (KDIC) – a CBK associate – that got orders to place Kemu Salt Packers under receivership to recover funds the businessman is believed to have obtained illegally from Dubai Bank.

The KDIC-appointed receiver managers had sued the businessman for contempt after he and co-directors denied the receiver managers access to the company’s premises even after he was served with court orders and for removing some of the firm’s assets from the said premises.

High Court judge Weldon Korir found that Mr Zubeidi and four other directors of Kemu Salt had acted in contempt of court in a decision that left the businessman with the prospect of serving six months in jail.  

The CBK-appointed receiver managers, Peter Obondo Kahi and Anthony Muthusi, had filed the contempt application after one of Kemu Salt directors, Hussein Ismail, denied them access to the company’s premises.

Mr Kahi and Mr Muthusi claimed that they were only granted access to the salt mine after filing the application for contempt.

Mr Zubeidi, Mr Ismail, Khoja Nurddin, Ahmed Hassan and Hassan Ahmed Abdullahi are named in the suit as Kemu Salt Packers directors.

The receiver managers had claimed that Kemu Salt’s owners had continued to mine salt after denying them access, a move they said was in contempt of the court orders.

Justice Korir found that the directors only offered a general denial of claims by the receiver managers who had also provided photographic evidence of the salt mining.

“The respondents offered a general denial to these allegations only opting to attack the veracity of the averments of Mr Muthusi on grounds of his sources and quality of evidence,” said the judge.

Mr Ismail, who responded on behalf of Kemu Salt’s directors, claimed that the photos used as evidence were supplied to Mr Kahi and Mr Muthusi by an individual — Moses Wachira Mugo — who is not a party to the case.

“Even without the photographs and the information received by Mr Muthusi from the named sources, who included his advocate, the evidence of Mr Muthusi confirms, to the standard required in a case of this nature that the receiver managers were denied access to the plant despite court orders which were known to the company,” Justice Korir ruled.

Under Kenyan law, a judge may sentence individuals found in contempt of court to jail for a period not exceeding six months, or a fine not exceeding Sh200,000. However, at his or her discretion, the judge may decide to hit an offender with both.

Obtained illegally

The KDIC placed Kemu Salt under receivership to recover funds Mr Zubeidi is believed to have obtained illegally from Dubai Bank. But Kemu Salt in November last year obtained a court order suspending the receivership.

Barely a month later, High Court judge Said Chitembwe set aside the suspension and allowed Mr Kahi and Mr Muthusi to return to Kemu Salt as receiver managers.

Mr Kahi and Mr Muthusi said that after they regained full control of Kemu Salt, they discovered that three generators, four packing machines, a mechanical weighing scale and a horizontal thermic boiler were missing.

A Dubai Bank branch in the Nairobi cbd. PHOTO | EVANS HABIL | NMG
A Dubai Bank branch in the Nairobi cbd. PHOTO | EVANS HABIL | NMG

Justice Korir has, however, allowed Mr Zubeidi and his co-directors to appear before him and show why they should receive a softer landing.

“The respondents who are said to be either directors or shareholders of Kemu Salt therefore acted in defiance of court orders. The applicants’ case is proved and their application succeeds. The contemnors will be given an opportunity to mitigate before sentence is passed on a date to be set after the delivery of this ruling,” Justice Korir added.

The KDIC in a status report claimed that Mr Zubeidi, who founded Dubai Bank and served as its chairman until its 2015 collapse, used his influence to issue unsecured loans to his firms.

Cooking books

Dubai Bank was placed under statutory management after the CBK accused it of cooking books to appear stable.

The CBK said the bank had lied that its liquidity ratios stood at 27.1 per cent at the end of 2014 and 21.4 per cent in March 2015 while investigations showed the actual figure was 9.6 per cent.

Under Kenyan laws, banks must maintain a liquidity ratio of not less than 20 per cent.

Dubai Bank had by August 2015 advanced Sh4.1 billion in loans, 98 per cent of which had not been serviced for more than three months, raising fears that more than half the amount would not be paid.