Embattled Dubai Bank founder Hassan Zubeidi has turned his guns on the Central Bank of Kenya (CBK) with demands for a meeting to discuss plans by a Virgin Islands firm, Sovereign Financial Holdings, to help revive the lender that was shut down in August.
Mr Zubeidi, who is facing separate charges for his role in the bank’s collapse, has more recently been pressing for a meeting with CBK governor Patrick Njoroge in a move that appears aimed at taking advantage of the 60-day window that the bank recently won in court against its dissolution.
Mr Zubeidi last Friday wrote to Dr Njoroge asking for a meeting to consider the revival plan that Sovereign Holdings and some of the bank’s customers have proposed. His quest to meet the governor came after the court issued a November 18, 2015 order suspending dissolution of Dubai Bank for 60 days.
Mr Zubeidi says in the letter that he and Sovereign Financial Holdings submitted detailed revival proposals to the regulator just 10 days after Dubai Bank was placed under statutory management for breach of industry regulations.
The CBK on August 14 appointed the Kenya Deposit Insurance Corporation (KDIC) as receiver managers of Dubai Bank after an audit found that it was in gross violation of industry regulations that exposed depositors to a loss of more than Sh1.7 billion.
The CBK then ordered Dubai Bank’s liquidation 10 days later but Justice Eric Ogola last month ruled that CBK’s move was premature as no rescue measures had been taken before deciding on such drastic action.
Unsuccessfully tried several times
“Since the placement of the bank in receivership and after the court order of November 18, I have unsuccessfully tried several times to schedule an appointment to discuss the proposals by Sovereign Financial Holdings to inject $20 million (Sh2.2 billion) into Dubai Bank.
“In terms of the court order and in the interest of all stakeholders I would be grateful if you would kindly give me an appointment for purposes of discussing the said proposal,” Mr Zubeidi says in the letter.
He reckons that Sovereign Financial Holdings sent a proposal to the CBK on August 24 -- the day the regulator ordered Dubai Bank’s liquidation, then again on August 31 and on September 15.
Justice Ogola’s ruling came through a suit filed by Dubai Bank’s second largest depositor, Richardson & David Limited.
The supplies firm told the judge that aside from Sovereign Financial Holdings’ proposal, it and other bank customers were ready to convert their deposits into equity and that the move could raise an additional Sh1 billion.
At the time of Dubai Bank’s closure, the firm had deposited Sh142 million in its accounts – an amount it risked losing if the bank was dissolved.
“If the proposed injection of $21.5 million by Sovereign Financial Holdings is allowed and the large depositors allowed to convert their deposits into equity, the net effect would wipe out Dubai Bank’s insolvency and leave it with a credit balance of Sh3 billion instead,” Richardson & David said.
But the CBK, after ordering for Dubai Bank’s liquidation, also filed a suit seeking to attach Mr Zubeidi’s property, arguing that he had acquired several assets by extending Sh1.6 billion unsecured loans to companies associated with him.
The Kenya Deposit Insurance Corporation (KDIC), said in a status report filed in court, that Mr Zubeidi who served as the bank’s chairman guaranteed his firm, Africa Energy Limited, €12 million (Sh1.39 billion) and an additional $2 million (Sh205 million) without security.
It has enjoined Africa Energy, Suleiman Enterprises Company, Kamp General Engineering Company, Kemu Salt Parkers Production Company and Maestro Properties in the suit, claiming they are either owned or controlled by the former Dubai Bank chairman.
Dubai Bank has been accused of cooking books twice in the past three years. In June this year, the CBK said the bank had lied that its liquidity ratios stood at 27.1 per cent at the end of last year and 21.4 per cent in March, 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. The bank is also accused of under-providing for its bad loans resulting in declaration of false profits. Last year it reported Sh7 million in pre-tax profits.
Justice Ogola’s ruling was also to see Dubai Bank furnish the court with a full disclosure of its financial standing.
The bank insists that it is worth Sh8.7 billion. The lender says it can recover Sh4.2 billion in loans issued to customers, and that the system used to run its day-to-day operations is worth Sh1.5 billion. It also has a 1.9 acre piece of land in Upper Hill valued at Sh2 billion.
“Dubai Bank runs on a comprehensive software called T24 worth about Sh1.5 billion. It had extended loans to its customers mainly secured with immovable properties and debentures ranging to an amount of Sh4.2 billion as at December 31, 2014,” the lender says.