Imperial Bank’s former managing director Abdulmalek Janmohamed ran an elaborate fraud scheme that robbed the lender of Sh34 billion over a period of 13 years, forcing the central bank to shut it down earlier this month.
Mr Janmohammed used a network of 20 companies and individuals to execute and cover up the mega fraud that shook Kenya’s financial services sector to the core after the regulators shut it down two weeks ago, citing risks to depositors’ funds.
Details of the fraudulent scheme have emerged from the courts where Imperial Bank directors have sued 20 companies and individuals related to Mr Janmohamed seeking to recover the colossal amount.
Imperial Bank on Tuesday filed two suits at Nairobi’s Milimani Courts revealing the anatomy of Mr Janmohammed’s fraudulent scheme, which he kept secret by falsifying the lender’s books of accounts.
Proceeds of the fraud were mainly invested in real estate properties, offering fresh insights into the role that corruption and crime plays in driving Kenya’s housing market boom.
Mr Janmohamed, who died last month, left a vast estate, including prime real estate properties, shareholding in blue chip companies and loads of cash in various banks, according to documents Imperial Bank has filed in court.
The bank on Tuesday sought and got an order freezing all the assets belonging to individuals and companies named as having participated in the fraudulent scheme.
High Court judge Fred Ochieng issued the conservatory orders freezing the assets until Thursday when the defendants are expected to tell the court why the caveat should not be retained until the matter is heard and determined.
Court documents show that Mr Janmohamed siphoned out billions of shillings from Imperial Bank and manipulated its software systems to hide it. All the irregular transactions were kept off the bank’s books and were known to a small clique of senior managers.
Imperial Bank argues in the suit filed under a certificate of urgency that a speedy determination of the case is necessary because “the receiver’s decision to reopen the bank or liquidate it will ultimately depend on whether the bank will manage to trace and recover the amounts that have been illegally and fraudulently obtained from the bank by the deceased and his associates”.
The court papers further reveal that Imperial Bank’s liability to depositors and buyers of the corporate bond it sold to local investors last month stands at a whopping Sh87 billion — nearly Sh20 billion more than the Sh58 billion that was said to have been at risk.
Imperial Bank, which is associated with the wealthy Popat family, became the second commercial bank to go into receivership since Patrick Njoroge took charge as CBK governor coming after the August closure of Dubai Bank.
Court documents show that Mr Janmohammed and his associates used 12 companies to open accounts at Imperial Bank into which they deposited massive amounts of cash that was then moved out of the bank before the accounts were immediately closed.
The transfers were made by a section of the bank’s top managers, including the current managing director Naeem Shah and his deputy James Kaburu.
The duo would then manipulate software systems at the bank to ensure the dummy accounts disappeared from the records.
Court documents show that the firms that owned the sham accounts were mere shell corporations used to embezzle customer savings from Imperial Bank but were presented as companies doing legitimate business.
Mr Shah and Mr Kaburu, despite revealing the scam to the CBK, have not been spared as they are among the respondents in the suit. They have admitted to making the illegal transfers but claim they did it on instructions from Mr Janmohammed.
The list of companies used in the fraudulent scheme includes E. Tilley (Muthaiga) Limited, Primecatch Exports, Mara Fish Packers, J Fish Limited, Victorian Delight, Ruby Red Limited, Value Pak Foods, From Eden Limited, Aqualite Limited, Marmo Granito Mines from Tanzania, Uganda’s Marmo Marbles and Fishways Limited.
E. Tilley (Muthaiga) Limited alone has admitted to receiving Sh10 billion from the bank and has expressed readiness to return the loot.
The family of deceased businessman Nargis Aziz Ali Jessa is also enjoined in the suit because of their vast interests in the firms named in the scandal.
The receiver managers want to freeze all their bank accounts and known assets in Kenya, including seven prime properties in Nairobi and Ruiru that have been charged as collateral to various other banks for loans.
“The defendant/respondents herein received the aforementioned sums from the bank either in cash or through other accounts in a bid to hide these fraudulent, illegal and unlawful transactions from the bank. The bank has instituted this case so as to recover the sums illegally transferred to the defendants by the instructions of Mr Janmohammed and other senior officers of the bank,” the court papers say.
The Imperial Bank cabal communicated all illegal transfers and other transactions through handwritten chits, which would then be destroyed.
The suit has also revealed a gigantic empire Mr Janmohammed left behind, which includes a five per cent stake in Butali Sugar Mills and another five per cent of Imperial Bank. Other prominent companies he had a stake in are Old Mutual and Apex Securities.
Mr Janmohammed also had shares in Sandview Properties, Allgate Limited, Serenity Limited, Plymouth Holdings, Upperview Properties, Downtown Holdings and Nature Stone Queries.
One of his companies, City Park Properties, owns office premises that rake in a total of Sh447,000 monthly.
The Imperial Bank founder’s cash was saved in four bank accounts, one each at I&M Bank and National Bank of Kenya, and two at Standard Chartered Bank. The Standard Chartered accounts were in foreign currency.
The bank wants his estate, Mr Shah and Mr Kaburu compelled to provide all their bank statements between 2002 and 2015 when the scam allegedly took place, and an inventory of all the property and cash he left behind.
The CBK has hired an American consulting firm that was involved in unmasking the perpetrators of a multibillion dollar Ponzi scheme to conduct a forensic audit at Imperial Bank
FTI Consulting will audit the bank’s books, processes and governance system to unravel the “unsafe and unsound business conditions to transact business” that led to the closure of the mid-tier lender.