LSK to join Chase Bank suit in pursuit of Sh2bn clients’ cash


Zafrullah Khan, former Chase Bank chairman. file photo | nmg

The Law Society of Kenya (LSK) has applied to join a suit in which troubled Chase Bank is seeking to recover more than Sh14 billion its former directors stole from depositors.

The LSK says it is interested in the recovery of about Sh2 billion that individual advocates and law firms are said to have kept in the bank on behalf of their clients as well as its own deposits of Sh38 million at the time the troubled lender was placed under receivership in April last year.

It has included in its application supporting the suit by the Kenya Deposit Insurance Corporation’s (KDIC) — the bank’s receiver managers — a list of advocates and firms whose funds are tied down in the bank and their letters asking for the lobby’s assistance in recovering the funds.

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“The said list does not set out all sums due by the bank to individual advocates and law firms but it is clear that the amounts due exceed Sh2 billion. As at the time Chase Bank was placed under receivership LSK itself has a fixed deposit account (Sh22.828 million) and a current account (Sh15.5 million),” the LSK says.

The LSK says that part of the Sh38 million it had at Chase Bank was for its benevolent fund, indicating that the lender’s troubles could spill over to the LSK’s philanthropic activities.

The KDIC is seeking to recover Sh14 billion from nine individuals and 11 companies accused of looting of depositor funds. Chase Bank collapsed last year on the day it published its restated financial results that showed it had under-reported insider loans by Sh8 billion.

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It was placed under receivership following discovery of the under-reported insider loans and irregular transfers of funds to senior bank officials.

Former Chase Bank chairman Zafrullah Khan, ex-managing director Duncan Kabui and other former senior bank officials have been charged with theft of depositor funds.

Justice Fred Ochieng in April issued a temporary order barring the defendants from selling assets at the heart of the court battle.

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Chase Bank says Mr Khan, Mr Kabui, former general manager corporate assets James Mwaura and former general manager finance Makarios Agumbi used their positions to illegally acquire and benefit from the bank’s assets it now seeks to recover. Also included in the suit are Chase Assurance and Ghengis Capital managing director Ali Cheema, Rafiki Microfinance chief finance officer Daniel Mavindu and managing director Ken Obimbo, former directors Anthony Gross and Ruth Muthoni, and a network of 11 companies said to have been used to siphon funds from the collapsed lender.