The Central Bank failed to act on a whistle-blower report on “doctoring of financial reports” at Imperial Bank during inspection from July 10 to October 2012, the lender's shareholders allege.
In a counter-claim case at the High Court, they argue the whistle-blower also raised issues on “certain clients with unsecured and non-performing loans in excess of Sh3 billion”.
Some of the firms whose loans were on a watch-list included Adra International (Sh2.6 billion against security of Sh1.5 billion), Samani Construction (Sh687.93 million against security of Sh261.12 million) and Athi Stores (Sh143.46 million against security of Sh165.28 million).
The beleaguered former directors allege the CBK “failed to honestly discharge its supervisory function and/or was reckless in this regard and/or conspired with (former managing director Abdulmalek) Janmohamed and his co-conspirators to conceal the true financial exposure of the bank from the board”.
The shareholders have accused the CBK and a forensic firm of falsifying the inspection report, concealing and deleting data prior to the collapse of the bank.
They claim the names of the firms were “deleted from the draft Appendix IV prior to the finalisation of the inspection report which was provided to the board and omitted from the credit risk section of the inspection report”.
Documents and witness statements filed in court by the former IBL directors allege schemes through which the data was deleted to show different data on the CBK's reports. The report to the board, they claim, was edited, sometimes showing discrepancies amounting to between Sh8 billion and Sh 5 billion per quarter.
The documents allege that between 20 and 25 bank accounts from the list of IBL's top 50 borrowers were manipulated and cooked loan balances presented.
The directors in their defence alleged that instead of CBK highlighting the illegal loans to such institutions as Samani and W.E Tilley, the regulator purposely deleted any reference to them in their Inspection Report.
“The shareholders enlisted a data intelligence firm GPW Ltd who did a random analysis of just three quarters from data in the bank’s system. They found enough evidence to show that CBK enabled the fraud in the bank by coaching and directing IBL staff to delete, falsifying data on the health of the bank for 20 years,” the shareholders claim.
The shareholders allege falsification of the bank’s accounts on non-performing loans and provisioning figures. They cite loan accounts for Samani, Jade, Adra, Metro, Italbuild, Sparetech, Added Performance and Rods & Steel.
They also allege further systematic concealment of billions of shillings in loans from the board negotiations between the late Group Managing Director’s office and the former governor’s office for a businesses associated to the former to provide an anti-fraud software for CBK in a way that circumvents the procurement process.
The shareholders, who have also applied to access FTI forensic reports on the bank, accuse the London-based forensic consulting firm of manipulation and an attempt to protect damning information. The shareholders further allege conflict of interest and attempt to secure data under false legal privilege.
The IBL shareholders hired a business intelligence company GPW Ltd to conduct parallel investigations into activities of the late former managing Abdulmalek Janmohamed who run the bank from 1993 until his death on September 15, last year.
They claim that after random analysis of the bank's three quarterly financial reports, evidence was found to show that CBK enabled the fraud.
In their various court suits, the former IBL directors have submitted that CBK staff worked in cahoots with bank employees, including Janmohamed and his personal assistant Anne Mboya who is still an employee at the bank.
Other IBL staff adversely mention include former head of credit Naeem Shah, former chief finance officer James Kaburu, head of treasury Nina Shah (who is still a staff at the bank) and Alisager Esmailjee, Robinson Boreh, Peter Nzuki and Mehboobha Shamji.
Former and present CBK staff named by the shareholders in the various suits include former governor Njuguna Ndung’u for inappropriate relationship with the late Janmohamed, who allegedly paid for his holiday trip to Thailand, and organised for his trip to Dubai. Others are assistant director for bank supervision Matu Mugo and Peter Gatere, the first receiver manager of IBL, whom they accuse of of taking bribes, asking for personal favours and helping hide vital information.
The former directors have also named Reuben Cheres for allegedly coaching and working with Kaburu on how to delete borrowers’ data on the inspection reports along with Simon Gichuki.
Others accused of allegedly concealing vital data on Imperial Bank's state of affairs are Medline Kihara, Daniel Thogo and Caroline Mwobobia.
Simeon K. Rono, R. G Langat, J.A Migude are accused to have allegedly taken bribes from IBL.
The present governor Patrick Njoroge and his deputy Sheila M’Mbijjewe are accused of mismanaging the recovery process after the bank was placed under receivership on October 13, 2015.