The state-owned National Bank of Kenya has been accused of using investigative authorities to fix some of its former bosses and sweep a multi-billion-shilling scandal under the rug.
Former director (corporate and institutional banking) Boniface Biko has claimed in court documents that the lender is using him and other ex-bosses as scapegoats to avoid further scrutiny on the 2016 scandals that revealed NBK's huge losses and bad loans.
Biko says that NBK's board met last year and resolved to use the police and Director of Public Prosecutions to ensure that he and other former top bosses take the blame.
He has filed a wrongful termination suit against the bank, seeking Sh110.5 million as compensation.
Biko has also filed a separate petition against the NBK, the DPP, the DCI and Capital Markets Authority. He wants the authorities stopped from harassing, intimidating or influencing his arrest over the 2016 storm.
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In the petition, Biko also wants NBK compelled to release to him 61 documents that the ex-director says will be crucial in absolving him and revealing more truth about the bank.
Biko claims that efforts to secure the documents have seen NBK managing director Wilfred Musau try to deceive the DPP and Central Bank of Kenya into taking action against him for allegedly breaching client confidentiality laws.
“The petitioner, as executive director, corporate and business banking, was not at any time involved in the preparation of the financials or issuance of any profit warnings. NBK, in the Board Nomination and Remuneration Committee held on March 28, 2017, made a resolution that contravenes the Constitution.
“The NBK Board specifically resolved that they should and will use the Kenya Police by interfering with investigations to ensure that I and others are charged in court for purposes of 'aiding' them in their sham defences filed at the employment court. In the full Board meeting held on March 30, 2017, the recommendations were adopted, signifying a protracted attempt to fix Biko,” the ex-director's lawyer Kimani Michuki says in court filings.
But the state-owned lender has denied the claims, arguing that the Board minutes were not an indication of a plan to misuse the police and DPP.
The lender adds that the minutes of the meetings Biko has filed in court as evidence are not signed and are confidential, hence, should be struck out of the suit.
“The minutes are marked 'private and confidential'. They are confidential documents which should not be in the petitioner's possession. Other than applying for them to be expunged, NBK will take appropriate action against the petitioner for accessing, obtaining and relying on such confidential information.
“The minutes are not signed. There is no basis for relying on them. NBK has not in any way used the DPP, DCI and CMA to intimidate, harass or prosecute the petitioner as alleged or at all. These are public bodies and independent offices. NBK has no influence or control of their processes and decisions,” NBK company secretary Habil Waswani says in a replying affidavit.
Biko and former chief credit officer George Jabba were in September last year charged with altering NBK's loan books to hide a bad debt of Sh1 billion. Both denied the charges and the case is ongoing.
After NBK announced a Sh2.721 billion profit for the year ended December 31, 2015, before auditor Deloitte revealed that the state-owned lender had in fact suffered a Sh1.06 billion loss for the period.
The loss was the first NBK had reported since 2008. The report arose after a steep rise in unserviced loans. NBK had before the audit stated its non-performing loans at Sh7.2 billion. However, after the Deloitte audit, the unserviced loans rose to Sh11.7 billion.
Biko insists that the Deloitte audit report did not implicate him in any wrongdoing, and that his job description had nothing to do with the allegations leveled against him.
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The loss followed cooking of NBK's loan book to alter default statuses of 19 firms, and an embezzlement scam that saw private agents paid Sh1 billion under a deposit mobilisation programme.
Under the deposit mobilisation programme, private agents received huge commissions for deposits placed by government institutions in their normal course of business.
The Capital Markets Authority has since imposed fines on head of Treasury Solomon Alubala (Sh140.8 million), former managing director Munir Sheikh (Sh5 million), former CFO Chris Kisire (Sh1 million), former acting CFO Wycliffe Kivunira (Sh1 million) and former chief credit officer George Jaba (Sh1 million).
Sheikh, Kisire and Alubala were fined for their involvement in the embezzlement scheme. Jabba and Kivunira were fined for misrepresenting the lender's financial statements.
Biko and Dennis Chumbe (former relationship manager, business banking) were absolved in the CMA process.
The CMA in its response to Biko's petition says it only summoned Biko for purposes of confirming whether or not he was part of the scandals at NBK.
Biko says NBK has been giving bits and pieces of information to the police and CMA, then refusing to release other documents that would aid in pointing out the real culprits in the scams.
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The “piecemeal” release of information, Biko argues, has seen him harassed by police and on occasion arrested.
“The respondents have continued to act with total impunity in the mistaken belief that they operate above the law and the Constitution of Kenya since they have the power, networks and financial capability to influence key agencies, including investigating arms of the CBK and Kenya Police,” Biko says.
Among the information he wants released are documents detailing loans to the 19 firms he has been accused of aiding to evade debt repayment.
NBK says, however, granting Biko's prayers will interfere with the independence of the Labour court, as well as the independence of the CMA, DPP and DCI.
The state-owned lender adds that it intends to prove to the Labour court that the documents Biko has requested cannot be released without breaching Kenya's banking laws on client confidentiality.
Reports last year emerged that KCB, Kenya's biggest lender by assets, is positioning itself to acquire a 70 per cent stake in troubled NBK.