Four ex-National Bank of Kenya bosses coerced money deposit-mobilising consultancies into subcontracting their duties in a scam that cost the state-owned lender Sh1 billion.
A probe report by the Capital Markets Authority has listed former NBK directors Richard Langat and Gideon Kyengo, alongside ex-managers Solomon Alubala (former Treasury head) and Chris Kisire (former chief Finance officer) as architects of the elaborate scam.
The Star is in possession of the report.
The report will be given to Director of Public Prosecutions Noordin Haji. He is working with the CMA and Directorate of Criminal Investigations to get to the bottom of the scandal.
Last month Haji wrote to the CMA requesting a duplicate file of the regulator's probe into the NBK deposit mobilisation scam.
Langat and Kyengo both sat on the NBK Board of Directors as representatives of the National Social Security Fund, the troubled lender's largest shareholder, with a 48.05 per cent stake.
The four have been accused of aiding Edge Capital Consultancy and Advest Company Limited to illegally collect Sh991.5 million in commissions under NBK's deposit mobilisation programme.
Under the programme, NBK was to pay commissions to agents that helped drive up money deposits by the lender's clients.
But the two agents were paid huge commissions for deposits paid by government institutions in their normal course of business. Advest was paid Sh561.6 million, while Edge Consulting received Sh429.9 million.
The CMA's probe report has revealed that Edge Capital Consultancy was contracted as an agent in the programme four months before it was registered as a company, putting under scrutiny the transparency of the recruiting.
Registration documents CMA says it holds indicate that Edge Capital Consultancy was officially formed on September 1, 2014, but it landed the NBK contract on May 5, 2014.
The capital markets regulator holds that Alubala approached the two agents and convinced them to subcontract their duties to marketers who would retain 10 per cent of the commission paid by NBK for deposits.
Edge Capital and Advest Company Limited surrendered crucial evidence to the CMA, which aided it in recovering text messages, emails and audio recordings of correspondence between the agents and NBK bosses.
The two agents' representatives assisted CMA's probe after entering into confidential informant agreements with the regulator.
The regulator holds that Advest's representative surrendered his personal cellphone, while Edge Capital furnished it with affidavits detailing the illicit contracts with Alubala for kickbacks.
CMA's probe has now revealed that Alubala, Kisire, Langat and Kyengo received kickbacks from Advest and Edge Capital Consultancy.
Langat has, however, denied receiving any kickbacks from the two agents. He told investigators that the land in Nakuru that the CMA claims he bought using proceeds of the scam was acquired with other funds.
After trailing the money paid to the two NBK agents, CMA says it has been able to trace Sh69.6 million to Langat, Kyengo, Kisire and Alubala.
“Nelson Onzere of Advest Company found it very difficult to mobilise any deposits from government agencies (the few he claimed to have done, e.g. Kenya Ferry, could not be documented) and was approached by Alubala to subcontract his company's contract to unknown marketers who were said to be able to mobilise government deposits in exchange for the retention of 10 per cent of the commission paid," the CMA says in its report.
“Kanini Kioko of Edge Consultancy submitted documentary evidence that she was involved in influencing the NSSF (through Kyengo) to deposit in NBK for commission. Kanini was later co-opted to the subcontracting arrangement by Alubala, despite her insistence that she was in a position to mobilise government agencies using her own networks,” the CMA says.
CMA holds that Alubala would monitor deposits placed by government institutions then alert Edge Consulting and Advest to raise invoices, taking credit for negotiating the transactions.
He would then confirm to other managers at the lender that the agents had convinced the government agencies to deposit funds in NBK accounts, before forwarding invoices to the finance department for payment.
Kisire then ensured that approval for payment of the invoices would be approved without questions.
The payments made by NBK did not have required supporting documents to show the source of the deposits, how much was mobilised and the interest rates that had been disclosed in the invoices.
The regulator says current NBK finance manager Lawrence Aswani confirmed that Kisire told him not to ask for verification “beyond what was submitted because the issue was a confidential matter”.
Audio recordings recovered from the agents indicate that Aswani also benefited financially from the deposit mobilisation scheme, and the CMA raises queries as to why he was not sacked alongside eight other top bosses shown the door in 2016.
Kisire and former acting CFO Wycliffe Kivunira approved invoices totaling Sh963.2 million, while former managing director Munir Sheikh gave a go-ahead for payment of Sh28.3 million.
“The results handed over to the Authority showed that indeed the agents were in close and continuous communication with Solomon Alubala when preparing and forwarding their invoices to National Bank, throughout the processing of the invoices, making payments, withdrawal of the funds and with regard to when, where and whom to hand over funds to,” the report further reads.
CMA has, however, failed to prove any wrongdoing by Kivunira, Aswani and Munir, but has suggested to the Director of Public Prosecutions that they be charged if they fail to testify as witnesses in court.
Two law firms — Kiplagat & Associates and Henia Anzala Advocates — have also been added to the list of witnesses that should be prosecuted if they refuse to testify in court.
Henia & Anzala received Sh52.4 million, while Kiplagat & Advocates got Sh17.2 million on behalf of Alubala.
Kiplagat & Advocates bought two houses in Karen and Ngong on Alubala's instructions, but the former NBK boss registered them in the names of his proxies that collected large sums of cash on his behalf.
Alubala's proxies, according to the CMA report, were two men identified as Dickson Marilu Ihaji alias Andrea, and Nashon Obeti Okune, alias Nash.
The regulator has proposed that the DCI investigate Langat and Kyengo, but that the DPP go ahead and prosecute Alubala and Kisire.
The scam came to light after NBK's external auditors Deloitte revealed in a 2016 audit that the lender had cooked its books to hide a bad debt of Sh1 billion.
The audit also revealed the scam under the deposit mobilisation programme.
CMA has since imposed fines on Alubala (Sh140.8 million), Munir (Sh5 million) and Kisire (Sh1 million).
Alubala and Kisire were also barred from holding directorships in listed firms for 10 years each, while Munir got a three-year ban.
Alubala and Munir have appealed the fines.