A BANK OR A POLITICIAN'S PURSE?

If I told you, that there was an easier way to rob a bank, a way that is more effective than wielding a gun and wearing a mask in a banking hall, would you believe me?

If I told you, that the real bank robbers wear suits and sit on the boards of the same banks that they rob, would you be afraid?

And, if I told you, that this kind of crime will not end soon, would you call me a liar?

Well, this is according to the Economics of crime: If the profit is greater than the punishment, then the crime will be committed; again, and again, and again!

This is the story of financial gangsters. From bank founders who plunder depositors funds, to bank managers who facilitate creative accounting to cover up fraud. From politicians who use such banks to launder money and central bank officials who are compromised.

From auditors who are part of the scheme to parastatal CEOs who channel public funds to the said banks.

In the last 40 years, at least 30 institutions have collapsed due to fraud and insider dealings. Unfortunately, 90% of these banks have been plundered by their founders, managers and powerful politicians. They follow an intricate layering of ownership where the main shareholders are shell holding companies that are in turn owned by powerful individuals.

A recurring theme in most of the banks discussed here is that the perpetrators are of Indian origin. From Ajay Shah of Trust Bank, Alnoor Kassam of Trade Bank, ?Abdulmalek JanMohammed of Imperial Bank,?Firdosh Jamal of Euro Bank, Kamlesh Pattni of Exchange Bank and Pan African Bank and the Shah brothers of the Charterhouse Bank.

Is it a coincidence that all these banks are collapsing with Kenyan?money, but under Indian frauds? Or is it a case of Indian state capture?

The supporting cast are Kenyans with political ambitions.

The fundamental role of a bank is the safekeeping of the depositors money. Kenyans, from all walks, trusted these banks with their savings. They further trusted the CBK to regulate the practices and monitor the reporting in order to avoid losses. However, the insiders used the money to enrich themselves, collectively causing Kenyans to lose close to Ksh.1 trillion.

1 trillion, to put it in perspective, is an unimaginable amount of money that if correctly used, we’d never have to see the eyes of a hungry child.

You know how I know it is a lot of money?

If you would lay Kshs. 1000 notes end to end, I Trillion would make a string of 150,000 km.?That is Enough to go around the earth 11 times! If you were the one tasked with laying the notes, and you spent approximately 5 seconds to lay each note, you would need, wait for it…..160 years to finish the job!?

Ksh. 1 trillion is how much money Kenya uses to run the Education, Defence, Agriculture and Public works in a year!

But that is how much the Economic gangsters have stolen from the banks!

EURO BANK

Euro Bank went down after ?Francis Atwoli whistleblew on the scandal when Sh256million of NSSF money disappeared in the institution back in 2003.

But to understand Euro Bank, let us go back to 10 years earlier, when another bank collapsed; Trade Bank, 1993.

Trade Bank was founded by Alnoor Kassam in 1982, with the help of one Nicholas Biwott. Trade bank was formed to facilitate proceeds from corruption as well as financing projects by the elite political class of the day.

In 1986, Kenya undertook a multi-billion project to create the Turkwell Hydro Generating dam. The company that was to undertake the project was hand-picked by Mr. Biwott. The contract sum of the project was 3 times higher than it should have cost, meaning that two thirds of the money was profit for Mr. Biwott and his political associates.

If that money had passed through just any bank, then questions would have risen immediately. But because Biwott indirectly owned the bank he helped Alnoor Kassam found, then he had a freeway of laundering it.

Trade Bank had a Forex Trade department, where it operated foreign accounts and foreign currency accounts. At the heart of that department was one Solomon Muthama. A young Meru man who was 26 turning to 27 when he met Biwott.

Biwott, through Alnoor Kassam, asked the young man, Solomon, to dedicate his entire time moving some money from Kenya to foreign bank accounts in the name of Forex trading. At first, Solomon did not know that the Billions he was going to handle from 1986 to around 1991, were the illegal proceeds from the Turkwell Dam project.

But with time, he learnt that the money was dirty. So dirty that even Biwott or Alnoor Kassam, had no idea as to how much money was being delivered to Solomon in briefcases every day at Trade Bank.

So Solomon was now fully entrusted with laundering of the proceeds of Turkwell Gorge on behalf of Biwott, Moi and other politicians in the late 80s.

Biwott's funds were being channeled to bank accounts located in Germany and the UK.

Solomon Muthamia simultaneously opened personal accounts with the same foreign banks, facilitating the transfer of funds for his own use. He ?skimmed off close to KSh 100 million at a tender age of 27 years.

With the safety of dollars in Europe, Muthamia was able to issue foreign cheques to local Asians during the foreign exchange crunch during which process he made hefty profits.

Meanwhile, Mr Kassam had overwhelming influence in the operations of Trade Bank. He used that power to enjoy unauthorised credit. He obtained colossal amounts of money by faking documents to obtain pre-shipment finance for ficticious exprorts. Mr. Kassam, using Trade Bank, had defrauded the CBK close to sh.2B

Eventually, Muthamia's dealings were discovered by investigators forcing him to flee from Trade Bank. Muthamia, through his connections with Kilonzo, the former police commissioner, was able to prevent any investigation from going ahead.

Mr. Kassam fled the country as Trade Bank doors was closed.

Muthamia began the operations of Eurobank in 1993 using the proceeds made from his clandestine dealings. His other director was Firdosh Jamal, Mr Zachary Kamondo and the then KRA commissioner General, John Munge.

The bank was known as a conduit for money laundering. It was its political connections, though, which kept the bank open.

Although soft-spoken, ?Muthamia was shrewd and well connected. Using an elaborate network of contacts in high places, he was able to get all major parastatals to bank with Eurobank, even when the government was promoting its own National Bank. He promised high interest rates after short periods.

These parastatals included:

NSSF, NHIF, the Kenya Pyrethrum Board, Kenya Wines Agency, the Kenyatta National Hospital, Post Bank, Kenya Tourist Development Corporation, Kenya Pipeline and Kenya Sugar Board…among others. It was such, that 70% of total deposits belonged to the parastatals.

Muthamia had roped anyone who could provide cover and a handy umbrella on stormy days. Easy and soft loans were extended to top civil servants, senior cops and key politicians who could provide cover for the bank. Protectors included a Commissioner of Police, former heads of public service, CBK staff, senior Kanu politicians from the Rift Valley and the Banking Fraud Unit. More than 85% of the loans were to such politicians, and they were non performing.

After 10 years of looting, the bank would start facing liquidity problems. It is then that Atwoli raised the alarm. The directors fled. The parastatal heads were questioned. But as you have guessed, the parastatals lost 1.8 billion to Muthamia and his associates;

The?National Social Security Fund?lost 256m shillings, the?Kenyatta National Hospital?421m shillings with the biggest casualty being the?National Hospital Insurance Fund, which lost 479m shillings in the collapse. Other state losses incurred were from?Kenya Post Office Savings Bank?Sh65 million,?Kenya Tourist Development Corporation?(KTDC) Sh60 million,?Kenya Pipeline Company?Sh55 million,?Postal Corporation of Kenya Sh53 million and?Kenya Sugar Board?Sh55 million.

It also claimed the career of Nahashon Nyagah, the then Central Bank of Kenya (CBK) Governor.?

IMPERIAL BANK

On 5th?April, 2012, someone sent an anonymous email to the Central Bank of Kenya, the National Police, the Ethics and Anti-Corruption Commission, the judiciary, the Financial Post, Royal Media, and about 10 others. The subject line was “Imperial Bank Frauds & Scandals.“

It is from the expose that followed that the following can be revealed;

?Imperial Bank opened its doors in 1993, its logo, a prominent purple crown sitting on the bank’s name like a crown on a monarch told the story of this young bank and its founder, Abdulmalek JanMohammed’s ?ambitious plan.

But by the time the bank was placed under receivership in October 2015, investors and depositors had lost Shs.39 Billion.

Abdulmalek JanMohammed owned 12.5% of the bank. It was however his hands on approach in the daily running that enabled him to run the bank like his personal purse. He was born in 1959, in Karachi India, but his parents moved to Mombasa shortly afterwards. He had training in finance, and had considerable experience working in a bank.

He was?a quiet man, but a manipulative leader. Abdulmalek Janmohammed knew people could be controlled in the easiest way, money. Everyone who worked for him directly earned a healthy salary and, if he liked them, random cash gifts.?Every one from the janitor at the toilets to the CFO, respected and feared him in equal measure. He was in the heart of every communication, and although it seemed like every one made decisions, it was clear that he was the puppeteer behind the strings.

He started stealing from the bank using a company called WE Tilley. It was a simple but elaborate trick; have multiple accounts opened on behalf of WE Tilley. The accounts were for savings and loans. Then once the amounts were transferred into those accounts, he would re-direct the money to other accounts, offshore hideouts or to many of the properties he acquired. The accounts would move up to Shs.70 million in a day.

Ordinarily, in a legit bank, such a scheme would be impossible to pull off. First, every bank has a policy of knowing its clients. Meaning that every account that is opened has to have a face behind it. Second, internal auditors would flag such a transaction immediately, for instance, A Tilley loan accounts were 20 times more than its deposit accounts, and the loans were not being paid back. Third, the external auditors would immediately notice the hole in the books. This would in turn be notified to the CBK, which is the regulator of banks, and an action would be immediate.

But Abdulmalek Janmohammed, or AJ as he was fondly referred to, had this schemed to the book. He had his CFO, and his bank’s head of treasury in his pockets. They were well paid, both in cash and in kind, and had learnt to trust AJ rather than ask questions. They inturn facilitated the creation of the fake accounts.

AJ always used handwritten notes instead of e-mails or smss. Every once in a while, handwritten chits would appear on the CFO’s desk asking for money to be transferred to particular accounts. Naeem Shah, as Head of Credit, would move the money. James Kaburu, as the CFO, would be the guy to make the books balance. Using the accounting software Flexcube, Kaburu tweaked and played with the numbers. Entries would be hidden by manipulating the accounting software, allowing for Abdulmalek to produce three different books of accounts. He had the real one showing the missing money. The Board got one, and CBK, as the regulator, the third.

Now that he had covered his tracks internally, it was time to deal with the external watchers. How did Abdulmalek Janmohammed, deal with external auditors from the globally acclaimed accounting firm, PKF?

And how could he keep the industry regulator, the CBK, well tamed for over 15 years?

The answer was simple, he knew man has a price, and if he dangled the carrot long enough, the victim would bite the bait. ?The CEO of PKF, one Atul PK Shah, was a codirector in a company that had been given an unauthorized loan of Ksh.263 million, that was not performing.

?Also, Rajan Shah was the partner at PKF in charge of handling Imperial Bank. He had a loan of ?Shs. 2.995 million given in 2006 and was never repaid. Abdulmalek, again being a sly banker and an investor in favors, kept a records of those who owed him favors. This is what that kept the auditing firm churning out clean bills of health, for 14 years.

In a rather cleverly hidden folder in his Google Drive, Abdulmalek kept a list of special loans. One sheet within the list was clearly marked CBK loans. He didn’t keep the names, just what looked like codes he gave his loanees. He was paying off people within the CBK by giving them money when they needed it, but with strings attached. ?One of the loans was a shs.1.2 billion given to the company renovating the CBK then. Your guess is as good as mine, the company was a front for the beneficiaries behind the walls in the building situated in Heile Selasie Avenue.

An e-mail exchange retrieved by the shareholders shows one Simeon K. Rono, an official at the central bank reminding Naeem Shah (former head of credit) of an ‘oath’ he had made with the late managing director.

“Bro. We agreed with Mzee (Janmohamed) sometime in 2004 that my children shall never lack school fees as long as his bank was in operation. This was more or less an oath between two friends…”

If money was flowing their way, they were his to control.

Another high profile beneficiary of AJ’s generosity was ?Prof. Njuguna Ndungu’s. ?The professor was the head of Central Bank. He was the man charged with regulating the market and rooting out rogue bankers like Abdulmalek. He was however compromised. Documents produced in court showed that the professor’s wife received gifts from Abdulmalek; fully paid holidays and access to credit cards among other things.

Over the course of many years, and unbeknownst to the bank’s board (Imperial), CBK’s officials deliberately flouted, breached and/or otherwise acted in disregard of the law in relation to the supervisory processes

By the time Abdulmalek Janmohammed died in 2016, perhaps the person most surprised by the death was himself. The 14 year heist he had undertaken had been abruptly ended by a heart attack.?