LIFTING THE VEIL OFF THE IMPERIAL BANKS 13 YEAR ELABORATE FRAUD SCHEME

So the details are now emerging of what actually bought Kenya’s 19^th strongest bank to its knees two weeks ago.  It was fraud, on a MASS scale.  Some are saying it’s the biggest fraud case this country has ever seen…..and it just happened to be my bank!  It makes for a VERY interesting read indeed.  Even though it was the mastermind of one man, there were a string of people involved, inside and outside the bank, which is just another example of corruption in this country, and what money can really buy you here.  One of the biggest scams this country has seen (outside the government that is) and a simple case of greed.    

So what do we know now?

The Central Bank of Kenya hired an American consulting firm to unmask the perpetrators of a multibillion dollar Ponzi scheme.  They conducted a forensic audit at Imperial Bank that audited the bank’s books, processes and governance systems that unraveled the “unsafe and unsound business conditions to transact business” that led to the closure of the mid-tier lender.  Revelations that Imperial Bank’s long-serving group managing director Abdulmalek Janmohamed discreetly siphoned Sh2.6 billion annually and is alleged to have fraudulently transferred a total of Sh34 billion over a period of 13 years from depositors’ cash to his entities and bank accounts between 2002 to September 15, 2015, by means of cash wired to his companies and bank accounts when he died.  The 56-year-old banking executive pulled off the elaborate fraud scheme that was so smart, only his death opened a Pandora’s Box into his deceptive dealings. Mr. Janmohamed held a bachelor’s degree in finance and management of data systems from Syracuse University, one of America’s prestigious schools.  Mr. Janmohamed had been with Imperial Bank since its inception in 1993, rising through the ranks to head the lender in 2006. He individually owned a five per cent stake at the lender.

Mr. Janmohammed used a network of 20 companies and individuals to execute and cover up the mega fraud.  Details of the fraudulent scheme have emerged from the courts where Imperial Bank directors have sued 20 companies and individuals related to Mr. Janmohamed seeking to recover the colossal amount.  Proceeds of the fraud were mainly invested in real estate properties, offering fresh insights into the role that corruption and crime plays in driving Kenya’s housing market boom.  Mr. Janmohamed, who died last month, left a vast estate, including prime real estate properties, shareholding in blue chip companies and loads of cash in various banks, according to documents Imperial Bank has filed in court.  The bank sought and got an order freezing all the assets belonging to individuals and companies named as having participated in the fraudulent scheme.  A High Court Judge issued the conservatory orders freezing the assets until the defendants are expected to tell the court why the caveat should not be retained until the matter is heard and determined.

Court documents show that Mr. Janmohamed siphoned out billions of shillings from Imperial Bank and manipulated its software systems to hide it. All the irregular transactions were kept off the bank’s books and were known to a small clique of senior managers.  Imperial Bank argues in the suit filed under a certificate of urgency that a speedy determination of the case is necessary because the receiver’s decision to reopen the bank or liquidate it will ultimately depend on whether the bank will manage to trace and recover the amounts that have been illegally and fraudulently obtained from the bank by the deceased and his associates.  The court papers further reveal that Imperial Bank’s liability to depositors and buyers of the corporate bond it sold to local investors last month stands at a whopping Sh87 billion — nearly Sh20 billion more than the Sh58 billion that was said to have been at risk.

Imperial Bank, which is associated with the wealthy Popat family, became the second commercial bank to go into receivership since Patrick Njoroge took charge as CBK governor coming after the August closure of Dubai Bank.  It’s actually a good thing, the man seems to be un-corruptible, it is just a shame that he had to start with my bank.  Court documents show that Mr. Janmohammed and his associates used 12 companies to open accounts at Imperial Bank into which they deposited massive amounts of cash that was then moved out of the bank before the accounts were immediately closed.  The transfers were made by a section of the bank’s top managers, including the current managing director Naeem Shah and his deputy James Kaburu.  The duo would then manipulate software systems at the bank to ensure the dummy accounts disappeared from the records.  Court documents show that the firms that owned the sham accounts were mere shell corporations used to embezzle customer savings from Imperial Bank but were presented as companies doing legitimate business.  Mr. Janmohammed and his close associates also awarded themselves unsecured loans at below market rates, according to court documents. 

The scam came to light after Mr. Shah, who succeeded Mr. Janmohammed as managing director, revealed to the bank’s board of directors that he had helped cover up the fraud scheme. Mr. Shah and Mr. Kaburu, despite revealing the scam to the CBK, have not been spared as they are among the respondents in the suit. They have admitted to making the illegal transfers but claim they did it on instructions from Mr. Janmohammed.  To execute the decade-old scheme, he enlisted the services of Imperial Bank’s head of credit Naeem Shah and chief finance officer, James Kaburu, documents filed at the High Court show.  Mr. Shah, currently the Imperial Bank’s acting managing director and Mr. Kaburu (current deputy managing director) were the whistle-blowers of the grand scam at the lending empire owned by the wealthy Popat family.  The deceased (Mr. Janmohamed) had for some time instructed them to carry out certain false, fraudulent, unlawful and illegal activities in the Bank.  They had been instructed to manipulate the Bank’s books so as to allow the false, fraudulent and unlawful acts.

The list of companies used in the fraudulent scheme includes E. Tilley (Muthaiga) Limited, Primecatch Exports, Mara Fish Packers, J Fish Limited, Victorian Delight, Ruby Red Limited, Value Pak Foods, From Eden Limited, Aqualite Limited, Marmo Granito Mines from Tanzania, Uganda’s Marmo Marbles and Fishways Limited.  E. Tilley (Muthaiga) Limited alone has admitted to receiving Sh10 billion from the bank and has expressed readiness to return the loot, I’m sure for less or no jail time.  The family of deceased businessman Nargis Aziz Ali Jessa is also enjoined in the suit because of their vast interests in the firms named in the scandal.  The receiver managers want to freeze all their bank accounts and known assets in Kenya, including seven prime properties in Nairobi and Ruiru that have been charged as collateral to various other banks for loans.  The suit has also revealed a gigantic empire Mr. Janmohammed left behind, which includes a five per cent stake in Butali Sugar Mills and another five per cent of Imperial Bank. Other prominent companies he had a stake in are Old Mutual and Apex Securities.  He also had shares in Sandview Properties, Allgate Limited, Serenity Limited, Plymouth Holdings, Upperview Properties, Downtown Holdings and Nature Stone Queries.  One of his companies, City Park Properties, owns office premises that rake in a total of Sh447,000 monthly.  The Imperial Bank founder’s cash was saved in four bank accounts, one each at I&M Bank and National Bank of Kenya, and two at Standard Chartered Bank. The Standard Chartered accounts were in foreign currency.  The bank wants his estate, Mr. Shah and Mr. Kaburu compelled to provide all their bank statements between 2002 and 2015 when the scam allegedly took place, and an inventory of all the property and cash he left behind.

As the revelations come out, it is now also known that the troubled Imperial Bank founder and long-serving chief executive Abdulmalek Janmohammed is shown in bank transactions as having continued to illegally draw funds from the lender weeks after he died in September, adding a new twist to the ongoing battle to recover the money stolen from savers.  Fresh documents filed in court show that a fictitious bank account Mr. Janmohammed operated received and shipped out Sh3 billion after his death in mid-September, pointing to the presence of in-house co-conspirators in the scheme.  Imperial Bank says in court documents that some of its top managers, including acting managing director Naeem Shah, deposited Sh3,058,439,474 in an account named Hanscombe Management Limited that Mr. Janmohammed had used since 2002 to hold money stolen from the bank’s savers.  Well after the death of Mr. Janmohammed and under the auspices of Mr. Shah and other senior bank officials, entries of Sh3.04 billion and Sh17.9 million passed through the Hanscombe account to conceal the fraudulent activities.  Investigations into the scandal in which savers are said to have lost more than Sh34 billion in 13 years have revealed that Hanscombe Management Limited, the company that owned the account, was liquidated in 2002 but Mr. Janmohammed kept open an account by the same name and used it to swipe Sh30 billion from Imperial Bank between 2002 and 2015.

Imperial Bank has filed two suits in court seeking to recover every single cent of the Sh34 billion Mr. Janmohammed allegedly stole from depositors in 13 years.  The first suit seeks to recover Sh34 billion from 20 firms and individuals believed to have colluded with Mr. Janmohammed in the scheme, while the second seeks to recover Sh4 billion he is believed to have left to his family in both cash and assets.  Court documents show that W. E. Tilley — one of the companies implicated in the scam — would receive bulk payments in a US dollar account on instruction from Mr. Janmohammed. W.E. Tilley would then transfer the funds to another account in the bank where the dollars would be converted into Kenya shillings.  The money would then be transferred to the accounts of other companies linked to Mr. Janmohammed, W.E. Tilley and its directors in installments of between Sh10 million and Sh100 million every week.  Imperial Bank’s receiver manager reckons that the fraudulently acquired funds earned interest and that while the principal amounts were wired to the accounts of various firms, the interest was sent to three bank accounts linked to Mr. Janmohammed and members of his family.  One account, in the name of Zulfikar Jessa and Zarina Mohammed, had received a total of Sh1.1 billion at the time of Mr. Janmohammed’s death, according to court documents.  A second account, named Barkhatkhan and which was in the care of Mr. Janmohammed and Naeem Shah, had received Sh3.2 billion by October 30 this year.  The third account in the name of Mr. Janmohammed’s mother, Gulshan had received Sh363 million at the close of September 2015.  “Mr. Shah has continued to unlawfully and fraudulently operate the Barkhatkhan account, which is evident from the entries made between September 15, 2015 and October 7, 2015 for sums in excess of Sh162 million. Reasons wherefore the plaintiff prays for a declaration that Mr. Janmohammed’s estate and Mr. Shah are liable to the bank for the sum of Sh4.7 billion,” Imperial Bank directors say in the suit papers. Mr. Janmohammed allegedly used the same process with 25 other accounts, which held between Sh25 million and Sh1.5 billion at any given time.

Imperial Bank says Mr. Janmohammed used the illicitly acquired wealth to significantly grow his offshore investment portfolio, including acquisition of stakes in companies outside Kenya.  In Mauritius, Mr. Janmohammed acquired stakes in Titan Investments, Astonfield Solar and Asachi Solar Power Limited. He also acquired part of Parvel International Enterprises Limited and opened a bank account with an undisclosed amount of money in the British Virgin Islands.  His other offshore assets include two beach plots in Zanzibar, a number of real estate projects in Mozambique, a studio apartment in Dubai and a share portfolio in South Africa managed by financial services firm MMI Holdings.  One of the companies owned by Mr. Janmohammed, Janco Investments, operated in the United Kingdom and South Africa.  Imperial Bank directors say they learnt that merely hours after Mr. Janmohammed’s death on September 14, Janco UK Limited was dissolved.  “An anonymous note received by the bank has disclosed that on the day Mr. Janmohammed died, Janco in which he held a 33 per cent shareholding was dissolved. The note goes on to state that the funds he held in his personal banking facilities at Imperial were transferred soon after Mr. Janmohammed’s death and that his trust has been taken over by his brothers (Salim and Mehdi Janmohammed),” Imperial Bank adds.

It goes past the one man.  There are a plethora of people that were a part of this fraud, using MY MONEY.  I wonder if the whistle blowers, Mr. Shah and Mr. Kaburu, who were participating in the fraud, still would have come forward if they knew this would be the reaction?  I am guessing they knew the enormity of the scam, why come forward?  Maybe they really were co-erced by the big man?  Who knows.  Do they now regret opening up what is one of the biggest can of unexpected worms in history?  How long were they part of it? Something is fishy here.

Lots of questions.

Who posted the entries?

Who authorized the transfers?

Who manipulated the entries?

Who verified the entries?

Who is in charge of the treasury?

Who are the branch managers where the dodgy accounts were domiciled? Did they raise the red flags?

Who reconciles the accounts?

Who are the internal auditors?

Has the senior management changed in the last 10 years?

If no then that could be a problem. 

Is there job rotation?

Which system is being used at the bank?

Can it be manipulated?

Have the ‘middle management’ also been reported and their account frozen?

So many questions still need to be answered, but slowly they are unraveling the truth and with 13 years to sift through, it makes sense that it would take some time.  They can have all the time they want, as long as I know that I WILL get my money back.  It seems, all the drama aside, and the magnitude of the scandal/scam/fraud, that so far so good we will get our funds.  But until the doors of the bank actually open again, and we are allowed to take money from our accounts, I will stay a little cautious and dubious until that time.  A lot can change in 4 weeks, so let’s just see what else may unfold during that time.