Majority owners of Imperial Bank Tuesday broke a three-month silence on claims of looting the bank in a meeting that saw the chairman break down in tears.
The bank’s chairman Alnashir Popat Tuesday apologised to depositors of the bank and the bond holders, an apology that may have come a little too late for more than 50,000 customers who are unable to access their cash after the scandal broke. “We want you to know that the shareholders and non-executive directors of the bank for whom I am spokesperson deeply sympathise with the plight and frustration of all depositors, bond holders, and all other affected stakeholders,” Mr Popat said at a press briefing held Tuesday. “We want to ensure the truth about what happened is revealed and we intend to work together with all the stakeholders to re-open the bank within the shortest time possible,” he added.
The chairman, however, broke down in tears after he described how the board had discovered the long running scheme that saw the bank lose Sh34 billion in one of the biggest theft syndicates in the industry. It has also emerged that the relationship between the owners of the bank at the regulator has deteriorated to almost irreconcilable levels after the owners linked Central Bank of Kenya (CBK) staff to the theft, accusing some of having benefited from it.
A forensic audit by FTI Consulting revealed shocking details of how eight members of one family that largely deals in the fish business conspired with the bank’s top managers to siphon Sh34 billion from the bank in one of the biggest bank thefts to strike the banking industry.
The scheme orchestrated by the bank’s chief executive and implemented by the head of credit and finance officers saw depositors cash wired to fictitious accounts without any paperwork.
“The late group managing director, Mr Abdul Janmohamed, was a colleague and friend and many of us, an extended member of the family and none of us could have imagined a betrayal on this level,” Popat said. “What he did was unforgivable, but we have resolved that we cannot let the actions of one disturbed man and a handful of weak and corrupt managers and public officers destroy the lives of thousands of people who placed their trust in the bank,” he added. The shareholders are also accusing CBK of keeping them in the dark and not giving them any response of their proposed revival plan. Mr Popat, who defended his board of any wrongdoing on grounds that the managers presented doctored reports that were approved by the regulator and their auditor, giving them no reason to be worried, went ahead to detail how the board found out about the heist at the bank, and what actions they took, including self-reporting to the CBK.
For instance, the bank’s chief executive would walk into his office in Westlands, summon his head of credit and give him a handwritten chit torn from one of the papers on his desk instructing him to disburse Sh100 million to the fictitious account. Only his signature was enough. No paperwork.
What is shocking is that the managers ran the scheme for over 13 years but not even the CBK, which prides itself on having one of the best banking surveillance systems in the region, failed to flag it.
The fraud has also exposed a cover-up by CBK officials who, despite being tipped off by a whistle blower in 2012, the regulator just watched; only to act when it was too late. According to the FTI Consulting forensic, the bank’s senior management committed a long-running and systemic fraud by running a hidden ‘parallel’ bank which disbursed the billions from the bank. The hidden ‘parallel’ book and financial statements were never disclosed to the Board or reported, which concealed true underlying position of Imperial Bank.
