The Capital Markets Authority (CMA) has fined former executives and directors of the collapsed Chase Bank and an audit firm a total of Sh36 million over their alleged role in the collapse of the lender that is currently in liquidation.
CMA has fined Duncan Kabui, who was the lender’s Group Managing Director when it went under, Sh5 million and has also banned him from being a director or holding any senior position at a licensed firm in Kenya’s financial markets for 10 years.
Also hit with a Sh5 million fine is Paul Njaga, who was the lender’s Chief Executive, and Ken Obimbo, who was the Group Finance Director.
Mr Obimbo has also been hit with a five-year ban from serving in a senior role or being a director at any licensed financial services firm in the country.
“In line with its investor protection mandate, the CMA has taken enforcement action against former board members, senior management of Chase Bank Kenya Limited (CBKL) (the MTN Issuer) and CBKL reporting Accountant for their role in the issuance and use of MTN in 2015,” said CMA.
Anthony Gross, who was serving as a board member and the chair of the bank’s audit and risk committee, and other board members that also sat on the committee including Laurent Demey, Muthoni Kuria and Rafiq Sharrif were fined a similar amount.
Another director, Richard Carter, was fined Sh1 million.
Meanwhile, Deloitte and Touche, the bank’s reporting accountant at the time, was fined Sh10 million.
“Further the Committee recommends that the conduct of the accounting partners during the respective audit periods be referred matters be taken up by ICPAK (Institute of Certified Public Accountants Kenya),” said CMA.
Massive fraud
Chase Bank collapsed in 2016 under the weight of massive withdrawals from depositors after massive fraud including insider loans of more than Sh13.62 billion advanced to directors, shareholders, employees and associates were unearthed at the bank.
The bank collapsed when it had received Sh4.8 billion from creditors through a Sh10 billion bond issue.
The Central Bank of Kenya (CBK) appointed the Kenya Deposit Insurance Corporation (KDIC) as a receiver for the bank for a period of twelve months.
“Following the Authority’s inquiry into CBKL, the Authority highlighted issues on the preparation of false and misleading financial statements, failure to disclose material information and conflict of interest,” said CMA.
The CBK last year gave the nod to the KDIC to liquidate the assets of the bank that had not been auctioned to salvage some money for customers who had more than Sh100,000 in the bank.
In 2018, Mauritian lender, SBM Bank carved out 75 per cent of certain assets and liabilities from Chase Bank in what was considered as cherry-picking ‘good assets.’
During the Chase Bank deal, SBM valued the total assets acquired at Sh69.59 billion, with property, plant and equipment assigned a fair value of Sh1.25 billion.
Total liabilities were valued at Sh66.68 billion while deposits from non-bank customers were Sh56.9 billion.
