A secretly recorded audio tape and WhatsApp text messages helped the capital markets regulator to gather evidence on corruption accusations against former National Bank of Kenya (NBK) officials.
The audio tape, recorded by an employee of a deposit mobilisation agency contracted by NBK, revealed how senior managers siphoned nearly Sh1 billion from the bank’s coffers and pocketed up to 90 percent of the loot in kickbacks.
At the centre of the scheme, which saw senior managers either sacked or resign from their jobs, was NBK’s former head of treasury, Solomon Alubala.
Many senior NBK officials, board members and an unnamed politician are said to have been co-conspirators in the scam.
The details are contained in confidential minutes of the Capital Markets Authority (CMA) board meetings.
The minutes, which had until December remained confidential in the ongoing court proceedings, were filed in court following an application by former managing director Munir Sheikh Ahmed.
“Senior management of NBK received massive kickbacks amounting to 90 percent of commissions paid to agents who were recruited to mobilise government agencies to deposit money at the NBK,” say CMA minutes for a meeting held on November 19, 2017.
The CMA, however, said there wasn’t enough evidence against the board members and the unnamed politician mentioned in the audio.
Mr Munir is challenging the CMA decision in April 2018 fining him Sh5 million and banning him from holding a board position in a listed firm for a period of three years for his role in the ineffective management of the bank, his failure to ensure the board was furnished with complete and reliable information and for the misrepresentation of the lender’s financial statements.
The former NBK CEO denies these allegations, arguing that the CMA’s sanctions were part of a scheme to make him the sacrificial lamb while protecting other board members.
Mr Munir was among eight senior executives of the troubled bank who were fined and barred from holding office in any public listed company.
NBK hired two firms, Edge Capital and Advest, to help in mobilising deposits and in turn earn 10 percent on the deposits.
Ms Kanini Kioko is named as a director of Edge Capital while Mr Nelson Onzere is a director of Advest.
The CMA established that the NBK board was aware of the hiring of the deposit mobilisation agents and the fact that it was an expensive venture to the bank.
However, it’s not clear why the board failed to veto the hiring of the agents.
The regulator proposed to charge the board members with failure to provide proper oversight, allowing weak internal control systems that led to embezzlement of the bank’s funds.
But after deliberation the CMA board decided not to charge the NBK board members, only reprimanding them so as to ensure stability of the bank.
According to the minutes on record the hiring of the two deposit mobilisation agents was approved by Mr Munir, acting chief finance officer Wycliffe Kivunira and head of treasury Solomon Alubala.
Edge and Advest received Sh991.5 million in total as commissions in 2015 and yet there were no actual deposit mobilisations.
But unknown to Mr Alubala and his other contacts, Ms Kioko, the director of Edge, was secretly recording the conversations and archiving the directions she received on distribution of the loot. She shared these with the CMA.
The investigations established that Mr Onzere was approached by Mr Alubala requesting the former to use his firm, Advest, as a front for a deposit mobilisation fund from which he would earn commissions.
He also shared the WhatsApp conversations.
When he appeared before the CMA Mr Alubala denied these allegations.
He has also filed a suit in court challenging the CMA’s decision to ban him from holding office in a listed firm for 10 years. He was also fined Sh104.8 million, being twice the amounts the CMA allegedly traced to him.
But the whistle-blower placed him at the centre of the action. Mr Alubala is said to have been the one initiating the wiring of cash from the bank.
The cash was then immediately withdrawn but converted into US dollars for easier distribution.
The CMA wondered why such huge cash withdrawals were not flagged by banks.
The withdrawals were, however, done before the tight financial reporting laws came into place.
The cash would be received by Mr Alubala’s brother and occasionally deposited in his lawyer’s account.
For instance, Sh51.5 million was transferred to Mr Alubala’s law firm Henia Anzala. The cash was used to acquire two residential properties.
The CMA says that it has identified assets belonging to Mr Alubala and placed restrictions on at least one.
Also mentioned in the document are Gideon Kyengo and Richard Langat, who represented the National Social Security Fund (NSSF) on the NBK board.
On October 27, 2014, Chris Kisire Chepkoit, the former NBK finance chief, sent Ms Kioko a text message containing bank accounts of Kiplagat and Company Advocates to which the deposit mobilisation firms transferred Sh17.2 million.
David Kiplagat told the CMA the funds were for acquiring a piece of land in Nakuru.