April 30th 2017

Business / News

With legal greenlight, CBK to press forward with transfer of Imperial Bank's assets

It was alleged that the management had siphoned Sh34 billion in the fraud scheme within a period of 13 years as Janmohamed and associates had manipulated the bank’s software to hide the irregular transactions.

By Oscar NdundaTuesday, 08 Nov 2016 21:23 EAT

The High Court has lifted the suspension on the restraining orders issued on the Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation (KDIC) filed at the High Court on February 9, by shareholders of the Imperial Bank which sought to stop the two firms from any transfer of assets of the Imperial Bank which was placed under receivership on October 13, 2015.

The bank was placed under receivership after it was discovered that the top management led by former Managing Director late Abdumalek Janmohamed had been disbursing loans amounting to millions to his friends and business associates in a fraudulently manner. It was alleged that the management had siphoned Sh34 billion in the fraud scheme within a period of 13 years as Janmohamed and associates had manipulated the bank’s software to hide the irregular transactions and also used 12 companies to open accounts at the bank in which massive cash deposits were being made.

On June 21, KDIC, with endorsement of the CBK effected an agreement appointing NIC Bank Limited (NIC) as the Assets and Liabilities Consultant for Imperial Bank. The agreement mandates NIC to disburse on behalf of KDIC a maximum of an additional Sh1.5 million each to the remaining Imperial Bank depositors, subject to account and identity verifications. In addition, the Agreement provided that NIC would undertake an assessment of the quality of the bank’s assets and liabilities, support the recovery of loans, and following negotiations, assume certain assets and liabilities as well as the majority of Imperial Bank staff.

It was however expected that through this process, depositors will be granted structured access to about 40 percent of the remaining amount of verified deposits above Sh2.5 million, which would bring the cumulative payout ratio for all verified deposits to about 59 percent. The judgement by the High Court on the 4th of November saw the court overrule the suspension which will allow the KDIC and the CBK to continue with the process of transferring the assets of the Imperial Bank as the shareholders were neither discriminated against, nor were their rights violated as the they (shareholders) have to-date failed to provide adequate assurances to implement a proposal that will enable the lifting of the receivership, reopening of the Imperial Bank, and resumption of normal activities for its customers.

The final proposal by the shareholders on June 15, was rejected whereby the shareholders withdrew their offer to inject Sh10 billion and replaced it with a proposal to raise Sh5 billion by way of a rights issue. KDIC and CBK remained open for the shareholders to present a credible and tangible recovery plan based on the revised fraud/ loss of Sh44billion, without prejudice to the forensic investigation. On September 30, the KDIC and CBK filed a suit for the recovery of Sh44.9 billion against the directors and shareholders of the Imperial Bank for fraud, breach of fiduciary duty and negligence.

In a press statement released today, the KDIC and the CBK will continue to engage all stakeholders concerning the next steps in the resolution for the Imperial Bank, as permitted by the law. “KDIC and CBK again reiterate their commitment to protecting the interests of IBLR depositors, its creditors and the wider public interests, by resolving IBLR’s receivership in a professional and legal manner,” read the statement from CBK.

The writer is the news editor of the Kenya Free Press





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