Diamond Trust Bank (DTB) which was mentioned as a conduit to siphon funds from Imperial Bank has emerged as the preferred suitor to acquire the collapsed bank, we can report authoritatively.
According to Bloomberg, DTB beat KCB Group to emerge as the leader among the investors that had expressed interest in the acquisition.
However, a deal is yet to be hammered out after Kenya Deposit Insurance Corporation (KDIC) rejected the initial deal from DTB.
DTB had proposed in the initial deal to take over part of Imperial Bank loans and deposits that would have potentially provided the collapsed bank’s depositors with a third of their savings during the recovery period.
In a meeting held on April 4, a technical committee of KDIC board rejected the DTB deal and asked the evaluation committee on the expression of interest on the bank to go back and negotiate a better deal.
But DTB interest in Imperial Bank is not that of an ordinary investor. For the bank has a lot to hide in its past dirty dealings with Imperial Bank depositors funds which eventually led to the collapsed bank being placed under receivership.
In fact, the role of DTB in the collapse of Imperial Bank has come under sharp focus following its high powered push to acquire the collapsed bank.
A forensic audit commissioned by Imperial Bank non executive directors shortly after the death of former group managing director Abdulmalek Janmohammed showed that DTB was one of the two banks that both Janmohammed and his co-conspirators used to move the bank’s funds in the Sh34 billion fraud.
Data gathered by the forensic auditing firm, FTI Consulting, showed that at the time of the collapse DTB held Sh408 million that had been fraudulently moved from Imperial Bank by directors of W.E Tilley (Muthaiga) Ltd, the co-conspirators in the fraud.
Further information showed that DTB was used by the directors of W.E Tilley to lauder proceeds of the fraud.
For example, five months before Imperial Bank was placed under receivership, DTB received a Sh4 billion transfer from the Emirates National Bank of Dubai into the account of one of the directors of W.E Tilley, Firoze Haiderali Jessa.
Ordinarily, such huge transfers are supposed to be reported to Kenya’s Financial Reporting Centre (FRC) which scrutinises sources to prevent laundering of funds from drugs and terrorism in the country. However, there is no evidence to show that this huge transaction was ever reported to FRC.
A trail of the fraud transactions shows that architects of the fraud moved funds in circular motions from Imperial Bank to both DTB and Fidelity Bank (now SBM Kenya) from where funds would be either be withdrawn in cash or wired to foreign bank accounts owned by W.E Tilley directors or Janmohammed and then back to Nairobi.
DTB however has done a good job cleaning its mess in Imperial Bank with the help of KDIC and CBK and the acquisition of the collapsed bank will push all the remaining dirt under the carpet.
For starters, DTB was given free access to Imperial Bank system when it was recruited by KDIC as a facilitator to disburse funds to depositors shortly after it was placed under receivership in 2015.
It did not escape notice that the receiver manager at the time that DTB was appointed to disburse funds to depositors was Peter Gatere, a CBK official who had helped Janmohammed to conceal the fraud in Imperial Bank for more than 10 years.
It is also instructive that with DTB, Imperial Bank depositors are staring at unfair deal compared to Chase Bank depositors.
Although KDIC has asked for a deal that will see DTB pay Imperial Bank depositors more than a third of their savings, there is no guarantee that they will get anything close to 70 percent.
According to our sources, a request by KCB to do further due diligence on Imperial Bank made KDIC burst the timelines that had been set in a road map for the bank’s recovery.
But on a scrutiny of the banks books, KCB found it would need to borrow funds from Central Bank of Kenya (CBK) to complete the transaction. It was this liquidity challenge that knocked KCB off the list leaving DTB as the preferred suitor.
Instructively, the fact that an investor as cash rich as KCB Group would need to borrow from CBK to conclude the transaction means that the way the receivership has been handled has taken a toll on the collapsed bank funds and the possibility of Imperial Bank depositors getting anywhere close to 70 percent of their funds is very dim.
State Bank of Mauritius (SBM) which has acquired Chase Bank beat other suitors with its offer to disburse to depositors 75 percent of savings.
Yet Chase Bank collapsed under the weight of liquidity pressures which forced CBK to place it under receivership.
In the case of Imperial Bank, the bank was placed under receivership when it was in good form in terms of liquidity. At the time KDIC officials took over the bank, it had Sh20 billion in cash and government securities. It also had a strong loan book valued at Sh40 billion. Essentially, this means the bank assets were conservatively valued at Sh60 billion.
There is also the fact the deposits could have been higher because the late group managing director used to suppress deposits in order to run the fraudulent parallel banking scheme.
Where all those funds have disappeared to is a story that only KDIC and CBK can tell.
Even as all indications are that KDIC will eventually hand over Imperial Bank to DTB, the deposit protector is yet to recover funds banked by architects of the collapsed bank fraud at DTB.