Email correspondence provided as annexures in the shareholders’ replying affidavit in the application by Kenya Depositors Insurance Corporation (KDIC) to freeze their assets now show that Imperial Bank not only enjoyed a lax supervisory relationship with the Central Bank of Kenya (CBK), but that managers were also always warned when the kitchen got too hot.
On July 17th, 2015, exactly two months before the late Group Managing Director Abdulmalek Janmohammed’s fatal heart attack, the bank’s Chief Finance Officer, James Kaburu received communication from CBK’s supervision department.
“Dear Mr. Kaburu, We spoke. Attached, please find forwarded. Regard, Kaloki.” The email is sent at 3:08PM.
The attachment from a Kaloki J.D at Central Bank’s supervision department was a circular dated July 14th addressed to the Managing Director of Imperial Bank. It’s subject: INFORMATION REQUIRED UNDER SECTION 32 OF THE BANKING ACT.
A Mr Ali Mohammed on behalf or the Director, Bank Supervision signs off the circular.
It says in part: “In accordance with the provisions of Sections 32 of the Banking Act, we hereby inform you hat the inspection of your bank at the close of the business on 30th June 2015 will be carried out commencing 3rd August 2015. The team for this inspection will be Ms. Medline Kihara.
To enable the exercise to progress smoothly, please ensure that all the inspection forms to be forwarded to you through email are completed and delivered to our offices by 28th July 2015.”
In his response, Kaburu emails a Reuben Cheres at the same department. He sends the email using his work address to Cheres’s yahoo address, but also copies his now co-accuser and former Head of Credit of the collapsed bank; the email is sent 25 minutes within receipt of Kaloki J. D.’s email.
“Dear Reuben, Good afternoon. It seems your righthand doesnt know what your left is doing. See below,” referring to Kaloki’s email.
Additionally the email exchange between Central Bank and Kaburu, provided in court and seen by Money and Markets, now shows that the banking sector regulator could have stopped the biggest theft of depositors’ funds had it taken the whistle blower warnings seriously.
The emails that form part of defence evidence in the suit where KDIC wants to freeze Imperial Bank directors’ assets show that CBK received three whistle-blower warnings on the fraud in 2012, between March and September.
In all the three warnings, CBK did not send investigators to the bank and neither did it call the managers to its offices for questioning.
Instead, the email conversations we have seen indicate that CBK took its sweet time to act on the whistle-blower emails when they landed in the regulator’s communication office, and ignored the third warning.
In one shocking delay in action on emails relating to whistle-blower warnings, a banking supervision department official at CBK identified as Reuben Cheres takes almost a whole month to look at a response from Imperial Bank on the warning.
On March 19th, 2012, the first whistle-blower email is sent to the banking regulator and is received the following day by its communication office which then forwards it to Pere FPK.
The whistle-blower says he wants CBK to bring malpractices at Imperial Bank under control, “before depositors; banks and CBK lose funds in this collapsing entity.”
He tells CBK that the bank is facilitating and abetting tax evasion through fictitious accounts and that directors were using clients’ deposits to engage in drug trafficking. He also flags the unsecured loans to unnamed clients amounting to Sh3 Billion and that CBK inspectors have been bribed with unsecured loans and kickbacks to keep mum about the huge unsecured loans.
When the whistle-blower email lands on Pere’s inbox, he quickly calls Kaburu and briefs him on the claim. Then he forwards the whistle-blower email. Imperial Bank responds through Kaburu with a simple message, “We spoke.”
It takes 46 minutes between the time Pere receives the whistle-blower email at 9:14 AM and 10:00 AM the time it is received from him by Kaburu. Then Kaburu takes a whole day to respond dismissing the allegations. His sends his response to Pere at 4:00 PM and this is where it gets interesting.
Pere receives the email from Kaburu almost a month later at which time the second whistle-blower email has been shot to CBK.
Determined to push CBK into action, the whistle-blower sends another email on April 5th, 2012 at 6:03 PM. But it is Easter eve and the communication office at CBK has closed for the public holiday that will go for the next four days.
On Tuesday April 10th, the communication staff see the email. However, they do not send it to Pere, but to Chepng’ar with a short message, “Good morning. This is for your attention.”
The email repeats the same allegations as in the first email but goes further and names the suspicious accounts including W.E Tilley which would later emerge as the leading account in a intricate web of accounts that were used by Janmohammed to steal from the bank.
Then a curious thing happens.
After Chepng’ar sends the the email to requesting the transaction on suspicious accounts, Kaburu called another CBK official Peter Gatere. Please mark the name Gatere because we will look at his role in the Imperial Bank saga in a subsequent story.
The following morning, Kaburu sent the whistle-blower to Gatere with the following message; “FYI (For Your Information) as discussed.”
Whatever discussion that had gone on between Gatere and Kaburu was productive because CBK dropped the matter until in September when the same whistle-blower sent his last SOS and gave up.
“Please take note that the bank has started moving funds to fictitious accounts monthly; accounts that don’t even have signatories or any KYC (Know Your Customer) in order to avert litigation. The Credit Manager by the name Asif has already resigned after he got wind of this email (the first whistle-blower email).
He was the one directly responsible for the heinous transactions. Please act with speed,” the whistle-blower pleaded with CBK.
In another curious turn of affairs, it is Gatere who forwards the last whistle-blower email to Kaburu.
The case will be heard on October 26th and 27th. The ruling on the Judicial Review application is also set for October 27th.