A complaint to the ethics and anti-corruption agency last week, calling for investigation of Central Bank of Kenya Governor Patrick Njoroge over alleged abuse of office, is the latest move in what is seen as a campaign to kick him out of office.

The complaint, filed by a law firm owned by Ahmednasir Abdullahi, acting for his Nairobi Law Monthly publication, raises questions about decisions the governor took on Imperial, Dubai and Chase banks, which had been placed under receivership.

The complaint is the latest addition to a heap of legal suits and threats to sue by advocates representing various interested parties, directed at different institutions, but most of which single out the governor for criticism.

For example, in a letter to the Director of Banking Fraud Investigations Department, protesting the detention of former National Bank chief executive Munir Sheikh Ahmed at the airport as he attempted to travel to Dubai, lawyer Paul Muite claims the action was taken on the instructions of the CBK governor.

“The one refrain my client and I kept getting was ‘orders from above,’ the above being the Governor of CBK,” Mr Muite says in the letter dated July 18. He mentions the CBK governor at least 13 times in the seven-page letter.

So far there are more than seven cases in court cross filed between Imperial Bank directors, shareholders, depositors against either the CBK, the governor, KDIC and the Capital Markets Authority. Out of this, only two rulings have been made with CBK appealing on one.

Mr Abdullahi’s firm, Ahmednasir, Abdikadir & Co. Advocates, acting for depositors of Imperial Bank, has also threatened to bring a class action suit against the Central Bank and the governor.

In a November 9 letter to CBK, announcing the intention to bring a class action, Mr Abdullahi accuses Dr Njoroge of holding “extra-statutory” power from a political power grid he is connected to, while specifically targeting certain banks owned by minority communities in the country.

“It is quite obvious that Dr Njoroge’s extra-statutory powers explains his utter contempt of the law and the ‘bull in a china shop’ management style he so impulsively exhibits as his guiding principle in the mismanaging the banking sector,” his letter to CBK reads.

'Legal mercenary' tactics

A source at CBK told The EastAfrican the bank was aware of this legal intent by some of the depositors and was currently preparing its legal team to respond to the suit, once it has been filed.

“We know that these people, driven by the cartels, are planning an avalanche of legal suits and measures against the bank and the governor. We will respond to these suits according to the law,” the source said, adding that the cartels had been frustrated with the cleaning up of the sector and had resorted to “legal mercenary” tactics to frustrate the CBK and intimidate the governor.

A person familiar with the matter suggested that ongoing criminal investigations against two individuals at Chase Bank had reached a crucial stage and the individuals were running scared.

The latest claims against the governor could also have been triggered by a case filed by Imperial Bank, CBK and KDIC against the directors of Imperial Bank, which has reportedly sent shockwaves in the entire industry.

In the case, filed on September 30 through Murgor & Murgor Advocates and Amolo and Gacoka Advocates, Imperial Bank, CBK and KDIC are demanding from the directors $449 million, which they say was the amount lost or defrauded while they were directors of the collapsed lender.

The amount includes a claim made against the shareholders for irregularly paying themselves $27 million as dividends when the bank wasn’t making any profit, and a further $20 million claimed from the directors for recklessly lending to firms.

The claims against the directors are based on gross negligence and breach of fiduciary duties, which arise out of guidelines issued by CBK imposing responsibilities on the directors of the banks.

The case seeks the freezing of the directors’ shares in 42 companies known to CBK and further claims any shares in any company in Kenya and out of the country.

Industry in shock

“The case sent shockwaves in the banking industry as every director of a bank that has been less than diligent panicked. It’s a landmark case that will change the face of the banking industry which has attracted all sorts of people — good and bad. This case alone provides great motivation for those who hitherto got away with murder, through insider trading,” a source with knowledge of the matter told The EastAfrican.

When the case came up for hearing, the CBK, Imperial Bank and KDIC sought to disqualify three law firms representing the directors on account that their lawyers had represented the bank in the past. This application will be heard in January.

The EastAfrican understands that it was after the filing of the disqualification application of the three law firms by CBK and KDIC that Mr Abdullahi wrote to Dr Njoroge, threatening to bring a class action suit, and later the letter to the EACC.

Outside legal circles, The EastAfrican has seen communication about intentions to target Dr Njoroge for removal from office.

“The problem we have here is that the governor is incorruptible with money. He has no known investments or business interests where he can seek favours. He doesn’t value business from our investments perspective and his only corrupt nature is his ego. Yes, we know he enjoys a security of tenure but we also know the legal loopholes to use to have him out,” a source with interest in the banking sector told The EastAfrican.

People we spoke to in the industry told us of a well-organised and powerful network that is targeting Dr Njoroge because of his resolve to clean up the sector.

It is understood that people associated with the three banks have attempted to rope in politicians and high-ranking government officials in their effort to have their way in the industry.

“They have engaged public relations experts who are controlling the social media in this onslaught. Fortunately, Dr Njoroge is a man who minds his business, doesn’t socialise and so it doesn’t concern him as much as it would to those people who want to be socially accepted,” said one person.

“While all his action will go a long way in streamlining the industry, it is clear it will earn him a lot of influential enemies. But he has vowed never to be cowed,” he added.

The official said that, unlike other regulatory issues, when it came to banking, it was simply a question of the missing money, with no plausible option outside of refinancing or recapitalising fully — including amounts to meet the liquidity ratios.

The EastAfrican has since seen documents and communication between interested parties and some government officials, which outlined a review of the laws and the loopholes that could be exploited in kicking out the CBK governor. In one of the correspondences, the concern that the absence of the board could compromise decision-making as the governor was left to implement policy without the backing of a board was explored.

The complaint raises questions about decisions the governor took on Imperial, Dubai and Chase banks, which had been placed under receivership, noting that these decisions were taken in the absence of the board, raising a possibility of constitutional and legal challenges over these decisions.

“For the past 18 months, CBK didn’t have a properly constituted board as required by the Central Bank of Kenya Act, which under section 10 of the CBK Act authorises only the board to formulate and owns the policy directions of the bank. Notwithstanding the lack of a lawfully constituted board of directors, the governor has been running a one-man show and has created liability for the bank without due supervision as required by law. Dr Njoroge’s actions and omissions are a blatant case of abuse of office,” NLM letter reads in part.

‘A board of one’

The publication also claims Dr Njoroge has been acting in breach of the law and has usurped the powers of the board, whose only member has been the chairman Mohamed Nyaoga, accusing him of operating in an atmosphere where there is no oversight management.

The government has since gazetted the names of the nominees to the CBK board — a day before Mr Abdullahis’ letter was delivered to EACC. President Uhuru Kenyatta appointed Mr Nyaoga as the chairman, while Rachel Dzombo, Samson Cherutich, Ravi Ruparel, Nelius Kariuki and Charity Kisotu will sit on the board.

Under Kenya Gazette Notice 9235 dated November 3, Mr Ruparel, Mr Kariuki and Ms Kisotu’s appointments came into effect on November 4, while Ms Dzombo and Mr Cherutich began working last week.

“We have seen attempts, both legal and political, to try and arm twist the governor to share the contents of these two forensic audits with the shareholders. However, in all the cases involving failed or mismanaged banks, forensic investigations have been done, results of which are aiding criminal investigations by the Directorate of Criminal Investigations and the Banking Fraud Unit,” the source said.

The EastAfrican has learnt that the CBK has applied to appeal the ruling of Justice George Odunga of November 4. This ruling asked CBK to brief the depositors on its legal actions as it sought to unblock their funds.

The CBK, Murgor & Murgor Advocates filed the application to appeal on November 15, citing dissatisfaction. Interestingly through a press release on November 8, the Central Bank had announced that it had won the case against the shareholders and depositors.