On Thursday, April 5, 2012, at 6.03pm, an anonymous e-mail was sent out by a person claiming to be a member of staff at Imperial Bank, alleging fraudulent activities in the bank.

Among the recipients of the mail was Kenya’s financial sector regulator, the Central Bank of Kenya (CBK). 

“I am sharing this information despite the threats that the management continuously issues,” the whistleblower wrote, adding that CBK inspectors who had condoned the crimes, together with senior management, would be named.

The whistleblower alleged that money laundering and tax evasion were perpetuated in several accounts, which included W.E Tilley.

READ: The intricate web of ‘smelly’ deals: A tale of four banks and a fish company

The whistleblower also claimed that the then managing director Abdulmalek Janmohamed had secret accounts abroad, to which embezzled funds were channelled to.

“The e-mail is one of the documents annexed to the affidavit of Anwar Hajee, one of Imperial Bank’s shareholders, in support of a court case in which the shareholders seek to stop actions that could lead to liquidation of the bank.

READ: Imperial Bank shareholders take liquidation battle to Kenyan court

Mid-morning Tuesday, April 10, 2012, the Central Bank’s Communications Office forwarded the whistleblower’s e-mail to an officer within the bank for action. Six hours later, a Mr Cheres wrote to James Kaburu, Imperial Bank’s chief finance officer, asking him to supply CBK with the 50 largest borrowers of the bank, and information on the alleged fraudulent accounts and activities in the bank.

Twenty minutes to midday of the next day, Mr Kaburu sent an e-mail response to Mr Cheres stating that no Central Bank inspectors had facilities with Imperial Bank.

“We also strictly follow CBK prudential guidelines — with regards to money laundering and tax evasion — when opening accounts and confirm that all transactions with our clients are above board. We have installed manstas systems that pick out all suspicious transactions. We hope that the information provided has clarified and exonerated the bank from such malicious and un-authenticated e-mails,” Mr Kaburu wrote.

CBK went ahead to request more information on two other accounts, which Mr Kaburu shared.

In October last year, Imperial Bank was placed under receivership by CBK after it was found that more than $340 million was missing in fraudulent activities that involved one of the accounts that the whistleblower had mentioned.

The EastAfrican has seen some of the documents, filed in court, which point to how the fraud happened and who was responsible.

They include a report by forensic audit firm FTI Consulting, which was hired by the bank’s shareholders to investigate the fraud.

On September 15, 2015, the bank’s managing director, Abdulmalek Janmohamed suffered a heart attack; and died. The next day, Naeem Shah, the then head of credit and James Kaburu, the chief finance officer, were appointed acting managing director and deputy managing director, respectively.

According to the documents before the court, seven days after assuming the new positions, the two new executives confided in the bank’s non-executive chairman Alnashir Popat about the alleged fraudulent activities initiated by Mr Janmohamed, that involved irregular disbursements of vast amounts of money belonging to the bank, but were concealed from the board.

In its findings, FTI names Mr Janmohamed and his senior management team as the players in the fraudulent scheme.

READ: Imperial Bank managers move to protect assets

According to the report, the financial statements presented to the board, which were subsequently reported, understated advances and deposits by $380 million, with suspicious disbursements of $200 million involving at least three customers made on the strength of handwritten chits by the group managing director, through a special accounting software.

According to the documents, the scheme roped in senior managers, who duped the board into believing that the bank’s books were up to date.

Final board report

For instance, in February 2013, while preparing a final board report, the bank’s senior business development manager Mehbooba Shamji sent an e-mail to Naeem Shah, then the bank’s head of credit, advising him that he was free to remove or add replacements, in relation to the top 50 largest borrowers whose records were not disclosed to the board in the final presentation.

The forensic audit also reveals the existence of “special loans” within the banking institution that totalled $60 million as at the end of March 2014.

“Documents created in April 2010 and March 2014 list ‘special loans’ that appear to be the accounts through which fraudulent funds were disbursed,” FTI states in its preliminary findings. It adds that apart from the fraudulent disbursements, the management converted to fake deposits in dormant or inactive accounts to fund cash withdrawals.

A Central Bank account, without any specific amount, appears under this special loans category.

In the court papers are e-mail exchanges among senior Imperial Bank staff, as well as with Central Bank staff.

In one of the e-mail exchanges, Mr Kaburu instructs a Mr Reuben from Central Bank to delete some information in what the FTI investigators, suspected could have been a case of collusion.

Conspiracy

“Dear Mr Reuben, the highlighted in purple are the ones to be deleted. Classifications of Automotive Solutions should change from doubtful to watch. Please send me the amended copy,” Mr Kaburu wrote. In the list provided, the changes requested have been effected.

In October, Central Bank governor Dr Patrick Njoroge acknowledged that bank’s supervision needed strengthening to avoid a repeat of Imperial Bank.

“We are going to do investigations into how this lapse happened. It will also focus on whether there was collusion between the bank and supervisory staff,” Dr Njoroge said.

On the October 12, Imperial Bank chairman Alnashir Popat wrote to Central Bank, highlighting the FTI report findings while at the same time requesting a face-to-face meeting with Dr Njoroge.

“The fraudulent transactions resulted in the loss of $380 million of which $200 million comprise disbursements and a further $180 million are accrued interest,” Mr Popat wrote.

In this letter, the shareholders wanted to have a meeting with the Central Bank to chart a way forward. However, the next day Dr Njoroge wrote back to Mr Popat noting that CBK had determined the business conduct of Imperial Bank as unsafe and unsound to transact business.

“In the circumstance and to protect depositor’s interest, the Central Bank has appointed the Kenya Deposit Insurance Corporation (KDIC) as the receiver manager for a period of twelve months effective October, 13” Dr Njoroge wrote, before the bank sent a press release to the media.

READ: Imperial Bank placed under receivership, bond listing suspended