How ‘fishmonger’ family looted Sh34 billion from Imperial Bank

Commercial banks are known to be the safest place to keep and grow your money. But as 50,000 depositors of Imperial Bank have painfully found out, their money would have been much safer at home under their mattresses.

This is after a forensic audit revealed shocking details of how eight members of a family that largely deals in fish business conspired with the bank’s top managers to siphon Sh34b from the bank in one of the biggest bank thefts to strike the banking industry.

The scheme orchestrated by the bank’s chief executive and implemented by the head of credit and finance officers saw depositors cash wired to fictitious accounts without any paperwork

It is the last day of August 2015. The Imperial Bank boss Abdulmalek Janmohamed walks into his office in Westlands, Nairobi. He immediately summons his head of credit and hands him a handwritten chit.

On it just five words are written, “For this week disburse Sh100 million.” At the top of the chit dated August 31, 2015 is the subject – Re Tilley. Tilley didn’t need any loan forms. There was nothing else required.

It did not matter that by that date, the Tilley account was already overdrawn by Sh390 million. Just the handwritten chit and the signature was enough for the head of credit to wire another Sh100 million into this fictitious account. This was an all too familiar instruction to Mr Naeem Shah by now.

This was the world of Imperial Bank for over 13 years in which more than 34 billion had been disbursed though this account. No questions were asked. This is just a tip of the shocking details unearthed by a forensic report by FTI Consulting, which has been filed in court and seen by the Business Beat that now gives the public a peak into what is now one of the biggest heist of the decade to hit the banking industry.

The fraud planned and meticulously executed by the bank’s insiders has also exposed a possible cover up by unnamed officials of the Central Bank of Kenya (CBK), who despite being tipped by a whistleblower in 2012, the regulator watched as a family of eight conspired with the bank to siphon Sh34 billion in about a decade.

The forensic audit revealed how the lender’s former Managing Director, late Mr Abdulmalek Janmohamed, and other members of senior management committed a long running and systemic fraud by running a hidden ‘parallel’ bank which disbursed Sh20 billion from the bank.

The hidden ‘parallel’ book and financial statements were never disclosed to the Board or reported, which concealed true underlying position of Imperial Bank. The true position could only be obtained from the raw data in Flexcube to which the lender’s board had no access.

According to the Privileged and Confidential report, which has been kept secret until the fallout between the bank’s main shareholders and Central Bank became irreparable, senior managers of the bank used a sophisticated report writing tool to manipulate the accounts. This fraud reduced net assets by Sh34 billion, of which the principal amount stood at Sh20 billion, to reflect loss of accrued interest of Sh18 billion.

What is worse, the financial statements presented to the Board and subsequently reported understated advances and deposits by Sh38 billion. Fraudulent disbursements of Sh20 billion involving at least three customers were made just by the use of handwritten chits by the group managing director, fictitious journals and ghost accounts, the forensic report reveals.

The forensic audit named Mr Janmohamed and other senior managers among them Naeem Shah, James Kaburu, Nina Shah, Mahbooba Shamji and Robinson Boreh, as having colluded to commit or cover up the fraudulent disbursements (including interest accruing on those disbursements) converted to fake deposits, in dormant or inactive accounts to fund cash withdrawals.

The Imperial Bank intrigues turned ugly last week after shareholders turned the heat on the CBK accusing its employees of being part of the cover-up transactions. As the drama unfolds, bond holders are stuck with Sh2 billion worth of untradeable paper after the market regulator stopped the bond from trading.

Imperial Bank Limited was formed in 1992 by Mr Janmohamed, who was sponsored by the current shareholder group. Janmohamed remained the boss for 23 years until his death in September 2015. The bank grew steadily and profitably, reporting Sh2.6 billion in pre-tax profit for 2014, with net assets of Sh11.2 billion as at September 30.

Trouble at the bank became public on October 13, last year when the CBK appointed the Kenya Deposit Insurance Corporation as the receiver of the bank for 12 months. Just a month earlier, the banks long serving group managing director, Mr Abdulmalek Janmohamed, had passed away after a cardiac arrest.

W.E Tilley (Muthaiga) Limited, a company registered in Kenya that has a fish processing plant and which over the years it is claimed obtained billions fraudulently from the bank, heads a group of companies owned and controlled by eight members of the same family, most of them into fish industry related business. The family members include Zulfikar Haiderali Jessa, Nasir Haiderali Jessa, Nargis Jessa, Nadir Azizali Jessa, Firoz Jessa, Salim Jessa, Irfan Shamshadin Jessa and Nashiv Haiderali Jessa. W.E Tilley was used by the Jessa family to orchestrate the fraud.

The Jessa family has an extensive business empire extending through East Africa and beyond and numerous areas of investment extending into fishing, mining, real estate, food processing and water bottling. “They have a large number of companies in which there is cross-shareholding and directorship by members of the family,” documents filed in court read.

W.E Tilley is owned by Zulfikar Haiderali Jessa, Nasir Haiderali Jessa, Nargis Jessa, and Salim Jessa. Mr Zulfikar Haiderali Jessa is also a director of four other companies named in the scam. Another company at the centre of the fraud is Prime Catch (exports) Limited which is incorporated in Tanzania.

According to the court papers, some of Prime Catch’s operations are conducted in Nairobi and it had bank accounts at Imperial Bank, which were also controlled by members of the Jessa family. Prime Catch Exports is claimed to have fraudulently obtained Sh291 million loan from the bank, loans which were not reflected in the bank nor paid.

It is also claimed that Prime Catch obtained another Sh436 million fraudulently through its account number 0101125009. The other players in the scam are J Fish Kenya Limited (a fish processing and exporting firm), Mara Fish Packers, Victorian Delight Limited (a fish processing and exporting company) and Ruby Red Limited (a marble and onyx stone supplier).

Others are Value Pak Foods (a horticultural services company), From Eden Limited (an export company and Aqualite Limited, which deals in drinking water. All these are Kenyan companies and their defacto managing director is Firoz Jessa.

“The Tilley Group of Companies is owned and operated by the Jessa family whose patriarch is the 14th defendant (Firoz Jessa).” Most of these companies involved were operating in the food business, fish processing and exports. The other foreign companies named in the scandal are Marmo E Granito Mines (Tanzania), Marmo Marble Limited (Uganda) and Fishways Uganda Limited.

Following the death of Mr Janmohamed, the bank’s former head of credit Mr Naeem Shah was appointed as the acting managing director while Mr James Kaburu, who was by then the Chief Finance Officer was appointed the acting deputy managing director. After their appointment, Mr Shah and Mr Kaburu held a meeting with the bank’s board of directors, where they claimed that the late Janmohamed had for some time instructed them to carry out certain ‘false, fraudulent, unlawful and illegal’ activities at the bank.

In particular, Mr Shah claimed that the late managing director had asked him to allow the Tilley’s among other customers of the bank to withdraw vast sums of money from their accounts without having any loan facilities or accommodation. Mr Shah had received instructions on handwritten chits to carry out the acts. The two also manipulated the banks books to allow the scam to go on unnoticed.

The stolen amounts were never reflected in the bank’s accounts but were instead suppressed by being contained in accounts which would not be exposed in the bank’s financial statements. The scheme, which ran from 2002 to September 2015 saw the bank’s top managers together with the Tilley Group in blatant disregard of the law and prudential guidelines governing the sector siphon out in excess of Sh34 billion. The money was paid out through the account of Tilley Group but mainly through W.E Tilley to various banks and parties.

The money was concealed by various means. In addition, the interest was accrued into one account and part of it was again misappropriated or reapplied as capital. The withdrawals went on without any loan documentation, securities or any positive credits in their bank accounts. The money varied from about Sh10 million to Sh100 million weekly. They passed through the W.E Tilley Account – 0100805006 and from here the monies were wired out to the Jessa’s and their companies.

Tilley had a dollar trading account at Imperial Bank. But over the years, some of the money would be transferred from this account to another account where it would be converted into Kenya shillings.

W.E. Tilley (Muthaiga) Ltd, which has been at the centre of the scandal, has now admitted receiving Sh10 billion from the bank and has offered to have a second charge created over its properties. “We hereby acknowledge the receipt of an amount of Sh10 billion. We confirm that we are willing to provide collateral for the disbursements made to us. We can allow you second charge on ...securities over the existing collateral at Fidelity Commercial Bank, Diamond Trust Bank and Prime Bank,” reads in part a letter dated October 10, 2015 addressed to Imperial Bank board.

In order to conceal the fraudulent and false payments in the Tilley Account, the overdrawn amounts would be transferred to another fictitious, illegal and fraudulently established accounts. The magic account was the Tilley account number 0102026004 – the overdrawn special account. “This account was specifically created by the deceased (Mr Janmohamed) and other senior officials of the bank to accommodate the transfers from the Tilley Account and apply interest thereon,” the court papers say.

“Having this transferred, the debits to the Tilley account would be credited with the fraudulent amounts so that it is cleared of any debit balances. A corresponding debit entry for the fraudulent amount would be entered in the overdrawn special account.”

The principal amount would then be transferred to a series of fictitious accounts where they would be domiciled and not reflected in the bank’s financial statements. There were about 25 special loan accounts ranging from Sh25 million to Sh1.5 billion. The total amount in the special loan account was an amount in excess of Sh18 billion.

It has also emerged that the shareholders have run out of patience with the regulator and have ganged up to drag the CBK to court. Some of the companies that hold significant shareholding in the bank include Abdulmal Investments Limited, Imaran Limited, Reynolds & Company Limited, East Africa Motors Industries Limited, Momentum Holdings, Rex Motors and Kenblest Limited.

In court papers filed on Friday, the owners of the bank are now accusing the regulator of being part of its troubles. In an interesting twist, the shareholders now seem to have changed tact on how they have been handling the issue after they linked the regulator to the fraudulent activities that saw the bank lose Sh34 billion. Shareholders have accused CBK of publicly humiliating them and ‘making menacing demands with the view to compulsorily obtain shareholder capital for the recovery of the bank.’

The shareholders are also accusing the regulator of warning them against engaging with the media, but at the same time using the media to run a prejudicial campaign against them. “The CBK has breached our clients constitutionally guaranteed right to an expeditious, efficient, lawful and procedurally fair administrative process,” the documents reads in part.

“Unlawful acts by the CBK against our clients (include) failing to subject CBK’s own staff to any form of scrutiny or accountability in view of the supervisory roles that CBK had over the troubled institution and its duties in this regard to all the bank’s stakeholders, including our clients,” the letter adds.

They accused CBK of violating the shareholders rights in the manner in which it handled the Imperial Bank case by breaching ‘of the right to fair administrative action and the presumption of innocence’. They want the CBK to take ‘immediate steps to remedy the violations’. “The CBK and Kenya Deposit Insurance Corporation (KDIC) explain whether or not the statutory powers for exclusion and transfer are being invoked under the Kenya Deposit Insurance Act and its regulations, and, if so, provide appropriate notices of the same,” they said.

The shareholders also want the CBK to provide information on the Imperial Bank funds so far traced or recovered as well as initiate open transparent investigations into all CBK staff who may involved in the fraudulent scheme.