South Sudan police seek arrest of Kenyan banker in Sh722m row

 

A senior Kenyan banker risks being arrested after South Sudan police issued a warrant of arrest in an escalation of a Sh722 million row between his employer and a customer.

The South Sudan police issued an international warrant of arrest against Fredrick Owuor, South Sudan’s head of Stanbic Bank, over a dispute with Air Afrik.

“Whereas Fredrick Owuor Ouko stands charged the offence under section 36/366/110 of the Penal Code, 2008, you are hereby directed to arrest the said person and bring him before the crime officer in charge of the police station and investigator,” the warrant says.

On one hand, the bank says in court that the airline owes it money wired to its account while on the other, the airline accuses the bank of illegally freezing its account and withdrawing money without authority.

Already, the High Court in Nairobi froze any action by the Director of Criminal Investigations (DCI) and Director of Public Prosecutions (DPP) against the bank’s boss, Joshua Oigara who moved to court over the matter.

There is a separate battle pitting the two before the Court of Appeal.

Air Afrik’s managing director Eric Lugalia in the commercial case accused Stanbic of freezing their accounts and then deducting money from them illegally without authorisation.

Lugalia alleged that this led to the loss of business for the airline.

He further says that after the move, the airline was unable to meet the aviation contractual obligations it had with the South Sudanese government.

In reply, the bank denied owing Air Afrik any money. Instead, it argued it should be compensated $1.1 million (Sh143 million) that Air Afrik withdrew in February 2020.

According to the lender, the money in question was credited erroneously to the Airline’s account.

It wants the court to order the Bank of South Sudan (BoSS) and Air Afrik to be ordered to refund the amount in addition to four per cent per month interest from February 19, 2016 to February 8, 2017.

It asserted that BoSS failed to honour its obligation to credit the airline with actual money amounting to Sh722 million despite repeated requests to do so.

At the same time, it claimed that BoSS misrepresented to Air Afrik that actual funds had been credited into the Bank’s account.

In his statement supporting the case, Owuor said that on February 8, 2016, Stanbic received credit advice from the Bank of South Sudan (BoSS) to wire $7.2 million to Air Afrik’s Nostro account.

A Nostro account is one that a bank holds with a foreign bank, which is normally in the currency of the country where the funds are held.

He said that the credit advice was not backed by actual funds despite Stanbic going ahead to credit the Nostro account with the funds.

“In normal practise, such funds would reflect as a credit balance on the customer’s account but would not reflect in the available balance, until actual funds have been received, in this case by BoSS wiring the corresponding funds to the Nostro Account.”

Erroneously credited

According to Owuor, the credit made by Stanbic was only a paper credit transaction that reflects on their books for internal accounting, but it does not translate to the remittance of available funds.

He said that Stanbic wrote to BoSS on February 9, requesting the bank to wire the money to the Nostro Account to enable them to complete the transaction but BoSS did not respond to the letter or honour the request.

Between February 11 and 12, Owuor claimed that the airline withdrew a total of $1.1 million from its accounts.

He argued that Stanbic had not yet received the money from BoSS.

Following the development, Owuor said, they froze the airline’s accounts and made further follow-ups with BoSS but got no response.

The court heard that this prompted Stanbic to notify Air Afrik’s Managing Director that the $7.2 million had been erroneously credited to their accounts.

“Thereafter on 22nd February 2016, the bank wrote to the Director General of BoSS seeking the reversal in the Clearing Account of the residual balance of the credit amount amounting to USD 6,107,500.00. BoSS did not respond,” said Owuor.

On April 21, 2016, Owuor said, that Stanbic wrote to BoSS requesting it to fulfil its outstanding obligations by crediting the Nostro account with amounts that had accrued over time for several transactions, but it did not respond.

Owuor stated that on the same day, they received a letter from the airline dated April 20 demanding full payment of the remaining $6 million plus an apology.

He also said that Stanbic then wrote back refuting the demand from Air Afrik and further demanded a refund of the $1.1 million that had been deposited in the airline’s accounts and withdrawn.

Owuor further said that on July 5, the bank received a letter from the Central Bank of Kenya (CBK) seeking information over the dispute, saying that Air Afrik had filed a complaint against them.

It emerged that while CBK was still probing the matter, Stanbic, Air Afrik and BoSS officials met in Nairobi to resolve the matter, which ended with BoSS promising to deposit the money.

On February 8, 2017, the court heard that BoSS finally transferred $1.5 million to the Nostro account, and Stanbic deducted the $1.1 million that Air Afrik had withdrawn and deposited the remaining $400,000 into the airline accounts.

Owuor further added that on April 20, 2017, BoSS deposited $5.7 million into the clearing account.

According to him, this confirmed that the credit advice did not represent actual funds.

He argued that BoSS was at the heart of the mess saying that its own communication showed instructions to transfer $2 million in two tranches in May and August 2017.

Owuor added that this confirmed that BoSS had not provided credit advice for the $1.5 million paid in February 2017.

He said that BoSS was liable to pay the outstanding balance due to the airline.

Erroneous withdrawal

According to Owuor, Stanbic notified Air Afrik that the payment would come from BoSS and not them. He said that Stanbic is seeking $1.1 million in interest from the airline and BoSS for the erroneous withdrawal by Air Afrik.

“It is the bank’s position that BoSS failed to honour its obligation to credit the offshore USD Nostro Account with actual funds in the sum of $7.2 million despite repeated requests to do so and misrepresented to Air Afrik that actual funds had been credited into the bank’s accounts,” he said.

Owuor wants Stanbic exempted from any orders that may be made against it in a compensation case filed by the airline.

“In addition to the foregoing, Air Afrik and BoSS maliciously caused highly damaging material concerning the bank to be published by the Kenyan media houses in relation to the alleged failure by the bank to honour the Credit Advice dated 5th February 2016.”

The bank CEO, Oigara was in December last year summoned by South Sudanese authorities over the row.

Here in Kenya, he had been summoned by DCI officers but got orders stopping his arrest or harassment, saying they were based on a false complaint.

The DCI’s Banking Investigative Fraud Unit (BIFU) summoned Oigara to shed more light on the eight-year dispute.

In getting the orders, Oigara and the bank through Senior Counsel Kamau Karori said that on the day the DCI summoned him, he had joined President William Ruto for an exhibition at the Kenyatta International Convention Centre (KICC).

Kamau said his client was not working at Stanbic when the dispute from the transaction arose adding that the move to have the matter probed by authorities in South Sudan and Kenya was meant to intimidate Stanbic.

According to Kamau, the DCI said it is investigating the alleged offence of fraud and false accounting.

The lawyer said the complaint had already been probed and the bank was cleared of any wrongdoing. Kamau added that Air Afrik had lodged a complaint with the CBK over the same dispute but it was thrown out.

CBK allegedly found that the bank had done nothing wrong by debiting amounts it had erroneously wired to the firm.

A case filed by the airline against the bank at the High Court’s Commercial Division was frozen after Stanbic got an order from the Court of Appeal.

The bank protested a ruling by Justice Nixon Sifuna saying that it stopped them from telling its side of the story since they had to get permission from the airline to even file a witness statement.