CBK defends plan to auction assets of former Tsavo Securities manager

Central Bank of Kenya (CBK) Governor Prof. Njuguna Ngung'u during the National Digital Registry Service Financial Services Sector briefing at the Serena Hotel on October 23, 2014. CBK has defended its plan to sale family assets of former Tsavo Securities Limited boss Fred Mweni arguing that he went against the agreement entered on how the debt would be cleared. PHOTO | DIANA NGILA |  NATION MEDIA GROUP

In Summary

• Tsavo Securities Limited, a company licensed by the Capital Markets Authority (CMA) as an investment advisor to firms listed at the Nairobi Securities Exchange (NSE), had through a deal dated December 13, 2012 entered with CBK, agreed to pay millions of shillings owed to the regulator.
• It discovered that two credits had been entered Free of Payment in August to two Central Depository Securities (CDS) accounts of Manline Telecommunications and Tsavo Securities valued at Sh7.1 million and Sh9.5 million respectively.
• The company loans with other banks also attracted interests at an alarming rate to the disadvantage of Tsavo Securities.

By ABIUD OCHIENG
More by this Author

The Central Bank of Kenya has defended its plan to sale family assets of former Tsavo Securities Limited boss Fred Mweni arguing that he went against the agreement entered on how the debt would be cleared.

Tsavo Securities Limited, a company licensed by the Capital Markets Authority (CMA) as an investment advisor to firms listed at the Nairobi Securities Exchange (NSE), had through a deal dated December 13, 2012 entered with CBK, agreed to pay millions of shillings owed to the regulator.

The debt arose from the sale of Treasury bonds by Tsavo Securities which CBK said were fraudulently acquired.

The monetary operations and debt management arm of CBK said it identified some anomalies while processing Cash Call-ups for Treasury bond interest payments due as at October 31, 2012.

It discovered that two credits had been entered Free of Payment in August to two Central Depository Securities (CDS) accounts of Manline Telecommunications and Tsavo Securities valued at Sh7.1 million and Sh9.5 million respectively.

“Further investigations revealed fraudulent entries of Treasury bonds amounting to Sh105 million in the CDS accounts of Manline Telecommunications (Sh65.6 million) and Tsavo Securities (Sh39.5 million),” the CBK added.

The two firms subsequently sold the securities and credited the proceeds to their respective bank accounts.

TRACED AND FREEZED
However, the Banking Fraud Unit of the police traced and freezed part of the proceeds in the sums of Sh25 million and Sh2 million belonging to Tsavo Securities in Standard Chartered Bank and Barclays Bank respectively, as well as Sh6 million held to the credit of one Jackson Nguli at Cooperative Bank.

As the investigations gathered steam, Mr Mweni approached CBK with a proposal to pay for the value of the securities received and sold by his firm.

It was agreed that the debt, together with accrued interests and capital gains as at October 26, 2012, was Sh48,333,368.84 and the amount would continue attracting interest at the coupon rates of the respective bonds until payment is made in full.

With the deal, Mr Mweni managed to pay Sh20 million in February 2013. There has been no further transactions to pay up the balance which stood at Sh31 million as at May 31, this year.

Mr Mweni had provided family assets as securities and upon failing to honour the agreement, CBK advertised the said properties with a view to auction them on September 23. The auction was recently stopped by the court pending determination of the dispute.

In court papers, Mr Mweni said that CBK has frustrated his efforts to service the debt. He said that CBK agreed with CMA to have him edged out of the board of directors of Tsavo Securities therefore putting him in an awkward position given that he had charged his family property to bail out the firm.

“Consequently, I had no participation or control whatsoever in management of the company,” Mr Mweni noted.

FUTILE EFFORTS

Further, Mr Mweni and by extension Tsavo Securities were precluded from executing any mandate at CBK and when they made a request for statement of their account with CBK, the bank declined putting them in the dark in as far as realisation of their investment was concerned, he noted.

Tsavo Securities had at the request of CBK, provided fresh directors, who would be signatories to the company account at the bank, but this was not approved until January 24, 2014.

To add on, attempts to know the status of their accounts with a view to liquidating the bonds held by CBK in order to reduce their debt were futile as the regulator failed to respond even as interests continued to accrue.

The company loans with other banks also attracted interests at an alarming rate to the disadvantage of Tsavo Securities.

Mr Mweni has also accused CBK of failing to authorise Standard Charted Bank to exercise its right of lien over the Treasury bonds which it held, despite instructions from Tsavo Securities being given in order to clear the debt.

The case will be mentioned on December 2.