How a Kenyan engineered Tanzania’s big loan scandal

Money Markets

Harry Kitilya, the former Tanzania Revenue Authority commissioner-general and the EGMA chairman. FILE  

By DAVID HERBLING, hdavid@ke.nationmedia.com

In Summary

• “Almost all of the EGMA $6 million was withdrawn in cash between 18th and 27th March 2013. Each of the four cheques was signed by Mr Mboya and Mr Nyabuti,” reads documents filed at Southwark Crown Court, London.
• The corruption cases against Tanzanians and Kenyan were filed under the UK’s Bribery Act (2010) which prohibits use of inducements to retain or win business deals.
• The fee inflation was to cater for “facilitation and arrangement charges,” according to a forensic investigation by the UK’s Serious Fraud Office (SFO).

A Kenyan insurance executive has been named as one of the people who pocketed part of the $6 million bribe that Stanbic Bank — which operates in Kenya as CfC Stanbic Bank — paid to wheeler-dealers to help win a lucrative fundraising deal from the Tanzanian government.

Peter Nyabuti, the managing director at Astra Insurance Brokers in Tanzania, is listed as a co-signatory in documents that were used to withdraw the kickbacks that Standard Bank plc paid in March 2013.

Standard Bank plc — now renamed ICBC Standard Bank plc — owns a 60 per cent stake in CfC Stanbic and was also a lead arranger in Kenya’s debut $2.75 billion Eurobond floated last year and listed on the Irish bourse.

Documents filed in a London court show that Mr Nyabuti teamed up with then Tanzania’s taxman Harry Kitilya and former Capital Markets and Securities Authority chief Fratern Mboya (deceased) to form a company that demanded a one per cent fee to help Standard Bank plc — which trades as Stanbic — act as transaction advisers for the sovereign debt.

Mr Kitilya, who was EGMA’s chairman, also served as commissioner-general of the Tanzania Revenue Authority between 2003 and 2013.
The trio is accused of forming Enterprise Growth Markets Advisors (EGMA) and causing Stanbic to inflate the commission charged to 2.4 per cent of the deal’s value from the initial 1.4 per cent fee.

The fee inflation was to cater for “facilitation and arrangement charges,” according to a forensic investigation by the UK’s Serious Fraud Office (SFO).

Signed by Mboya and Nyabuti

“Almost all of the EGMA $6 million was withdrawn in cash between 18th and 27th March 2013. Each of the four cheques was signed by Mr Mboya and Mr Nyabuti,” reads documents filed at Southwark Crown Court, London.

Mr Nyabuti and his now deceased accomplice reportedly pulled out the loot in four cheque to cash transactions totalling $5.2 million, SFO sleuths told Judge Brian Leveson who presided over the case.

“On the 27th March 2013 EGMA requested transfer of the remaining proceeds and closure of the collection account.” 

Mr Nyabuti declined to comment on this story. He is a shrewd businessman and has been reported in local dailies attending fundraising events in his home area Kisii County.

It is not clear whether Mr Nyabuti is involved in Kenya’s insurance industry either as director or owner of an insurance firm, broker or agent. The Insurance Regulatory Authority was yet to respond to our queries on this matter by the time of going to press.

The involvement of Mr Nyabuti in the Standard Bank bribery scam adds to the list of Kenyans entangled in scandals abroad.

The list of foreign cases where Kenyans are entangled in corruption includes the $183 million Tegeta Escrow Account scandal in Tanzania and a $1.3 million bribery scandal involving the former president of the United Nations General Assembly, John Ashe.

Tanzania in February 2013 raised $600 million from the international capital markets, with Stanbic Bank earning $14.4 million or 2.4 per cent of deal size in fees – and wiring EGMA its share of the funds equivalent to $6 million or one per cent of deal value.

“We are extremely pleased to have closed such a prestigious deal as this,” Stanbic announced after the closure of the offer which was oversubscribed fourfold

Kenya paid out a total of $947,127.03 (Sh82.4 million) in commissions to the lead arrangers of the now controversial Eurobond — including JP Morgan, Barclays, Standard Bank, and Qatar National Bank.

UK bribery act

“Our involvement in this transaction demonstrates Standard Bank’s ability to facilitate successfully landmark deals of this nature,” said the bank’s dealmaker John Ngumi in September last year. Mr Ngumi left the bank in July this year.

The corruption cases against Tanzanians and Kenyan were filed under the UK’s Bribery Act (2010) which prohibits use of inducements to retain or win business deals.

“Promising and/or giving EGMA Ltd 1 per cent of the monies raised or to be raised by Standard Bank plc and Standard Bank Tanzania for the Government of Tanzania, where EGMA was not providing any or any reasonable consideration for this payment was illegal,” reads the charge sheet.

ICBC Standard Bank Plc last week agreed to pay the SFO nearly $33 million (Sh330 million) in fines and penalties to settle the damning bribery case under a mechanism technically referred to as deferred prosecution agreement.

The settlement deal with the UK anti-graft agency includes a financial penalty of $16.8 million, $7.04 million in compensation and interest to the Tanzanian government, seizure of $8.4 million for illegally making a profit, and £330,000 in legal costs to the SFO.

The SFO said the corrupt dealings were arranged by Bashir Awale, then chief executive of Stanbic Tanzania, and Shose Sinare, then the unit’s head of corporate and investment banking.

Mr Awale was Stanbic Tanzania boss for seven years and was fired on August 19, 2013 for failing to co-operate in investigations into the role of EGMA in the sovereign fundraising deal.

Ms Sinare, a beauty queen, won the Miss Tanzania title in 1996.

According to court documents, Ms Sinare, who resigned from Stanbic Tanzania on June 3, 2013, is the one who authorised the bribery payments on March 15, 2013 to an account held by EGMA.

Tanzania’s $600 million debt instrument took the form of an unlisted and unrated seven-year floating rate instrument, the proceeds of which were to be used for infrastructure projects.

Harbinder Singh Sethi, a Tanzanian-born Kenyan businessman, was in December last year named by Tanzania’s Public Accounts Committee as the face behind the irregular withdrawal of $183 million from Tegeta escrow account, a thermal power producer.

Court documents tabled in New York show an unnamed Kenyan UN diplomat meeting an agent of former UNGA boss Ashe to help real estate developers land big development contracts in Nairobi.

Kenya’s widespread graft is seen as a risk to the economy.

President Uhuru Kenyatta on November 23, 2015 declared corruption a national security threat “with immediate effect” in his address from State House.