Mr James Mugerwa, Shelter Afrique’s managing director. PHOTO | FILE
By DAVID HERBLING
Top managers at pan-African housing financier Shelter
Afrique have been thrown into the eye of a storm after documents emerged
showing massive looting of funds through creative accounting and
subprime lending that is now under investigation.
Documents show that the company’s managing director, James
Mugerwa, has been dishing out subprime mortgages to unqualified
borrowers resulting in a steep rise in the company’s non-performing
loans.
At least 59 per cent of Shelter Afrique’s $246.3 million loan
book was classified as non-performing by February 2016, according to
documents addressed to the lender’s board of directors and financiers.
Jean Paul Missi, chairman of the Shelter Afrique board, acknowledged receipt of the documents and promised appropriate action.
“The board asserts that the allegations are taken seriously and
will give them appropriate attention,” he said, adding that the
organisation is committed to complying with the highest international
standards, best practices, and its policies.
The documents show that Shelter Afrique has been restructuring
overdue loans by rescheduling such facilities to appear and making them
appear as performing, effectively suppressing the volume of toxic
mortgages.
“The loans are restructured multiple times to ensure they are
not classified as non-performing and are therefore hidden NPLs that are
not disclosed,” information sent to the board dated September 8, 2016
says.
Shelter Afrique is also said to be borrowing to pay debt and not
to finance new investments or lending, turning it into a pyramid or
Ponzi scheme.
Kenyan taxpayers control 10.63 per cent of Shelter Afrique,
which is owned by a total of 44 African countries together with the
African Development Bank and African Reinsurance.
Housing and Urban Development principal secretary Aidah Munano
represents Kenya on the Shelter Afrique board. The PS, however, refused
to answer any questions on the alleged irregularities despite the
fiduciary duty she owes the taxpayers.
Mr Mugerwa is also accused of presiding over a creative
accounting regime that has subdued provisions for bad loans, and refused
to provide sufficient impairment for the $4.1 million Shelter Afrique
had in the collapsed Chase Bank.
Consulting firm Deloitte has been hired to carry out a forensic
audit as well as replace Ernst & Young as Shelter Afrique’s external
auditor.
The list of Shelter Afrique’s big debtors includes Nairobi’s Taj
Mall, Translakes Estate in Kisumu, Eden Beach Resort in Shanzu, and
Oakpark Properties’ Pine City in Athi River.
Consequently, Shelter Afrique has seized 11 apartments at Eden
Beach, 17 houses and land belonging to Oak Park under an “asset swap
programme” and has classified these properties as “held for sale.
Mr Mugerwa is further accused of wasteful and questionable
spending that has seen him vary by more than three-fold the cost of
repairs at his residence, splurging more than €30,000 on house furniture
which internal auditors couldn’t trace, making double per diem claims
for foreign trips, buying six smartphones in eight months, and
arbitrarily sacking junior staff.
The Shelter Afrique boss’ profligate spending is evidenced by
the $7,390 phone bill he incurred in the month of May 2015 for one of
his mobile phones, according to a postpaid bill from Safaricom.
Mr Mugerwa — who took office in August 2014 after the
acrimonious exit of Alassane Ba — did not respond to questions on the
state of the company’s finances.
Ernst & Young, who have been the external auditors at
Shelter Afrique for the last five years, also declined to respond to
questions of professional misconduct in handling the lender’s books.
Shelter Afrique enjoys diplomatic status and is not regulated by
any authority – meaning it has no legal guidelines on capital adequacy,
risk management and corporate governance
No comments:
Post a Comment