Ex-NBK executives banned and fined for theft of funds

NBK’s former managing director, Munir Sheikh, tops the list of senior managers alleged to have participated in the illicit scheme. FILE PHOTO | NMG 

By BRIAN NGUGI

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Summary

• The Capital Markets Authority (CMA) on Wednesday said its investigations had found the officials liable for misrepresenting the bank’s financial statements for the periods ended June 30, 2015 and September 30, 2015.
• CMA said it had found that the Nairobi Securities Exchange (NSE)-listed bank’s profits were grossly overstated and Sh1 billion lost through an embezzlement scheme.
• NBK’s former managing director, Munir Sheikh, tops the list of senior managers alleged to have participated in the illicit scheme. He has been banned from holding any position in a public listed company and hit with a Sh5 million fine.

Eight former senior executives of troubled National Bank of Kenya (NBK) have been fined millions of shillings and banned from holding office in listed companies for up to 10 years over cooking of books and theft of more than Sh1 billion from the lender.

The capital markets regulator on Wednesday said its investigations had found the officials liable for misrepresenting the bank’s financial statements for the periods ended June 30, 2015 and September 30, 2015.

The Capital Markets Authority (CMA) said it had found that the Nairobi Securities Exchange (NSE)-listed bank’s profits were grossly overstated and Sh1 billion lost through an embezzlement scheme.

“The board of the Capital Markets Authority (CMA) has taken administrative action against the NBK board members and former senior managers, who served at the bank as at December 31, 2015 for misrepresentation of financial statements and embezzlement of funds,” the regulator said in a statement.

The CMA said it has also recommended to the Office of the Director of Public Prosecutions, the prosecution of some of the senior managers and further criminal investigation of additional individuals.

NBK’s former managing director, Munir Sheikh, tops the list of senior managers alleged to have participated in the illicit scheme. He has been banned from holding any position in a public listed company and hit with a Sh5 million fine.

Other senior managers facing sanctions over the alleged cooking of books and theft of funds are George Jaba (former chief credit officer), Chris Kisire (who was chief finance officer till April 2015), Wycliffe Kivunira (former acting chief finance officer), Solomon Alubala (former head of treasury), Boniface Biko (former director corporate and institutional banking) and Dennis Chumbe (former relationship manager business banking).

The CMA said it had concluded an inquiry into the affairs of the former executives and will now pursue their prosecution based on whistle blower information.

The misrepresentation of financial statements was linked to a premature recognition of sale of assets amounting to Sh800 million, under-provisioning for loans, and wrongful recognition of interest income leading to overstatement of profit in the respective periods.

“The bank had published unaudited financial statements reporting profits of Sh1.7 billion for the quarter ended June 30, 2015 and Sh2.2 billion for the quarter ended September 30, 2015 but subsequently reported a loss of Sh1.2 billion in audited financial statements for the period ended December 31, 2015,” it said.

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The alleged embezzlement scheme is linked to a deposit mobilisation programme that paid commissions to private agents for funds banked by government agencies.

The CMA says investigations had established that up to 90 per cent of the commissions paid to the private agents may have subsequently been transferred back to NBK officials.

The regulator said it had issued a regulatory caution to the board members who served during the period under review.

The CMA has also recommended criminal investigation of additional individuals for alleged involvement in the embezzlement scheme. Mr Munir has been disqualified from holding a board position in a public issuer of securities or working for a licensed person for a period of three years.

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He will also suffer a Sh5 million financial penalty for his role in ineffective management of the bank.

Mr Alubala and Mr Kisire have also been disqualified from working for an issuer of securities or a licensed person for a period of 10 and three years respectively.