Judge quashes CMA’s ban, Sh5 million fine on former NBK boss

Former National Bank of Kenya managing director Munir Sheikh Ahmed. FILE PHOTO | NMG 

By SAM KIPLAGAT
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The High Court has quashed a Sh5 million fine and the ban from holding office in listed companies for three years that the capital markets regulator slapped on former National Bank of Kenya managing director Munir Sheikh Ahmed for cooking of books and theft.

Justice Pauline Nyamweya, however, found that Mr Munir had contravened several sections of regulations among them failing to ensure preparation of the interim accounts for the period ending September 30, 2015, as well as quarterly accounts in line with the International Financial Reporting Standards (IFRS).

Justice Nyamweya also said Mr Munir failed to supply the board with relevant accurate and timely information to enable the board to discharge its duties.

The Capital Markets Authority (CMA) in April last year fined eight former senior executives of National Bank 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.

CMA said the bank’s profits were grossly overstated and Sh1 billion lost through an embezzlement scheme, recommended criminal prosecution against the eight.

Mr Munir argued through lawyer Isa Mansur that the penalty and the decision to bar him from holding office as a key officer of a public listed company was arrived at erroneously.

The regulator wrote Mr Munir a letter on August 2017 over misrepresentation the financial statements for the period ended June 30, 2015.

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 an overstatement of profit in the respective periods. This upped the bank profits by Sh847,920,000.

The alleged embezzlement scheme was 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.

But Mr Munir said the fine and office ban was biased, partisan and flawed as the regulator was acting as a complainant, investigator, prosecutor and adjudicator. He also alleged that CMA did not accord him a fair hearing and that crucial evidence was suppressed.

Mr Munir further said the CMA went for the maximum penalty and disqualifying him would stigmatise him having worked in the private sector for more than 20 years.

The regulator had opposed the application, saying it was an abuse of office and Mr Munir ought to have withdrawn an appeal at the Capital Markets Tribunal first.