Trade Bank

Trade Bank incurred heavy debts after it was sold to Alnoor Kassam

– Biwotts Lawyer

KROLL ON BIWOTT – TRADE BANK

KROLL ON BIWOTT – TRADE BANK AND ‘EXPORT FINANCING’

The Kenya Kroll Report alleged that Nicholas Biwott, according to ‘Source A’ [Alnoor Kassam], was involved with ‘exporting financing fraud… to a quantum of about 700m’ through Trade Bank.

DID KROLL GET IT RIGHT?

Biwott’s lawyer said: A commission of inquiry in to the Goldenberg scandal investigated this allegation and found conclusively that Nicholas Biwott and his companies had not been involved in export financing.

THE SOURCE INVESTIGATES…

It is clear from the Bosire Report into the Goldenberg scandal that Trade Bank was heavily implicated in the export financing fraud. The timings of Trade Bank’s fraudulent activities in this regard are important in relation to any implication that Biwott was involved.

Kenya’s pre-exporting finance scheme was introduced in December 1990 and terminated in March 1993. The available evidence indicates that this was after Alnoor Kassam (Kroll’s ‘Source A’) assumed control and management of the bank.

The Kenya Kroll Report does not name Biwott as a party to the export financing fraud. The Source is uncertain as to whether Kroll was trying to implicate him in this regard, or merely repeated Kassam’s allegations without checking their veracity or the reliability of the source. Had they done so they would have discovered that ‘Source A’ (Kassam) was found by the High Court of Kenya (a decision upheld by the Appeal Court) to have fraudulently transferred the ownership of the Yaya Centre from Nicholas Biwott to support a massive loan to build the Trade Bank Centre, fraudulently transferred money that resulted in the collapse of Trade Bank, and was wanted by Interpol for questioning.

There was, however, a suggestion in the East African Standard, reporting on the Goldenberg Inquiry, on 7 May 2004, that Biwott’s HZ Group of companies were connected to a number of companies which Trade Bank used to obtain pre-shipment finance for fictitious exports. The companies in question were identified as Gawi Freighter Ltd, Air Maritime and Wilgo Agencies Ltd.

The East African Standard however, does not give the basis upon which the companies were linked to Biwott. Nor is it apparent from the reproduced transcripts of evidence since Biwott was not one of those named as a shareholder or director of any of the three companies.

According to the transcripts of evidence at the Goldenberg Inquiry, former CBK deputy governor Eliphaz Riungu gave evidence on 21 April 2004 that the directors and shareholder of Gawi Freighter and Wilgo Agencies were PK Lang’at, PA Yego, Wilfred Yego, Samuel Yego, AK Abdi and Bezelel Hezei. Riungu confirmed that he did not have any personal knowledge that the companies were related to Biwott.

On 6 May 2004, Daniel Ng’atuny, a Central Bank employee, told the Commission that the directors of Gawi Freighters were PK Langat, AA Abdi and PO Collins and that the directors of Wilgo Agencies were Wilfred Yego and Samuel Yego. He said that those of Air Maritime were unknown.

The Source conducted company searches for Air Maritime at the Registrar of Companies, Nairobi. These indicated that the directors and shareholders of the company were George Kipketer Changwony and Samuel Kipruto Tororei.

The Source have found no information during the course of our research to link either of these two individuals to Biwott and no evidence to indicate that he was a shareholder in the company.

KROLL ON BIWOTT – THE COLLAPSE OF TRADE BANK

The Kenya Kroll Report alleged that Nicholas Biwott’s fraudulent dealings ultimately led to the collapse of Trade Bank ‘having borrowed numerous sums of money from the bank’ leading to considerable loss for minority shareholders and thousands of Trade Bank depositors.

DID KROLL GET IT RIGHT?

Biwott’s lawyer said: Trade Bank incurred heavy debts after it was sold to Alnoor Kassam.

Kassam took out huge loans from Trade Bank to build the Trade Bank Centre but ran into financial difficulties in 1990/91.

It was Kassam’s massive borrowing and subsequent fraudulent transfer of money that caused the collapse of Trade Bank.

Kassam also fraudulently, personally transferred millions of dollars overseas and subsequently fled to Canada.

Kassam is currently wanted for questioning by Interpol.

THE SOURCE INVESTIGATES…

The issues surrounding the financial difficulties experienced by Trade Bank in the early 1990s and the steps taken to try and resolve the ensuing liquidity crisis were reported in the press at the time and were also examined during the Goldenberg Inquiry.

The collapse of Trade Bank was the subject of a report compiled in June 1993 by Bellhouse Mwangi Ernest & Young (the “Bellhouse Mwangi” report) on behalf of the Governor of the CBK.

According to an article published in the East African Standard on 7 May 2004, the Bellhouse Mwangi report found that Trade Bank’s problems were ‘the pre-export finance scheme [a Kassam project], the investment in Yaya Development Ltd [a new company started by Kassam], loans from amounting to KSh1 billion to the DPF [taken out by Kassam], Trust Bank and Co-operative Bank and the operation of the Foreign Exchange Department [by Kassam].’

The author of the report, statutory manager of trade M G Waweru, is said to have observed that the biggest problem in the bank was the misuse of the pre-shipment finance facility and the running of the Foreign Exchange Department, according to an article published in the East African Standard on 22 April 2004.

Again Kroll relied on a newspaper report as the basis for a section of their own report, quoting from it directly.

The Bosire Report into the Goldenberg scandal quoted from the Bellhouse Mwangi report the following paragraphs relating to Trade Bank’s misuse of the pre-export finance scheme:

‘According to the information obtained from the senior management of the Bank, Trade Bank was introduced to the use of the facility by CBK management in a bid to help the bank to improve its liquidity. This happened at the time the bank was acquiring Yaya Centre and at the same time paying off H.Z & Co’s liability to Pan African Bank. Thus the Bank started to use the scheme initially for the purpose of liquidity improvement. However, from around August 1992 it was used to fund accounts which were either overdrawn or used as conduits to take money out of the bank.’

‘Based on our findings, it is our opinion that the facility (pre-export finance) was grossly misused by the exporters, the senior management of the bank and its principal shareholder, Mr. Alnoor Kassam.’

In relation to the reference made to money being siphoned out of the bank, it is worth noting that it was reported by The East African Standard on 7 May 2004 that a report presented to the Goldenberg Inquiry claimed that Alnoor Kassam illegally remitted funds before fleeing to Canada.

According to the Bosire Report, the amounts owed to Trade Bank by companies associated with Kassam in pre-export finance totaled more than KSh1.017 billion at liquidation. The Bosire Report stated that the amounts ‘were certainly all fraudulent because of the facts that the loans were not repaid and that no export of any nature was shown’.

The Bosire Report did not add to this sum the amount owed by Yaya Centre Development (K) Ltd, KSh824,369,520. The available evidence indicates that this company was also connected to Kassam who fraudulently transferred it to Trade Bank, the officials who did so not being properly appointed directors of Yaya Towers Ltd, as was established by the High Court in February 1994, a decision upheld by the Appeal Court in May 1997.

Daniel Ng’atuny, a former employee of Kenya’s Central Bank, gave evidence at the Goldenberg Inquiry on 6 May 2004 that the Yaya Centre Development Account belonged to Yaya Towers Ltd, which was wholly-owned by Trade Bank. He said that it was opened on July 9 1992 (which is after Kassam assumed control of the Yaya Centre) and was financed by pre-export bills between January 1993 and March 1993, when the CBK stopped the scheme. According to Ng’atuny, the bills were discounted in the names of Gawi Freighters, Wilgo Agencies and Air Maritime, which were used to obtain pre-shipment finance for fictitious exports. Ng’atuny said that Kassam was listed as one of the persons operating the account.

Ng’atuny’s evidence at the Goldenberg Inquiry was that Trade Bank was grossly mismanaged, operating without any regard to the Banking Act, according to an article published in The East African Standard on 11 May 2004.

The evidence suggests that Trade Bank’s failings prior to its liquidation were internal and not due to Nicholas Biwott.

A commission of inquiry in to the Goldenberg scandal investigated this allegation and found conclusively that Nicholas Biwott and his companies had not been involved in export financing

– Biwotts Lawyer