KDIC goes after Chase Bank fraud masterminds

In yet another case that has opened the lid on Kenya’s banking sector corporate fraud, Chase Bank receiver managers have moved to court seeking to recover Sh6.5 billion from former directors and shareholders.

The suit filled at a Nairobi court on Wednesday also offers a glimpse of how the masterminds of the scheme spent part of the over Sh30 billion that is said to have been taken from the bank.

It was a web of deceit and elaborate scheme that the Kenya Deposit Insurance Corporation (KDIC) says was masterfully designed and concealed from the books of Chase Bank that it currently manages under receivership.

In suit papers filed before the Milimani court, the beleaguered bank is seeking to recover more than Sh6.5 billion from the former directors and shareholders and prime assets acquired by nine individuals and their 11 companies under pretext that they were owned by chase bank.

Topping the wanted list is Zafrullah Khan, the former chairman of Chase Bank who the suit papers describe as the architect of the scheme.

His long time group chief executive officer Duncan Kabui features prominently as his right-hand man oiling the gravy train using depositors’ funds.

This, the receiver managers claims was delivered through a number of third party companies disguised as special purpose vehicles but whose benefits funded personal fortunes for the accused.

From the windfall generated from the schemes, it is alleged the beneficiaries funded lifestyles that mirrored the trappings typical of billionaire playboys.

Mr Khan, who is seen as the architect of the scheme, floated in a sea of fine things and prime properties funded, in part, by hefty bonuses and consultancy fees he awarded himself for his own version of a job well done, but the KDIC claims this was contrary to the banking industry corporate governance guidelines .

The court documents show that the former chairman had amassed an estimated Sh2.2 billion in personal expenses using the Chase Bank’s funds.

These included a one off bonus payment of Sh1 billion which was to be staggered for a period of five years but that was paid in a record 45 days.

Some Sh75.6 million was also paid to him after stepping down as the chairman as consultancy fee in monthly installments of $50,000.

Chase Bank claims, Zaf, as he is known in his circles subsequently embarked on property binge buying including treating his wife Shehla Khan to a Ferrari Dino that cost Sh45 million.

The former chairman is also said to have bought his wife a limited edition Chevrolet corvette to the tune of Sh12.7.

Both cars are registered in the USA.

In collusion with his then group CEO, Mr Kabui, the chairman is said to have laid out a well crafted plan that saw money from the bank siphoned to set up companies through which they transacted private business.

The case seeking to recover the money from the directors comes barely two weeks after the central bank of Kenya invited both local and international bids for a majority shareholder to take over the bank.

This has seen the receivership period for the bank extended by a further six months pending conclusion of the deal.

When Chase Bank was initially placed under receivership on April 7 2016, after a CBK audit forced the bank to restate its books pointing to glaring holes.

The ensuing confusion saw depositors rush to withdraw their money forcing the banking regulator to place it under receivership to protect it from imminent collapse.