An American consulting firm that was hired to conduct a forensic audit into the collapse of Imperial Bank may have earned more than Sh1 billion so far, according to leaked contract documents showing the professional charges agreed for the service.
The Central Bank of Kenya (CBK) hired Washington D.C.-based FTI Consulting to review troubled Imperial Bank’s books — a job the American firm has been doing for the past 32 weeks.
Imperial Bank collapsed in October 2015, and the CBK immediately asked FTI, which had been invited by the bank’s board to conduct a forensic audit of the lender, to continue with the job under a wider mandate.
“Our fees will be charged on the basis of a combination of time spent conducting the engagement and volumes of electronic data collected, extracted, analysed, processed, searched and reviewed,” the contract document says, adding that the fee rates may be varied from time to time and “we reserve the right to charge for our time at the amended rates”.
FTI, a specialised forensic accounting consultancy, is being paid £338,000 per week, broken down as £155,000 (Sh22.7 million) for on-site investigation, £45,000 (Sh6.5 million) in other expenses, a retainer of £100,000 (Sh14.6 million), and £38,000 (Sh5.5 million) for strategic communications.
FTI is also allowed to levy separate charges for data processing at the rate of £170 (Sh24,909) per gigabyte.
The auditors have already unearthed about 1.2 terabytes of electronic data at Imperial Bank, according to the CBK, meaning analysing this mountain of information will cost the fallen lender’s owners £204,000 (Sh29.8 million).
All fees quoted by FTI do not include value-added tax or any other relevant levies, which must be borne by their clients — in this case the shareholders.
“We will continue to provide invoices on a weekly basis which will be payable on delivery. The retainer will be offset against our final invoice and we will either seek payment of the outstanding balance or will repay any unused amount,” says the letter signed by David Morris, a senior managing director at FTI.
Mr Morris, who is based in London, is the forensic auditor responsible for the Imperial Bank’s forensic audit while Chris Osborne, FTI’s co-chairman in charge of Europe, Middle East and Africa (EMEA), is the overall man in charge of the Kenyan project.
Mr Osborne is co-chairman of the EMEA region and the global head of FTI’s Economic and Financial Consulting practice.
Based on the above rates, FTI has earned at least £9.8 million (Sh1.4 billion) for the seven months it has been on the Imperial Bank job.
The Sh1.4 billion fee note excludes the strategic communications fee which was dropped in favour of the CBK handling the media relations segment of the assignment.
CBK governor Patrick Njoroge declined to reveal the actual amount so far paid out to FTI for the Imperial Bank audit and how much longer it will take. Dr Njoroge also refused to state whether the central bank is picking the tab for the audit or payments are being drawn from Imperial Bank’s reserves.
Kenya’s banking regulator had in March said FTI’s work was “progressing at a good pace” and needed three more months to complete.
Credit: Business Daily