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Kenya: How Imperial Bank’s mega theft stalled Fidelity’s sale

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The High Court has relaxed its freeze on the assets of a controversial businessman linked to the theft of Sh44.9 billion in the collapsed Imperial Bank, paving the way for Mauritian lender SBM Holdings to complete acquisition of the troubled Fidelity Bank.

The businessman, Firoz Jessa, is one of the shareholders in W. E. Tilley, a fish firm at the centre of the Sh44.9 billion Imperial Bank heist and the freeze of his Fidelity Bank stake had become a major stumbling block to SBM’s acquisition.

His minority shareholding in Fidelity Bank were among the assets frozen by the High Court in October 2015.

Justice Fred Ochieng varied his earlier orders to allow SBM to buy Mr Jessa’s shares but warned that his decision in no way legitimises the takeover of the bank, which some shareholders including Mr Jessa, have opposed.

“To the extent that the injunction order, in place in this case, could be a bar to the acquisition of the shares owned by Firoz Jessa, I order that the injunction be varied, so that the said process is given a chance,” the judge said, adding that the court was moved by the fact that the time within which various steps should have been taken had already lapsed.

“Therefore, I wish to make it clear that the orders granted herein do not purport and cannot purport to clothe the process with legitimacy, if the process is shown to otherwise be unfair or arbitrary or unlawful.”

Fidelity Bank had moved to court expressing fears that SBM’s acquisition of Mr Jessa’s shares could be in violation of Justice Ochieng’s orders.

Rebrand

SBM has finalised plans to take over Fidelity Bank in a deal that will see it pay shareholders Sh1.3 billion and inject additional Sh1.46 billion capital into the struggling lender.

The Mauritian lender in May rebranded Fidelity Bank to SBM Bank. SBM, after rebranding, appointed three new board members to its Kenyan operation.

The new board members are Flora Mutahi, businesswoman and chairperson of Kenya Manufacturers Association, Strathmore University don Jim McFie and lawyer Sharad Rao.

East African Development Bank country manager Jotham Mutoka has been appointed acting CEO ahead of the hiring of a Kenyan managing director.

Imperial Bank’s receiver manager, the Kenya Deposit Insurance Corporation (KDIC), has sued 12 firms and eight members of the Jessa family who own them, as it seeks to recover Sh44.9 billion in lost depositor funds.

Justice Ochieng in October 2015 issued an order barring the 12 firms and eight individuals from selling or transferring their assets until the suit has been determined.

The order forced Fidelity Bank to file an application to allow SBM to acquire Mr Jessa’s stake in Fidelity Bank and complete a buyout of the struggling lender.

Opposed buyout

Mr Jessa has, however, opposed the forced acquisition of his shares and indicated that he will challenge the move.

He had asked Justice Ochieng to dismiss Fidelity’s application, arguing that the compulsory acquisition of his shares would leave him in breach of the freeze order, against his will.

SBM has also emerged as the frontrunner to take over Chase Bank, which collapsed last year.

Fidelity Bank told Justice Ochieng that 95.09 per cent of its shareholders had approved SBM’s takeover.

The Mauritian lender is compulsorily acquiring the remaining shares, including those owned by Mr Jessa.

The remaining 4.91 per cent is owned by Mr Jessa, Aziz Javer and Ojilo Investments.

Court documents indicate that Mr Jessa’s W. E. Tilley was one of the key beneficiaries of a scheme orchestrated by former Imperial Bank managing director Abdulmalek Janmohammed as it received Sh31.5 billion in irregular loans that was wired through ghost accounts.

The KDIC says W.E. Tilley received Sh16.1 billion from ghost accounts at Imperial Bank and an additional Sh15.4 billion through loans that were not recorded in the lender’s books.

Imperial Bank’s shareholders in October 2015 claimed that the fish firm had acknowledged irregularly receiving Sh10 billion and was ready to return the money — a claim that W.E. Tilley has since denied.

The Jessa family and their W.E. Tilley were also implicated in the collapse of Charterhouse Bank in 2006.

Their firm was then said to have been involved in a Sh18 billion money laundering scheme.

Credit: CNBC Africa

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