In her report, Auditor General Nancy Gathungu revealed how taxpayers could’ve lost Sh45 million in a bitched deal between Information Communication Technology Authority (ICTA) and Family Bank.
The money was part of unsecured loans that were lent to various startups that were executing various programmes under the digital villages programme.
The loans popularly known as Pasha Loans were advanced by the Mwai Kibaki government to enhance the growth of ICT, tapping into the National Optic Fibre Infrastructure (NOFBI).
In the contract between ICTA and Family Bank, the latter was to assess the loan recipients, disburse the funds and follow up on recovery.
But out of the Sh128 million that was lent, the bank only remitted Sh82 million, leaving a balance of Sh45 million.
The Auditor General in her report casted doubt the monies would be recovered.
MPs at the Public Investments Committee on Commercial Affairs and Energy have begun a probe into the matter following the query but has never given report.
The committee accused Family bank of fraud,
“Nobody can fail to explain the loss of Sh45 million just like that. The bank is a suspected of sinking Sh45 million. ICTA has said it was the responsibility of the bank.”
This was after Family Bank CEO Rebecca Mbithi while appearing before MPs said they have been unable to recover the money.
Mbithi revealed the bank closed the account and the same was acknowledged by ICTA.
The MP maintained that “The bank is a suspect of sinking Sh45m of taxpayers’ money. It can only get out of that by explaining and showing everything was done above board.”
“It is the bank that interacted with the beneficiaries and knows where they are. What were they looking at since the loans were unsecured?” Ganze MP Tungule Charo asked.
Wajir West MP Farah Yusuf Mohamed asked,
“Before entering an agreement with ICTA, was there an advert? Why did ICTA terminate the contract?”
“They say they were to vet applicants and recover loans…vetting they might have done but still failed and now Sh45 million taxpayers money is missing,” he added.
MPs further observed that the “contract has serious gaps.”
The Sh45million has been squandered and will never be Recieved.
Ex CCO Ouster
In October last year, Former Family Bank Chief Commercial Officer Kenneth Kaniu asked the High Court to award him Sh717 million, claiming the lender ruined his career after allegedly authoring a damning report before kicking him out.
In his case before Justice Lawrence Mugambi, Kaniu narrates that he was hired by the lender on December 24, 2021, following a rigorous exercise that involved a background check by Deloitte and Touché.
Further, the appointment was subject to the Central Bank of Kenya (CBK) clearing him after another vetting and background check.
According to his court papers filed by Echesa Bwire Advocates, CBK gave him a clean bill of health. Before Family Bank, Kaniu worked with Britam Asset Managers (BAM), a subsidiary of the Britam Insurance for six years as CEO.
He states that BAM was paying him Sh2.6 gross monthly salary. After joining the lender, Kaniu says on May 24, 2022, he received a termination letter.
The lender based its decision on an alleged background check report allegedly from CBK and Capital Markets Authority (CMA). Kaniu argues that Family Bank lied as there was no such report.
To demonstrate his battle with the lender, Kaniu takes the court to the pulpit. He refers to himself as a meek person, just like David of the Bible.
“I am a meek law-abiding citizen, who has no matching might to fight against the respondent (Family) a Goliath. Further, the impunity of the respondent is demonstrable; going to all heights including publishing a false report that the interested party issued a negative report when none was issued,” states Kaniu.
The former CCO argued that Family ruined his livelihood and condemned him to unemployment. He claims the lender’s letter was circulated to the entire banking industry and the CMA.
Kaniu narrates that he was once a golden boy of the banking industry, having worked in seven top-tier institutions, including the Commercial Bank of Africa (current NCBA). He said he has a commendable professional acumen and standing, such that he has been sitting on boards of at least 12 institutions.
“The publication that the interested party had issued a negative report on fit and proper status concerning me was false and was at all times material known to the respondent (Family) to be false. I have suffered and continue to suffer odium and ostracisation from professional peers, a tag, and scar that I bear as a consequence of the deliberate and malicious publication of falsehood by the respondent,” Kaniu adds.
Sh24million Mortgage Fraud
An attempt by Family Bank to defraud a client failed after High Court Judge A. Mabeya ruled in favour of the client, Deborah Ngugi.
The matter involved case No. E274 of 2020 at the High Court.
According to court papers, Deborah Ngugi took various loans from the bank totalling Ksh. 24,220,000 repayable in monthly instalments of Ksh. 203,000.
She utilized the loans to develop residential apartments on her property LR No. Ruiri/East Block 5/118 which at the time, already had 21 pre-existing apartments with a monthly rental income of Ksh. 250,000, the intention was to increase the same by a further 41 units.
The bank assigned one of its officers, Mary Wamaitha Muriu a Credit Analyst, as her point of call and reference in her engagement with the bank. Mary had processed the aforementioned mortgage facility and worked closely with her. In or about June 2014, Mary summoned her to the bank and pleaded with her to guarantee an LPO financing loan in favour of one Jackson Migwi Kirika T/A Quan Systems for Ksh. 3m. It was represented to her that the proceeds there from the Kenya National Examination Council would be applied towards settling her loan with the bank as it would be made through Jackson Migwi Kirika’s account with the bank.
Upon disbursement of the loan and supply, KNEC made payment through the bank in two instalments however, the bank failed to recover the said sum but allowed the said Jackson Migwi Kirika to withdraw the entire sum. The bank then wrongfully demanded that Deborah honour the guarantee.
Investigations reveal that there was a conspiracy by the bank and Jackson Migwi Kirika to defraud Deborah.
Subsequently, the bank consolidated the guaranteed amount and arrears into the plaintiff’s Mortgage Account without notice causing the account to be in huge arrears and increased interest of between 16% to 23% PA.
Under the above circumstances, Deborah lost her property valued at Kshs. 65 million as a direct consequence of the bank’s breach of contractual obligation. It also came out that Deborah did not know Jackson and that it was Mary who pleaded with her to guarantee the LPO loan and that there was evidence that the bank received payment from KNEC but failed to recover its entitlement.
The judge found out that Family Bank acted to the contrary. It either acted recklessly or in connivance with the said Jackson, it failed to open an escrow account and permitted the proceeds to be deposited in Jackson’s account who withdrew the entire sum. The bank therefore failed and refused to recover the loan from the proceeds of the LPO.
The events led to the eventual loss of Deborah’s property LR No. Ruiri/East Block 5/118 were a result of the bank’s breach, such that the prayer for restitution and damages is justified.
It has also been discovered that because of the circumstances leading to the utilization of the LPO proceeds by Jackson, the bank caused the arrest of its officer, Mary Wamaitha, who was charged with defrauding the bank as a collateral damage.
Further, in a bid to rescue the property from sale by the bank, she approached the KWFT to seek another loan to buy out the loan with the bank. Unfortunately, the latter loan had an even more expensive rate such that the rental income could not sustain it and KWFT eventually sold off the property.
The Judge ruled that Deborah be refunded Ksh. 3m plus penalties and interest. The judge further ruled that she is refunded the amounts paid to the bank’s advocates and valuers before securing the discharge of the property for it to be charged to KWFT, and the amounts paid to KWFT’s advocate and the bank’s advocate in the transfer of the mortgage to KWFT and fresh charging of the property. All totalled to Ksh. 2,332,165. The final prayer was for general and exemplary damages which the judges awarded Sh4.8million.
The conspiracy by the Family bank to defraud Deborah is a habit that alot of clients in the bank are battling right now. Acting like loan sharks, micro-finance banks. If you’re thinking of acquiring loans with Family bank, you know the drill. Don’t burry yourself in the sand.
KenyanHour 