It has emerged that former Chase Bank Kenya chairman Zafrullah Khan awarded himself a three-year consultancy contract for unspecified projects in the bank, 16 months before it collapsed on April 7, 2016.
A special audit report by an audit firm, Deloitte released a month after the CBK placed the bank into receivership shows the man at the centre of Sh14.9 billion internal bank heist was to earn $50,466 (Sh5.15 million) a month.
The report further unmasks irregular loans to entities owned by the bank’s top management.
On December 30, 2015, a day to closing its books for the financial year, the bank disbursed Sh1,023,900,000 to Camelia Investment, Coinbrook Holdings, Cleaopatra Holdings and Golden Azure Investment without adequate documentation or securities.
Those loans were not disclosed as insider despite Mwaura indicating that those firms belonged to Khan, the chairman.
Others who benefited directly from those loans include Mohammed Zasrullah Khan and Claude Wagner Khan, brothers of the bank’s chairman.
Based on official company search, the two owned Golden Azure Investment and Camelia Investment. Camelia was later changed to Riverside Mews Limited jointly owned by Khan and Kabui.
Another Sh3.009 billion to Nine Fifty Limited; Constellation Investment, Anest Africa, Bamburi Rod Partners and Codicote Limited were not disclosed in CBK return for December 2015 despite those entities being linked to bank directors.
Five term loans with a total balance of Sh1.608 billion were 180 days beyond loan status and no payment had been done. Some of those loans were linked to Rafiq Shariff, former Chase Bank director.
The forged loan facilities were then posted into CBK Settlement account, therefore reducing the outstanding balance by a similar amount in a classic white collar robbery that has become a key subject for case studies into failed banks in Kenya and beyond.
Chase Bank’s financial statement as at December 31, 2015, reflected overdue interests on loans and advances at Sh5.6 billion. The audit, however, shows the loan book was overstated by Sh3.245 billion in violation of part 3: Section 3.6 (b) of CBK’s regulations.
ResearchGate, in its 2017 study dubbed ‘commercial banking crisis in Kenya’ described insider loan fraud at Chase Bank as ‘supervised theft’