Executives of collapsed Imperial Bank colluded with a global network of shadowy companies led by W.E. Tilley to defraud the lender, a newly released report on the mega theft that led to the bank’s sudden collapse late last year says.
Forensic audit firm FTI Consulting says in a report dated February 9 that the multi-billion shilling fraud was mainly perpetrated through non-payment of loans and withdrawal of funds in excess of account balances.
The report says W.E. Tilley was at the centre of the fraudulent transactions and was aided by former Imperial Bank’s managing director, the late Abdulmalek Janmohamed and the bank’s former head of credit, Naeem Shah.
Imperial had estimated the loss from the scheme at Sh34.4 billion, but FTI has revised the net exposure from the scam to Sh28.8 billion comprising net outflows of Sh5.6 billion and defaults on interest and other charges amounting to Sh23.2 billion as of 2015.
“The exposure relates primarily to withdrawals made in excess of available funds and the accrued interest and is recorded in the form of loans created for the purpose of clearing the excessive withdrawals and the overdraft balance outstanding as at the date the receiver manager was appointed to Imperial Bank,” FTI said in a report.
On a weekly basis, W.E. Tilley would approach Mr Janmohamed to advise him of the fish processing firm’s likely expenditure over the coming week.
The former CEO would write out a handwritten chit to Mr Shah, advising him of the credit to be extended to W.E. Tilley for the forthcoming week.
Withdrawals would then be made from the W.E. Tilley’s Shilling account in excess of available funds, leading to accumulation of interest on the overdrafts that were not paid.
The overdrawn balance was either concealed by forward dating of transactions and/or converting the accumulated debits into a loan or credit transfer from other Imperial Bank accounts.
The Shilling account was fed by a dollar account which received cash from foreign companies, some of which are in the fish/food business and others whose business models are yet to be identified.
W.E. Tilley also made numerous transactions with 12 other subsidiaries, which operated a total of 73 accounts at Imperial Bank. W.E Tilley (Muthaiga) Limited had the most accounts at 46, followed by Value Pak Foods Limited (six) and From Eden Limited (four).
“The analysis, albeit on a sample basis, clearly shows withdrawals of funds from the accounts following notification on the chit. The authorisation for such withdrawals was communicated by Abdulmalek Janmohamed to Naeem Shah. At this stage the sample chits do not have the corresponding communication from W.E. Tilley requesting the extended credit,” reads part of the report.
The arrangement saw Imperial incur net outflows of Sh5.6 billion, having accumulated overdraft interest of Sh15.7 billion, loan interest (Sh6.5 billion), and interest on loans to W.E. Tilley’s owner the Jessa family (963.1 million).
“FTI’s analysis shows that in the period 2006 to 2015 the W.E. Tilley Group had net external outflows of circa Sh5 billion. The largest element of the W.E. Tilley Group exposure is the interest that has been charged against the overdrawn balances on the shilling account and the overdraft interest account and the interest charged on the loans,” the report says.
The chairman of W.E Tilley is Firoz Jessa and its managing director is Zulfikar Jessa. FTI says the loans were not documented, adding that Imperial staff manipulated the bank’s system to cover the illegal activities including suspected money laundering.
Entries, for instance, were made to cancel liabilities in some accounts while others were made to make local transactions appear like foreign cash inflows.
The consulting firm says nine W.E. Tilley foreign counterparties appear to operate in the fish/seafood industry, two in the meat products sector and one in agricultural produce.
Activities of 11 other counterparties had not been ascertained from publicly available records, with six deemed to be individuals. FTI said some of the companies could be used to effect circular money flows to give W.E. Tilley the impression of active trading. A Swiss-based company, Jiwa Sadrudin, appeared to transfer monies to and from W.E. Tilley’s dollar account.
“This type of activity is typical in respect of window-dressing and could possibly be indicative of money laundering,” the report said. FTI identified a total of 23 counterparties which operate banks in Cyprus, Germany, Hong Kong, Israel, Moldova and the Netherlands among other countries.
FTI said investigations to identify all of the counterparties and quantify the amounts transferred to and from the same was ongoing.
Source: Business Daily