How former officials of defunct Chase bank defrauded it

Senior officials of the collapsed Chase Bank Limited (CBL) issued loans running into tens of millions to its customers without following proper banking procedures, a financial consultant has told a court.

But Dennis Murathe Wahome, a top official of the defunct institution, told Milimani Magistrate Susan Shitubi that the bank regularised the paperwork of the loans long after the money had been withdrawn.

Responding to questions from defence lawyer Cecil Miller for former chairman of the collapsed lender Mohammed Zafrullah Khan and others, Mr Wahome said, "It was not criminal to give overdraft facilities to customers, which were later converted into loans".

Mr Wahome, who joined CBL in 2007 and left in 2012, told Ms Shitubi that he was instructed to issue an Exceptional Management Approval (EMA) to regularise the paperwork for loans granted to Cleopatra Holdings Limited (CHL).

Mr Wahome told the court that in a normal banking procedure, the perfection of a loan applicant's documentation is verified before the lender grants the requested facility.

"In the present case, the money was disbursed way before the perfection of the securities," he told Ms Shitubi in his chief witness statement.

He said that CBL granted a loan of Sh46 million and $108,000 to CHL prior to verification of the securities.

The witness stated that after the EMA was prepared, it was forwarded to the bank's Head of Assets and Chief Executive Officer for approval and issuance of a loan note. The magistrate heard that after the credit committee approved the loan application, the paperwork was regularised.

Mr Wahome, who left the bank before it collapsed in 2018, said all overdraft transactions to CHL were regularised.

"Can you explain to me and the court whether it is criminal to allow a customer to overdraw his account?" Mr Miller asked.

"It is my testimony as a career banker and financial consultant that the loan facility granted to Cleopatra Holdings Limited was legal, procedural and regular contrary to what is stated in the charge sheet," Mr Wahome told the court.

He added that the bank officials did not break the law by granting the overdraft facilities to CHL, Camellia Investment Limited (CIL), Colnbrook Holdings Limited (CHL) and Golden Azure Investments Limited (GAIL).

Mr Wahome was testifying in a case in which Khan, Duncan Kabue Gichu, James Mwaura Mwenja, Markarios Omondi Agumbi, CIL, CHL, Cleopatra and GAIL are accused of conspiring to defraud the collapsed lender of Sh529,328,000 ($1,326,000) which they transferred from CBL's internal account to the accounts of Camelia, Cleopatra, Golden Azure and Colnbrook.

The indictment further alleges that the defendants represented the money transferred to the companies' accounts as genuine loans and that the money was disbursed in the normal course of the loan process.

Khan, Gichu, Agumbi and Camelia are accused of stealing Sh483,328,000 on December 31, 2015, the property of the collapsed bank -- CBL.

Mr Mwenja (general manager Corporate Credit) and Mr Agumbi (general manager Finance) are charged with stealing Sh46 million on February 28, 2023.

Other charges against the accused include money laundering and failure to report suspicious transactions.

Mwenja and Agumbi are also charged with stealing $630,000 from the collapsed lender.

The accused have denied the charges against them and are on bail.

Ms Shitubi adjourned the case to November 29, 2023.

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