Treasury steers clear of Charterhouse closure and refers House team to CBK

Frustration and fatigue was evident in the heated exchanges that marked last Tuesday’s hearing of Parliament’s Finance Committee as yet another attempt to unravel the mystery of Charterhouse Bank’s continued closure appeared to fail.

Before the committee were Finance minister Uhuru Kenyatta and the Permanent Secretary, Joseph Kinyua.

As the custodians of the government’s coffers, the duo was expected to have the final word on the failure to reopen the bank closed four years ago amid a wave of bad publicity.

But Mr Kenyatta and Mr Kinyua surprised the MPs when they said, in a brief statement, that the matter was not within their jurisdiction and should be referred, as the Banking Act says, to the Central Bank of Kenya.

The two top Treasury men then spent the better part of two hours defending the ministry’s apparent inability or failure to act and either reopen the bank or liquidate it — anything to enable depositors to gain access to their money.

Towards the end of the meeting punctuated by shaking of heads by the Treasury duo, Mr Kenyatta said the committee would get nowhere by questioning the ministry.

“You are flogging a dead horse. Neither you nor we (the ministry) have the mandate to resolve (the closure). All we can do is seek a speedy resolution to the matter,” said Mr Kenyatta.

But to whom should the queries be directed?

All government agencies related to the matter have washed their hands off it, and the Charterhouse Bank affair has become the one thing nobody, except the Finance committee, wants to touch.

On Tuesday, committee chairman Chris Okemo spoke with emotion about the team’s failure to gain much ground on the matter three months after it began investigations.

“There have been allegations and mystery, and these (meetings) have not yielded much despite our digging,” he said.

Gem MP Jakoyo Midiwo shared his sentiments. “The more I listen to this story on Charterhouse, the more I get the feeling that something is going on somewhere,” he said.

This is the second time both MPs are handling the matter. They sat on the Finance Committee of the Ninth Parliament, which also investigated the Charterhouse affair in 2006.

In its report of October 2006, the then Finance Committee, which was chaired by Mr Okemo, recommended that the bank be reopened. A committee’s report has to be tabled, debated and approved by majority MPs in the House for its recommendations to be adopted, and that one was not done until Parliament was dissolved the following year.
Mr Okemo and Mr Midiwo have in hearings this year said they were later accused of impropriety in their work at the committee in the Ninth Parliament.
Mr Midiwo also produced a letter allegedly written by Richard Cox, an official at the British Foreign Office, who alleged that an MP on the committee “bribed and bullied” his colleagues to recommend the reopening of the bank.
Both deny the accusations, and Mr Okemo said last Tuesday the committee intends to get to the bottom of the matter with the hope of clearing the names of MPs that had been mentioned in bad light in the past.
So far, the biggest padlock on the door of Charterhouse Bank appears to be that of the British and American governments, with the latter sparing no words to emphasise the need to keep the bank closed.
Earlier this year, US envoy Michael Ranneberger wrote a strongly worded letter to Prime Minister Raila Odinga, which was copied to the President, Mr Kenyatta and the governor of the Central Bank of Kenya, Prof Njuguna Ndung’u.
“The owners and managers of Charterhouse Bank, as well as some of its account holders and their business associates, were credibly believed to be involved in narcotics trafficking, smuggling, money laundering and tax evasion worth billions of shillings from approximately 2001 to 2006,” wrote the outspoken envoy.
He went on: “Reopening Charterhouse would send the wrong signals to the international and domestic financial communities. Were it to reopen, the message to the financial community would be clear — Kenya’s financial regulatory environment and fraud, corruption and worse, go unpunished.”
“The information we have indicates clearly that Charterhouse Bank management conspired with depositors to evade import duties and taxes and launder the proceeds of these crimes in a total estimated at approximately $500 million (Sh40 billion) from 1999 to 2006,” reads another one written on February 14 this year.
Parliament’s Standing Orders and diplomatic practice does not allow the committee to summon the envoy to present evidence before it.
With the ball back in Central Bank’s court, Igembe North MP Ntoithia M’Mithiaru made reference to a paragraph in the CBK’s submission to the committee.
“As the issue involved substantial and grave policy considerations for the banking industry, the Central Bank has been reluctant to arrive at any resolution which does not involve wider consultations within the Government and the industry as any way forward for the bank will require the cooperation of other industry participants,” the paragraph reads.
But according to Mr Kenyatta, there is no need for the “wider consultations” suggested as the Charterhouse Bank issue was not systemic but limited to one bank. “We have no issues, whether the bank is closed or liquidated. We don’t see the need for wider consultations,” he added.
But he said the ministry could implement a suggestion by deputy chairman Prof Phillip Kaloki that all government agencies involved be brought together to resolve the matter within the law.
The Finance Committee will soon be winding up its hearings, having listened to the Kenya Anti-Corruption Commission, the Kenya Revenue Authority, and the Central Bank of Kenya, the State Law Office and the Ministry of Finance.
It will then write a report, table it in the House in order for MPs to discuss the matter and adopt it with its recommendations if they find it favourable.
For the 35 depositors who have their money held up in the bank, a new period of waiting will have begun.