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Fraud

ROT AT NATIONAL BANK OF KENYA ,A TRAGEDY IN WAITING

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Dear Kenyans,

NBK is a titanic ship which is cruising dangerously on turbulent waters as if on a suicide mission. At this rate, it is oblivious that it will not be able to halt in good time to avoid a head-on collision. However, unlike the proverbial Titanic ship; NBK can be salvaged if and only if rescue mission can arrive now without further ado and without fail.

NBK is bleeding; it is being milked dry by a cartel of persons led by Mohamed Hassan (chairman, BOD), Munir Ahmed (CEO) and Mohamed Abdalla (Director ICT) in conjunction with others mentioned in this letter. Mohamed Hassan, who is the chairman of the board behaves more like the CEO of the bank, he has an office at the bank hence at the bank on a full time basis. Additionally, he has a driver fully paid by the bank and his international trips are fully paid by the bank even when it is clear they have nothing to do with the bank.

Munir who is the CEO has assumed more the role of the Chief Procument Officer (CPO). It is on record that in 2013 while on a trip to china, Munir procured a board room table on behalf of the bank at a cost US$ 12,000 and a local furniture company paid to assemble it. In 2014 while on a trip in Malaysia,  he brought with him a container full of furniture, tiles and other interior decor. The tiles bought were of poor quality hence the bank was not able to make use of them, thus the tiles were temporary held at the bank’s go-down before being transferred to a ‘safe’ place. Some of the items purchased cannot be used in a bank setting e.g. lamp-shades, yet they were worth millions. The irony of this is a local company was paid for the goods. It is rumoured that the company is associated with Munir. In a nutshell, Munir sold to the bank the goods but of course at an exorbitant price. It is open knowledge that Munir has interest in real estate development hence strong belief that some items paid by bank have been utilised for this purpose. This is a clear case of abuse of office and flouting of procurement policies.

Mohamed Abdalla the ICT director has no clue what ICT is all about, his skills and capabilities are wanting. But what is for sure is, he is at the bank to mint as much money as possible and invest it in real estate, a fact he boasts about. He is busy looking for avenues of making money through purchase of systems, systems customization’s, system fix, systems upgrade, change requests, system maintenance and software licenses etc. Most of the ICT jobs have been awarded singly to a little known company called Neutronics and some other dubious companies. The jobs awarded are suspicious and don’t seem to benefit the bank in any way. Every time the company is paid the owners of the companies are always seen in Abdalla’s office with a suitcase, in what is believed is session of money exchanging hands.

But how did National Bank of Kenya (NBK) find itself in this mayhem?

The bank changed its management in 2012 and the new management led by Munir came in with color and pomp to move it to the top tier position. However it seems they had a totally different agenda. Whereas Munir has vehemently denied allegations of mismanagement, there are indications which can prove beyond any reasonable doubt that all is not well. While the outside may be glittering, the inside has been full of garbage and rot.

One notable indicator has been the downward trend of the share price which was above Ksh 40 when Munir took charge but is now trading around Ksh.11.

The sole purpose of this letter is to expose the malpractices under the helm of Munir and have him and his team held to account for their crimes. This letter wish to highlight the indicators which show that the bank is headed in the wrong direction and the schemes applied by the management to conceal the rot.

Liquidity Position

This indicator measures the cash and near cash health of a company. When Munir joined the bank in September 2012, the bank had Kshs. 26Billion worth of Treasury Bills, Bonds and Government Securities.

However all these have been depleted in mysterious ways with word doing the rounds that Solomon Alubala (Head of Treasury) has been getting kick backs each time they mature. Even worrying is the belief that the bank has borrowed handsomely abroad. Is the BoD aware that Munir has engaged lenders abroad for loans at an exorbitant price?

Whilst Munir has been on record complaining that without the right issue, the bank cannot embark on strategic ventures, this is a lie. Munir found a solid liquid position hence with right priorities these monies would have been used to grow the core business of the bank which is, lending.

The first pay-out from the bond was in May 2013 of Ksh. 5Billion which would have transformed the bank. However the money went to finance the expensive venture of re-branding and retro-fitting the bank as if this was a priority. This project has been so expensive to the bank, with reports showing that the cost so far incurred could have surpassed Ksh.3Billion. The bank is still incurring costs related to this upto date. Of course all paid to a company in which the chairman has vested interest.
Why fix what is not broken?
Wouldn’t internal re-engineering have helped the bank more?

Well, many are of the view he should have undertaken to improve internal systems that would have benefited the customers more hence increasing profitability, liquidity and shareholders’ wealth. It is worth noting that there is no amount of money that can be enough for Munir and it for this reason a right issue under his helm will be a bad idea.

It is worth noting that the shareholders have not received meaningful returns to their investments for decades. Hence, it will be so unfair to float a right issue and have the proceeds wasted and swindled in the pretext of moving the bank to the top tier position.

Munir’s tenure has seen wasteful expenditure, misplaced priorities and dubious expenditure. This state of affairs has injured the liquidity health of the bank. The liquidity position reported to CBK is different from the one reported internally to the top management, almost similar to the fraudulent book-keeping done by Imperial Bank, a trait that is rife in th Kenyan corporate sector.

For instance sometime in August 2015, the position was 11%, the position was falsified to 22% but since Munir wanted a higher figure, it was manipulated it to 26% – A jump of 137%. The position reported to the regulator is manipulated and massaged in such a way that the true position is concealed. This is done by overstating mobile money income, among other unscrupulous means.

There are various indicators which support the fact that the liquidity position is dire.

Firstly, the bank is unable to fully carry out its core business, that of lending hence the loan book has stalled. Customers’ loans deliberately take several months to be disbursed. Recently, Munir suspended lending since the liquidity position could not support further lending.
Secondly, the bank is struggling to pay withdrawals especially for the corporate ones like KRA and TSC. The situation causes a lot of distress to branch managers who are told to manage the customers. The branch managers end up lying to them saying that the system is down and at times engage in cat and mouse games.
Thirdly, there has been an increase in overnight borrowing a clear indicator that the bank is struggling. The bank has been spending on average Ksh.12Million daily which ranges between Ksh.175 – Ksh.200Million monthly. Even more worrying is a bank that used to lend to other banks overnight, can no longer lend with other players of the industry shying away from also lending NBK.
Fourthly, the delaying tactics that used to be applied by the bank when TSC used to channel teachers’ salaries through NBK en-route to other banks. TSC would send teachers’ salaries to NBK by 22nd every month with NBK expected to route the monies/salaries to teachers’ accounts held in other banks before end month. However, this was never the case, the bank would apply delay tactics ensuring that money was disbursed after end month. This strategy was meant to create a favourable liquidity position for the books at the end of the month. Consequently due to the delay, TSC has since stopped channelling the money through NBK further injuring the liquidity position. This means the pressure to falsify the position is greater now, more than ever.
The fifth indicator is a declining cash reserve ratio which saw the bank penalised recently by the regulator.

Profitability

It is said that Munir is keen on a favourable bottom line so much, that the profit figure is manipulated to achieve this goal. In 2013 the Bank incurred slightly over 250M in a staff structuring program undertaken by McKinsey. Nevertheless only a fifth of this cost was expensed in 2013. The management argued that the bank was to enjoy benefits associated with consulting Mc Kinsey over 5 years hence the rationale to amortize over 60 months. This did not go well with Deloitte who insisted that the whole cost be recognised in full in the year it was incurred – Deloitte’s plea was ignored.

However, to avert a possible clash with Deloitte in the audit for 2014, the unamortized amount of Mc Kinsey was expensed in full 2014. However, the bank was at it again in 2014 where they failed to amortize Ksh. 959Million out of the 1.1Billion spent to send some staff on early retirement programme. Deloitte did not take this lying down for a second time running. They forced the management to have the amount absorbed in full or risk a qualified report. This saw the bank deep its profit in its 2014 net profit to Ksh.870Million from Ksh.1.1Billion in 2013 which was attributed to staff retrenchment costs.

Profitability has been on a downward trend due to heavy/wasteful expenditure, loss of business, wrong priorities, vested interests, increase in non-performing loans, ridiculous salaries paid to some members of staff, legal costs etc. Because of this, profit has been manipulated to depict a favourable position. NBK is achieving this through the following ways;

First, under-stating provision for bad and doubtful debts.
Secondly, delaying to recognise huge expenses in the month they are incurred. For example costs related to overnight borrowing, some ICT related costs and commissions paid to 2 dubious companies for alleged deposit mobilisation. These costs are hidden in suspense accounts or adjustments are done downward off balance sheet.
Thirdly, is recognising as income what has not been received yet but only anticipated as it happened in June 2015.

It was reported in various sections of the media that the bank was selling its branch-owned premises and leasing them back. Unfortunately only Ksh100M had been received out of the 1.3Billion anticipated from the sale as at end of June 2015. Despite this shortfall the management was quick to recognise the full gain on disposal (Ksh. 850Million give or take) as if the bank had received the full amount. This saw the bank report a profit before tax of Ksh. 2.4Billion before and Ksh. 1.7Billion after tax.

It should be noted that the bank was yet to receive the full amount for the sale of its buildings as at September 2015. Hence the profit figure for 3rd quarter was also overstated.

The bank has been paying some members of staff huge salaries which it is struggling to meet, some salary amounts have also been capitalised in the books.

In a nutshell, the books are being cooked and are almost ready for a meal. The problem is that people to eat the meal would be starved by the same bank. Word has it that Munir gives the Finance team a target profit figure and has to manoeuvre in such a way that the goal is achieved. The chief chef one Wycliffe Kivunira who is the acting CFO and a team of rogue cooks who are apparently ICPAK members execute the order.

The Institute of Certified Public Accountants of Kenya has of late been in the news, after it emerged that one of their directors Jonathan Ciano had been engaging in fraudulent activities during his tenure as CEO of Uchumi Supermarkets.

The books are so cooked that the real financial position is unlikely to be known. Even worrying is the fact that Deloitte have not been able to untangle the twisted financial figures. It is said that Kivunira who joined the Bank in May 2014 did such a good job that he was awarded a half a million bonus for spear heading the 2014 Financials in April 2015.

Toxic Loans and huge portfolio of nonperforming loans.

A bank’s core business is to lend. Whilst interest income forms the major source of revenue for a bank, NBK has not been able to reap from its loan book. The main reason for this is the huge non performing loans (NPL) which range between Ksh. 9Billion to Ksh. 9.6Billion. Records at the bank can support this position. However this has been a well-guarded secret aimed at ensuring that what is reported is a figure below this, possibly half this amount. The following malpractice can explain the huge NPL.

Loans are disbursed but there is no effort to recover them hence loans which are in arrears have increased sharply during Munir’s tenure. The irony of this is debt collection has been outsourced to one company called Quest Holding which instead of collecting the bad loans has been recovering the performing loans. One would wonder why would a bank with such a huge NPL would choose to outsource the performing loans and not bother to collect the bad ones. Does it make any sense? Word has it that the company called Quest is being used by some well connected persons to fleece the bank. One notable culprit of the mess in credit is one George Jaba who is the CRO.

The Company is directly related to Director Corporate and business banking, Mr. Boniface Biko whose brother Stephen Biko is the owner of the company. The company attaches a bogus list of loans collected some of which belong to deceased persons who are obviously supposed to be paid by the insurance, meaning the so called recoveries are a fraud.

There are relationship managers (RMs) who are known to have purposely bought bad loans from other banks. The loans are restructured and the RMs get cuts from the deal. These RMs also benefit from bonuses at the end of the year since what matters is not the quality of the loan brought but the quantity. For example RM Murumba brought in KAABs loan which is related to the cancelled Lamu title deeds worth Ksh.1Billion.

It is unfortunate that word going round in the industry is, if you want a loan and don’t want to pay, GO TO NBK.

Some loans have been given under moratorium. This is where a loan is disbursed but the debtor is given a grace period during which he/she is not expected to repay both principal and interest. For instance a moratorium of 3 months which keep being renewed till 2 years down the line. This is what is happening under Amana/Islamic banking. There seem to be a deliberate effort not to recover these loans.

Loans given to friends, relatives and others. The loans given to this group of people do not follow KYC policies and best industrial practices for lending. There are times when a walk in customer opens an account, a loan is processed within hours and disbursed to the customer. The unfortunate thing is the loan disbursed is then wired out of the bank within hours of crediting the account. How will such a kind of a loan be recovered? A good example are Fozi Investments and Lunga Lunga Transporters who were extended Hundreds of Millions of Shillings, but have not paid even a cent several months down the line. These companies are said to be closely related to Munir. These companies were given loans for construction but have not serviced their loans even after completing the projects and selling the houses handsomely. A classical case of mismanagement and abuse of power.

There are circumstances where a loan is disbursed with strings attached. Those involved in the disbursement of the loan, are given kickbacks. This is happening at the Islamic banking where loans are just being dished out without following procedures and policies. Worth noting is that the bank has no policy regarding lending under Islamic banking. How do the same officials turnaround and recover a loan which part of it they pocketed? Can Musa the Director Islamic Banking and Obuna the analyst expound more on this issue?

Lack of due care by the new management in loan disbursements.

How can an unsecured personal loan be extended to a person whose salary goes through another bank? This happened in 2013 and 2014 with 98% of these loans being now non-performing.

Other loans which are also questionable include Red Cross, Kenya Airways loan, Swahili Beach Hotel Loan, KAAB investments, Juja Coffee exporters, Nairobi upper hill Hotel and Signature Tours and Travels.

As result, NBK has been applying some unscrupulous methods to manipulate and falsify the loan book. These methods are; firstly to manually altering the grading in the core banking system so as to arrive at a favourable reporting position. Secondly, restructuring of nonperforming loans and rebooking them afresh as if new loans without the consent of the customer and spreading them over a longer period. This is ongoing and is being done to shrink NPL and to falsify the provision for bad debts thereby misrepresenting the profit position. This has seen loans of grade 3-5 being moved to grade 1. Interest which had accrued for these loans has been moved to revenue accounts by the credit team so as to misrepresent the financials.

Islamic Banking/Amana

The deposits under the Islamic wing of the bank are about Ksh.1.5Billion against a loan book of Ksh 0.9Billion (which represent 600% loan/deposit ratio) meaning the Islamic wing of the bank is eating into the main stream banking. This wing has denied the main stream banking from lending. The worrying thing about this scenario is the fact that loans offered under Islamic banking are under moratorium, some up to 2 years and are not being serviced.

The Islamic wing is a project of Munir which is a big hole that is swallowing the banks money without returns. This is where loans are given at low interest rates, no proper documentation (KYC), under moratorium on both interests and principal given for more than one year and if the term ends the moratorium is renewed. Moratorium means delaying or suspending principal and interest repayment for a period of time meaning the bank is not getting any repayment during this period, hence the probability of losing both principal and interest is real. Large loans like Red Court/Cross Swahili Beach/Lordhip Africa are under Islamic banking.

In a nut-shell CBK should check the loan performance and loan provision in this bank as this will be a shocker.

Investigations will confirm that the provision for bad debts have been understated by Ks.1.5B or even more. And the bank has been dishing loans as if they are sweets without following due process thereby endangering depositors’ savings and defrauding the general public.

Financial mismanagement and abuse of office.

The bank under Munir has been on a spending spree. Most of the expenditure does not benefit the bank in any way but have some individuals driving the agenda with the sole purpose of personal gain. Highlighted below are the crafted schemes meant to fleece the bank of its assets:

Dubious payments paid to two companies called Advest Company and Edge Capital for allegedly mobilising deposit for the bank. These companies have so far been paid a total of Ksh. 850Million since January 2015. However, there are certain issues that don’t sit well with these transactions. For instance;
Why hasn’t the deposit improved in the books?
Which are these deposits that have been brought to the bank?
Why hasn’t the liquidity improved thereby enabling the bank to it meet its lending obligations to its customer?
Why do these companies have Gmail email addresses?
Where are their registered offices? How come they have no internet presence?
For instance website page, Face book/Twitter account?
Are they genuine companies or companies which have been formed by certain individuals at the bank with the sole reason to defraud?
Why would the bank embark on such an expensive strategy to mobilise its deposit?

Many questions, little answers. The bank used to enjoy deposits from parastals which was a good and a cheap source of deposit. However these parastals were mishandled and have either reduced their deposits significantly or have left. Two people must be held to answer the above questions and others. These are Munir and Head of Treasury Solomon Alubala.

It is unfortunate that the so called deposit mobilisation is nonexistent. The reason why deposit has not improved despite being mobilized by the 2 companies is because they have been riding on what is already there. For instance, a fixed deposit matures and is automatically renewed by the customer without the intervention of the 2 companies. No brainer. The companies take up the renewal as if it is a new deposit and bill the bank. The commission charged is exaggerated and is meant to siphon money out of the bank with certain individuals said to be getting cuts from the deal. These are Alubala and Munir in conjunction with others. As highlighted above, the bank has so far paid Ksh. 850Million, which essentially means that the 2 dubious companies have brought in deposits worth Ksh.107.6Billion to earn Ksh.850Million at 0.79% commission. Where is this deposit of 107.6B solely brought by the 2 companies? This is broad daylight robbery. It is worth noting that the movement of deposits as obtained from the Trial Balance shows a declining position furthering supporting the view that these are dubious payments.

In NBK, there is no project which has no owner and an owner with vested interest. The core banking system BFUB currently being used was implemented in March of 2012 with the bank having so far incurred roughly Ksh2.8Billion. The system was meant to benefit the bank up to 10 years. However, Munir and the ICT director Abdalla have embarked on a new project to upgrade the system at Ksh.2.5Billion, barely 3 years after it was implemented. It makes no sense to upgrade a system which is not half way its life span. This project has not gone well with some senior management who are of the view that what is needed now is not a system upgrade but stabilization of the system. However, the system has experienced many downtime moments as a result lack of qualified staff to support the system. It is worth noting that there is no single month that passes without at least a staff exiting ICT department which has negatively impacted on its service delivery.

Word has it that Munir and Mohamed the ICT Director are using the upgrade project to siphon money out of the bank.

Whilst the system is to be purchased from Misys, other fictitious companies purporting to be involved in the project will be tagged along; for-instance Neutronics (already mentioned above) and little known Digitronic having so far been paid Ksh. 9Million under unclear circumstances. All documents signed by Mohamed should be audited and will definitely prove that indeed fraud is taking place.

It sounds ridiculous but NBK has a second core banking system called IMAL which supports the Islamic wing of the bank. The bank has incurred Ksh2.3B to implement the IMAL system. Even laughable is the fact that these 2 systems are not only incompatible but have not been interfaced. Wouldn’t 2 core banking systems be very expensive for an ailing bank like NBK? Wouldn’t it be cumbersome to manage data which is split between the 2 systems? Even more puzzling is the fact that the 1st core banking system that is BFUB has an Islamic module which the bank would have been allowed access by just paying an amount which is much lower than the cost of buying a completely new system. As a result of lack of interface between BFUB and IMAL, 2 suspense accounts were created to help manage data exchange between the systems.

The IMAL system only exists in some branches which are perceived to have more Muslim customers.The tragedy of this situation is that customers’ accounts are held in two different systems making transactions difficult. For instance if an Amana customers visits a branch where the system does not exist, the customer is paid upon confirmation via telephone from his domicile branch. The Amana customer is paid by debiting a suspense account (called IMAL inter-system) and advising the domicile branch who should reverse from the suspense and debit the customer. However this has not been happening. The suspense account had at some point in July a debit of Ksh 5.9B. Even worrying is the fact that the top management is not keen to have the account reconciled and items lying in the account reversed to their relevant accounts. There are fears that the account is being used to siphon money out of the bank, worse still is being used to hide costs and NPL thereby falsifying the Financials of the bank.

The bank has also been expanding its network. However what is worrying is the leakage associated with this noble course. Previously the bank used to open branches within 10-12 weeks which was advantageous and beneficial. However this has not been happening with some branches taking close to a year to be opened for business with the bank paying rent all this period. A good example is Sameer and Greenspan branch which took about 11 months to be opened with the bank incurring a total of Ksh. 7.2Million as rent. Of more concern was the fact that the branches were demolished twice before being completed, with the bank meeting the cost in full. One would wonder why the bank would not get it right from the onset to avoid wastage. The bank also lost Ksh. 8Million in 2013 being rent paid one year in advance for what was to be Corner House branch after the idea was abandoned almost immediately with the bank also being forced to pay damages to the contractors who had been awarded the job.

Another misplaced priority has been the state of art gym being constructed at the NBK building at Ksh. 200Million. Why would a bank which has been struggling to do business engage in such a venture? Was it prudent to send Tamarind Hotel away who was a tenant at the premise and instead put a gym? How does this venture support the core business of the bank? Is it prudent for the bank to use so much resource to put up a gym yet it is struggling to lend to its customers and pay dividends to its shareholders? This gym project is meant to be used by just a section of the staff. Munir’s tenure has seen differential staff treatment a fact that has been causing disharmony among staff.

The bank has also been wasting much of its resources on furniture, interior décor and high tech gadgets such as tablets. The furniture that have been bought exceeds Ksh.1.3Billion so far this year which is the amount of money the bank is to earn from the sale of its buildings. Leading one to ask, was there any sense in selling the building and incur the same cost through purchase of furniture? The sad news is that the companies paid for the furniture have not been pre-qualified, the job was not tendered and there exists a close relationship between the companies and some top individuals of the bank. This is not an arm length transaction but a transaction with an ‘interested party’.

Whereas other banks are investing in systems such that customers spend as little time as possible in the banking hall, NBK want its customers to spend as much as possible on its cozy furniture, surrounded by expensive décor and amuse themselves with tablets and IPads. All these things purchased from dubious companies in a scheme meant to siphon money of the Bank. Is NBK an Interior décor company?

The bank has already incurred about Ksh.125Million under the pretext that it was to conduct a rights issue. This cost has been lying somewhere in a suspense account since 2014 but Deloitte also missed it in its audit. Several questions beg for answers.
Why did the bank rush to incur costs related to rights issue, while the writing has been on the wall that the Government was not for it?
What happens to this amount should the bank not go through the rights issue way?
Will the monies spent be refunded? If NBK is to float a rights issue in the long run under a different management, will it be able to utilise the funds?
Was the amount paid related to rights issue or another ploy to defraud the bank?
For how long should the amount continue to sit in the suspense account?

Many questions, fewer answers!

Munir seems not able to differentiate the bank from himself. He has also been incurring expenditure through his credit cards which are of a personal nature but which are paid by the bank. The costs in question are in millions. This can be supported by his credit card statement. Munir has been running this bank as if it is his own personal property. This is not how to run a bank or a public company for that matter. There should be adherane to good corporate governance principles and industrial best practices.

Massive exit of key customers

One notable mistake has been Munir’s mishandling of customers he found when he joined the bank. His regime has not only witnessed massive staff exit but also massive customer exit. The bank has Sony Sugar (the best customer in LCs), Kerio Valley, TSC, KPA and many others. It is no secret that Munir rarely does customer visits and would prefer golfing or travelling abroad instead. This partly explains the liquidity problem being experienced by the bank. Recently the bank lost a deposit of Ksh. 500Million and an additional top-up of Ksh. 1Billion when the MD of a prominent Hospital in Nairobi clashed over what started as a conversation who sought Munir’s take on the recent bad publicity. The MD of the Hospital had initially requested for a meeting with Munir who refused to show up preferring to send a relationship manager in the pretext he had an emergency to handle. The MD of the Hospital later telephoned Munir in the hope that he would be assured that all was well before topping up the hospital’s deposit by a further Ksh.1B. It is not known what transpired in the conversation but it is anybody’s guess since Munir is known for his arrogance in handling people and his vulgar language (use of F-words). The bank lost the account within hours of the conversation. Branches have been struggling to get deposits which is further complicated by the recent bad publicity and Munir’s style of handling customers which usually borders on arrogance.

Problematic Human Resources policies and run away organisational structure.

The bank no longer has a sound Human Resource policy as this is purely done on who you know basis. The former HR Director who is currently the PS for Labor had to exit when he could not cope with Munir’s ways. The current HR director who has no HR background is the puppet being used to pass the malpractice in staff matters. The new regime came in with a salary which is not in the scale of the bank (also cannot be matched in the industry) and the MD had no apologies to make stating that he had to pick the best from the industry and pay a premium to have them. The truth of the matter is, cronies, lovers and friends were brought in, under the guise that they were technocrats. For instance;
Who is Rahab Runoh?
Do her qualifications and skills justify the position she holds in the bank, that of Head Corporate Affairs?
Why has her salary been on an upward trend every other month?
Is she the most hardworking staff in the bank?
Why is she among the few privileged who are always going for training, most of these training’s being out of the country?

There is always a price to pay for mixing business with pleasure. But the output of the so called ‘cream of the market’ is wanting. This can be supported by the stupid decisions mentioned above. Their decisions have seen the bank lose business, opportunities, incur huge losses and expenditure.
For instance the head of Banassurance is paid Ksh895,000 a month with the second highest not paid even a quarter of her salary. Banassurance which is a subsidiary of the bank is meant to undertake insurance business thereby generating additional income for the bank. This has however not been the case with Banassurance barely making any profit month to month with the highest being Ksh. 3Million so far in 2015. While it is meant to bring in new business this has not been the case. The subsidiary relies heavily on staff and customers’ insured loans for its business. What is the logic of paying that kind of a salary? Is this what is called the cream of the market?
Munir has deliberately sidelined the staff he inherited from Reuben Marambii. The first time he reviewed their salaries was in April 2015 when he awarded them 3-5% but at the same time reviewed staff loan interest rates upwards by 1.5% which translated to a dip in the net salary. He has also forcefully moved some unionisable staff into management which would mean they have been promoted without increasing their salaries. This is in total disregard of the collective Bargaining Agreements which require them to be given a minimum of 10% increment.

Unfortunately, there is no HR policy guiding promotion. Hence one could be awarded anything from nothing to over 100% increment depending on who is who. This state of affairs has led to low staff morale, exit and staff led fraud.

The bank has about 8 legal cases at the industrial courts filed by staff and ex-staff against the bank. The cases include PIP (Performance Improvement Plan) staff members who were sacked without valid reason, Voluntary Early Retirement staff who were not well compensated, forced early retirement staff who sued the bank too, not to mention the sacking of the staff taking place every day and individual court cases after the sacking. It is worth noting that this scenario is similar to KQ and it is in public domain the huge losses KQ recently reported.

Fraud cases have increased sharply as people are employed on contract basis, even on sensitive departments hence access to customers’ privy information which is later used to defraud the accounts. This has been caused by massive staff exit. The casual staff who earn as little as Ksh 19,000 per month have been entrusted with sensitive tasks of the bank. For instance, account opening. There have been cases of fraud that have occurred as a result of this team of casual workers interfering with static information of some accounts.

The static information such as photo, signature etc are temporarily changed and the particulars of a fraudsters put, who conveniently withdraw money from the account as if is the owner of the account. These set of staff are paid lowly compared to permanent staff and have no other benefits. However they have found a way to compensate themselves for the shortfall.

There are other factors contributing to increase in fraud. Firstly, a weak internal control system like for instance suspense accounts, which are not being reconciled. Secondly, lack of job segregation whereby two staff can comfortably run the entire branch since they have several keys and combinations. Secondly, low staff morale as a result of partial HR policies which has led to most staff not enjoying annual salary increment or at the very least cost of living adjustment. Thirdly, there is belief that the current management is awarding itself hefty salaries and bonuses at the expense of the lower staff who are the ones that toil hence staff perpetrated fraud is happening. In addition to this, there is belief that there is massive wastage by the management which does not benefit the bank in any way.

The organisational structure of the bank has never stabilised 3 years since Munir took charge. For instance, Procurement has been in 3 different departments. That is HR, Finance and currently in Operations headed by a director (Thomas Gachie) who has no idea what Procurement policies are about. Thomas Gachie a close ally of Munir is used to achieve certain agendas. He has the largest department in the bank, with sub departments which are unrelated. Once Munir falls out with any member of his top management team, he is frustrated to leave. This is done by either moving the department he was heading to Operations or bringing in another boss who take over the duties of the former. This situation is made worse by the fact that staff recruitment happens every other month with Munir himself involved fully but disregarding HR. There are instances where new staff members have been employed without a job application or interview. It is common to see staff members reporting into a role in which they earn more than the head of the position. How will they respect the boss and take take instructions? It is even more common to see staff members who have been acting for over a year. This a ploy to have them take up more responsibilities but are not rewarded through a salary increment. This is very common among the staff Munir found at the bank.

It is widely known that the bank has 2 antagonistic camps one called the ‘green team’ which comprises of the staff pre-Munir period and the ‘yellow team’ who are post Munir period. There exists differential treatment depending on which camp one belongs, a fact causing disharmony and poor delivery. Munir has made no attempt to unify these 2 camps despite being fully aware of their existence. The salary differences are a clear testimony of this. How can a general lead troops who are divided to victory?

In conclusion, NBK is going to the dogs because it lacks leadership, sense of direction and organisation. The reality is, 90-93% of customers’ deposits are held up in loans. Even sad is the fact that the bank holds a huge portfolio of nonperforming loans furthering endangering customers’ deposits. In addition the bank has been on a spending spree with most of the projects not benefiting the bank in any way thereby continuing to erode shareholders’ wealth. In addition, procurement policies have been thrown out the window with the companies engaged’ being dubious ones which are being used to fleece the bank of its assets.
This letter finds it necessary to highlight the malpractices at the bank since the departments and institutions meant to safeguard the bank have terribly failed. The Finance department has failed to protect the bank’s assets from misuse and theft. In addition it has also failed to prepare financials that depict a true and fair view but has instead chosen to misrepresent the financials. Even worse is the internal Audit department which is supposed to be the watchdog, but has also failed miserably and seems it has joined in the conspiracy and cover up. With the Internal Audit Director already compromised by having some of his relatives employed in the bank, NBK is in trouble. The internal Director Mr Maingi has chosen to see no evil, hear no evil and hence say no evil.

In addition, the external auditors Deloitte are not competent enough to unravel the twists and turns in the financials. It should be noted that Deloitte have been auditors of a number of troubled companies namely Mumias, CMC, Dubai Bank and Tuskys where there are family wrangles with Deloitte believed to have favoured one side.

What even complicates the situation further is a gullible and a moribund Board of directors, an overpowering chair and a CEO enjoying the protection of the chairman. A good example is the Ksh. 2Million which the MD awarded himself without the board approval, and the chairman coming to his aid saying he solely approved the bonus in April 2015. Worth noting is the fact that Munir had also awarded himself a bonus of Ksh1.8M and a salary increment in April 2014.

The compliance department headed by one Robert Ogindo (an ex CBK staff) has not helped the matter. It is widely believed that he was brought in so as to use his influence to compromise the staff at CBK. It seems this failed to work. The Risk department headed by one Dominic Wadongo who lacks the know how in risk matters, has not helped either. This is because, if he had the chaos in the loan book would have been averted. It should not be forgotten, that the Nation Media Group has ran a serialised a story in June 2015 in which it had tried to expose malpractices at the bank. The issues raised were toxic loans, assets stripping,s taff purging, mismanagement and abuse of office. This was however stopped when NBK gagged Nation hence stopping it from furthering covering the issue but Blogging is the alternative media and something Must be done before they gag the Chief editor of this Site Blogger Cyprian Nyakundi.

The above situation creates a sense of hopelessness, which leaves me with no option but to WHISTLEBLOW and expose the corporate governance issue at the bank. This is purely in the public interest and it is without malice or prejudice. It pains me to see hard earned money belonging to depositors and shareholders being wasted and misappropriated. It did not escape the attention of  this watcher that the AGM for last year (2015) were purposely held in March locking out the shareholders from ‘mashinani’ who had expected the usual May/June date. With the notice of the AGM digitized, many of these shareholders missed out. Even ironical was the change of the AGM venue from the traditional KICC to Safari Park which is several folds expensive. While other companies are finding cheaper ways to minimize costs associated with AGM, NBK seems obsessed with spending. Depositors, investors, shareholders, creditors and the general public must be protected from those who reap where they have not sowed.

It is expected that the management will vehemently deny the above allegations. However a forensic system audit will prove that the issues raised above are true and that the rot is indeed deeper than highlighted herein.

More attention should be given to the Islamic wing where loans are being dished out like sweets but the deposits associated with Islamic Banking are peanuts. This is where recovery of the loans is almost non existence and most of the loans have been given to people related to Munir.

Munir has on a number of occasions acknowledged that not all is well. For instance in email in June 2014 to his top management he admitted that his regime had accumulated so much bad debt in a record of less than 2 years since he took charge. He further went on to say that, the bad debts under his rein meant that his management was worse than the previous one. This was in reference to the Ksh.1Billion loan to KAABS a Lamu Land buying company whose title deed was revoked by the Government for illegalities plus other bad loans. In Addition, in another email in October 2015, he admitted to his top management that liquidity was so bad and hence lending was to be suspended.

The Watcher was present when the bank was at its knees in the 1990s. He saw the spirited effort of the late Marambii and how a bank that was almost liquidated was turned around started making profits and paid dividends for the first time in 2010. Munir and his team are dancing on the titanic ship oblivious it is headed on a head on collision. Someone must come to its rescue and change its course lest Munir sinks this ship. Furthermore the declining share price is a true testimony that all is not well. It worth noting that NBK is the oldest bank in Kenya and as long as we are all contributing to NSSF and paying taxes, we all have a stake in this bank.
This bank has been on this route before. Will it be second time lucky? NBK must be rescued. NBK need another ‘Marambii’ urgently to rescue it from the jaws of hyenas and claws of vultures.

Please share this as widely as you can across the world to save National Bank of Kenya. Urge everyone to wake up and address these serious issues. Contact politicians, contact newspapers, radios and even television stations. Demand that your voice is heard today and NOW .

So if we are ever going to do something, then we’d better realize that it is now. Only three seconds to midnight. So lets be fast.


Would you like to get published on this Popular Blog? You can now email Cyprian Nyakundi any breaking news, Exposes, story ideas, human interest articles or interesting videos on: [email protected] Videos and pictures can be sent to +254 710 280 973 on WhatsApp, Signal and Telegram.


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