Kenya's Piggy Banking: Innovations in Crime and Robbery

Paolo Sattanino (in Charterhouse Scandal below) assumes the role of the Godfather

Microfinance, the rage in the Kenyan banking industry for the better part of the last decade is not actually a Kenyan innovation. This many of my readers would already know since something along the lines of Equity Bank's microfinance strategy based on banking and lending to the poor had already been started in poverty stricken Bangladesh way back in 1972. 

This was spearheaded by one Dr. Yunus Mohammad who quickly articulated his ideas through a creature of his 'innovation', the Grameen Bank.

Yunus Mohammad; founder Grameen Bank

What the reader might not know is that microfinancing was not Grameen's or Dr. Yunus' novel innovation either. They were just expediently saddled with that credit as an evocative poster child for microfinance funding; something like " Hey! All rich people dudes, look! The poor mankind guys over in Bangladesh are trying something hippy; isn't that cute? . . . awwwwh! Let's hit them with some fresh bread crumbs." 

The only innovation then, was that the neo-liberals had conjured up the idea that what was happening with Grameen in Bangladesh was something absolutely fantastic and novel.  Yet just across the border in India, there were dozens if not hundreds of sizable Grameens at that time!

Microfinancing, through informal savings and credit groups as well as burial societies, has been around for centuries in various parts of the world and microfinancing still exists in it's rudimentary form by various names. For example "chamas" in Kenya and  the larger East Africa region, "susus" in Ghana, "chit funds" in India, "tandas" in Mexico, "arisan" in Indonesia, "cheetu" in Sri Lanka, "tontines" in West Africa and "pasanaku" in Bolivia.

Chama: One of the many Self-Help groups in Kenya

To cut a long story short these informal groups and the ideas underlying them (self-help through micro-credits) began to be formalized into microfinance banks in the 18th century.  The process really got an uptick from the activities of one rabid Irish patriot, Jonathan Swift (author, turned nationalist, turned banker . . . after that he died, or something) who was utterly disillusioned by British capitalist imperialism in Ireland.

Tired of the all too common cry amongst the poor in Ireland about inaccessibility of capital Swift began with the "chama" concept and fused it with professional banking practices. His idea and model began slowly but by the 1840s it had snowballed into a widespread institution of about 300 funds all over Ireland.

In short it is just the Equity story two hundred years ago. So before Grameen and Equity there was already a long history in microfinancing, and following the rapid evolution and spreading of Swift's model , there were numerous institutions spread out across the world in the formal microfinancing sector. Forget innovation, there is a far bigger, much fatter, more lucrative thought you are missing, it is called 'original' imitation. Yes/No? . . . China? . . . Fake knock-offs? Yes? No?

Jonathan Swift

Anyway, am loath to say -- that is not where the similarities end. After Swift's institution got established some fishy practices started to emerge. Much like the mafia or vigilante groups the early microfinance institutions initially behaved themselves. 

The mafia, as is well known, take over neighbourhoods by at first being all nice, do trivia like kick out petty thugs, pick up litter like candy wrappers, help grannies cross roads, flash broad smiles and strive to be trusted by being all courteous and superficially helpful. Then when they are firmly in control they turn into extortionist cartels and brutally choke the life out their 'clients'.

Similarly the microfinance institutions of the 19th century, such as those in industrial Europe and Latin America, and those of today win over the poor with deceptively small credits with low interest rates, in time this progressively changes and continue to be deceptively sold as micro-credits but with exorbitantly high interest rates not to mention with other hidden charges. 

Hidden charges such as penalties automatically effected for failing to meet the payment of an instalment, wildly vacillating floating interest and other spurious surcharges that are put as overhead charges.

Microfinancing has not lessened the scourge of poverty

The consequence is that the majority of the poor end up being heavily indebted and far worse off than they were before. Those who are unlucky enough to have submitted property as collateral end up with nothing, just because they got a brilliant idea:

 "Hey let's go get a loan from nice Bank X, they are in Microfinance honey, that means they are as poor-friendly as our patron saint of poverty.  Silly Mr. Y told me Mother Teresa wouldn't lend at better rates herself!" But soon enough they discover why Mother Teresa chose to be a  nun (and not an executive at a microfinancing firm) as her chosen path to help the poor.

This is not a new story and it has happened for almost two hundred years now. Equity's forerunner and inspiration, the Grameen bank has been accused of these very same vices. But with the rising voices of protest, the microfinance institutions have mirthlessly slapped back the poor (in an effort at muzzling them), by funding numerous reports that rubbish their complaints as 'Myths'.

The impressive multi-million dollar Microfinance headquarters in India and Kenya (left; Grameen HQ and right; Equity HQ) which were built from the customers'  'myths'

Go ahead, just do a search on 'myths about microfinancing' and be thoroughly astounded by how many academic reports there are out there with such eminently suspicious titles, many specifically with the word myth. 

 I assume then after going through them the natural thing you would ask yourself (like I did) is; 'Who is 'mything' here, the people who are hurting or those who are growing fat and opulent from the supposed myths?'

{The Romans, so as to quickly filter through lies, coined this logic into a beautiful Latin phrase, 'Cui bono?' -- who stands to gain? In criminal law this is paraphrased and split into two; Who has the mens rea? -- intent or motive and The actus reus -- who actually committed the crime?}

This is what the Kenyan banks have been subsumed and occupied with for the last ten years,  feverishly engorging themselves with the microfinance robbery. They have been so busy to out do each other (and to deaden the wind from Equity's sails) that they have even attained global recognition and adulation for their 'wonderful' work in microfinance. 

Did anyone notice that a majority of Kenyans, and thus their clients, are still growing wonderfully poor?

The runaway success; M-PESA

So we didn't innovate the microfinance thuggery, but Kenya is abuzz with the 'innovation' term we must have innovated something, right? M-PESA? Yes, mobile money transfer which is now directly linked to real bank accounts is a true innovation, unfortunately it is not a banker's innovation. 

It is the telecoms that came up with that mammoth success. The banks just raised hell when it was being introduced but when it got off the ground and shot up to the moon, they brazenly back-pedalled, supplicated and conveniently squeezed in. To be fair though, the innovation buzz is not all for nothing.

The banks indeed have come up with something and they are touting it as a global first. Unfortunately what the banks are terming as an ingenious innovation is actually another imitation. They call it 'Agency Banking', which I think is as banal and unoriginal an idea can get.

In this enterprise what the banks have done is to copy the agency structure of M-PESA and strove to devolve their deposit, withdrawal and account opening services to small businesses and agents. The idea is to turn every shopkeeper, if possible, in every village and street corner into a bank agent. Just think of it as human ATM machines that can also fill forms.

Though agency banking has been aggressively fronted and promoted, it has not yet become a raging success, in polite banter it would be aptly called a one-third success. The banks' attempt to muscle in on the telecom gravy train by deviously supplanting the telecom money service with a bank one has not worked. The lesson? Corporates are only successful when they are robbing gullible, idiotic masses . . . not other giant corporations.

The agency banking concept and it's execution is delightfully impressive, so they would want us to believe. The banks have tried to whitewash the failure of the scheme by claiming that the serious insecurity levels in the country and floating cash problems at the agencies have been monumental impediments that they have been successfully battling on their own.

But the M-PESA service practically blasted through the roof with these same problems, never mind the potential, fussy users had no previous model whatsoever to relate to. I can virtually hear the imitation braniacs and the strategy cogs in the banking sector groaning with exertion to come up with a more brilliant imitation to wipe off the tears and humiliation of agency banking.

In fact am convinced they recently came up with one, but the expeditionary avarice they so flagrantly demonstrated in that one, quickly put paid to their schemes.This is the reprehensible Forex arbitraging that wiped off up to 35% from the value of the Kenya Shilling -- within a span of ten short weeks!

Rogue banker's got a wild kick greedily riding the Forex market

The sheer amounts that they were betting on the short side (that is, they were hoping the shilling would fall further, so they mopped up dollars from the market with the objective of buying back the shilling a few weeks or days later and thereby skimming off the millions on top and making unimaginable profits in Kenya Shillings in a matter of days) drove the shilling to be ranked the worst performing currency against the US dollar in 2011.

The outrage from the public and business community led the lackadaisical CBK into a knee-jerk reaction and adjusted the Central Bank Rate (CBR rate) upward by a wholesome 500 pips in one swoop. 

(That is equivalent to 0.5% from 6.0% to 6.5% which in the world of finance is as momentous as waking one morning and finding that a skyscraper has been moved overnight to a sleepy village 100 kilometers away).

It was (and still is) drastic and painful, for one has to remember in effect the CBR rate is what banks charge each other for overnight lending, i.e. the extra money you would owe me if we were both banks and if I lent you or you had not transferred my money to me by close of business of the clearing house (let's call this the neighbourhood pimp or thug that guarantees payment).

Math Time!!

The extra amount (the interest amount you would owe) is calculated as the 'total' money you owe (as a bank) multiply by the CBR and divide by 365 -- in effect the banking world a 0.5 difference means billions of shillings -- a single night! Very painful. 

Suddenly no one had liquid money and no one was willing to risk any to play around with the Kenyan economy in diabolical Forex arbitraging. Stupid persistence in any case would have meant more pain as the CBR rate would have had to be pushed even further up.

Now we are back to 'normal' as the demand and supply of Forex is being dictated and executed according to the actual needs of the 'real' economy. Not the giant, planet-sized speculators in form of banks who suddenly appeared in Kenya's exceedingly tiny and relatively puny speculator's 'village'. 

Essentially what has been made obvious is that Kenya's Forex transaction volumes can (still) only sustain small-time speculators (when compared to let's say the undisputed, silver-back gorilla in Forex -- London); large institutions or funds engaging in speculation in the USD/KES currency pair is like putting a 6 tonne elephant on a kindergarten see-saw. Forget balancing, the damn thing would just get broken.

Out of the 50 billion they allegedly made the major culprit banks have only had an unspecified number amongst them being fined one million shillings each. Even though they suffered even more with the higher CBR rate, this is a farce, how can everybody get to suffer for their greed while they get to cushion themselves with ill-gotten profits?

CBK Governor Ndungu

The CBK governor practically winked and gave their robbery a free pass! It is certain there is something in it for him, in both protecting the identities of those involved and which his dubious appointment perhaps guaranteed these banks. Something that I'll shortly be focussing on below.

Under pressure from a challenging operational environment Kenyan banks have been pushed to the wall to come up with new ideas, if not to survive then to sustain their high levels of profit-making. In a typically Kenyan twist, it is an open secret that their published profits are woefully doctored.

 If the banks are bleeding money the figures are adjusted to conceal or understate this fact as they grapple with the problem. On the other hand, if they are trully making wild profits with no reasonable, passable or obvious explanation they in their turn brazenly machinate elaborate concealment and prune down to size the profit figures. Everyone knows this is illegal, but 'illicit' is the other name for profit in Kenya.

This is especially true of privately owned banks or those with overwhelming stakes in the hands of a single owner or a cohesive business cartel. From their perspective, the need for this doctoring practice is answered by the question: Why should we expose the fleecing of customers and our perfect robbery schemes by stupidly publishing the embarrassing proof of our misdeeds?

The Lehman Brother's, a major American financial institution, became a victim of it's semi-cleverish Financial Engineering Schemes; in this photo even it's outdoor sign is being taken to be auctioned at Christie's, an art gallery

Financial engineering, something that they are also engaged in is the dubious art of creating 'innovative' new products designed to attract and ensnare customers. 

The products are deliberately made so complex and convoluted, that 99% of customers are completely befuddled, intimidated and overwhelmed when they try to understand the mechanics behind them. What they end up knowing is what the banks choose to tell them. In this way customers 'miraculously' and in a perfectly calm manner, peaceably acquiesce to being robbed naked (they are already blind so I guess they can't be 'robbed blind').

This is something that has had a long history in the developed world, particularly in the major financial markets. So it is not surprising that the Kenyan bankers (who previously did not have the wherewithal to play around with financial engineering tricks in what was an illiquid and technologically retarded country) have suddenly grown receptive to tricks formerly reserved for developed sophisticated markets.

Bernie Madoff,  investment 'guru' aka pyramid scheme dim-wit. He moved from being a billionaire to having even his underwear being auctioned to recoup clients' money

This can be attributed to the rapid financial and technological growth and maturity of the Kenyan economy.  But not all such tricks have to be high tech, but they still require a liquid market, such as creating mortgage and real estate offerings that can suck the blood out of what they perceive as imbecilic customers. 

I wouldn't be surprised to see a recycled sub-prime mortgage crisis in Kenya in a few years, we have Bernie Madoffs and Lehman brothers in plenty in the making.

For those banks not bright or muscled enough to reap their rewards from complicated manoeuvering such as microfinancing, Forex arbitraging and various forms of financial engineering such as, creating fishy mortgage products and formulating dubious real estate financing, their greed and desperation has led them to resort to old school thieving and blatant crime.  Mainly in the form of archaic tax evasion and dim witted money laundering.

 Such banks simply help thugs steal from the Kenyan public besides actively aiding and abetting very serious crimes, which rank international in stature both by virtue of their severity and in the sense of cross-border transactions. The fact that prosecutions have been non-existent says more about the political patronage and potency of individuals behind these crimes rather than anything even remotely intelligent about the banking executives behind them.

To demonstrate this last kind of especial and insidious form of robbery (and the sheer stupidity of that greedy set of bankers) I will use the infamous Charterhouse Bank as an example; an unambiguous snapshot of the mesmerizing improprieties the Kenyan banks engage in to earn their shady directors and owners a quick buck.

This all, astonishingly, at the expense of the already poverty neutered Kenyans (yes poverty is castrating Kenyans, would there otherwise be so many new cases of husband-battery?) never mind that these banks are flippantly putting at risk the painstakingly built financial integrity of the entire banking sector in Kenya.

There is a wealth of material publicly available and easily accessible via the Internet on the nefarious activities of this particular bank. What I will do is provide a link to one such compelling and credible source (a comprehensive report) as a footnote at the end of this blog as the basis of the serious accusations I will be bringing out, which actually happens to be the coup de grâce of this post. 

This being the naming and shaming part the link will give you the benefit of easily verifying for yourself the credulity of the succeeding assertions.

                                    "CHARTERHOUSE" is . . . 

When one delves into affairs of the privately owned Charterhouse, which in my view is a scandal of a bank, the first thing that hits you is the scale of the improprieties and the amounts involved in the dubious transactions.

The bank's controversies and filth first  burst onto the public domain in 2001, at that time the CBK was involved in a tussle with the bank over a single deposit into the account of one Crucial Properties Ltd. amounting to 2 billion shillings (25 million US dollars). The Crucial Properties people crucially claimed the money was a loan (from unspecified sources) to invest in the property market.

The CBK people thought they were inordinately twisted liars, their 2 billion shillings explanation fell far short of expectations but more importantly the money had the face of, and eerily looked like, the bastard child of crime. 

The Crucial fellows feverishly fought the court order that had frozen the account and money, on the grounds that the investigation (which they were probably impeding) were taking too long. The freeze order was withdrawn, the money was out of the country on that very same day.

But this was merely a mucoid spit onto a roadside bush, the filth from Charterhouse really came pouring out like a broken sewer in 2004. At that time some conscientious employees risked their lives, and for the public interest, raised the alarm over numerous gargantuan irregularities at the bank. Under pressure from the public and even concerned foreign missions investigations by a joint task-force by CBK, KRA and the defunct KACC got underway.

As the investigations dragged on, Charterhouse Bank was not by any means cowed. It was not Charterhouse that actually was to get an epiphany, the shock and revelation come to , and was at the chagrin of -- the all powerful Central Bank (CBK).  Quite separate from the ongoing joint task force investigation, in January 2005 CBK stumbled onto one of the many anomolies and irregularities at Charterhouse.

The inspectors had noticed that Nakumatt Holdings had been illicitly lent more money, which was way above the legal limit the law allowed under the arrangement they were conducting the transaction.  Furthermore that account had no proper account opening documents. Charterhouse was ordered to expediently rectify those anomalies and was fined; a far lenient recourse by the CBK given the other aggravating accusations against the bank.

But what Charterhouse bank did afterwards is even more surprising. The sequence of events that followed can only be termed as a sensational challenge to the CBK's authority and unrivalled impudence on the part of Charterhouse bank.

On a follow up inspection following the discovery, one month later (in February 2005), the CBK found that Charterhouse bank had not rectified the gaps in the account openning documents of Nakumatt, again they warned the bank and made it clear the anomalies have to be done away with.

Amazingly, eight months later in October 2005 a CBK follow up inspection found Charterhouse had done nothing! They obviously were not even remotely aware of the CBK! In a show of utmost impunity, they had simply ignored the national regulator as a if it were a pesky itinerant preacher!

In March 21, 2006 the then CBK governor Andrew Mullei recommended the withdrawal of the licence of Charterhouse bank, the mounting evidence of institutionalized malpractice from all quarters, every nook and cranny in the bank was just too compelling. The licence was not withdrawn but the bank was placed under statutory management.

The Accuser who was turned a Suspect: Andrew Mullei

A few short weeks later, Andrew Mullei was dislodged from his post as the CBK governor -- he had been charged with abuse of office. Regardless of the merit of the accusations, one cannot ignore the convenience of the emergence of these acquisitions and the speed with which Andrew Mullei was routed out of office vis-a-vis the menacing behaviour of Charterhouse bank.

Fast forward to October, 2010 one Njuguna Ndungu aka CBK Governor and his eminent gerontocratic team of academics backtracked and said that they saw no reason for Charterhouse bank's closure. No reason my old foot!

Prof Ndungu Njoroge has not been averse to managerial lassitude; the bane of academics

Before the current pressure following the rapid depreciation of the shilling, there were many lingering questions surrounding the competence of Ndungu for his job as CBK Governor, quite apart from his dubious appointment and re-appointment. Dry academics, dead and withered economics. That is what Ndungu brought to the CBK. 

It is hard not to imagine that he was basically given that job because he was  Kikuyu with the right degrees and with the right political connections in the Kibaki government. Certainly not because he was suitable for that job..

The man is insular, and deeply layered with obsolete economic theories from the world of academia.  Ndungu's pastime has been to regurgitate and indulgently disseminate cold war economics. The indecision within the management at the Central Bank when faced with what was a situation getting out of hand clearly brought out two of possible scenarios:

1. The incompetence of the bookworms at the CBK, (bookworms that Ndungu seems to have gleefully yanked and rescued from chalking stale notes on campus blackboards), and that they were good for nothing in responding to real life situations. I remember Kenya's most salient economic analyst Aly Khan Satchu prescribing and agitating for strong measures from the CBK to stem inflation and the fall of the shilling months before this was finally and grudgingly effected.

Or 2. Ndungu was neck-deep in collusion with the rabid speculators, and he was giving them free rein to make money.

Unbelievably, in changing the board to face the new challenges of the 21st century, Prof Ndungu saw it only appropriate to pack the CBK with his clones, people with a penchant for classical macro-economic theories. Supply and demand -- that is the only thing the bunch of them and Ndungu are able to articulate as the CBK monetary policy!

Going back to Charterhouse bank, the investigations at the bank revealed that on account of tax evasion alone, the bank had helped some companies skirt taxes to the tune of 18 billion shillings (254 million US dollars), and that was on only based on the records they could find or decipher. At Charterhouse there was deliberate patchy documentation and at the height of investigations a mysterious fire destroyed other crucial documents.

This is merely money owed in taxes, but at the time of the accounts being frozen with the closure of Charterhouse in 2006, there was only 3 billion Kenya shillings in the bank. Money pretty much came in, and often during the same day, it would go out -- what kind of a bank is this?

Gladwell Otieno

Not to reproduce Gladwell Otieno's entire report here (the link is down below) I will arrange my arguments under the name of individuals and companies and the malpractices they are connected to in the Charterhouse thuggery.

Sailesh Prajapati  Account
Over the five years and seven months it had been in operation this account had had deposits amounting to 2.2 billion Kenya shillings. Perhaps this wouldn't seem to fishy, even though it seems like a personal account, right? This Prajapati fellow could have been a top-notch footballer in Europe between 1999 and 2004 (the time the account was active before it was frozen).

But visualize this: the account had a total of 1,570 deposits, out of these exactly 1,300 deposits of 1 million Kenya shillings were made into the account. Amongst the deposits there was another series of perfect transactions -- 28 equal instalments of 3.76 million Kenya shillings totalling 105 million (from Nakumatt) into that account. But more astoundingly, all the transactions were conducted in cash!

What kind of an account has almost 90% transactions in regular, equal deposits of cash and yet that same account has no openning documents and which on the face of it has no owner or authority operating it? Damn you Charterhouse bank.

The real Butere and a 'real' Butere businessman, he is called Roulex Odhiambo and he is a veterinarian.

Odesys Enterprises  Account
This amazing account had been opened by a sole proprietor right next to the border in Uganda, in Butere. It remains a mystery why he chose to open the account in a bank that had no branch in Kakamega, leave alone Butere. In the 10 months leading to 23 June, 2006 the account had had deposits totalling close to 555 million Kenya shillings. In cash! What on Earth could this man have been doing in Butere to generate such kind of money?

For those not in the know Butere is as rural as it gets, you will find people there either eating sugar cane, planting sugarcane, harvesting sugarcane, transporting sugarcane and such like sugary activities.  But like most accounts in Charterhouse bank, the money did not stick around long enough, within those very same 10 months there were withdrawals totalling slightly more than 566 million Kenya shillings.

He was such a good customer that Charterhouse bank was literally giving him regularly more money than he deposited. From the AfriCOG report I can't make out what was the balance status of the account at the time it was being frozen, but wouldn't it be just adorable of Charterhouse to dish out to this hardworking man a princely overdraft totalling more than 110 million shillings in tight neat little increments in a period of ten months?

Especially given the fact that he deposited the millions in cash -- and withdrew slightly more millions on the same day! There was virtually no money in that account at any one given time! There is no legitimate business in the world, leave alone in Butere, that can operate like that. Charterhouse,  you damned launderer! 

Paolo Sattanino Accounts
 This man with the name of a catholic priest is a very very bad man indeed. With information accruing from the AfriCOG report Sattanino can snugly fill one of two roles; a nefarious courier rat or a 'Godfather' figure in the Nakumattian web of tax evasion.

 Anyway Sattanino had opened 4 accounts at Charterhouse bank. Three of these accounts were opened in his personal capacity and one as the Managing Director, Capricorn SRL.

Me thinks he is a rat, no mafiosi overlord would wobble into a bank and open an account under his name, Charterhouse bank or not. It is not just good for business, . . . at least that is what I hear the smarter ones say in the movies. Or he missed all the wiseguy (La Cosa Nostra) movies? 

What kind of an Italian is he then? One from Gujerat and one who has more affinity for Bollywood? Goodness! What is the world coming to if Italians prefer Bangra to Opera?

Money Laundering is illegal in Kenya

Now the CBK, in line with standard global practise against money laundering, has made it mandatory for banks to maintain supporting documents for transfers of over 10,000 US dollars. Beyond 50,000 the CBK requires all banks to automatically report and furnish it with the relevant particulars of the transactions. 

The automatic recourse for those wanting to circumvent the rules and thus keep the CBK from nosing in on their business is to split up large amounts into smaller ones and then remit the money on different days.

But Creative Innovations Limited (which is owned by the same people who own Charterhouse bank and is a major supplier of Nakumatt) went innovatively stupid and did something audaciously non-intelligent. From 17 to 27 January 2005 (with the exception of the weekend dates of 22 and 23) they instructed Charterhouse bank to remit on every single day 10,000 US dollars into just one single account of Paolo Sattanino. 

This amounted to 90,000 US dollars. As if realizing their stupidity more than two thirds of the way, from 28 January to 1st February (skipping the weekend dates of 29 and 30) they deposited slightly more than 6,000 (varied figures this time) Euros on each day into another one of Paolo Sattanino's account. It all amounted to around 19,000 Euros.

 Creative Innovations Limited was not the only entity making payments to Paolo Sattanino, there was a complex web which always ended with Paolo Sattanino as the final beneficiary. He then wired the money out of the country.

Those in this  web are:
1.Kingsway Mart Limited
2.Paul Mburu
3.Fones Direct
4.Phones Direct (as a different entity)
5.Cashline Forex Bureau
6.Cargo Distributors
7.Intra Market Trading
8.Triton Petroleum
9.Panaroma Imports
10.Brand Imports
11.Capricorn SRL (which for all intents and purposes is Paolo Sattanino)

The pattern is clear enough: 1. Juggle the money around in the same way ambushed pedestrians on Jogoo Road would do if they were given the same task 2. Always make sure the funds ends up with Paolo Sattanino.

 Uncalled for silliness. That is all I will say with regard to that 'plan'.

Not to bore the reader (if any, looking at the horrible length of this post I have the nagging feeling that I will be the only human who ever read it upto this point -- if there is another one out there kudos to you. You need a Greyhorn medal . . .  the GOSO award i.e. the coveted Greyhorn Order of Screen Ogling); . . . going on . . . as I was saying, not to lull you into premature retardation with a boring and similar narration as the one above (by merely changing the heading to 'tax evasion'), I will strive to compress the main activities of some companies that were carried out in collusion with Charterhouse bank.

The Opulent but apparently 'filthy'-rich Nakumatt

Nakumatt Holdings Ltd.
From the outset of investigations the accounts relating to Nakumatt had brow raising anomalies and they were simply perplexing in magnitude. To the auditors it must have felt as if they were looking at a stark naked and dirty madman playing with the gold sceptre in parliament during the reading of the national budget. 

The behaviour of Charterhouse on the other hand was as incredible as that of the speaker shamelessly urging everyone there is no such nude lunatic in the august house. (What would parents tell their unconvinced children what that obscene figure on the floor of parliament is? The ghost of Kenyatta?)

In the face of these awkward and most visible anomalies, Charterhouse and it's management continued to treat the furore with as much disregard as watching giddy children make much ado about nothing. To Charterhouse (and Nakumatt) the anomalies were the pure figment of the investigators imagination which had been seeded by former disgruntled employees. What was not fictitious in any way, shape or form was that goons in the form of hitmen were sent (in 2006) to permanently shut up those pesky former employees. Who sends murderers after lazy delusional daydreamers?

On 21st June, 2006 the shadow Finance Minister Billow Kerrow tabled in parliament a leaked report from the joint task force. The report alleged Nakumatt had been aided by Charterhouse to evade taxes to the princely sum of 18 billion Kenya shillings (250 million US dollars) over a six year period.  

The average of 3 goddamned billion each year! Amazingly, Nakumatt was apparently suffering crippling losses at that time -- for they never declared a single cent in profit during those six years.

And to think half the urban population in Kenya was shopping with the fervour of paid agents at Nakumatt during that time -- losses my bruised elbows! I can testify those people never looked broke to me, infact every other day one of their branches would pop up in the suburbs; and the branches became so saturated that they had to leap into neighbouring countries just to get some breathing space for their frenetic expansion.

But that was not all, Nakumatt was alleged to have been holding back VAT (Value Added Tax) that they had collected from sales. The chronically ailing Uchumi of that time, (which even temporarily collapsed and had to be bailed out by the government during 2006), was remitting 10 times the amount Nakumatt was remitting! Really, how can a man admitted in an ICU ward outrun David Rudisha? It is a strange world I tell you, that these Charterhouse and Nakumatt people crawl in.

The report also cited a number of companies other than Nakumatt for tax evasion:

Tusky's; . . . Chap Chap Tax Evader

Tusker Mattress
There was Tusker Mattress (what is it with supermarket chains?) which operated an undisclosed account with 4.3 billion Kenya shillings at Charterhouse bank. The directors of this company also operated 75 different personal accounts at Charterhouse bank, each with mouth gaping balances. Tusker Mattress kept abreast in the game and had undeclared sales of 911 million Kenya shillings.

WE Tilley (Muthaiga) Ltd
This fish-mongering business, yes they are indeed involved with real fish but I don't know how the leafy suburb of Muthaiga with it's golf courses comes in, was also marked out. 

Allegedly the credits at their account in Charterhouse bank saw a remarkable spike in activity over a 9 month period (from January to September 2004) which totalled 5.9 billion Kenya shillings. Furthermore they declared sales only in Kenya and none in Tanzania. But more interestingly they made colossal transfers of the fishy money to persons who had no relationship whatsoever . . . with the fish trade!

In the web of tax evasion there was the inbred firm Creative Innovations (has shared shareholding with Charterhouse bank), Paolo Sattanino, Sailesh Prajapati and one account simply known as the D Shah account. In each case millions, often hundreds of millions were involved, there were suspicious transfers and other such Charterhausian artifice.

All in all Charterhouse is accused of more than a dozen different violations and breach of law. There are so many accounts with anomalies that perhaps it would be prudent if you went through the report yourself. 

By any means Charterhouse is not the only bank in Kenya that was involved (and still involved) in such activities, but it is the only bank that was stupid enough to be overconfident in it's political patronage to behave in such a flagrant and brazen manner (thus abusing it's most prized asset -- that very same insidious patronage).

The Poor Kenyans (the Wanjikus like the lady above) have gained nothing

In all the activities above the biggest loser has been the ordinary Kenyan, particularly due the billions lost in tax evasion. All the activities are criminal in nature. So it is surprising that the parliamentarians who had been outraged with the sheer magnitude of malpractices in Charterhouse bank have now made a U-turn (now that the elections are around the corner, have they been paid?). 

They now mischievously pretend that Charterhouse is not a flimsy veil for money laundering and a central cog for the criminal underworld both in Kenya and abroad. Believe it or not, the only rational reason why Charterhouse would be open at this juncture is that it's services in bankrolling the politicians' campaigns is needed.

No Bank is Your Friend!

In conclusion the banks are not your friend, and some of them indeed are to be treated with the alertness and circumspection that is reserved for the most implacable and potent of enemies. 

It is hard to rationalize such amoral avarice (that are outlined through out this post) which diabolically gleams red when one scratches and peers just below the surface. But alas! They even have permanent 'strategy teams' that spend every waking moment thinking of ways to relentlessly keep robbing you of your hard earned money! 

When you think of a bank just think of the following words: Pigs, Criminals, Robbers and conduct your self accordingly when you transact with any individual representing that world.  They have already been robbing you for years, why should you keep aiding them by remaining passive?

MW

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I have recently been going through some figures and research shows that for 2,150 pageviews one should expect an aggregate average of 43 remarks (comments, fb-likes and tweetering). 

Blogging -- something I only started the other day -- is quite a curious enterprise. I can 'see' from my blog stats that indeed people from across the world are reading or skimming through the blog on a regular basis.

This creates a feeling like you are having a party but all your guests are ghosts,  and since you can't see or hear them, you sit at the high table and crack jokes hoping that you are humouring and cracking the shivers out of them. 

Indeed, you are clueless as to whether they are even paying attention to you at all, or simply it is that your house happens to stand on an ancient graveyard you don't know about. 

Hauntingly, some remark I heard just before I started blogging in Lawrence Fishburne's latest movie "Epidemic" or something, just can't get off my mind. A grumpy baby-boomerish character memorably said, "Do you really think you are a writer? Blogging is just punctuated graffiti!"

Mmh, I guess that explains why there is no feedback. I don't remember signing my appreciation for the 'artistic value' alongside the many toilet graffiti I have seen in my life. In fact what I should expect is that there are more bloggers out there because of me -- graffiti artists and enthusiasts acknowledge each other by drawing bigger obscene graffiti!

For those of you who already like the style and content of the blog you need not fret that I will implode with exasperation and quit writing. 

The sheer joy and pleasure I derive from writing and researching these posts is unbelievable, the unorthodox length of my blog posts speaks for itself. Common sense and necessity often forces me (despairingly) to cut them short, otherwise each blog would be a mini-encylopaedia for me to say all I want to. I have realized I will probably be a blog-bugger in some shape or form for life. 

Finally I hope you are not a cyber-robber (plagiarism happens to be standard practice in these parts). If you are one, what can I do but inform you that you are gleefully robbing me (your humble weird blogger) a measly, cursory acknowledgement! I might at some point go berserk and disable the url from public access . . . then the blog would become my personal diary!

M. Wycliff,
Nairobbery.


 links:
1. Gladwell Otieno, Smouldering Evidence - The Charterhouse Bank Scandal (click this link to download the full pdf report from the AfriCOG site)
2. CGAP, History of Microfinance (page link)
3. I acknowledge myself.
Yes this is a weird blog, but it is not a gonzo library. I harbour no particular love for lengthy bibliographies (like those found in communist theses).

 For those with a more scholarly bent it would suffice to state that the material at these two sites was adequate in expatiating my arguments.