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Legal suits threaten to kick Central Bank governor out of office

A complaint to the ethics and anti-corruption agency last week, calling for investigation of Central Bank of Kenya Governor Patrick Njoroge over alleged abuse of office, is the latest move in what is seen as a campaign to kick him out of office.

The complaint, filed by a law firm owned by Ahmednasir Abdullahi, acting for his Nairobi Law Monthly publication, raises questions about decisions the governor took on Imperial, Dubai and Chase banks, which had been placed under receivership.

The complaint is the latest addition to a heap of legal suits and threats to sue by advocates representing various interested parties, directed at different institutions, but most of which single out the governor for criticism.

For example, in a letter to the Director of Banking Fraud Investigations Department, protesting the detention of former National Bank chief executive Munir Sheikh Ahmed at the airport as he attempted to travel to Dubai, lawyer Paul Muite claims the action was taken on the instructions of the CBK governor.

“The one refrain my client and I kept getting was ‘orders from above,’ the above being the Governor of CBK,” Mr Muite says in the letter dated July 18. He mentions the CBK governor at least 13 times in the seven-page letter.

SEVEN CASES FILED

So far there are at least seven cases in court cross filed between Imperial Bank directors, shareholders, depositors against either the CBK, the governor, KDIC and the Capital Markets Authority. Out of this, only two rulings have been made with CBK appealing on one.

Mr Abdullahi’s firm, Ahmednasir, Abdikadir & Co. Advocates, acting for depositors of Imperial Bank, has also threatened to bring a class action suit against the Central Bank and the governor.

In a November 9 letter to CBK, announcing the intention to bring a class action, Mr Abdullahi accuses Dr Njoroge of holding “extra-statutory” power from a political power grid he is connected to, while specifically targeting certain banks owned by minority communities in the country.

“It is quite obvious that Dr Njoroge’s extra-statutory powers explains his utter contempt of the law and the ‘bull in a china shop’ management style he so impulsively exhibits as his guiding principle in the mismanaging the banking sector,” his letter to CBK reads.

A source at CBK said the bank was aware of this legal intent by some of the depositors and was currently preparing its legal team to respond to the suit, once it has been filed.

DRIVEN BY CARTELS

 “We know that these people, driven by the cartels, are planning an avalanche of legal suits and measures against the bank and the governor. We will respond to these suits according to the law,” the source said, adding that the cartels had been frustrated with the cleaning up of the sector and had resorted to “legal mercenary” tactics to frustrate the CBK and intimidate the governor.

A person familiar with the matter suggested that ongoing criminal investigations against two individuals at Chase Bank had reached a crucial stage and the individuals were running scared.

The latest claims against the governor could also have been triggered by a case filed by Imperial Bank, CBK and KDIC against the directors of Imperial Bank, which has reportedly sent shockwaves in the entire industry.

In the case, filed on September 30 through Murgor & Murgor Advocates and Amolo and Gacoka Advocates, Imperial Bank, CBK and KDIC are demanding from the directors $449 million, which they say was the amount lost or defrauded while they were directors of the collapsed lender.

The amount includes a claim made against the shareholders for irregularly paying themselves $27 million as dividends when the bank wasn’t making any profit, and a further $20 million claimed from the directors for recklessly lending to firms.

The claims against the directors are based on gross negligence and breach of fiduciary duties, which arise out of guidelines issued by CBK imposing responsibilities on the directors of the banks.

The case seeks the freezing of the directors’ shares in 42 companies known to CBK and further claims any shares in any company in Kenya and out of the country.

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