Kenya anti-graft body asked to probe public payments to collapsed banks

by Katy Migiro | @katymigiro | Thomson Reuters Foundation
Wednesday, 8 December 2010 14:17 GMT
Kenya's parliamentary committee overseeing government spending asks anti-corruption agency to investigate why central bank gave $103 million to five banks - newspaper

NAIROBI (TrustLaw) - Kenya’s parliamentary committee overseeing government spending has asked the anti-corruption agency to investigate why the central bank gave 8.3 billion Kenyan shillings ($103 million) to five collapsed banks, the Daily Nation newspaper reported on Wednesday.

The request follows the presentation in parliament on Tuesday of a report by the Public Accounts Committee on its 2007-2008 financial year. The committee found that recovery of the money had not been possible for many years, the newspaper said.

It did not say when the cash had been given to the banks.

The committee wants the Kenya Anti-Corruption Authority to prosecute the officer responsible for making the illegal advances.

The five banks under liquidation that received state funds are Exchange Bank, Trade Bank, Post Bank Credit Limited, Euro Bank and the Continental Bank of Kenya.

Exchange Bank played a role in the Goldenberg scam, the country's biggest financial scandal. It involved the loss of at least $1 billion in central bank money via compensation payments for bogus exports before the 1992 election.

Exchange Bank, owned by a company called Goldenberg International, received millions of shillings from the central bank for exporting gold and diamonds in 1992. Opposition leaders said at the time the gold and diamonds did not exist and alleged Exchange Bank had channelled vote-buying funds.

After Euro Bank collapsed in 2003, five senior government officials were charged with corruption for allegedly making fraudulent bank deposits resulting in the loss of millions of public funds.

The men were accused of having illegally deposited public funds amounting to around 1.1 billion shillings into Euro Bank. The bank was wound up after it was found to be insolvent to the tune of 1 billion shillings. At the time of its closure, it held 1.4 billion shillings ($17.4 million at Wednesday’s exchange rate) in deposits from several state-owned corporations.

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