CHARTER HOUSE REPORT AT WIKILEAKS >Shs 100 Billion

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DA~MNING REPORT GETS INTO WIKILEAKS; TAX EVASION, MONEY LAUNDERING AND CHARTER HOUSE BANK. AUDIT SAYS REPORT THREATENS STABILITY OF ECONOMY (thus the hush by KIMUNYA).

LOOTING AND CAPITAL FLIGHT GO HAND IN HAND: COULD THERE BE A LINK BETWEEN THIS REPORT AND THE KROLL REPORT ON LOOTING.

*Reports on Shs 100 Billion laundered through Charter House Bank.
*Tens of Billions in Tax Evasion by Corporations.
*Drugs and Possible Terrorist links in a Shs 2 billion transfer from Leichtenstein.
*Whistleblowers fleeing Kenya into asylum in the USA.
*Government suppressed reports and secret claims that the reports revelations “threaten the stability of the Kenyan economy” and its active bourse the NSE.
*Investigations cost former CBK Governor, Andrew Mulei his job.

Finance Minister Amos Kimunya is still so mum about charges of Billions worth of Tax Evasion and Money Laundering activities by Charter House Bank (CHB). The Anti-Money laundering Bill has not been tabled too.

New reports recently posted at Wikileaks website reveal astounding and dam`ning information about CHB, placed under statutory management in 2006. Excerpts from Wikileaks below offers insight into this complex web of dealings.

CHB is apparently not a normal bank -it has most of its branches within Kenya's largest supermarket chain (Nakumatt)- and - it moved tens of millions of dollars in single transactions around the world.

According to Wikileaks, CHB’s first claim to notoriety was a botched anti-money laundering operation against an account holder called Crucial Properties, who in 2001 received US $25 million ( Shs 1.8 Billion) from Liechtenstein for "property development and trading in Africa." The account holder also ran a minor eatery in Nairobi (~ Green Corner?) which detectives didn't think suggested the ability to attract tens of millions of legitimate dollars. The Sh 1.8 billion vanished one day after the courts let through a stay order against the investigators.

Thus began suspicion that CHB was laundering proceeds of illegal business, and constituting a threat to national security. Just in 1998, al-Qaeda terrorists had bombed the US Embassy in Nairobi, killing 214 people.

Today CHB stands accused of more financial scams, tax evasion schemes and money laundering operations that saw flight of billions of shillings out of the country by “unidentified” persons. Close to 100 accounts have been investigated and questions asked in Parliament and by foreign diplomats, and at least two whistleblowers have fled the country to the US.

At stake is over Shs 100 billion worth of transactions, which dwarf most scandals in a country known for mega-corruption. Investigating this fraud may have cost a former Governor of the Central Bank his job. Certainly, virtually all those hired to investigate CHB have either fled into exile or been moved off the case.

So it doesn't surprise some, that the Kenyan Finance Ministry is accused of foot-dragging in a scandal which the Government's own secret audit claimed "threatens the stability of the Kenyan economy." For some strange reason, CHB appears to enjoy political protection at the highest levels in Kenya.

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The Crucial Properties Case 2001:

Pieces of puzzle begin to fit perfectly in place if you consolidate this report together with the Kroll reports touching on claims of illegal drug trade by a son to a former President.

* In January 2001 Charter House Bank (CHB) reported to CBK, receipt of US$25 million into the account of Crucial Properties.
* CBK applied for a magistrate’s order freezing the account of Crucial Properties and starts investigating the account (suspecting theft or laundering of drug proceeds).

*CHB declined the request for investigation of Crucial Properties accounts, claiming it had no legal obligation to co-operate with the unit.

*CBK established that Crucial Properties had been incorporated in Kenya in May 1998 with two directors. In December 2000 the company opened a foreign currency account at CHB and introduced Humphrey Kariuki as an additional director. Kariuki was to be the star player in the court cases that followed the report of money’s receipt by CHB. Soon after Kariuki became a director, the US $ 25 million was remitted into the account.

*Questioned about the source of the money, Kariuki claimed that it was transferred from Jersey “for property development and trading within Africa ”.

*CBK however, found that the source of the money was not Jersey, as claimed, but Liechtenstein, in Europe. Kariuki failed to provide a proper explanation.

*CBK now said, the money was the proceeds of drug trafficking.

*Crucial Properties then made an application in the High Court for the lifting of its accounts freeze.

* The AG stepped in with Money Laundering charges which were later declared a nullity by the High Court. CBK had assumed that Jersey, the claimed source of the money, was the same as New Jersey, US, and therefore directed its investigation to the US.

*The High Court Judge concluded that he had “no reason to believe that these highly reputed international banks can engage in money laundering”, and ordered the money to be released to Crucial Properties. CBK closed its investigation.

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BBC on Charter House Bank "threatens economic stability": interviews whistleblower in exile: news.bbc.co.uk/1/hi/world/africa/6123832.stm

Bank scam threatens Kenya economy.

Kenyan President Kibaki was voted in to tackle corruption. The government of Kenya is being accused of failing to act on evidence of an alleged banking fraud worth $1.5bn, dwarfing other recent scandals.

The alleged scam, involving money laundering and tax evasion, was exposed by whistle-blowers as early as 2004.

Investigators believe tax evasion and money laundering worth 10% of Kenya's national income are involved. A recent auditor's report says the scale of the operations "threatens the stability of the Kenyan economy".

The government is being accused of dragging its feet on the issue, but Finance Minister Amos Kimunya said the government was closing in on the perpetrators. "I can assure you that we will be taking action within the law in as short a time as possible," he told the BBC.

But one of the key whistle-blowers, Titus Mwirigi, now in hiding in the United States, has questioned the commitment of a government, elected to power on an anti-corruption ticket.

He told the BBC that virtually all of those hired to probe the operations at Charterhouse Bank Ltd have been moved off the case or have fled overseas.

The auditor's report, which was seen by the BBC, has called for the bank's licence to be withdrawn, The BBC's Karen Allen in Nairobi says that for a government seeking re-election in a crucial presidential vote, this could be the final test of its willingness to take on powerful political-cum business interests.

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Institute for Security Studies (SA):

CHB & Supermarket chain tax evasion. www.iss.co.za/index.php?link_id=28&slink_id=3585&link_type=12&slink_type=12&tmpl_id=3

Kenya does not yet have a law against money laundering. The government had promised that the Proceeds of Crime and Money Laundering (Prevention) Bill 2005 would be passed by Parliament, but this has not happened.

In the meantime, Kenya has gained notoriety through the much publicised ‘Goldenberg’ and ‘Anglo Leasing’ scandals.

A commission of inquiry into the Goldenberg scandal revealed a massive scam in which the Goldenberg group of companies claimed subsidies for fictitious gold and diamond exports. The loss to Kenya has been estimated at around Shs 100 billion .

Anglo Leasing was involved the illegal awarding of government contracts amounting to some Shs 56 Billion to an apparently non-existent company.

In recent months, the Central Bank of Kenya has closed down a commercial bank (CHB) on allegations of tax evasion and money laundering, and it is believed that this may not be the only bank embroiled in such activities.

Charterhouse Bank is alleged to have aided a well- known supermarket chain, Nakumatt, to evade tax and to launder money. Estimates are that the country has lost approximately Shs 36 billion in taxes over a period of five years.

Nakumatt is alleged to have underdeclared sales to report trading losses for some five years. Curiously, in spite of the losses, the supermarket chain expanded, opening numerous new stores countrywide.

Charterhouse Bank is alleged to have flouted know-your-customer principles by allowing the supermarket chain to open accounts under fictitious names, which were then used to launder receipts.

Other companies linked to Nakumatt as well as its lawyers, are said to be some of the bank’s biggest depositors. These Kenyan shenanigans are illustrative of some of the tactics used by dishonest business in a country without an enforceable anti-money laundering regime.

The Nakumatt chain is alleged to have invested heavily in real estate, an Internal Container Depot and other acquisitions, apparently without raising questions.

In addition, the Nakumatt chain is also alleged to possess a 10% shareholding in Charterhouse Bank as well as having directors in common. This situation raises potentially serious issues of conflict of interest and flies in the face of principles of good corporate governance.

The NARC government came into power on an anti-corruption ticket, with promises of political and economic reforms aimed at reversing the decline endemic during the Moi regime. Sadly, it would seem that it has been unable to stem the tide of economic crimes that continue to plague the country.

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Other highlights:

CharterHouse Bank, owned by some of the country’s wealthiest families, (Shah family).

Nakumatt supermarkets alone, evaded taxes estimated to total some Ksh.18 billion.

Questions have arisen as to why the KRA has abetted this massive tax evasion.

Questions have arisen as to the possible ties between complicity & abetting of tax evasion and the peculiar ethnic composition of KRA's senior officers.

Former CBK Governor Andrew Mulei was sacked from CBK shortly after tightening the investigations into CharterHouse Bank. Mulei's Deputy, Jacinta Mwatela replaced him briefly before her stepping aside for the new Governor Njuguna Ndungu.

Other companies linked to Nakumatt Holdings, also involved in tax evasion include Nakumatt, Tusker Mattresses, John Harun Group, Kingsway Tyres, W.E Tilley (Muthaiga) Ltd, Creative Innovations, and Kariuki Maigua and Company Advocates.

Nakumatt supermarkets was performing 20 times better than Uchumi Supermarkets (that temporarily collapsed) yet paid less taxes than Uchumi. While Uchumi was paying between Ksh500 million and Ksh600 million per annum in VAT Nakumatt was only paying between Ksh33 million and Ksh85 million per annum (instead of KSh 1.8 Billion to KSh 2.5 Billion).

Nakumatt accounts books have never shown a profit to date; always loses.

After Mwiraria resigned in February 2006, Mullei wrote to the new finance minister, Amos Kimunya, to take action with a possibility of withdrawing the bank’s licence. No action however was taken. Later Mullei was suspended as governor of the CBK over allegations of illegally awarding a contract. He was subsequently charged by KACC.

A Nakumatt store containing crucial documents CBK was seeking for from the bank was burnt in mysterious circumstances, just hours before CBK officials were to access the documents.

[kamalet]

If my recollection serves me right, the Parliamentary commitee on Finance called a press conference at Bunge and the chairman one Oburu Odinga claimed that the bank had done nothing wrong and should be opened.

But that is not an important detail... or is it?