Middle East Bank under probe for irregular deals

01 Jun 2016 | by
Middle East Bank under probe for irregular deals

For the last four months, the Banking Fraud Investigations Unit has been investigating complaints of malpractice by a bank and an oil company in the irregular transfer of property.

BFIU detectives have been interrogating Middle East Bank and Hass Petroluem Kenya Limited officials over an alleged irregular transfer of a multi million property in Upper Hill belonging to architect Austin Kitololo.

BFIU summoned Middle East Bank Kenya Ltd chairman A.A.K Ismail and the bank's Managing Director and Hass Petroluem Kenya Limited CEO Issa Sheikh to record statements over the transfer plot L.R. No 209/10375 in the city's Upper Hill area then known as Multichoice Tower but now renamed Hass Plaza.

The summons were issued after the first African municipal engineer in Kenya and consulting civil engineer Austin Kitololo lodged a complaint with BFIU accusing the bank of irregularly transferring the said property.

Eng Kitololo, who is known for designing the newly constructed UoN Towers, Hass Plaza, Corner house Rehani house  and Egerton university has also accused Middle East Bank of selling plot 780/II M.N., Mombasa and Plot 6798/I M.N Mombasa and seizure of five other properties in Mombasa after irregularly charging them for a Sh 50 million the architect never received from the bank.

Middle East Bank and Hass Petroluem have been summoned to explain the circumstances under which the properties were transferred and whether a crime was committed.

The summons to the bank and Hass Petroluem were issued after a Mombasa court gave a ruling on March 18th 2016 allowing police to conduct investigations into Eng Kitololo's complaint.

The saga over the five storey building developed by Maarifa Developers Limited on Lower Hill road began in 1998 when the company borrowed Sh 125 million from the bank to repay  an earlier loan obtained from Southern Credit Banking  Corporation Ltd and its sister company Fidelity Shield Insurance Company Ltd.

The directors of Maarifa Developers Ltd then were listed as  Mr and Mrs Buphinder Singh Dogra and Eng Austin Kitololo. Middle East Bank was represented by  its chairman A.A.K Esmail, S.S Dinamani as the MD and B. S Pai the then Chief manager credit/Operations.

In 1998, Dogra decided to relocate from Kenya and asked Eng Kitololo to buy his 50 per cent shares off using a loan Dogra had arranged from Middle East Bank to cover the shares  and repayment of construction loan of Sh 59.9 million.

Using his association with the Middle East Bank chairman, Dogra obtained the Sh 125 million loan with the  sole collateral being Multichoice Towers which had then been valued at Sh 200 million and payment would be from rental income which was estimated to be  between Sh 16 million and Sh 20 million.The loan was  finalized in June 1998 left the country but has since returned.

According to Middle East Bank records, Sh 59.9 million was transferred to Fidelity and Souther Credit through transaction reference 8298154001 on June 3rd 1998, Sh 1.5 million was transferred to A.A.K Esmail as legal fees on June 4th 1998.

On the same day cash withdrawals of Sh 35 million were paid to Concrete Components Ltd, Sh 15 million was paid in cash to Milestone projects, Sh 10 million was paid in cash to Sanghani Construction Co Ltd and Sh 11 million was paid to Superior Construction Co Ltd vide four cheque numbers MBKA 594543, 594544,594545,594546. All the  money was drawn from Maarifa Developers account No. 200564006 at the Middle East Bank in Nairobi. None of the companies paid the money was associated with Maarifa Developers Ltd or Eng Kitololo. 

The payments to the four entities were not authorised by the owner of the account namely Maarifa Developers Ltd

However, records show that the first cheque written by Maarifa Developers Ltd after opening the accounts at Middle East Bank is N0. 000001dated July 7th 1998 for Sh 5,820.

On the same June 4th 1998 Sh 12 million and Sh 13 million was deposited in  former Maarifa Developers Ltd director B. S Dogra's account and another Sh 3 million deposited in Manjeet Singh's account in the same account.

On September 4th 1998, three months after the loan was issued, Middle East Bank wrote to Maarifa Developers alleging that  not all rent money was being deposited into the bank even though they were aware that tenancy leases were signed at different times. Middle East Bank then asked for additional security and Eng Kitololo offered seven of his properties to hold until the rent was collected.

The bank vide letter ADV/A/782/99 dated March 25 1999 appointed one of its employees Shamin Dhamji as a receiver manager top collect rent from Multichoice Towers until the loan is repaid. The appointment and termination of appointment of the receiver manager were registered at the Lands office on the same day the property was transferred to Hass Petroleum.

Six years after the bank took over the building and had collected rent, Middle East Bank sold the building earlier  valued at Sh 200 million to Hass Petroluem at Sh 85 million. Middle East Bank then sold two of Eng Kitololo's properties and is in the process of selling the third property all in Mombasa.

On August 30th 2005, the same day the property was transferred to the oil company, it was charged to Barclays Bank of Kenya for USD$ 7.2 million (Sh 702 million). A month later the property was further charged by Barclays Bank of Kenya for USD$ 1 million (Sh 100 million).

On February 23rd 2010, the property was further charged for Sh 165 million by Gulf African Bank Limited and on November 23 2010, the same property was again charged to Standard Chartered Bank Kenya Limited.

On December 19th 2014 it was yet again charged by Standard Chartered Bank Kenya Limited  for Sh 650 million before the Registrar of Titles  put a caveat on the property on October 27 2015.

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