The collapsed Imperial Bank has said Deputy Chief Justice Philomena Mwilu improperly borrowed Sh12 million in October 2013.
In a statement recorded at the Directorate of Criminal Investigations, the bank’s credit manager Peter Nzuki says the Sh12 million was given to her in inappropriate circumstances contrary to bank-customer relations.
No appraisal of her creditworthiness was undertaken, and Mwilu did not apply for the loan as required. Nor did the bank make her an offer specifying the terms.
Nzuki’s statement points to irregular activities that led to the bank’s collapse. He says the disbursement was highly irregular and could not be described as a loan.
Two other witnesses — Jacob Kivindyo and Naeem Ahmed Shah — also noted the discrepancies, including missing application, offer acceptance and a contract.
Nzuki says before any loan is drawn, basic documents must be submitted. They include a borrower’s request letter, appraisal, subsequent approval by the bank and duly executed letter of offer stipulating loan covenants such as loan amount and repayment period.
Of interest in Mwilu’s case is the absence of a borrower’s request letter in the loan file. And curiously, the loan was also advanced at zero interest.
“This is quite strange due to the fact that as a bank, the core business is to trade in depositors’ funds held at cost without expecting returns. It is only in circumstances where a facility becomes nonperforming or a project funded fails that such loans are restructured or rebooked at zero interest but this was not the case in this instance. The absence of a borrower’s request puts into doubt the lending contract,” reads part of Nzuki’s statement.
“Facilities at nil (zero interest rate) are discounted loans where interest is recovered upfront upon disbursement and non-performing accounts which interest is suspended as per Central Bank of Kenya guidelines. The disbursement of Sh12 million did not qualify for this. The loan was authorized by one Mehbooba Shamji contrary to the procedure laid out in the bank’s credit manual where such loans are to be authorized by the bank’s credit committee,” he says.
One of the charges facing Mwilu is using her office to improperly confer a benefit to herself of Sh12 million from IBL.
But in her defence, Mwilu claims the money was an unsecured loan advanced to her by the bank and credited to her account in her capacity as a customer in the course of normal banking/contractual relationship and has since been repaid in full.
In response to a petition filed by Mwilu at the High Court, the DCI, through Abdallah Komesha Mwatsefu, says Mwilu, being a state officer, accepted a disbursement of the money without applying for the same, without any letter of offer and with nil interest.