Former KUSCCO national chairman George Magutu, three others arrested over Sh13.3 billion heist

Former top executives at the Kenya Union of Savings & Credit Co-operatives Ltd (KUSCCO) believed to have been involved in the multi-billion scandal have been arrested.

The four, former national chairman George Magutu Mwangi, Jackline Pauline Atieno Omolo, George Ochola Owino, and Mercy Njeru, were arrested today by detectives from the Directorate of Criminal Investigations (DCI) in different areas within Nairobi and Nyeri.

They are expected to be charged with Conspiracy to Defraud Contrary to Section 317 of the Penal Code.

They will also be charged with Stealing by Directors or Officers of Companies Contrary to Section 282 of the Penal Code and Making a False document Contrary to Section 347(a) as read with Section 349 of the Penal Code.

Confirming the arrest, Inspector General of Police Douglas Kanja said the National Police Service (NPS) is committed to ensuring a thorough and transparent investigation, uncovering the facts that will see all those involved in the scandal brought to book.

Their arrest comes hours after the IG received the KUSCCO forensic audit report by PricewaterhouseCoopers (PwC) from the Cabinet Secretary for Cooperatives and MSMEs Wycliffe Oparanya.

The CS called on the IG to ensure proper investigations and arrest for charging in a court of law for those found culpable of theft and cooking financial statements that put Sh13.3 billion of depositors at risk.

The audit by PwC revealed forgery by the top officials at KUSCCO as cooked financial accounts were signed by a deceased auditor Alfred Basweti of Omenye and Associates.

This joined a list of other accusations that have been surrounding KUSCCO including unexplained withdrawals, large scales of theft by the executives, and conflict of interest where contracts are issued to companies belonging to the top managers.

The report by PwC retrieved evidence from e-mails, M-Pesa statements, and documents of atleast 23 top managers with eight of them being in the spotlight.

Amongst those put in the spotlight are Managing Director George Ototo, Finance Manager George Owino, and KUSCCO chairman, George Magutu.

With Sh13.3 billion lost, the umbrella body of SACCOs has been left insolvent with Sh12.5 billion only from a total of Sh24.5 billion that was received from SACCOs.

The report also revealed that the SACCO umbrella body concealed Sh3.7 billion as a way to help them overstate their net earnings.

PwC unearthed that as KUSCCO expanded into real estate and insurance, they came up with a scheme to pay marketers on commission with false entries of up to 3 per cent being recorded totaling Sh1.6 billion being withdrawn while only Sh1.1 billion was paid to the marketers.

It was indicated that Ototo and Owino received Sh107.3 million for bringing business into doubt.

The audit shows that between 2018-2023, KUSCCO may have lost up to Ksh 206 million through withdrawals from the savings account which was meant to replenish KUSCCO Fosa branches, only Ksh 633 million was received at the branches while Ksh 839 had been withdrawn.

KUSCCO’s main Cashier Francis Wande told PwC that Ototo and Owino had instructed him to deliver Ksh 135 million to them with Ksh 20 million being a loan that was never returned.

While handing the report to the IG, Oparanya agreed with the audit report and stated the lost billions needed to be recovered.

He indicated that had requested several agencies to undertake legal and administrative action upon probe to support litigation on the criminal and economic crimes committed.

Oparanya said the complex of fraudulent transactions may need a bit more time for the probe to be completed.

“We have met with KUSCCO members and told them that we are unlikely to recover the money and if recovered, it will take much more time,” Oparanya stated.

The CS indicated that at its peak, KUSCCO had a Sh3.3 billion capital share, Sh15.3 billion deposits, and a loan book of Sh14 billion; however, the diversion into financial services without proper structures, regulatory oversight, and investment framework policy exposed them to mismanagement and theft.

He stopped them from conducting unlicensed financial activities including deposits and loan issuance leaving it with its original mandate of advocacy and training.

He also revealed that the workforce of the SACCOs umbrella body would be trimmed to 40 from about 200 spread across the various subsidiaries.