Having served at the helm of the saccos lobby, the Kenya Union of Savings and Credit Co-operatives Society (KUSSCO) Limited for a decade and a half, the now disgraced and sacked former KUSSCO Managing Director (MD) George Ototo was last month forced out of office amid a cloud of graft claims hanging over his head.
His name at KUSSCO had become synonymous with the organization having been recruited as a junior clerk who rose to the apex of the organization before being kicked out in a humiliating manner.
Ototo had presided over at the helm of the now tainted saccos’ lobby for 14 since 2010 when he took over as the Managing Director.
Through a quick dispatch by new KUSSCO leadership to newsrooms dated January 15, 2024, Ototo and former national chairman George Magutu were dismissed from service following a night-long board meeting that extended to past midnight, The Informer Media Group can authoritatively reavel.
“We announce the departure of National Chairman George Magutu and Group Managing Director George Ototo. We understand that change can bring uncertainty, but we assure you that this transition is part of our ongoing efforts to ensure efficient service delivery to members.” KUSSCO said.
David Langat was named the new national chairman while Arnold Munene was appointed as the acting Managing Director to replace Ototo.
However, Magutu who also doubles as a board director of Nyeri based NewFortis Sacco was retained as KUSSCO board member.
The duo were unceremoniously ejected from office after the Co-operative, Small, and Medium Enterprises Development Cabinet Secretary (CS) Simon Chelugui last year ordered an inquiry into suspected violations of Saccos regulations by the KUSCCO.
The CS also directed the Sacco Societies Regulatory Authority (SASRA) to investigate the matter.
The said illegal operations by KUSSCO were cited by the Central Bank of Kenya (CBK) and asked SASRA to regulate KUSCCO’s unregulated deposit-taking business two years ago.
The then CBK Governor Dr. Patrick Njoroge said SASRA has a role to play in ensuring the sustainability and financial stability of deposit-taking Saccos.
SASRA appears to have ignored these concerns, leaving KUSCCO to operate in a legal vacuum that has now become a major issue in the larger plan to formalise its three decade-old inter-lending facility.
“…given the matter falls within your regulatory and supervisory remit, we believe that SASRA is best suited to look into concerns raised in this matter.” Njoroge said through a correspondence dated 17, 2022.
Our investigations have since established that a number of serving and former KUSSCO board of directors and a select pool of senior managers at KUSSCO are on the verge of facing active criminal probe by the Directorate of Criminal Investigations (DCI) over suspected financial fraud, irregular loan advances among board directors and senior managers among other economic crimes.
This will be a parallel probe to an ongoing separate investigation by the Sacco Societies Regulatory Authority (SASRA) is handling against KUSSCO over illegal activities and allegedly engaging in illegal deposit-taking business.
KUSCCO has since gone to court to block probe by SASRA.
According to impeccable sources at both KUSCCO and the DCI, fresh twists into illegal financial activities have now morphed into a suspected clandestine financial fraud of illegal loan advances to insiders, claims of cooked books of accounts with discrepancies on sacco deposits and actual funds held by KUSSCO Limited.
Among the key issues under probe is an inter-lending facility, a Central Finance Fund (CFF), platform used by all deposit-taking saccos affiliated to KUSCCO that operates on the same principles as the inter-bank lending facility used by banks and running sacco businesses without a license.
Notably, the financial capital for KUSCCO’s CFF is sourced from regular deposits by deposit-taking SACCOs with the lobby paying interest on the deposits, which is then disbursed quarterly to its member societies.
When contacted for comment both via KUSCCO official mail and through short text messages, both their exit, Ototo and Magutu declined to comment on the matter and whether or not they have received summons from the DCI.
“May I request that you send a formal request for us to discuss as a board paper and respond as such.” Ototo replied.
However, Magutu did not offer any response.
If they are found guilty, the officials risk being prosecuted and convicted and their assets obtained through proceeds of crime traced for forfeiture to the government.
CS Simon Chelugui first blew the lid off KUSCCO’s dubious operations and ordered SASRA to undertake inspection of the society’s books, accounts and records in accordance with provisions of current legislations governing savings and credit co-operatives (Saccos).
The directive to investigate the umbrella body for Saccos, Chelugui said followed information made available to the ministry from other quarters and submissions shared by SASRA.
“I note with concern that from available information and from your extensive correspondence with its management, the KUSCCO Ltd appears to be carrying out and or undertaking regulated Sacco businesses without being licensed and or authorised to do so as required by the provisions of the Sacco societies Act No. 14 of 2008 and the regulations made thereunder.” Chelugui told SASRA Chief Executive Officer (CEO) Peter Njuguna through a letter dated October 5, 2023.
In his whistleblowing letter to SASRA, Chelugui observed that regulated sacco business as prescribed by law entails either deposit taking Sacco business which must be licensed or specified non-deposit taking business which must be authorised.
Legally, the Cabinet Secretary is empowered under Section 49 of the Sacco Societies Act 14 of 2008 to direct SASRA to conduct inspection or cause to be conducted an inspection of any sacco society and of its books, accounts and records.
“Consequently, I hereby direct the authority to conduct an inspection of the said Kuscco and its books, accounts and records in accordance with the requirements of the provisions of the Sacco Societies Act No.14 of 2008 as read together with the provisions of the Cooperative Societies Act as applied thereto by dint of Section 67 of Sacco Societies Act No. 14 of 2008.” Chelugui told Njuguna.
During his now 14 years stint at the peak of KUSCCO’s leadership before his ejection, Ototo’s star rose to the global stage.
In 2016, Ototo was elected as a director of the 14-member body of the World Council of Credit Unions’ (WOCCU) Board of Directors for the first time for a two-year term.
In 2020, he was re-elected to the WOCCU board for another two-year term and subsequently elected as the WOCCU’s committee chairman and treasurer of the Audit and Risk committee.
After his departure from KUSSCO, Ototo has to relinquish all the other prestigious seats he has been serving courtesy of the position he held at saccos’ lobby.
Beginning next week February 19, 2024, KUSCCO has organized a weeklong saccos leaders’ convention in Mombasa to be presided over by CS Chelugui and will run until February 23, 2024.
