Euro Bank Scandal

The Euro Bank Scandal is a scandal that in February 2003, caused a political storm in Kenya after the collapse of Nairobi Based Euro Bank.^[1] This resulted in a loss of 1.4bn Kenyan shillings (£11.6m; $18m) which state organisations had deposited in the Bank.

State Losses

The National Social Security Fund lost 256m shillings (£2.1m; $3.3m), the Kenyatta National Hospital 421m shillings with the biggest casualty being the National Hospital Insurance Fund, which lost 479m shillings in the collapse. Other state losses incurred were from Kenya Post Office Savings Bank Sh65 million, Kenya Tourist Development Corporation (KTDC) Sh60 million, Kenya Pipeline Company Sh55 million and Kenya Sugar Board Sh55 million.^[2]

Resignations

The bank's collapse with pensions savings for thousands of workers, resulted in the resignation of Nahashon Nyagah the Governor of the Central Bank of Kenya for failing to prevent the ^[3] Also forced to resign was John Munge the Kenya Revenue Authority(KRA) Commissioner-General who was a director of Euro Bank, and had previously worked at another bank that collapsed.^[4]

Court Cases and Aftermath

Five years after the scandal, little progress had been made in recovery of the lost funds. Some cases over the fraud at the bank have since been dropped following the death of key suspects including:^[5]

Dr Augustine Muita - former director of Kenyatta National Hospital (KNH)
Paul Songok - former financial director at Post Bank Limited
Zachary Kamondo - One of Euro Bank’s owners

Zachary Kamondo who initially fled to Scandinavia had most of his property seized was by the Government.

Some suspects arraigned in court were acquitted. They are:^[6]

John Munge - former Kenya Revenue Authority boss and Euro Bank director
Prof Julius Meme, a former director of Kenyatta National Hospital (KNH) and one-time Health permanent secretary
Isaiah Kiplagat - former managing director Post Bank Limited
Mr Solomon Muthamia
Mr Jamal Firdosh

Mr Muthamia & Mr Firdosh had been sued by Kenya Pipeline Company.

Most of the remaining cases had been referred to a constitutional court established in January 2004 after the accused challenged the Kenya Anti-Corruption Commission's legality in the prosecution.

These were former parastatal heads:

Francis Chahonyo - Postal Corporation of Kenya
Joshua Kiptoon - Pyrethrum Board of Kenya
Ibrahim Hussein - National Hospital Insurance Fund

The attorney-general withdrew a case involving a former Euro Bank employee, Mr Peter Fernandez, whom the Kenya Anti-Corruption Commission had accused of stealing from the bank.

Mr Fernandez, alongside former colleagues Isaac Njagi and Jason Mutuma as well as his (Mr Fernandez’s) employee, Mr Rikki Kimani, faced yet another case filed by NSSF for alleged destruction of exhibits.

Other cases involved

Mr William Chelashaw (Kenya Tourist Development Corporation)
Mr Ben Mtweta (NSSF)
Mr Stanley Chemng’orem (Kenya Wine Agencies).

References

Corruption scandals in Kenya

Before 1990	Turkwel Hydroelectric Power Station Kisumu Molasses Project

1990–1999	Goldenberg scandal

2000–2009	Anglo-Leasing scandal NHIF Ambulance Scandal KPC Ngong Forest Land Mau Forest Euro Bank Scandal Maize scandal Triton scandal Grand Regency Scandal

2010–present	Embassy Property Purchase Scandal City Council Cemetery Land Scandal NHIF Civil Servants Scheme Scandal

Banks of Kenya

Central bank	Central Bank of Kenya

Commercial bank	African Banking Corporation Bank of Africa Barclays Bank Bank of Baroda Bank of India Stanbic Bank Chase Bank Citibank NA Kenya Commercial Bank of Africa Consolidated Bank of Kenya Cooperative Bank of Kenya Credit Bank Development Bank of Kenya Diamond Trust Bank East African Development Bank Ecobank Kenya Equity Bank Family Bank FidelityBank First Community Bank Giro Commercial Bank Guaranty Trust Bank (Kenya) Guardian Bank Gulf African Bank Habib Bank Habib Bank AG Zurich Housing Finance Company of Kenya I&M Bank Limited Imperial Bank Limited Jamii Bora Bank Kenya Commercial Bank Middle East Bank Kenya M-Oriental Bank National Bank of Kenya NIC Bank Paramount Universal Bank Post Bank Prime bank Sidian Bank Spire Bank Standard Chartered Kenya Trans National Bank Kenya United Bank for Africa Victoria Commercial Bank

Financial services organization	Diamond Trust Bank Group Equity Group Holdings Limited Commercial Bank of Africa Group Guaranty Trust Bank (East Africa) I&M Bank Group Kenya Commercial Bank Group NIC Bank Group

Foreign banks	Bank of China Bank of Kigali HDFC Bank Nedbank The Hongkong and Shanghai Banking Corporation First Rand

Defunct banks	Dubai Bank Kenya Euro Bank

Microfinance Institutions	Faulu Microfinance Bank Limited SMEP Microfinance Bank Kenya Women Microfinance Bank

Related Topics	Automated Teller Machine (ATM) ATM usage fees De-Materialisation (DEMAT) Foreign Exchange (FOREX) Financial Services Real Time Gross Settlement (RTGS) National Electronic Fund Transfer (NEFT) Structured Financial Messaging System (SFMS)

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