Anonymous Letter Alleges Improprieties at Equity Bank

Improprieties:
The last week was marked by revelations on the alleged improprieties at Equity Bank occassioned by a letter from an anonymous financial consultant and observed by Hon Khalwale among other M.Ps in Parliament.

Alleged Facts:
The anonymous letter Cpied to various concerned institutions) points out that millions of poor indigenous kenyans have been fraudulently robbed of millions of shillings through the listing of the banks shares at the NSE and gives the follows "facts";

Trade Bank Collapse:
1. James Mwangi, Equity CEO was the Finance Manager at Trade Bank, and part of the senior management team that supported Mr. Kassam before the bank collapsed with Billions of customer deposits.

Moved with Ksh 200M:
2. He moved with Kshs 200Million cash to Equity from the collapsed Trade Bank which he injected as capital supporting the resultant position of being the largest shareholder of the bank despite being only 42 years old.

Goldenberg Iquiry:
3. Mr. Mwangi was adversely mentioned inthe Goldenberg Inquiry.

Directorship:
4. From the above is he fit and proper under CBK guidelines to be a director of the Bank today?

30% shareholding:
5. He owns over 30% shareholding at the bank well above the 5% limit set by the CBK for a CEO, most of it in nominees accounts alleged held by the following members of staff:

Nominee Accounts:
Name: Designation: No. of Shares: Value:
Andrew Kimani General Manager 11.3M 1.6B
Mary Wamae Company Secretary 5.22M 730M
Gerald Warui General Manager 4.9M 686M

Bonus:
After the 2:1 bonus issue an employee earning kshs 400, 000 P.M would never build such a portfolio i nthe bank even in 200 years!

CBK and CMA?
How comes the CMA and CBK cannot see that they are just some of the nominees of James Mwangi?

Independent Directors:
6. Two Independent directors resigned from the board starting from the well respected Wanjiku Mugane of First African capital and now David Ndii citing serious corporate governance issues. Dr. Ndii is a highly respected development policy expert at the UoN with a PhD from Oxford University and previously worked at the world Bank.

Senior Staff Turnover:
7. Equity Bank has the highest senior staff turnover in the industry none stays for more than 1 year also citing serious corporate governance issues.

Exorbitant Prices:
8. The purpoted listing has been driven by the directors need to offload at exorbitant prices shares held in Asociate/Nominee names as their shares are bonded by CMA for 2 years hereunder for illustrations:

Dyer and Blair:
a) The principal shareholder of Dyer and Blair Investment Bank the leading broker on the shares is also a major shareholder of Equity Bank.

Kshs 70/Share Listing:
b) The listing was done at Kshs 70 Per Share, which was pushed to over 240 Per Share before huge bonus issue (2:1) ( capitalizing all revenue reserves) with subsequent share price then pushed to over Kshs 140 i.e. in simple monetary terms the value/ wealth of the directors has been multiplied more than 8 times in less than 1 year through the machinations at the NSE.

Front Running:
c) Clearly the share is being front runed/Spiked up poor kenyans are being duped to buy the share.

Industry P/E Ration:
d) Even the industry everage PE ratio of almost 60 times compared with similar institutions profitability base the share price at a reasonable industry PE of 15 should be around Kshs 30 Per share on the higher side but notKshs 140!

Hyped Media Bliss:
9. The hyped up daily unprecedented media bliss in Kenya's history is a cover up for all these fradulent activities to hype up the share price.

Unsustainable growth:
10. The bank is being pushed to grow at an unsustainable rate and indeed as observed by Hon. Members of parliament may go the same route Mr. Mwangi the CEO and friends of Trade Bank!
11. Former senior staff from CBK-Bank Supervision have been employed at the Bank to slow down any findings from CBK onsite inspection team.

Tip of the iceberg:
The letter alleges that this is only a tip of the iceberg and you may wish also to review how the Kshs 1Billion ICT, Branch expansion and overall procurement is being carried out that has prompted the 2 key directors and senior staff to resign; kenyans will be in for a big shock if you do not urgently intervene.

Yours Faithfully,

S.K. Patel

cc: -Governor CBK
-All fund Managers
-Commercial Banks
-Stock Brokers
-Capital Markets Authority
-PS Treasury