Paying Whistleblowers: The Case of Housing Finance Company of Kenya

Former HF Group CEO Frank Ireri(left) handing over to the current group CEO Robert Kibaara (center). On the right is the retired HF group chairman Steve Maina.

In the just released Building Bridges Initiative (BBI) report, Kenyans got excited with a proposal to give whistleblowers up to 5% incentives of the amount stolen little did they bother to dig in the risks involved in and the cost of whistleblowing.

Former employee of HFC Kevin Isika Mule, an accountant by profession is a perfect case study for whistleblowing in Kenya. Until June 2016 Kevin was the Director of Credit Risk at Housing Finance Company. His monthly salary was Sh1.16 million only. As a risk director he noticed bad loans amounting to sh4.3 billion that Housing Finance Corporation risked losing, some of which had been issued irregularly. As a diligent employee who loved his job he opted to approach two of the senior-most directors at Housing Finance (HF Group managing director Frank Ireri and HFC managing director Sam Waweru) with information of undisclosed bad loans, in his mind he thought he was about to save the mortgage lender from huge losses and a public relations disaster.

Kevin would later be summoned to meet HFC MD Sam Waweru at the Serena Hotel at 6pm. He assumed the meeting would be on the mitigating issues of the bad loans the corporation had engaged in following his revelations. Little did he know that MD Waweru would hand him a notice of show cause letter demanding why he should not be fired for failing to apologize for grievances by debt management staff, failure to hire a valuer, reporting to work later and leaving early without permission, and absenteeism. At that time, he had already been locked out of the HFC system and his access card deactivated too.
The matter would end up in court where the whistleblower, Isika, was awarded sh8.9 million last week since his termination was unfair in substance and procedure. A meagre sum by many counts.

As fate would have it, all Isika’s tormentors ranging from HF Group Managing Director Frank Ireri, HFC MD Sam Waweru and other Senior managers such as HFDI Director James Karanja, Director Finance Constantine Barasa, Director of strategy Caroline Armstrong and Director of business operations Patrick Mokaya have all been fired.

HF group has adversely been mentioned in cases of non-compliance in credit, risk, financial reporting, corruption, malpractice, malfeasance, conflicts of interest and inefficiency at the lender. It’s last week that a borrower, Firoz Hirji, was awarded Sh1.2 billion by court after a long-running dispute with HF Group that lasted 19 years over an auctioned property valued at Sh20 million.
On default, the bank sold the property by public auction in 2000 for Sh6 million and credited Hirji’s account with Sh5 million after deducting what was due to the bank and the auction-related expenses. In 2003, Firoz challenged the sale claiming that the property was worth Sh20 million and also claimed for interest at 26 per cent from 2000 when the property was sold.

It is now emerging that fraudulent auction was perpetuated by Geoffrey Kimaita and he managed to cover it up with the help of Frank Ireri, Sam Waweru and Regina Anyika.

It has been revealed that in 2016, Mrs Sharok Kher Mohamed Ali Hirji approached HF Group through the Company secretary Regina Anyika that she was not interested in the damages but a return of her house or a similar house. This was after the judgement.

The company secretary, Anyika, allegedly refused since she wanted to benefit from the huge kickbacks from the legal fees which by now were piling up to over a Shs 100m. She and a few others did not care for the outcome.

Those on the know say that Regina Anyika is secretly gaining from these failed legal matters. That there is no way one can pursue expensive litigations instead of going the cheaper out of the court settlements that would have saved the HF Group lots of money and resources.
As a PR stunt to save HF Group from public humiliations and shame on their reputation and image, HF Group is lying to the public that the case is headed to the Supreme Court.

Dangling carrot to mainstream media

It’s said that HF group is a well shielded pyramid scheme, a no go zone for mainstream media due to the envelope journalism where senior editors are paid to kill the stories. Leading the pack is Tom Mshindi who allegedly took about Kshs 200M in loans from HF Group which he failed to service. He would later have all his arrears capitalised back to the principle amount and the interest rate reduced to abnormal rates.

This is what led to favourable reporting from Nation Media group on issues touching HF Group. A close look at the Business Daily in 2016, 2017 and 2018 reveals that whenever HF Group launched mundane products, a favourable story would be published.
“When HF’s losses grew, the lead story would be based on HF’s response, not the actual facts on the ground,” a source observed.

How HF dirty deals
The Board of Directors with questionable characters such as Peter Munga who has been using his interest in Britam and direct shareholding using proxies, has managed to remain the Director. Peter doubles up as the Head of the Group Nomination and Governance Committee. This is the docket involved in the appointments of all senior staff including the Managing Director and the final decision rests with the office.
As if that is not enough, it’s reported that Peter Munga has allegedly ensured that only Embus can aspire to be Directors in the group. 70% of the Board of Directors are from Embu County.

There are claims that Peter Munga is using his position at the HF Group to ensure his dealings with HFDI are protected and Equatorial Nuts continues to default on repayments. To hide the default, the bank continues to capitalise his loan repayments and interest to fool Central Bank Inspectors who regularly receive bribes from the HF group.

Kennedy Gachoki, who was once the CBK Inspector designated to HF Group was hired and given a lucrative position by HF as Head of Compliance to provide a permanent corruption gravy train link between Central Bank and HF Group. This would ensure that Non performing loans were hidden from Central Bank staff aided by CBK’s Director of Inspections, who has a special relationship with Steve Mainda, the Chairman of HF.

Steve Mainda, the Chairman of the group continues to be the Chairman and he oversaw all the fraud during Frank’s tenure. Steve survives from kickbacks from HFDI, from Peter Munga and worse still he is hopelessly inept. He suffers from dementia as he is frequently asleep in board meetings and irrational. He is a politician and has no business running a bank as history has shown.

HF has continued to keep this mess under the corrupt internal auditor Joseph Ngare by bringing in fraudulent accounts and having a hand in removing the Forensic Investigator after he uncovered fraud involving senior staff.

HF Group MD Robert Kibaara, a childhood friend and relative of Peter Munga. He is said to be a non-performer. He replaced former HF Group MD Ireri.

It is report that Mr Kibaara was sacked by Munir Ahmed at the National Bank of Kenya (NBK) for incompetency related issues. Same to NIC Bank before finding refuge at HF Group. Mr Kibaara is accused of hiring his former colleagues at the NIC Bank.

HF has been in the news for auctioning people’s property. However, the process is mired in corruption. Since the law only allows sale of properties of values not lower than 75% of the valuation, HF Group has employed new tactics where they carry out under valuations to sell properties to their cronies.

Robert Kibaara and the rest of the staff are actively “buying” property from those with non- performing loans. Those who own flats are forced to part with 2 to 3 units in order to buy time and save them from auctions.

In other cases they are demanding huge bribes to write off the interest element of loans. The board has been rubber stamping these approvals since Steve Maida and some board members have been recipients of these monies.

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