Former National Bank of Kenya (NBK) acting chief finance officer Wycliffe Kivunira Lindong’a has won a reprieve after the High Court quashed a Sh1 million fine slapped on him by the capital markets regulator.
Besides revoking the penalty, High Court judge Benjamin Musyoki also set aside the summons issued by the Capital Markets Authority (CMA) for Mr Kivunira to appear before it to answer charges of allegedly misrepresenting the lender’s financial statements in 2015.
The judge said Mr Kivunira had been convicted on charges that were not the subject of the trial and that he was being investigated on charges of which he had not been informed, thereby denying him his right to defend himself.
Justice Musyoki added that it was in the public domain that the bank had undergone significant restructuring, and it was his opinion that to proceed in the manner (probing the matter) would amount to double jeopardy, as the circumstances had changed.
“In the premises, it is my considered view that the orders that shout for fairness is to set aside the sanction meted out on the appellant (Mr Kivunira) as a result of the flawed process,” the judge said.
Mr Kivunira was among former NBK officials implicated by the CMA for allegedly misrepresenting the bank’s financial statements for the periods ended June 30, 2015, and September 30, 2015.
The bank was accused of publishing unaudited financial statements showing a profit of Sh1.7 billion for the quarter that ended June 30, 2015, and Sh2.2 billion for the quarter that ended September 30, 2015, but subsequently reporting a loss of Sh1.2 billion in audited financial statements for the period ended December 31, 2015.
The former CFO was issued a show cause letter on August 22, 2017, over accusations of preparing and publishing false and misleading financial statements for NBK.
He was later slapped with a fine of Sh1 million, and he rushed to the Capital Markets Tribunal, but the appeal was dismissed.
CMA said it conducted investigations following an anonymous tip-off into alleged misconduct at NBK.
He, however, faulted the industry regulator, saying it misdirected itself in law and fact by finding that he had acted in contravention of the Capital Markets (Securities, Public Offers, Listing, and Disclosure) Regulations.
Mr Kivunira maintained that his role in finance did not include provisioning for loans.
He responded to the notice to show cause but requested to be supplied with several documents and information then held by the bank at the time to enable him to prepare his defence.
The documents were never provided as they were allegedly confidential and protected under the Banking Act and Prudential Guidelines by the Central Bank of Kenya.
In his appeal to the High Court, Mr Kivunira stated that the tribunal did not grant him a fair hearing.
The judge agreed, saying that the former CFO had asked for documents he considered vital to his defence, but had been denied.
“In my assessment, the totality of all this amounted to a violation of the appellant’s right to a fair trial, which under Article 25(c) of the Constitution cannot be limited. This violation renders the respondent’s process to have been against the rules of natural justice and breach of the appellant’s right to a fair administrative action,” said the judge.
