Mr James Mugerwa, Shelter Afrique’s managing director. PHOTO |
FILE
By DAVID HERBLING,
hdavid@ke.nationmedia.com
Posted Monday, October 31 2016 at 18:54
Source; http://www.businessdailyafrica.com/Corporate-News/Bad-loans-put-Shelter-Afrique-CEO-in-the-eye-of-a-raging-storm/539550-3436558-item-0-o4t6s3z/index.html
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managers at pan-African housing financier Shelter Afrique have been thrown into
the eye of a storm after documents emerged showing massive looting of funds
through creative accounting and subprime lending that is now under
investigation.
Documents seen by the Business Dailyshow that the
company’s managing director, James Mugerwa, has been dishing out subprime
mortgages to unqualified borrowers resulting in a steep rise in the company’s
non-performing loans.
At
least 59 per cent of Shelter Afrique’s $246.3 million (Sh24.63 billion) loan
book was classified as non-performing by February 2016, according to documents
addressed to the lender’s board of directors and financiers.
Jean
Paul Missi, chairman of the Shelter Afrique board, acknowledged receipt of the
documents and promised appropriate action.
“The
board asserts that the allegations are taken seriously and will give them
appropriate attention,” he said, adding that the organisation is committed to
complying with the highest international standards, best practices, and its policies.
The
documents show that Shelter Afrique has been restructuring overdue loans by
rescheduling such facilities to appear and making them appear as performing,
effectively suppressing the volume of toxic mortgages.
“The
loans are restructured multiple times to ensure they are not classified as
non-performing and are therefore hidden NPLs that are not disclosed,”
information sent to the board dated September 8, 2016 says.
Shelter
Afrique is also said to be borrowing to pay debt and not to finance new investments
or lending, turning it into a pyramid or Ponzi scheme.
Kenyan
taxpayers control 10.63 per cent of Shelter Afrique, which is owned by a total
of 44 African countries together with the African Development Bank and African
Reinsurance.
Housing
and Urban Development principal secretary Aidah Munano represents Kenya on the
Shelter Afrique board. The PS, however, refused to answer any questions on the
alleged irregularities despite the fiduciary duty she owes the taxpayers.
Mr
Mugerwa is also accused of presiding over a creative accounting regime that has
subdued provisions for bad loans, and refused to provide sufficient impairment
for the $4.1 million Shelter Afrique had in the collapsed Chase Bank.
Consulting
firm Deloitte has been hired to carry out a forensic audit as well as replace
Ernst & Young as Shelter Afrique’s external auditor.
The
list of Shelter Afrique’s big debtors includes Nairobi’s Taj Mall, Translakes
Estate in Kisumu, Eden Beach Resort in Shanzu, and Oakpark Properties’ Pine
City in Athi River.
Consequently, Shelter
Afrique has seized 11 apartments at Eden Beach, 17 houses and land belonging to
Oak Park under an “asset swap programme” and has classified these properties as
“held for sale.”
Mr. Mugerwa is further accused of wasteful and questionable
spending that has seen him vary by more than three-fold the cost of repairs at
his residence, splurging more than € 30,000 on house furniture which internal
auditors couldn’t trace, making double per diem for foreign trips, buying six
smart phones in eight months, and arbitrarily sacking junior staff.
The Shelter Afrique boss’ profligate spending is evidenced by
the Sh739,010.14 phone bill he incurred in the month of May 2015 for one of his
mobile phones, according to a postpaid bill from Safaricom.
Mr
Mugerwa — who took office in August 2014 after the acrimonious exit of Alassane
Ba — did not respond to questions on the state of the company’s finances.
Ernst
& Young, who have been the external auditors at Shelter Afrique for the
last five years, also declined to respond to questions of professional misconduct
in handling the lender’s books.
Shelter
Afrique enjoys diplomatic status and is not regulated by any authority –
meaning it has no legal guidelines on capital adequacy, risk management and
corporate governance.