Bank linked to Kenyan businessman, Baloobhai Patel to pay couple $1.9 million for fraudulent shares sale

In a recent court ruling, a Kenyan couple was awarded Ksh231.2 million ($1.9 million) by the courts for shares that were fraudulently sold without their consent by Absa Bank Kenya, a Nairobi-based commercial bank partly owned by Kenyan businessman Baloobhai Patel.

The couple, Stanley Mwangi Gachungu and Bilha Waruguru Mwangi were awarded $1.9 million for the shares in various companies, such as East African Breweries Limited (EABL) and British American Tobacco Kenya (BAT Kenya), that were sold by the bank without their consent.

The case dates back to 1991, when the couple used share certificates from over ten different companies as collateral for loans. They had paid off the loans in full but had not requested the release of the share certificates. They discovered seven years later that the shares had been sold and that they were no longer receiving dividends from them.

The court’s ruling, in this case, determined that the value of shares includes intrinsic values such as dividends, bonuses, and interest and that the couple should be paid accordingly. The judge in the case, Alfred Mabeya, established that plaintiffs’ expectations when buying shares are to benefit not just from the shares themselves but also from any accompanying perks.

This ruling is particularly impactful in cases involving shares used as collateral for loans. The couple, who had purchased the shares as part of their retirement plan, were also awarded interest and costs. This outcome grants them the benefits and justice they sought for their shares.

Absa Bank Kenya, originally Barclays Bank Kenya Limited, operates as one of the leading financial services providers in Kenya. Kenyan businessman Baloobhai Patel owns 1 percent of the banking group.

In recent times, Patel has commenced plans to transfer his direct equity positions in publicly traded companies into his holding company, Aksaya Investment Holdings Limited, including his stake in Carbacid Investments, Sanlam Kenya, Bamburi Cement, Absa Bank Kenya, and Co-op Bank, as part of a succession plan that began in 2015.

The Kenyan businessman also holds stakes in Williamson Tea Kenya, Diamond Trust Bank Group, and Safaricom, the country’s largest telecom service provider.