10th April 2016: Thief who brought down his own bank

By JOHN KAMAU
More by this Author

Kenyan billionaire Ketan Somaia is in a UK jail for fraud. Somaia swindled more than Sh164 million out of Caneland Ltd through his collapsed Delphis Bank and Dolphin Holdings. PHOTO | NATION MEDIA GROUP 

Summary

• Actually, nobody thought much of him after he had bought the remnants of the local branch of the shadowy Bank of Credit and Commerce International which collapsed in July, 1991.
• Somaia continued BCCI’s vice from there by opening its Kenyan branches as Delphis Bank, which he operated like a personal piggy bank for himself and his close associates – among them Kamlesh Pattni, the father of the Goldenberg scandal and who earned billions of shillings as cash subsidies for fictitious exports of gold and diamonds.
• He brought out some financial statements of a company known as Driscoll Investments Limited which showed that it was a holding company with assets worth $75 million.

Somaia bought a piece of this $20 billion rogue empire that still tops the world as the most corrupt financial institution.Banks can be run by thieves. Put another way, there was a thief named Ketan Somaia who used to run a bank in Kenya – it’s name was Delphis Bank.

Finally, he ran it down the drain.

Now in jail for fraud, Somaia used to spot an awkward horse-shoe bald head and a classic door knocker circle beard – both peppered with flecks of white. Once upon a time, Somaia used to spot the Van Dyke beard, a style once dismissed by a Chicago Chronicle columnist Edith Sessions Tupper as indicative of a man “who was selfish, sinister, and pompous as a peacock”.

For Somaia, the door knocker beard gave him the guise he craved; that of a suave businessman. He also concealed his deceitful persona with expensive Savile Row suits, tailored to hide his rotund appearance rounded off with black round rimmed glasses with clear glass lenses – good for a man with nothing to hide!

Like many other pilfering types that he wanted to copy with near perfection, Somaia entered the banking world through the back door.

Actually, nobody thought much of him after he had bought the remnants of the local branch of the shadowy Bank of Credit and Commerce International (BCCI) which collapsed in July, 1991.

BCCI, as it was widely known, was not an ordinary bank; it was a citadel of vice. As it was found many months after it had collapsed, BCCI financed drug dealers, terrorists, and carried out various covert operations. It had layers of secrets, an inner circle of two dozen executives straddling continents where it had 62 branches and operated loan documents that were off limits to bank inspectors. Eventually, it was shut down by the Bank of England with the loss of billions of dollars to some 1.4 million depositors around the world.
Simply put, Somaia bought a piece of this $20 billion rogue empire that still tops the world as the most corrupt financial institution in the history of banking.

In the official 614-page report of the Committee on Foreign Relation of the US Senate on the BCCI Affair, the bank officials in Kenya — and other African countries — are accused of giving “cash bribes, kickbacks to senior central bank officials” and “having special arrangements with the heads of state”.

Somaia continued BCCI’s vice from there by opening its Kenyan branches as Delphis Bank, which he operated like a personal piggy bank for himself and his close associates – among them Kamlesh Pattni, the father of the Goldenberg scandal and who earned billions of shillings as cash subsidies for fictitious exports of gold and diamonds.

To get some commercial mileage and a semblance of trust, Somaia approached a two-time British Conservative party leader, Lord Parkinson (late), to become the chairman of the umbrella off-shore holding company, Dolphin Holdings, which he had registered in the tax-haven of Bermuda. Here, he would skim profits, hide his books, and occasionally pilfer some cash.

PROMISING POLITICAL CAREER

Many a time, according to court papers, he would jet between offices in Dubai and London, where both Somaia and Lord Parkinson would while away time in an imposing building which housed Dolphin offices.

Somaia first met Lord Parkinson when he (Parkinson) was MP for Hertsmere and with a promising political career. British newspapers say that Parkinson had some charming look or what they call “Kennedyesque good looks” according to the Telegraph newspaper. He knew as much and once told a newspaper that if he were reincarnated, he wished to be born “short, fat and ugly”.

It was these good looks that endeared him to his secretary, Sara Keays, who in 1983 spilt the beans over their illicit affair and a secret child.

Parkinson resigned from Prime Minister Margaret Thatcher’s cabinet and only returned in 1987 having won his parliamentary seat with a landslide. He was named Energy Secretary with the task of privatising the electricity industry. Four years later, he joined Somaia’s Dolphin Group and gave it the deserved gentle cover.

To mask the identity of the bank and its associated companies, Somaia incorporated several off-shore entities where he could park and launder funds.

The first was the Dolphin Management Services Limited and Global Investment Holdings Limited, which were incorporated in Bermuda, a British Overseas Territory in the North Atlantic Ocean, known as a safe tax haven for corporations. Shell corporate entities, like those formed by Somaia, loved Bermuda because it imposed no direct taxation.

Somaia also incorporated Somervale Securities Limited in the British Virgin Islands and Delphis Bank Limited in Mauritius. He had another outfit, Saropa Holdings, which was incorporated in the Bahamas.

All these were incorporated by the Panamanian company, Mosseca Fonseca, now at the centre of global attention after millions of its documents were hacked into triggering uproar on the number of shadowy companies operating offshore accounts.

From the eighth floor of Dubai’s Arbift Tower, a 23-storey building facing Dubai creek and now known as Al Masraf Tower, Somaia lured his would be victims with promises. His other shell companies were operated at the offices of Mosseca Fonseca.

That is when he met British multi-millionaire Murli Mirchandani – a man who had grown up in India and built a transnational business based in Germany, from where he would import and export food and chemicals between Europe and West Africa. He built a solid fortune selling industrial gas and cooking oil through his largely successful company, Aveem.

Then in November 1998 the “king of con”, as the British press would later call Somaia, arrived with his fairy tales. By this time, small banks in Kenya were going through a financial nightmare after the Central Bank increased capital requirements and raised the gearing ratio from 5 per cent to 7.5 per cent to forestall the crisis. He was desperate to get some money to save his bank.

The flashy Somaia decided to spin a story of success: That he was a successful financier with a personal fortune of $100 million (Sh10 billion) and that he controlled an empire with assets worth Sh50 billion. It was a lie. He then told his three victims that he was a close associate of billionaire Hinduja brothers — the owners of Ashok Leyland and currently listed number 58 in the Forbes list of the wealthiest people in the world.

HAD A PRIVATE JET

Somaia had a private jet and had access to several others. Away from the ground, he would strike pseudo-deals as he flaunted his wealth aboard the jets, where expensive champagne — the type made from grapes of Chardonnay, Pinot Noir, or Pinot Meunier flowed freely. His victims would also be treated to all-expenses paid tours in Kenya and Dubai or, according to court papers, his palatial home in the exclusive north London suburb of Hadley Wood.

Mirchandani was one of them. After one such party, and with no paper work, zilch, he gave Somaia Sh2.3 billion, just like that. The first payment of Sh86 million had been transferred to Somaia’s National Westminster bank account on the morning of June 23, 1999. It was to be repaid on October 23, 1999.

This followed a meeting held at 77 Brook Street in London, where Mr Mirchindani had expressed interest in acquiring 10 per cent of Delphis Bank in Mauritius at a meeting attended by Somaia’s nephew, Shohan Daswani. In what looked like a favour, an opportunity to buy into a Mauritius bank, Somaia asked Mr Mirchindani to give him $865,000 as a personal loan.

He lied that he was floating shares of the Delphis Bank and that the new shares would amount to 25 per cent of its share. Thus, he wanted the money to buy the shares which would rise in value enabling him to repay.

But a day before that deadline, Somaia called Mr Mirchandani and begged for more time. “He said he would not be able to repay at maturity and insisted that I should extend the deadline to December 15, 1999 at an interest rate of 30 per cent,” Mr Mirchindani would later say in an affidavit.

“The reason con artists get away with what they get away with is, their victims are ashamed of their own blindness and their own gullibility, and they tend to just quietly go away,” wrote Walter Kirn, the famous American novelist, literary critic, and essayist.

And that was not the only money. Mr Mirchandani had also transferred on June 25, 1999 another $7.5 million to Somaia to ostensibly buy a 10 per cent stake in Delphis Bank in Kenya. Another meeting had been set for July 5, 1999 to discuss further investments within Dolphin Group.

That afternoon, at 5.30 pm, Mr Mirchindani was lured into a glitzy office at Spring Villa Park in London’s Edgware area. A brass name plate read: The Dolphin Media House and to receive him was Somaia and his nephew Daswani. He was shown around the various offices and they then drove to 105 Camlet Way, Somaia’s private residence at Hadley Wood.

It is Harshit Walia, the famous Indian photographer, who once said: “Every man has three worlds. What he perceives; what he shows to the world and his reality. The third one is the mystery to be lived.”

It was during this night meeting that Somaia decided to pull his last trick. He brought out some financial statements of a company known as Driscoll Investments Limited which showed that it was a holding company with assets worth $75 million. He told Mr Mirchindani that the company’s value would double in about 3 years and asked him to purchase a 20 per cent stake.

But Driscoll was only a briefcase company although he claimed that it owned substantial shares in Kenya’s Delphis Bank, a motor dealer Marshalls (East Africa) Limited and Tourists Paradise Investment Limited which owned a restaurant and Nairobi Museum Hill’s International casino.

Somaia came with a proposal: The $7.5 million he had already received from Mr Mirchandani would form part of the purchase price and an extra $7.5 million would be added to make the 20 per cent interest in Driscoll.

A world of fantasy had been brought before Mr Mirchindani. “If someone is going down the wrong road, he doesn’t need motivation to speed him up,” wrote Jim Rohn, a famous American entrepreneur. Mr Mirchindani had reached a point of no-return and Somaia knew as much.

He even proposed that they form a separate company to hold the investments that he held. The two ended up at the door of Mossack Fonseca where they registered Balmoral Investment Groups Limited in the British Virgin Islands.

SINKING A FORTUNE

After sinking a fortune into Somaia’s dreams, Mr Mirchandani was given a letter welcoming him to the Dolphin team. In the meantime, he was scheduled for a board meeting at the Dolphin Group UK headquarters at 77 Brook street. That meeting took place from 1 am on August 26, 1999. Six months later he received a share certificate for his 20 per cent stake. After that, everything was done on phone.

“We spoke on the phone almost every day and he would assure me that everything was going well and that he expected the investment to double within about 3 years,” he told a court.

It was during a lunch meeting at Durban’s Zimbali Lodge Hotel in South Africa that the two finally met a day before the Christmas of 1999. Mr Mirchindani complained that no board meeting had been held, and no dividends had been paid. Somaia started evading Mr Mirchindani who was demanding a director’s fee of $100,000 a year.

There was neither a board meeting nor business updates. In essence, Mr Mirchindani had been conned. Somaia left UK – hoping to tire Mr Mirchindani. It then struck him. The series of weddings in Dubai and the free dinners at Annabel’s nightclub in London were not for free.

But Mr Mirchandani was not willing to let Somaia get away with his money. He simply waited. Not for one year, but for 14 years. In turn, Somaia thought, and for several years, that he had managed to pull a trick on Mr Mirchandani.

The money he had conned the industrialist was enough to prop up his failing banking businesses in Nairobi and continued funding his life of luxury and jumping into private Learjet planes for more escapades away from his Mayfair office in London.

When he was once cornered in early July 2000 at his Hadley Wood house in North London, Somaia repaid the $259,500 interest. Then he went under with $2.3 million from a man who used to call him Ketebhai – signifying trust and brotherhood.

Using his local political networks, and by swindling many abroad, Somaia had invested some of his money in Miwani Sugar Company, Dolphin Leisure Club, Block Hotels, and Delphis Bank. He had also made a fortune by stealing through the Goldenberg scandal where he was adversely mentioned.

Delphis was not a bank. It was an avenue for Somaia to do dirty work. He was not a banker as it later emerged. He was a thief now in jail in London courtesy of Mr Mirchandani, and that is why his Delphis Banks collapsed – Dephis Tanzania in March 2003, Delphis Kenya in June 2001 and Delphis Mauritius in March 2002.

Kamau is the Acting Editor, Investigations and Special Projects. jkamau@ke.nationmedia.com. @johnkamau1