KUSCCO Scandal: Arrests Made as Investigation Uncovers Massive Fraud

Today, February 12, 2025, officers from the Directorate of Criminal Investigations (DCI) Headquarters arrested key individuals linked to a massive fraud and money laundering scheme at the Kenya Union of Savings and Credit Co-operatives (KUSCCO). The arrests come after extensive investigations into financial misconduct amounting to billions of shillings.

Arrested Individuals:

• Jackline Pauline Atieno Omolo (ID 1370784)
• George Ochola Owino (ID 12460173)
• Mercy Njeru (ID 7035879)

These individuals, all officials or employees of KUSCCO, were apprehended at different locations within Nairobi County.

Charges Against the Suspects:

1. Conspiracy to Defraud – Section 317 of the Penal Code
2. Money Laundering – Section 3(b)(i) as read with Section 16 of the Proceeds of Crime and Anti-Money Laundering Act
3. Stealing by Directors or Officers of Companies – Section 282 of the Penal Code
4. Making a False Document – Section 347(A) as read with Section 349 of the Penal Code
5. Uttering a False Document – Section 353 of the Penal Code

Additional Arrest in Nyeri County:

Detectives also arrested George Magutu Mwangi (ID 3630494) at his home in Githima Village, Mathira West Sub-County, Nyeri County. He faces the same charges as those arrested in Nairobi.

The KUSCCO Scandal Unveiled

This latest development follows a series of shocking revelations regarding financial misconduct at KUSCCO. Investigations have linked top executives to a scandal involving the misappropriation of over Ksh 13 billion, leaving thousands of Sacco members at risk of losing their savings.

Key Findings from the Forensic Audit:

• Forgery of Auditor’s Signature – Executives forged the signature of deceased auditor Alfred Basweti to validate falsified financial statements.
• Unauthorized Cash Withdrawals – Over Ksh 5.47 billion was withdrawn between February 2013 and April 2024 without proper documentation.
• Suspicious Transfers – Ksh 318.16 million was wired to KUSCCO Housing’s company secretary without justification.
• Unsupported Loans – Senior staff received questionable loans totaling Ksh 61.5 million, including Ksh 50 million to the managing director.
• Irregular Payments – Ksh 434.16 million was transferred to insurance agencies despite KUSCCO lacking a license to offer insurance services.

Government’s Response:

• Dismissal of the Entire KUSCCO Board – Cabinet Secretary Simon Chelugui dissolved the board over systemic failures and unreliable financial records.
• Appointment of an Interim Board – A 15-member interim board was installed to oversee recovery efforts and restore trust.

Impact on Members:

KUSCCO currently holds deposits worth Ksh 18.9 billion from over 4,168 Saccos. However, its insolvency, with a deficit of Ksh 12.5 billion, raises serious concerns about depositors’ funds.

Investigative Reports Leading to the Arrests

Extensive reporting on this scandal has exposed numerous fraudulent activities, including:

• Illegal deposit-taking operations
• Unexplained withdrawals and transfers
• Conflict of interest in contracts awarded to executives’ firms
• Massive bribery attempts to suppress the investigation
• Suspicious real estate investments using stolen funds

The Role of Regulatory Authorities

Authorities such as the Sacco Societies Regulatory Authority (SASRA) and the Insurance Regulatory Authority (IRA) have come under scrutiny for their failure to prevent these fraudulent activities.

Investigations revealed that KUSCCO illegally operated as a deposit-taking entity without proper licensing. Former CBK Governor Patrick Njoroge had raised concerns about KUSCCO’s financial dealings as early as 2022, but regulatory action was delayed.

The Future of KUSCCO

As investigators uncover more details, attention now shifts to how KUSCCO will recover from this financial mess. The forensic audit has confirmed that over Ksh 10 billion is unaccounted for, and only Ksh 3.5 billion remains in its accounts.

With the arrests of key suspects, the focus will be on prosecution and asset recovery to compensate affected members.

Stay updated on Kenya Today for more in-depth coverage of this developing story.