The Kenya Union of Savings and Credit Cooperative Society (Kuscco) is embroiled in a massive scandal following the release of a forensic audit conducted by the Sacco Societies Regulatory Authority (Sasra).
The audit, covering the tenure of former CEO George Ototo, has revealed that Kuscco engaged in illegal deposit taking activities, leading to the loss of a staggering Sh18 billion.
The audit has exposed how leading cooperatives made illegal deposits amounting to Sh18 billion, which were not properly accounted for.
The funds, instead of being securely held and managed, were involved in risky and unauthorized transactions, leading to massive financial losses.
The forensic report, which is now complete, has recommended criminal charges against Ototo and his team for their involvement in the fraudulent activities.
Among those implicated in the report are former Kuscco board members, including the then-chairman George Magutu, vice-chairman David Lagat, and directors David Ogega, Alfred Mlolwa, Peter Manga, John Sigei, Wilfred Aima, Bernard Ngunjiri, Ann Mutinda, Henry Okwatch, and Hesborn Malova.
These individuals are facing imminent arrest based on the findings of the forensic audit.
The auditors were particularly shocked by the discrepancy between the declared Sacco deposits and the actual funds held by Kuscco.
This gap, reportedly running into billions of shillings, points to deep-seated financial mismanagement and possible embezzlement under the leadership of Ototo and his board.
The scandal surrounding Kuscco has been further complicated by recent political developments.
According to sources, George Ototo is attempting a comeback, leveraging the new political ground shaped by the coalition between President William Ruto and ODM leader Raila Odinga.
Ototo is reportedly lobbying for his return to office, claiming that he was unfairly targeted by the Kenya Kwanza regime when it first came to power.
This political maneuvering comes at a time when Wycliffe Oparanya, a prominent ODM figure, has taken over as the Cabinet Secretary for Cooperatives.
Oparanya’s appointment has given the removed Kuscco directors hope for a potential reinstatement, despite the serious allegations against them.
They argue that their removal was politically motivated and are seeking to reclaim their positions within the organization.
The forensic report also revealed that the directors of Kuscco had borrowed large, unsecured loans from the Sacco, further jeopardizing the financial stability of the institution.
These loans, granted without proper collateral or safeguards, were a clear violation of the principles meant to protect Sacco members’ interests.
The scandal came to light after former Cooperative CS Simon Chelugui directed Sasra to conduct a thorough investigation into Kuscco’s operations.
Chelugui’s orders led to the initial removal of the implicated officials and the appointment of an interim team to manage Kuscco’s affairs.
The audit found that former Kuscco chairman George Magutu, who was also the chairman of New Fortis Sacco in Nyeri, played a major role in the fraudulent activities.
He influenced New Fortis Sacco to deposit Sh800 million with Kuscco, money that has now been lost as Kuscco struggles to stay afloat on overdrafts.
The audit uncovered that the Ototo led Kuscco cartel offered a 15% kickback to Sacco officials who deposited funds with them.
In the New Fortis deal alone, the officials involved pocketed Sh12 million as a reward for facilitating the deposit of members’ savings into Kuscco’s coffers.
Although Magutu was replaced as chairman of Kuscco’s board on March 15, 2024, by John Githinji, he still wields considerable influence within the organization as a board member.
The current board, which includes CEO John Mathinji and directors Francis Kamau Muiga, Marga Wangeci, David Maina, David Nduhiu, Eustace Mwai, Charles Wanjohi, Charles Muga, Daniel Matu Muturi, Moses Kamande, and Charles Kariuki, is now tasked with navigating the fallout from this scandal.
The Kuscco forensic report has also revealed that Sh18 billion was lost in a white elephant housing project in Kitengela, which was another major financial disaster under Ototo’s leadership.
The project, intended to provide affordable housing for Sacco members, instead became a symbol of corruption and mismanagement, with vast sums of money disappearing into the venture with little to show for it.
The call for accountability and justice grows louder.
The recommendations for criminal charges against Ototo and his team mark a major step towards addressing the deep-rooted corruption within the cooperative sector, but whether these measures will lead to meaningful change remains to be seen.
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