MASERU – The seemingly never-ending MKM saga deepened yesterday when the Central Bank of Lesotho (CBL) distanced itself from growing speculation that it is engaging with MKM representatives to discuss the repayment of its investors.In a mortal blow to duped investors who had pinned their hopes of recovering their investments on the CBL, its top official stressed it was not holding any MKM funds or assets.
The CBL move was aimed at staunching swirling reports that it is party to ongoing processes to reimburse hundreds of MKM investors, left in the lurch when the scheme collapsed over a decade ago. Despite initiating proceedings in the High Court back in 2008, the bank revealed that the matter is now solely in the hands of liquidators under the supervision of the Master of High Court.
“Any interference by the bank in the matter at this stage would be both contemptuous and illegal,” the governor of CBL Dr Retšelisitsoe Matlanyane told a press briefing yesterday afternoon. To set the record straight Matlanyane showed that the bank was established for purposes of the attainment and maintenance of price stability and financial stability.
She said the institution executed this mandate through various functions which included licensing, registration and supervision of other financial institutions. She added: “To do that effect, the Bank has in place the Financial Institutions Act, the Insurance Act and their implementing regulations. These laws require institutions that intend to operate as financial institutions to obtain licenses to conduct either insurance or banking business and also make unlawful for them to operate without licenses.”
Following a series of forensic reports filed between February and June 2008, it was revealed that MKM owed members of the public at least M400 million and that it did not have sufficient assets to meet that liability. At that time MKM could only afford to marshal M100 million.The shocking figures came to light after the bank engaged Price Waterhouse Coopers forensic investigators to probe the operations of MKM with a view to determine its scope of liability as well as the amounts owed the investors.
In 2007, proceedings were initiated by the CBL before the High Court to compel the MKM Star Lion Group to stop its operations.This was after an examination by the bank revealed MKM was conducting businesses akin to banking and insurance underwriting without a valid license.Following the examination, the bank made several attempts through guidance and engagements with management of MKM to encourage them to comply with both the financial institutions Act and the Insurance Act.
“When all efforts failed, the bank was left with no option but to approach courts of law to stop the illegal operations of MKM and also initiate the due processes to have the money deposited by the members of the public returned back to them,” added Matlanyane. As a result, an application was lodged before the High Court in November 2007 for an order to declare MKM operations illegal, for the bank to determine the extent of MKM liability to its investors and to determine a list of investors and amounts owed.
An interim court order was then granted on November 27, 2007. On the basis of that court order, that is when the bank engaged the forensic investigations firm to then asses the operations.Furthermore, the forensic report resulted in the bank initiating proceedings again in the High Court in September 2008 to have MKM liquidated. A long-awaited ruling which dragged for three years was finally made in 2011, confirming that MKM should indeed be liquidated. The liquidation process involves a series of steps according to the bank.
“Firstly the liquidators start with the determination of the assets and liabilities of an entity being liquidated and this long process may result in legal disputes over ownership of assets being assessed and the MKM has not been an exception,” Matlanyane said, noting that the whole process added to delays in finalizing the liquidation process.
The bank further cleared the air on more speculation that the bank may somehow be in possession of the money and belongings of MKM.“The bank has no money in its possession belonging to MKM and cannot therefore be preparing to repay any money to its investors. As said the matter is now outside the scope of authority of the bank but a matter of the office of the masters of the High Court,” Matlanyane also said.Default Basic Success warning Info Danger Primary