Kuscco Fraud
The government has directed 247 savings and credit cooperative societies (Saccos) to reduce dividend payouts and set aside funds to cover potential losses stemming from a massive fraud scandal at the {Kuscco Fraud) Kenya Union of Savings & Credit Co-operatives
A forensic audit by PricewaterhouseCoopers (PwC) uncovered fraudulent activities at Kuscco amounting to Ksh 13.3 billion, rendering the umbrella body insolvent by Ksh 12.5 billion and putting at risk Ksh 24.8 billion in deposits collected from Saccos across the country.
The audit exposed a pattern of financial malpractice, including book tampering, large-scale theft by senior executives, bribery, suspicious bank withdrawals, and conflict of interest, where procurement contracts were awarded to companies linked to top officials.
To mask the fraudulent schemes, financial statements were manipulated to reflect non-existent profits.
Among the institutions affected are some of Kenya’s largest Saccos, such as Mwalimu Sacco, Stima Sacco, Harambee Sacco, Kenya National Police Sacco, and Tower Sacco, whose collective assets run into hundreds of billions of shillings.
In response, the State Department for Cooperatives has asked Saccos to stagger provisions for these losses over several years and, where necessary, seek bank loans to strengthen their financial buffers.
Authorities have also advised Saccos to limit dividends to members to maintain liquidity and avoid further financial distress.
The government has not disclosed the full list of the affected 247 Saccos, fearing that such revelations could trigger panic withdrawals, leading to a collapse of some cooperative societies.
However, it has been acknowledged that larger Saccos with excess capital were the most exposed, having invested heavily in Kuscco.
Investigations have placed former Kuscco executives at the center of the scandal, including former Managing Director George Ototo, former Finance Manager George Owino, and former Chairman George Magutu, alongside several other senior officials.
PwC’s forensic audit established that between 2018 and 2023, executives misappropriated at least Sh206 million through withdrawals disguised as cash replenishments for Kuscco FOSA branches.
Records also indicate that commissions of up to 3.0% were falsely recorded, allowing officials to withdraw Sh1.6 billion while only disbursing Sh1.1 billion.
As a result, eight former Kuscco officials, including Ototo, Magutu, Owino, and former Advocacy Manager Mercy Muthoni, are now facing multiple criminal charges, including theft, forgery, and money laundering.
Additionally, Kuscco’s former external legal counsel, Jackline Omolo, has been charged with preparing fraudulent land purchase agreements, stealing, and engaging in money laundering.
The accused have denied the charges and are currently out on bond as investigations continue.
