Controller of Budget Margaret Nyakang'o's troubles in an ongoing fraud case can be traced to a civil row between businesswoman Claudia Mueni Mutungi and Fountain Enterprises Programme (FEP) Sacco Society Ltd.
The dispute began in 2019 after Ms Mutungi allegedly transferred Sh29 million from her account at Kenya Women Finance Trust (KWFT) to the Sacco.
According to court documents, Ms Mutungi kept the money in a fixed deposit account at KWFT, where Ms Susan Kiambati, who is also a suspect in the criminal case, was a customer care manager.
It started in November 2019 when Ms Kiambati informed Ms Mutungi that she had moved from KWFT to FEP Sacco Society Ltd, which offered higher interest rates on fixed deposits compared to KWFT, now Kenya Women Microfinance Bank.
According to documents filed at the Mombasa High Court, Ms Mutungi then transferred the money to FEP's accounts. She was then paid Sh1.1 million in anticipated interest in advance.
After several months, she informed FEP that she needed to deposit her money in a call account for a month after the maturity date of March 3, 2020.
Silvanus Osoro confirms government is after Controller of Budget Margaret Nyakang’o
However, court papers show that the woman was shocked when she received a response indicating that she had been a member of PEF Sacco, but had not filed any paperwork to become one.
After attempts to get her money back proved futile, Ms Mutungi sued FEP claiming she had been made a member without her knowledge.
In the suit, the woman said at the time she wired the money, she had not applied and was not required to be a member of the Sacco.
"When I wanted the money placed in a call account, the Sacco responded by introducing a mischievous theme known as an intent to withdraw membership," she said.
According to Ms Mutungi, she had always believed she was dealing with a bank, not a Sacco thus when a form mentioned it, she was confused.
Ms Mutungi said the form she was given stated that she was withdrawing from the Sacco and asked for Sh20 million. "I filled the said form," she told a Mombasa court.
Three months later, Ms Mutungi told the court that the issue of resignation was revisited, with the Sacco informing her that a notice on the same could only take effect from July 5 and would expire on September 5, 2020.
Nyakang'o arrest: A case of prosecution or persecution?
The woman then claimed that both the Sacco and Ms Kiambati had breached their agreement and asked the court to order a refund of the money and a declaration that she had never been a member of the Sacco.
"I pray for a declaration that the respondents contravened the Sacco Societies (Deposit -taking Sacco Business) Regulations, 2010 and engaged in prohibited business by recruiting her and operating a fixed deposit account in her favour when she was not a member," she said.
"I pray for special damages and a further order compelling the Sacco and its agents to pay me the accrued interest on the principal amount from July 5, 2020, to the date of payment of the principal amount," she said.
Ms Kiambati and the Sacco, however, objected to the case, arguing that the High Court had no jurisdiction to hear the dispute.
The Sacco's chief officer, Dr Jackson Wanjau, insisted that the woman was their member after she applied and filled out forms before the funds were transferred.
However, he told the court that the plaintiff later withdrew from the Sacco by filling out mandatory withdrawal forms. "You cannot withdraw from what you were never a member of," Dr Wanjau said.
He denied that the Sacco was a deposit taker, saying information about its legal status was clearly displayed on its website.
Dr Wanjau further said that the woman's registration as a member of the Sacco qualified her to transfer her savings it only dealt with members.
Controller of Budget Margaret Nyakango arraigned at a Mombasa court
The Sacco further argued that before the money was transferred to its account, its regional manager wrote an official letter to KWFT informing it that the plaintiff was its member and confirmed her membership number as a measure of good practice.
"The plaintiff intentionally failed to disclose all of the interest paid to her by the Sacco on four separate occasions between December 2019 and May 5, 2020," Dr Wanjau said.
The Sacco said the Co-operative Court was best placed to deal with the dispute between it and the businesswoman.
"In the event that the court finds that the plaintiff was not a member of the Sacco, it would not have the power to enforce an illegal contract as the Sacco does not have a license to conduct deposit-taking business as defined in the Sacco Societies Act," Ms Kiambati said.
The Sacco produced a copy of a duly filled and executed application form in court to prove its case, but the woman denied knowledge of the documents.
Justice Njoki Mwangi, who presided over the dispute, found that Ms Mueni was a member of the Sacco and referred the matter to the Cooperative Court.
The judge said the woman had failed to explain the circumstances under which the transfer was made, other than stating that she was a depositor and that the Sacco was a deposit-taking institution.
The court also said the woman did not produce any documents to suggest that she had asked the police to investigate the documents.
"On the other hand, the Sacco presented evidence to support its claim that the plaintiff was its member. I find that the applicant was and is a member of the Sacco," the judge said.
However, Ms Mutungi has appealed against the ruling and has submitted new evidence that she believes will be in her favour. The new evidence, she says, is a forgery that made her a member of the Sacco without her knowledge.
However, Dr Nyakang'o was not named in the civil suit filed by Ms Mutungi.
Meanwhile, Ms Kiambati and Dr Wanjau, who defended the Sacco in the civil case, are among the 10 people charged along with Dr Nyakang'o in the Mombasa Chief Magistrate's Court.
Other suspects are James Wanyangi, John Kithaka, Jane Ndayi, Muthoni Eliphas, Joan Chumo, Mercy Mukora, Gregory Mailu and Michael Kangogo.
They are accused of defrauding Ms Mutungi of Sh29 million by pretending to run a genuine investment business, operating a Sacco without a license and forging Ms Mutungi's signature.
Dr Nyakang'o was released on Sh2 million bond with a surety or alternatively on Sh500,000 cash bail after she denied the charges before Chief Magistrate Alex Ithuku.
Her co-accused, who were not in court on Tuesday have been summoned to and enter their pleas.
