Lloyd Masika Probed for Fraud as Stanbic Bank Exposed for Incompetence in Due Diligence

A storm is brewing in Kenya’s financial and real estate sectors after the High Court in Nairobi ordered top property valuer Lloyd Masika Limited to bare its financial soul to Stanbic Bank Kenya, in a case that has laid bare staggering negligence, inflated valuations and apparent incompetence in bank due diligence.

Justice Aleem Visram, sitting at the Milimani Commercial Court, directed the firm to surrender its audited financial statements, bank accounts, title deeds and company books to Stanbic Bank within 21 days, as part of efforts to trace assets that could settle a massive KSh 58 million decree.

The court warned that should evidence of concealment or fraudulent transfer of assets emerge, the corporate veil could be lifted — effectively placing the company’s directors in the legal crosshairs.

The sensational case traces back to February 2018, when Lloyd Masika, one of Kenya’s oldest and most respected valuation firms, priced three properties in Machakos County at an open market value of KSh 87 million and a forced-sale value of KSh 56.5 million. On that basis, Stanbic Bank advanced a loan facility to a borrower.

But when the borrower defaulted, a fresh revaluation exposed a shocking reality — the same properties were now worth only KSh 17 million and KSh 13.1 million respectively. The eye-popping discrepancy, nearly KSh 70 million off the mark, sparked outrage within the banking sector and sent alarm bells ringing about the integrity of professional valuations.

Stanbic Bank, left nursing a colossal loss, accused Lloyd Masika of gross negligence and submission of false valuation reports.

The dispute went to arbitration, and in December 2021, the arbitrator ruled squarely against Lloyd Masika, holding the firm liable for KSh 40 million in losses plus costs, pushing its total liability to about KSh 44 million.

However, years later, the bank is still chasing shadows. A public auction of Lloyd Masika’s assets raised a paltry KSh 1.13 million, of which just KSh 706,335 reached Stanbic.

With over KSh 57 million still outstanding, the bank turned to the courts — demanding access to the firm’s financial innards to determine whether it is hiding assets or operating on empty promises.

In a striking twist, Lloyd Masika’s directors fought back, accusing Stanbic of blackmail and embarrassment tactics, arguing that they already hold a KSh 500 million professional indemnity policy with UAP Insurance, which they claim can satisfy any decrees.

The firm contends that the bank’s demand is premature since the insurance litigation is still ongoing.

But Justice Visram dismissed the argument, saying the insurance claim does not excuse the company from disclosing its books.

“The purpose of Order 22, rule 35 is to enable a decree-holder to obtain information on a company’s assets and financial affairs,” the judge ruled, stressing that “whether the insurance claim ultimately satisfies the decree is a separate matter.”

For a firm that once stood as a pillar of Kenya’s real estate market — managing prime commercial buildings, luxury residences, and multi-billion-shilling developments — the ruling is a devastating blow to its reputation.

It now faces public scrutiny and possible deeper probes into its valuation practices, which could shake investor confidence and trigger a wider regulatory reckoning.

But Stanbic Bank is hardly emerging unscathed. Industry insiders say the case exposes the bank’s lax due diligence and failure to independently verify valuations before lending. Critics argue that for an international financial powerhouse, the bank’s internal controls appear embarrassingly porous, leaving it vulnerable to shoddy appraisals and costly misjudgments.

“This is what happens when banks get too comfortable outsourcing critical risk assessment to third parties without proper oversight,” said one senior banking analyst, who asked not to be named because of the sensitivity of the matter.

The fallout from this case could be seismic. Regulators may be forced to tighten oversight on property valuers and re-examine how commercial banks validate collateral. Meanwhile, Lloyd Masika’s directors are preparing for what could become a forensic unmasking of their corporate operations, as the possibility of the court lifting the corporate veil looms large.

For now, both corporate giants — one in real estate, the other in banking — find themselves on trial in the court of public opinion.

Lloyd Masika faces questions about professional integrity, while Stanbic Bank must answer how such a massive valuation scandal slipped through its systems. The Machakos valuation fiasco has not only dented reputations but also reopened debate on the fragile trust underpinning Kenya’s property and financial markets.

The courtroom lights are still on, the files are open, and the reckoning has just begun.