CMA wants Kiereini, Njonjo to refund cash
Deposed CMC Motors directors Jeremiah Kiereini, Martin Forster and Charles Njonjo should pay back millions of shillings that the company could have lost through illegal offshore accounts, a report by the Capital Markets Authority has proposed. The three together with other ex-directors Richard Kemoli, Peter Muthoka, Joseph Kivai, Andrew Hamilton and Sobakchand Shah have been found to be responsible for the woes that have afflicted the listed motor dealer whose shares are currently suspended from the Nairobi Securities Exchange.
CMA on Friday disqualified them from appointment to the board of any listed company in Kenya over their dealing with CMC. In particular, Forster, the former chief executive, has been cited as the person who bears the greatest individual responsibility for the lapses in corporate governance and engaging in the risky business model in CMC Holdings.
The report has cleared directors including current chairman Joel Kibe and his business associate Paul Ndung'u and the current managing director Bill Lay who brought the illegal dealings at the motor dealer to the limelight. The report also clears director Ashok Shah and the finance manager, Mary Ngige of any wrong doing. CMA has now given the motor dealer and other relevant government agencies the go-ahead to conduct further investigations to pursue some of the accused directors with a view of recovering the funds which are held in offshore accounts in the Island of Jersey.
The Director of Public Prosecutions Keriako Tobiko has already hinted that his office has started investigations into the alleged fraudulent transactions that might see some of the high flying individuals land in court. The CMA is also seeking to obtain information through relevant local and international institutions to ascertain the actual amount siphoned out of CMC Holdings under the offshore arrangement.
“Once the quantum has been established, (CMC) to initiate recovery from Mr. Forster an amount equivalent to two times the amount of the benefit accruing to him by reason of the breach pursuant to Section 25A(1)(c)(ii) of the Act,” says the report in part. The same is said of Kiereini who has been directly linked to the offshore accounts that were used to lend money to CMC Motors. Forster and Kiereini were directors of Regent Trust Company Ltd, Corival (1996) Ltd, Fair Valley Investment Inc and Fair Valley Trust, the mysterious companies that were used to operate the illegal offshore accounts.
“Having analyzed the evidence adduced, the CMA board found that Mr. Kiereini breached his fiduciary duties as a director of CMCH,” the report says. Kiereini is accused of not only being aware of the existence of the offshore arrangements but was also intimately involved in their operation. “He benefited from the offshore arrangements to the detriment of the CMCH and its shareholders,” the report says about Kiereini.
Forster had confirmed to the CMA that he knew of the existence of the offshore accounts which were opened to achieve the ‘over invoicing thing’ and to ‘manage’ the exchange control rules. He further stated that executive directors and top management benefited from the Trust and that no tax was paid.
“The Trust, as he was informed by his lawyers, was irrevocable,” the report notes. The report adds that Foster also mentioned that the reason for the lending of over invoiced funds back to CMC and its subsidiaries was that bank interest rates in Kenya and Uganda were very high at that time and the ‘overseas funds’ were loaned at a lower rate of interest.
“He further submitted that Mr. Charles Njonjo, P K Jani and Kulei were involved in the scheme,” the report says. The report raised queries as to how Kiereini was able to benefit from the offshore accounts that were established for the benefit of the past, current and future members of staff of CMC Holdings when he has never been and was not a member of staff of the company.
The CMA investigation has however failed to link Njonjo with the offshore accounts.It however recommends that CMC and the relevant government agencies conduct further investigations to establish the link between Njonjo and the offshore arrangements for purposes of any recovery and restitution.
The CMA report is also silent about the Sh1.5 billion that CMC is claiming former board chairman and Andy Forwarders chief executive Peter Muthoka. Muthoka, through Andy Forwarders, his wife and son control more than 25 per cent of CMC which is against the provisions of take-over and mergers regulations.
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