Britam now restates profit after exit of two directors
Roshi Bhadain, Mauritius Minister for Financial Services, Good Governance and Institutional Reform (left) and Andre Bonieux, a senior partner at PricewaterhouseCoopers and one of two conservators of BAI Co (Mauritius) Ltd. PHOTOS | COURTESY
What you need to know:
The Sh342 million profit reduction was revealed two days after the resignation of Mr Dawood Rawat and Mr Moussa Rawat, caught up in a corporate governance crisis in Mauritius.
Britam says the revision is due to a valuation issue with a local associate, unconnected with the troubles facing the Mauritian insurer that is the company’s single largest shareholder.
Financial services firm Britam has revised its books for 2014 a month after they were published, reducing its after tax profit by Sh342 million to about Sh2.5 billion.
The reduction was revealed two days after the resignation of two directors caught up in a corporate governance crisis sparked by the collapse of a Mauritius bank associated with the company’s single largest shareholder.
Mr Dawood Rawat, the Mauritian business magnate wanted for fraud, money-laundering and embezzlement, and Mr Moussa Rawat, his nephew, left Britam’s board on April 22, according to notices sent to regulators the same day.
The notices were, however, not made public within 24 hours as required by law.
Tarun Ghulati, a former Bramer Bank CEO and Group President who joined Britam’s board at the same time with the Rawats, resigned in May 2014.
The trio had represented the interests of BAI Co (Mauritius), which had a 23.34 per cent stake in Britam and in which Mr Dawood Rawat had a controlling stake.
The firm has been placed under a conservator by the Mauritian government after evidence of overvalued assets and understated liabilities emerged.
A statement sent to the Nairobi Securities Exchange attributes Britam’s revision to its financial statements to “an issue with respect to… the carrying value of a local associate company”.
The group has two associates — Housing Finance (46.04 per cent stake) and Acorn Group Limited (25 per cent), neither of which has any financial connection to the Mauritian troubles.
Last week, the Mauritius government said it would take control of Mr Rawat’s stake in the Kenyan firm as it begins a global hunt for assets that can be seized and sold off to repay victims of his fraud.
The search has so far unearthed a castle near Italy’s capital, Rome, and property in places like the United Kingdom, Croatia and Romania.
The asset seizures are part of a plan Mauritius Prime Minister Anerood Jugnauth presented to parliament on Friday, whose aim is to compensate policyholders and investors caught in the Ponzi-type fraud affecting BAI Co (Mauritius) and its sister company Bramer Bank.
A Cabinet meeting held just hours before the parliamentary address agreed on wide-ranging legal and administrative steps that will see a proposed National Insurance Company (NIC) replace BAI Co (Mauritius) as a shareholder in British-American (Kenya) Holdings, the single largest shareholder in Britam.
A yet-to-be-appointed national administrator for a proposed National Property Fund and NIC’s board of directors will decide whether and when to sell the stake in the Nairobi-based regional financial services group.
The country’s Financial Services minister Sudarshan ‘Roshi’ Bhadain said the sale of BAI Co’s stake in Britam to interested parties was likely as the national insurer tries to get value for Mauritian policyholders.
The conglomerate that Mr Rawat owned is also invested in Botswana and Malta.
Botswana regulators have delisted BAI (Botswana), in which BAI Co (Mauritius) holds an 80 per cent stake, and placed it in receivership.
GlobalCapital, in which Mr Rawat’s firm owns a 48 per cent stake and controls a further 6 per cent, was also taken off the stock exchange in Malta.
“Kenya is isolated from what is happening,” Mr Bhadain said. “It’s only a 23 per cent holding and there’s no control (exercised by the Mauritian BAI conglomerate over Britam, unlike in Malta and Botswana).”
He, however, acknowledged the risk of ripple effects from the scandal adding: “But now the situation is going to improve because the Mauritius government is giving the assurance to all (Britam) investors that we are stepping in.”
Initial investigations by BAI Co (Mauritius) conservators André Bonieux and Mushtaq Oosman, appointed by the Financial Services Commission, found that there were “no operational or commercial ties between Britam and BAI”.
“The only (financial) link is the investment via the stock exchange,” Mr Bonieux told the Business Daily, adding that he and others in Mauritius with a voice in what happens to the Britam stake are in touch with Kenyan regulators and Britam executives on what is going on in Mauritius.
He hinted at a possible sale of GlobalCapital, suggesting multiple suitors.
Britam, he says, remains the “jewel in the crown” of Mr Rawat’s crumbling empire, and that the Mauritius government and Mr Sattar Hajee Abdoula, an administrator hired to run the non-insurance businesses, also consider it his best investment.
Meanwhile, efforts to find and freeze assets owned by Mr Rawat and other beneficiaries of his scam continue.
An asset recovery unit run by Mauritian police and public prosecutors has obtained Supreme Court orders freezing shares and immoveable assets in the country, even as the Attorney General seeks mutual legal assistance to seize other assets around the world.
But is this swift response to the fraud a case of “déjà vu all over again”? The intervention underway is reminiscent of the resolution to a 2009 fraud scandal involving British-American Investments (Trinidad & Tobago).
Known as the CLICO scandal, after BAI (T&T) Ltd’s parent company Colonial Life Insurance Company, it, too, involved over-valuation of assets and was “resolved” with a government bailout of the conglomerate, which had TT$100 billion ($16 billion or Sh1.5 trillion) in assets in 32 countries.
Media reports in several countries in the Caribbean affected by the giant firm’s failure suggest many policyholders got the short end of the stick.
Bhadain says Mauritius, which is still reeling from the discovery of another alleged $16.5-billion Ponzi scheme last month (Belvedere, run by two South Africans), is keen to take the right actions to gain a reputation for “clean business”. This, he says, is why the State wants to protect policyholders.
The State has promised capital repayment for all policies, including those offered under toxic single-premium investments at the heart of the fraud, only imposing a ‘haircut’ (loss of interest) on the Ponzi scheme victims.
The Mauritian government has also taken steps to clean house, with at least a dozen appointees to various oversight positions losing their jobs.
An international arrest warrant for Mr Dawood Rawat, now known to be in France, is still in place.
Former BAI (Mauritius) chief executive Oomeshsing ‘Rishi’ Sookdawoor is out on bond after being charged in a Port Louis court with aiding Rawat’s fraud.
At least one other unidentified BAI official is facing a similar fate, reliable sources say, even as a government minister confirmed the police and other investigative bodies were looking at a wider range of suspects.
Most of Bramer Bank’s employees, including chief executive Ashraf Esmael, have stayed on at the new State-owned National Commercial Bank.
In Nairobi, Britam Chairman, Francis Muthaura affirmed the board’s confidence in the leadership and integrity of Group Managing Director Benson Wairegi, who served as a Bramer Bank director from mid-2013.
“My government (has) saved the country from an unimaginable financial disaster,” Sir Jugnauth said, as he announced the plan to sell BAI properties to pay policyholders. “If we had not made decisions, our financial system would have tumbled as in Trinidad & Tobago.”
