Economy

Capital markets watchdog revives fight with Kiereini over CMC’s millions

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Mr Jeremiah Kiereini has traded stocks worth Sh1.2 billion in the past four months. PHOTO | FILE

Businessman Jeremiah Kiereini was Thursday preparing for the opening of a new battlefront in defence of his multi-billion-shilling empire after the capital markets watchdog obtained orders stopping him from trading shares he owns in public-listed firms.

The Capital Markets Authority (CMA) on Wednesday got the court order as part of its effort to recover Sh195.7 million that Mr Kiereini allegedly received fraudulently during his long tenure as a chairman of motor dealer CMC.

“The temporary injunction restrains (Mr Kiereini) from selling, transferring or in any manner dealing with any shares in any listed company at the Nairobi Securities Exchange and the Central Depository and Settlement Corporation,” says the directive issued by a Nairobi court.

The CMA said it sought the order after further investigations into fraud allegations at CMC revealed that Mr Kiereini illegally received up to £447,000 (Sh65.2 million) of the motor dealer’s funds.

The capital markets regulator said it had noticed aggressive selling of Mr Kiereini’s portfolio in Nairobi Securities Exchange-listed firms, interpreting the move as an attempt to frustrate the cash recovery plan.

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The Business Daily’s analysis of share trading at the NSE shows that Mr Kiereini has traded stocks worth Sh1.2 billion in the past four months, including minority stakes in East African Breweries and CFC Stanbic Holdings.

Mr Kiereini’s lawyer, Njoroge Regeru, said his client was shocked by the CMA’s action which he vowed to fight in the courts.

“My client is shocked by this development which is a continuation of the CMA’s vendetta against Mr Kiereini that has been going on for years,” Mr Regeru said.

“Instead of serving the person they have picked to do battle with, the CMA has sought to publicise this matter through the press and this is highly unprofessional. We will face them in court.”

Mr Regeru said that neither he nor Mr Kiereini had been served with the ex-parte court order which they plan to challenge in an escalation of the long-running legal battle against the regulator.

Mr Kiereini’s troubles with the CMA began in 2012 after a forensic audit by South Africa’s Webber Wentzel found that he was part of a group of former CMC directors who siphoned millions of shillings from the auto dealer into secret accounts in the financial safe haven of Jersey.

The report also named former directors of CMC Charles Njonjo and Martin Forster, who served as the company’s CEO for 33 years until his ouster in March 2011, as having benefited from the scam.

READ: Njonjo linked to CMC’s secret Jersey accounts

The investigators said the Jersey accounts had Sh250 million and were fed by illegal commissions charged on motor vehicles sold by CMC.

The report said Mr Kiereini was paid £32,000 (Sh4.6 million) out of the total £538,684 (Sh78.6 million) that was disbursed between 2008 and 2011. The money was not taxed.

The CMA reckons that the payments reported in the Weber report were just a tip of the iceberg, saying that fresh evidence shows Mr Kiereini had received much larger amounts over the years.

“The Jersey Financial Services Commission facilitated the exchange of critical information relating to the offshore accounts. The information confirmed that indeed (Mr Kiereini) benefited to the tune of £447,000 (Sh65.2 million),” the CMA says in court papers.

The law allows the regulator to recover up to twice the amount accruing to an entity wrongfully plus restitution of the original amount, taking the total cash it is seeking to recover from Mr Kiereini to £1.3 million (about Sh195.7 million).

The CMA says it moved to freeze the businessman’s marketable securities after noticing increased trading of his portfolio in recent months.

“It had come to the attention of CMA that Mr Kiereini was actively offloading, transferring and/or selling his shares and the shares he indirectly owns through his companies in the listed firms,” says the regulator.

The CMA says the “massive sales” were a bid to frustrate the intended enforcement actions against the businessman whose NSE portfolio forms a small portion of his multi-billion-shilling fortune.

Mr Kiereini has substantial interest in Nairobi’s real estate and several privately held firms. His stakes in publicly traded companies are seen as low-hanging fruits for the CMA’s intended action.

“Shares in listed companies are the best form of and available security falling within the regulatory purview of the authority,” the CMA says.

The businessman has, however, traded nearly all of his stocks in the past four months, according to a review of documents by Business Daily, potentially rendering the CMA’s action futile.

Mr Kiereini — who holds shares under his name and that of his investment vehicles Kingsway Nominees and Kingsway Family Holdings — has disappeared from shareholder lists of five blue-chip firms.

The businessman has sold his 1.4 million EABL shares currently worth Sh412.2 million, 5.1 million CFC Stanbic Holdings stocks (Sh618.6 million), and 5.1 million Liberty Kenya Holdings shares (Sh92 million).

He also traded one million shares of Unga Group worth Sh35.2 million and 911,655 shares of investment firm Centum that are currently valued at Sh43.7 million.

It was not immediately clear whether the businessman had also liquidated his position at Kenya Airways where he has held 1.1 million shares for years.

Mr Kiereini had apparently been banned by the CMA from selling any of his shares prior to May this year awaiting the outcome of a legal battle against the regulator’s enforcement actions, including his disqualification as a director of NSE firms.

The CMA says it lifted the ban in May to facilitate the buyout of CMC by Dubai-based Al-Futtaim Group, a transaction in which Mr Kiereini earned Sh947 million for his 12.5 per cent stake in the motor dealer.

The regulator says Mr Kiereini used the opportunity to also sell his shares in other companies, a move it sees as posing a threat to recovery of the said sums.

Mr Regeru, however, defended the businessman’s transactions, saying he is free to trade as he pleases.

“Mr Kiereini cannot be stopped from undertaking commercial activities in speculation that the courts will find him guilty,” Mr Regeru said.

The long-running legal battle is expected to come to a close on September 26 when the Court of Appeal will make a decision that could either see the businessman walk free or face punitive action by the regulator.

It was not immediately clear who would benefit from a potential recovery of the Sh195.7 million from Mr Kiereini.

All former CMC investors, including some 14,000 individuals, sold out to Al-Futtaim who fully acquired the company for Sh7.5 billion.