International financial services firm Alexander Forbes Emerging Markets is facing investigations over the 2012 sale of its Kenyan healthcare arm to Zanele Investment Holdings Limited – a local company.
Kenya’s Directorate of Criminal Investigations (DCI) has launched investigations into the deal after Zanele, which is fighting off Alexander Forbes’ attempts to recover a disputed Sh554 million loan from it, filed a complaint against the South African firm.
Details of the probe have emerged in a suit Zanele has filed in a Kenyan court seeking to stop Alexander Forbes Emerging Markets from recovering the disputed amount. The suit has shed some light on the sale of Alexander Forbes Healthcare Limited, which has remained a closely guarded secret since 2012.
Alexander Forbes Emerging Markets, a subsidiary of Johannesburg-based Alexander Forbes Group, is yet to respond to the suit, but has until July 14 to file a replying affidavit.
Zanele bought a majority stake in Alexander Forbes Healthcare Limited in 2012 as the South African firm exited the business citing the coming into force of new regulatory requirements. But the Kenyan firm now says Alexander Forbes did not present the Insurance Regulatory Authority (IRA) with intimate details of the share transfer, the loan at the centre of the dispute and other facts when completing the sale.
Alexander Forbes Emerging Markets indicated that its decision to exit the health business was informed by an IRA directive requiring companies offering medical insurance services to either convert to insurance companies or revert to brokerage by the end of December 2012.
“The entire transaction was unlawful due to deliberate misrepresentation of material facts to the IRA on the sale of shares to Zanele, obtaining approval for the transfer of business from the Competition Authority by misrepresentation and Alexander Forbes failure to fully fund its liabilities before exiting the business thereby exposing policyholders.
Zanele says Alexander Forbes agreed to pay it Sh524 million to cover liabilities that the healthcare arm was suffering at the time. It claims that the funding was however disguised as a loan to Zanele.