CMA seeks Kiereini ouster from listed firms after CMC board war
Influential businessman Jeremiah Kiereini, who resigned as chairman of East African Breweries Limited last Thursday, faces further sanctions as the Capital Markets Authority (CMA) moves to strip him of directorships in public companies.
The capital markets regulator on Monday said that Mr Kiereini’s directorship in companies listed on the Nairobi Securities Exchange (NSE) had become untenable after he was accused of stashing facilitation money from CMC contracts in offshore accounts.
“We are in the process of writing a letter to all listed companies where Mr Kiereini is director asking him to step aside over the adverse reports at CMC,” said Kung’u Gatabaki, the chairman of CMA .
Mr Kiereini was last week replaced as chairman of East African Breweries Limited (EABL) , ending his 24-year reign as head of the regional brewing giant.
“This information could have leaked to the EABL given the changes they made yesterday (Thursday),” added Mr Gatabaki in reference to the replacement of Mr Kiereini replacement at EABL.
Mr Kiereini remains a director at CFC Bank, CFC Life Insurance and Unga Limited.
His removal from the boards of NSE listed companies would be a big blow to a man who spent nearly 50 years at the top of government and in the business sector.
Mr Kiereini, who holds a diploma in administration from the University of Oxford, has been in the board of Unga Limited since 1984, CFC Holding affiliates since 1995 and joined CMC Motors in 1995 before being ousted by other directors in March last year.
As an individual, he is a top shareholder in the companies and is regarded among Kenya’s wealthiest with interests in real estate, coffee farming and the hotel industry. He retired from the public service in 1984.
Mr Kiereini teamed up with former President Moi and powerful Attorney- General Charles Njonjo to make waves of acquisition in corporate Kenya through an investment vehicle called African Liaision and Consultant Services which epitomised the close links between business and politics in the 1980’s.
He is listed as chairman of African Liaision and Consultant Services whose key investments includes 30.3 per cent in CFC Life Insurance where he has a direct stake of 1.02 per cent.
Former President Moi, Mr Njonjo and Mr Kiereini had interests in CMC Motors and CFC Holdings, which owns CFC Bank and CFC Insurance. Mr Kiereini had a 12.5 per cent stake in CMC.
CMC chief executive officer Bill Lay charged that Mr Kiereini accumulated the money held in secret foreign accounts by colluding with suppliers who overcharged CMC and remitted part of the premium money back to Mr Kiereini and other senior employees of the auto dealer in a span of more than 20 years.
Documents provided by Mr Lay indicate that Mr Kiereini and the auto firm’s immediate former chief executive Martin Forster operated three secret offshore trust accounts whose proceeds were fed by adding half a percentage point to the invoiced cost of every car purchased from Jaguar Land Rover and Nissan UD.
After Mr Lay blew the whistle of the existence of the secret accounts, which had more than Sh255 million at one point last year, the CMA commissioned a forensic audit by South African firm Weber Wentzwel.
The report is yet to be concluded after CMA directed the auditors to conduct further investigations.
The regulator has however discussed a summary of the report with the directors of CMC and signalled its intention to shake up the motor dealer’s board based on its findings.
Mr Kiereini’s exit from CMC was not linked to the off-shore accounts but was rather instigated by other directors and shareholders who had disagreed with him over strategy.
In a board meeting on March 28 2011, the directors led by hitherto friends and now sworn enemies Peter Muthoka, Joel Kibe and Paul Wanderi Ndungu forced out Mr Kiereini from the chairmanship, making him the second director to be forced out after the sacking of Mr Forster a few days earlier.
Legal experts reckon that Mr Gatabaki would rather do a note to Mr Kiereini requesting him he resigns from the boards instead of writing to the companies because there is no legal basis for doing so.
“The regulator’s actions should be supported by law instead of sending considerations to companies or individuals,” said Fred Ojiambo, the managing partner at Kaplan & Stratton, the law firm representing one of the CMC shareholders, Mr Muthoka, in a court case against the CMA.
“It will be wrong for CMA to base its actions on the forensic or PwC reports since they are being challenged,” he said. Mr Gatabaki, however, said his action was backed by good corporate governance practices rather than legality.
Other lawyers reckon that the capital markets regulator would be laying ground for a legal battle with the CMC directors after it earlier suggested it would take action on those suspected to have been involved in irregular deals at the company.
A forensic audit report by PricewaterhouseCoopers (PwC) says the motor dealer lost more than Sh1.1 billion in inflated bills charged by Andy Forwarders, a logistics firm that is owned by CMC board member, Mr Muthoka.
