Britam seeks to recover Sh3.9bn from ex-employees

Acorn Group CEO Edward Kirathe (right) with Cytonn CEO Edwin Dande during the announcement of the appointment of Cytonn as the lead transaction advisor in a Sh40 billion real estate deal on October 8. PHOTO | DIANA NGILA
Acorn Group CEO Edward Kirathe (right) with Cytonn CEO Edwin Dande during the announcement of the appointment of Cytonn as the lead transaction advisor in a Sh40 billion real estate deal on October 8. PHOTO | DIANA NGILA  

Investment firm Britam has opened a multi-billion shilling legal battle against former employees who left the company two months ago with one of the largest real estate financing deals it had in the pipeline.

The Nairobi Stock Exchange-listed Britam is seeking to recover Sh3.94 billion from former executives who quit its asset management unit in August, causing suspicion of a major fallout whose details have now emerged from the courts. 

Britam has accused the former British-American Asset Managers (BAAM) executives of fraudulently transferring the money to bank accounts held by Acorn Group.

Suit papers filed by Nairobi lawyer Fred Ngatia say the four former Britam employees Edwin Dande (chief executive), Elizabeth Nkukuu (portfolio manager), Shiv Arora (investment analyst) and Patricia Wanjama (head of legal) defrauded the company of the money earlier this year.

“The first to fourth respondents fraudulently, irregularly and without authority transferred the cumulative sum of Sh3,944,558,634, being money belonging to the applicants (BAAM), to bank accounts operated by the 8th to 12th respondents,” Britam says in a sworn affidavit.


Mr Dande and his team are accused of wiring out of Britam Sh1.16 billion in five tranches to multiple accounts held by Acorn at Chase Bank and a further Sh2.78 billion to seven entities that are subsidiaries of Acorn. The transactions were made in July.

The seven Acorn affiliates are listed as Edenvale Developments LLP, Starling Park Properties LLP, Crimson Court Development LLP, Sinopia Properties LLP, Mikado Properties LLP, Crescent LLP and Spring Green LLP.

“I discovered that the respondents had in their instructions to the administrator fraudulently passed the payment of Sh1.16 billion as being on account of expenses, yet they had signed a schedule indicating that the payment was an approved investment by the BREF Investment Committee,” said Jude Anyiko, acting CEO of BAAM, in court papers.

Britam says it unearthed the alleged fraudulent dealings at BAAM, a wholly-owned subsidiary, following a forensic audit by KPMG and law firm Coulson Harney.

The former BAAM executives have since set up a real estate-focused private equity fund dubbed Cytonn and teamed up with Acorn to snatch a Sh40 billion property deal from Britam, their previous employer.

Loss of the multi-billion shilling real estate project has opened what promises to be a bruising battle pitting Britam against its former employees for control of the lucrative projects that were to be developed by Acorn – where Britam owns a 25 per cent stake.

High Court judge David Onyancha on Thursday issued restraining orders barring Acorn and Cytonn from transferring the disputed funds and developing any of the planned 10 real estate projects until November 12 when the case will be heard.

“An injunction is issued restraining all the respondents from withdrawing, assigning, alienating or transferring monies from the five accounts they hold at Chase Bank pending determination of the suit,” he ruled.

Acorn chief executive Edward Kirathe expressed shock that Britam, a minority shareholder in the firm, had taken to the courts despite ongoing negotiations to settle the differences through mediation.

“We are surprised that Britam has elected to file especially because we have been in discussions and both parties have expressed the desire to solve the matter through mediation as set out in the agreement entered into by the two parties,” said Mr Kirathe in a statement.

The court orders effectively slam the brakes on Cytonn’s involvement in Acorn’s real estate projects that have been frozen. Acorn has been stopped from developing any of its planned projects, including shopping malls, office complexes and mixed-use projects.

The orders came only a week after Acorn and NSE-listed Crown Paints broke ground on a Sh1.2 billion office block dubbed Tiara Business Park in Nairobi’s Lavington district.

Britam says that it had set up a BAAM Real Estate Fund (BREF), a unit incorporated in the tax haven of Mauritius, to bankroll its property projects.

“The respondents instructed the 13th respondent (Acorn Group) to transfer the cumulative sum of Sh2.78 billion to limited liability partnerships (LLPs) owned and controlled by the 6th and 7th respondents (Acorn Properties and Acorn Investments).”

Britam says that the four former employees incorporated Cytonn after “their well-choreographed resignations” and teamed up with Acorn which “issued breach notices of the aforesaid purported joint venture agreements” that were to be executed by the two.

Court papers tell of a messy fallout between Britam and the four former asset management executives, contrary to earlier reports that they had parted ways on good terms.

Mr Dande’s newly-formed real estate-focused PE fund had been appointed the lead transaction adviser and fundraiser for this Sh40 billion property deal pipeline to be undertaken by Acorn.

Britam’s asset management unit had also been mandated to help Acorn structure real estate-backed investment products and exit solutions such as real estate investment trusts (Reits).

Cytonn had been tasked to raise Sh20 billion or half the deal size meant to bankroll Acorn’s 10 real estate projects, with the balance being raised from bank loans.

The projects include three mixed-use projects at a cost of Sh2.4 billion along Riara Road, Jogoo Road and Baba Dogo each featuring a minimart, and 150 residential units made up of studio apartments and one-bedroom flats.

The loss of Acorn’s real estate portfolio is set to hit Britam hard and throws into a spin the firm’s strategy to tap into opportunities in Kenya’s lucrative property market.