CMC hires sleuths to recover millions in secret accounts
CMC Holdings showroom on Lusaka Road in Nairobi’s Industrial Area. Photo/FILE
What you need to know:
The money was accumulated by colluding with suppliers to overcharge CMC on invoices and the monies would be paid back to the directors along with other employees over the last 26 years.
CMC Motors has hired investigators and lawyers to recover more than £1.7 million (Sh220 million) stashed away in foreign accounts by past directors.
The money was accumulated by colluding with suppliers to overcharge CMC on invoices and the monies would be paid back to the directors along with other employees over the last 26 years.
Cash held in the account was never disclosed in the firm’s annual reports to shareholders or to the Kenya Revenue Authority.
Bill Lay, the former CEO of the auto firm, accused his predecessor, Martin Forster, and long-serving directors Jeremiah Kiereini and Charles Njonjo of illegally funnelling the company’s funds to secret New Jersey accounts.
The secret accounts have seen auditors Ernst & Young express a qualified opinion on the CMC’s latest financial statements, meaning that there were information gaps in the balance sheet and earnings statement.
“The company is still pursuing the recovery of any money in the foreign accounts through investigators and lawyers…the board will continue to pursue these investigations until the matter is resolved conclusively,” said Joel Kibe, the chairman of CMC Motors, in a notice to shareholders ahead of the dealer’s AGM on June 12.
“The existence of certain foreign offshore bank accounts set up in prior years by certain past directors ... have not been included in the financial statements.”
Forensic investigations by Webber Wentzel, the South African audit firm that the Capital Markets Authority (CMA) hired to probe the affairs of the troubled motor company linked Mr Kiereini, Mr Njonjo, Mr Forster, former (deceased) directors Jack Benzima and P K Jani to the secret accounts.
According to the Webber report, CMC directors built the secret account over three decades by inflating import prices of Land Rover, Nissan UD and Suzuki vehicles. CMC would order the vehicles and strike a particular legitimate contract price.
The Kenyan firm would then ask the international car makers to increase the bill by between two and 1.5 per cent and present this as the full invoice to CMC Motors.
The additional amount would be routed into an investment trust account and the proceeds paid to past directors and current and past employees through secret payouts.
“Kiereini, Forster, Jani and Njonjo were the directors of both Corival (1996) and CMC Group, the cheque signatories to the bank accounts,” stated the Webber report. At one point in 2010, the offshore account had a bank balance of £1.7 million or Sh221 million at current exchange rates.
The recovery of the money in the secret accounts is set to pit the company against some of its top shareholders and former powerful civil servants. Mr Njonjo, 93, owns 1.32 per cent of CMC Holdings, while Mr Kiereni, 84, controls a 12.5 per cent stake. Mr Njonjo and Mr Kiereni served as Attorney General and head of public service respectively in Moi’s government.
CMC will hold its first AGM in more than two years following boardroom wrangles. The wrangles, which has seen its share suspended from trading since September 2011, led to the ouster of former chairman and the firm’s top owner Peter Muthoka.
The warring shareholders reached a truce in February.
Andrew Hamilton, Mr Kiereini, Mr Njonjo and businessman Richard Kemoli have quit CMC’s board over the past two years.
