The appointment of PricewaterhouseCoopers (PwC) to audit offshore loans borrowed by directors of the Sh240 billion Tatu City project has sparked a new dispute between local and foreign shareholders of the real estate venture.
Norwegian director Hans Jochum Horn has claimed in a new application filed at the High Court that local Tatu City directors Nahashon Nyagah and Vimal Shah are colluding with the consultancy firm to expand the limits of the ongoing audit approved in March by Justice Eric Ogola.
Mr Horn claims the two have asked PwC to investigate the ownership of Tatu City’s offshore lenders, which was not part of the parameters set by Justice Ogola. The audit is expected to confirm the amount borrowed since the project began and the current status of the loans.
“The auditors, at the prodding of Mr Nyagah and Mr Shah, perceive the scope of the audit to include carrying out background checks on the financiers’ ownership whereas this exercise was to determine the total loan amounts secured from inception and the reconciliation on repayments,” says Mr Horn.
Mr Nyagah and Mr Shah are yet to respond to the application, but Justice Ogola ordered them to file their replying affidavits and appear before him on May 13 for a hearing.
Mr Horn and New Zealander Stephen Jennings are major shareholders of the multibillion shilling project. Mr Nyagah and Mr Shah moved to court in February after a boardroom war erupted between them and the foreign shareholders.
The local partners claim that their foreign counterparts want to kick them out of the project so as to freely plunder assets and capital of Tatu City and Kofinaf-- the firm that owns the 2,400 acres of land on which the project is to be built.
Mr Horn however wants Justice Ogola to compel the parties in the suit to hire either KPMG or Ernst & Young for the in-depth audit of its offshore loan accounts.
The switch, Mr Horn adds, is necessary because PwC is unable to carry out a balanced investigation on Tatu City’s accounts owing to its previous dealings with Mr Nyagah and Mr Shah which have created a potential conflict of interest.
The consultancy was CBK’s external auditor when Mr Nyagah was governor of the regulatory body, and it still carries out the same function for BIDCO, which is owned by Mr Shah.
“Mr Shah, who is the alter ego of BIDCO, failed to disclose to the court that PwC is the firm’s external auditor. PwC was also CBK’s auditor during Mr Nyagah’s tenure as governor. It is apparent that PwC cannot conduct an independent audit due to conflict of interest,” says Mr Horn.
The legal battle was sparked by the foreign directors’ decision to kick their local partners out of Tatu City’s board. Justice Ogola has since reinstated Mr Nyagah and Mr Shah, after he found that their ouster was done irregularly.