The Assets Recovery Agency (ARA) has frozen bank accounts and property belonging to Eastleigh Mall – a Nairobi-based trading complex that is owned by Kenya’s ambassador to Saudi Arabia Mohamed Mohamud and his partners.
The ARA, backed by the Kenya Revenue Authority (KRA), last week obtained a court order barring directors of Eastleigh Mall from interfering with its assets, pending determination of a Sh385 million tax evasion suit the agencies have filed against the shopping complex.
The order effectively bars directors of the company from selling, transferring shares and winding up processes that may lead to dilution or disposal of the disputed property.
“An order is hereby issued restraining the sale, transfer of shares, change of directorship, winding up or any other dealing in respect of the Eastleigh Mall Limited to avoid dissipation of or disposal of the property,” says the court order. Eastleigh Mall’s owners have since last year been fighting the taxman over the multi-million shilling tax bill that is now the subject of tax evasion charges before Nairobi’s Milimani Chief Magistrate’s Court.
The ARA says in court papers that the mall owners have been transferring cash from Eastleigh Mall’s 18 bank accounts, leaving a paltry Sh626,000 by mid last week.
The Assets Recovery Agency says it fears the mall’s owners may try to dispose of the establishment’s assets and needed to be stopped.
Neither Eastleigh Mall nor its directors have responded to the suit.
KRA filed a criminal suit against the mall and its directors on April 13, 2015 and got orders allowing it to retrieve from the premises import-export documents, books of accounts and money, data storage devices including CCTV cameras and other records that would facilitate a tax investigation for the period between 2007 and 2015.
The taxman reckons that while the mall files income tax and VAT returns regularly, a comparison of the declared turnover showed huge variations each year adding that while the mall is a commercial building it has never filed rental income returns.
Mr Mohamud and his co-directors last year filed a suit seeking to stop their prosecution for criminal offences over the alleged tax evasion, but the suit was dismissed paving way for a trial.
The other directors are Abdi Ali Raghe, Abdinasir Daud, Mohamed Shakul, Noor Ahmed Noor, Abdi Karim Hassan, Osman Ali Salat and Siyaad Rahma Shuriye.
Muthoni Kimani, the ARA director, says in court papers that KRA first obtained a freezing order against Eastleigh Mall’s 18 bank accounts in July last year when they had a balance of more than Sh14 million, but the firm’s owners have somehow managed to withdraw almost all the money.
Six of the bank accounts frozen by the KRA and the ARA are run by Eastleigh Mall while the other 12 are owned by Mr Mohamud and his business partners.
Ms Kimani wants the court to order the opening of a joint escrow account in the name of KRA and Eastleigh Mall, and that the mall’s owners deposit Sh385 million in it as security in the event they are found guilty of tax evasion.
“Investigations into the tax affairs of Eastleigh Mall have since revealed massive tax evasion resulting into a liability of Sh385,920,173. The assessed tax liability is a liability and there is no other known source of income or assets belonging to Eastleigh Mall,” Ms Kimani says.
The taxman also wants to be allowed to appoint an estate manager to collect revenue from Eastleigh Mall’s tenants until taxes due are fully paid.
The KRA says the directors have lately not been depositing income from their business in any of Eastleigh Mall’s known bank accounts in their alleged tax evasion scheme since 2008.
To complete their scheme, KRA accuses the mall owners of cooking accounting books to show under declared revenue.
Justus Kivuvu, an investigations manager with the KRA, adds that Eastleigh Mall’s owners have not been remitting Pay as You Earn (PAYE) on employees’ salaries and directors’ drawings, and have been evading withholding tax payments.
“The issuance of restraining orders against Eastleigh Mall and the appointment of an estate manager and opening of an escrow account to receive income will ensure that the property is secured, the KRA secures the taxes and the respondents are denied proceeds of crime,” Mr Kivuvu adds.
Ms Kimani believes that Mr Mohamud and his business partners may be involved in money laundering, arguing that the crime usually goes hand in hand with tax evasion.
Neither Ms Kimani nor the KRA’s Mr Kivuvu ascertains whether secret the accounts where Eastleigh Mall owners kept proceeds of the business have been traced or frozen.
She says the funds used by Mr Mohamud and the other directors to construct Eastleigh Mall are under investigation and could lead to a higher tax demand upon conclusion of the process.
“Tax evasion is a predicate offence for money laundering and any benefits acquired from tax evasion constitute proceeds of crime. The source of funds used by the respondents to construct Eastleigh Mall is under investigation for further tax offences,” Ms Kimani says.
Eastleigh Mall’s owners had in the petition seeking to stop their trial argued that the taxman in July last year notified the public of proposals contained in the Finance Bill 2015, including a 100 per cent tax amnesty for individual landlords on principal taxes, penalties and interest for periods before 2013 and further amnesty on penalties and interest for years 2014 and 2015.
The KRA and ARA suit filed against Eastleigh Mall and its owners will be mentioned by Justice Charles Kariuki on February 3, when he will give the parties further directions.