Kiereini accuses CMA of harassment over share sale ban

Businessman Jeremiah Kiereini has hit back at the Capital Markets Authority (CMA), accusing the regulator of harassing him and making unsubstantiated claims that have seen the watchdog freeze the trading of his shares at the stock market.

Mr Kiereini, in response to a case filed by the CMA accusing him of receiving Sh65.2 million fraudulently during his tenure as chairman of motor dealer CMC, says there is no evidence to support the allegations.

He says the suit is in contempt of an order issued by Justice David Majanja in August last year, in which the Judge reportedly quashed any enforcement against him by the CMA.  

“By purporting to take enforcement action against me through this suit, the applicant is acting against the said judgment (by Justice Majanja) of this honourable court and is, therefore, in breach and contempt of the said judgment,” says Mr Kiereini in an affidavit.

The businessman argued that the Judge had directed that he should be given an opportunity to be heard before any action could be taken against him.

The businessman said he has never been contacted by CMA with regard to any investigations.

CMA last week got a court order as part of its effort to recover Sh195.7 million that Mr Kiereini allegedly received fraudulently during his long tenure as a chairman of CMC.

The CMA said it sought the order after further investigations into fraud allegations at CMC revealed that Mr Kiereini had illegally received up to £447,000 (Sh65.2 million) of the motor dealer’s funds.

READ: Capital markets watchdog revives fight with Kiereini over CMC’s millions

The capital markets regulator said it had noticed aggressive selling of Mr Kiereini’s portfolio at the Nairobi Securities Exchange-listed firms, interpreting the move as an attempt to frustrate the cash recovery plan.

The CMA says it lifted the ban in May to facilitate the buyout of CMC by Dubai-based Al-Futtaim Group, a transaction in which Mr Kiereini earned Sh947 million for his 12.5 per cent stake in the motor dealer.

The regulator says Mr Kiereini used the opportunity to also sell his shares in other companies, a move it sees as posing a threat to recovery of the said sums.

But Mr Kiereini says the suit amounts to a witch hunt and vendetta against him has been brought pre-maturely before the condition imposed by the High Court judgment by Justice Majanja has been satisfied.

Justice Majanja issued the orders last year in a case filed by Mr Kiereini in 2012, in which he argued that the CMA infringed on his right when a committee was set up to deliberate course of action on the Webber Wentzel report without giving him an opportunity to be heard.

Mr Kiereini’s troubles with the CMA began in 2012 after a forensic audit by South African firm Webber Wentzel found that he was part of a group of former CMC directors that had siphoned millions of shillings from the auto dealer into secret accounts in the financial safe haven of Jersey.

The investigators said the Jersey accounts had Sh250 million and were fed by illegal commissions charged on motor vehicles sold by CMC.  

But Mr Kiereini said he served as CMC director for over 27 years and argued that the CMA had not produced evidence to show that whatever he received in his account was not an emolument and benefits accruing from his directorship.

READ: Njonjo linked to CMC’s secret Jersey accounts

Mr Kiereini says the issue being raised arises from his role as a director of CMC and claims that the property that can be legally targeted is what led to the case, arguing that not all his property or shares traded at the stock exchange constitute the subject of the suit.

Mr Kiereini argued that Kingsway Nominees Limited, an investment vehicle that holds a substantial share of his wealth at the bourse, is a separate legal entity from him and its property cannot be legally attached to compensate for the claim against him.

He says Kingsway Nominees Limited has never been director of CMC Motors and since it has not been alleged to have been culpable its assets cannot lawfully be attached.

He further argues that he has no shares in the Kingsway Family Holdings Limited, having already transferred his interest in the company.

The document filed by CMA shows that Mr Kiereini holds 800 shares in Kingsway Nominees Limited and the other 200 shares are held by Eunice Muringo Kiereini.

Kingsway Nominees Limited in turn holds 799 shares in Kingsway Family Holdings Limited, and the other 1 share is held by Mr Kiereini.

The court Wednesday gave the CMA 10 days to serve Kingsway Family Holdings Limited, who are listed as third respondents, with the court papers.

There was a moment of anxiety for the CMA as Mr Kiereini, through his lawyer Njoroge Regeru, moved to capitalise on a law that requires a party that has acquired an ex-parte order to serve it within three days, failing which the order automatically lapses.

Mr Regeru told court that the order stopping trading of Kiereini's shares was extracted on August 28, but was served on him on September 2. He said the media was already awash with news of the order on August 28.

Mr Kiereini told court there is nothing to be extended and urged court not to entertain excuses from CMA.

But CMA through its lawyer, Gatonye Waweru, pleaded with the court to issue the order afresh arguing that the delay was caused by unsuccessful attempts to serve Mr Kiereini personally.

The regulator said it only resorted to serving Mr Regeru after its attempt to serve Mr Kiereini became futile.

The Judge, while agreeing the order has lapsed, issued it afresh noting that it was in the interest of preserving the subject matter and ensure justice for all. The case will be heard on October 29.