Senior officials of Kakuzi Plc are under investigation over financial and other dealings in the company, the capital markets regulator has revealed.
The Capital Markets Authority (CMA), in a report released a short while ago, is investigating allegations which if proved could disclose transactions at the Nairobi Securities Exchange (NSE)-listed agricultural firm that may have cost shareholders dearly for years while enriching some officials of the company.
The company officials are accused of forming companies and approving payments totalling millions of shillings from Kakuzi to these entities without disclosing their interests.
One of the officials is said to be facing a conflict of interest charge for doubling as a Kakuzi director and a senior executive whose board services are outsourced through a company in which he is the owner.
Another official, who is a director of a Kakuzi-related company, is identified as a recipient of millions of shillings that were wired out of the company between January 2018 and May 2021.
The markets regulator has, as part of the ongoing investigations, dispatched show cause letters to all board members of Kakuzi before drawing formal charges against those responsible for abetting the alleged suspicious dealings at the company.
“You are hereby required to respond in writing within fourteen days from the date of this letter giving a detailed explanation to the above issues to enable the Authority arrive at an objective assessment of your potential culpability or otherwise, for the alleged contraventions cites,” states the CMA in the letters sent to the officials.
“In the event that you do not respond as indicated, please note that the Authority will proceed to consider the matter and determine the appropriate regulatory action with regard to the above, without further recourse to you.”
The Kakuzi report evokes memories of a similar probe on directors of auto trading company CMC Holdings a decade ago.
The investigation revealed evidence of decades-long siphoning of company cash by directors and senior CMC managers through secret offshore bank accounts.
“The matter is under our review and because of data protection laws we cannot discuss it,” said the CMA in response to the Business Daily queries on the ongoing investigations.
Chris Flowers, the Kakuzi managing director, declined to respond to our calls, text messages as well as queries sent to the company’s official email.
A letter drafted by Kakuzi’s advocates stated that the company would not respond to our queries as the matter was pending before the Capital Markets Tribunal.
The CMA report accuses some three officials of Kakuzi of entering into a contract with another company for the provision of technical services for finance and administration without disclosing to the board that they were the only shareholders and directors of the company.
An analysis by the regulator shows that Kakuzi paid that company a total of Sh186.2 million between January 2018 and March 2021.
“There was no evidence showing disclosure to the Kakuzi Board that the three officials were directors and shareholders of the consulting company and at the same time (they) were also signatories to the bank accounts,” states the CMA.
The regulator also found that Kakuzi entered into a management support services agreement that had no end date.
An inquiry by CMA established that the three Kakuzi officials are the directors and shareholders of the company that rendered the management support services.
“Between January 1, 2018, and March 10, 2021, Kakuzi made irregular and/or unsupported payments totalling Sh320.9 million for the management services support which the three officials of Kakuzi who are also shareholders of that management support services company allegedly approved and/or authorised,” states the regulator.
Two of the Kakuzi officials double as bank account signatories for the management support services company.
One of these officials additionally received payments totalling Sh11.5 million between 2018 and 2021, wired through the management support company.
“These payments were also not disclosed to the board of Kakuzi,” states the regulator.
Further, the management service provider received a total of Sh484.2 million from Kakuzi between March 2020 and May 2021, which it wired offshore to an associate company in the United Kingdom.
“A search from the UK official companies’ registry indicates that two officials of Kakuzi are the directors and shareholders of the UK associate of the management services company … The Authority further notes that the procurement of technical know-how services was not in accordance with the Kakuzi procurement policy.
“The provision of board services by a company in which a supposedly independent director is a partner constitutes a related party transaction which gives rise to a conflict of interest,” states the regulator.
Kakuzi or its directors and officials had not responded to the allegations or to the CMA’s letter at the time of publication of this story.