Sunny Varkey, Dubai-based GEMS Education founder and now a business partner of India’s Gautam Adani, sold his high-end Kenyan school for the price of an 800-gram loaf of bread in 2021 after a flopped attempt to capture the Nairobi market.
Court papers filed in a Dubai court show that Mr Varkey’s Gems Africa Ltd initially sold Regis School Runda to Ernest Mureithi, who was at the time the institution’s country director, for $1 as debts continued to pile in the millions.
The sale was designed to escape the mounting debts, pursuit by the Kenya Revenue Authority (KRA) and the need to pump additional capital into the school that targeted higher-income earners.
Peter Burugu and his Runda Gardens Development Ltd have sued Mr Varkey and Gems Africa Ltd in Dubai, citing several breaches of contract allegations that led to a $1.85 million (Sh239 million) out-of-court deal, which the Kenyan entrepreneurs say was also not honoured.
In 2021, the Dubai-based Varkey Group dropped its interest in operating any school outside the Middle East region, viewing the handing over of the Runda-based Regis to Dr Mureithi as an exit plan that would not abruptly interfere with learners.
Mr Varkey has partnered with Gautam Adani to increase Gems Cambridge’s footprint in India.
Among the creditors knocking on Mr Varkey’s door at the time he sold the school for $1 were Peter and Mary Burugu, the property developers who had put up buildings customised to Gems Cambridge standards as part of a 30-year lease agreement.
Two weeks ago, the Burugu family made Sh1.2 billion from selling the school to South Africa’s ADvTECH after a two-year stint at operating Regis School Runda to recover rent and other arrears that the botched lease with Gems had occasioned them.
Court papers reveal the intrigues in the seven-year-old school’s operations, including claims of embezzlement and mismanagement.
The documents show how on March 2, 2023, a school bus transporting children home that afternoon was stopped by auctioneers and attached.
Children and school staff were left stranded, as it emerged that the management under then Gems Cambridge country director, Dr Mureithi, had borrowed Sh60 million from a financial institution but defaulted on payment.
An audit report would later show that only Sh21 million from the borrowings got to school bank accounts, with the rest being sent to private bank accounts.
The Burugus’ sale to the South African entity that also owns Makini Schools came three months after a UAE court ordered the winding up of Dubai-registered Gems Africa Ltd – the firm that the Varkey Group used to kickstart its Kenyan misadventure.
Dubai International Financial Centre Courts (DIFCC) judge Jeremy Cooke issued the winding order on May 12 upon an application by Gems Africa Ltd amid protests from Mr Burugu through his Runda Gardens Development Ltd (RGDL).
Justice Cooke, in his judgment, said that based on the evidence before him, it was best to put the debt-ridden Gems Africa Ltd out of its misery.
“The claim that is made by RGDL against the Petitioner is in fact admitted. There is litigation pending, which will be affected by any order of winding up, but I am satisfied that the granting of the order is the most economic and efficient way forward for all concerned, whether they be creditors, shareholders or stakeholders of one kind or another,” Justice Cooke said.
Mr Burugu had opposed the winding up, accusing Mr Varkey of trying to evade liability in a separate case that Runda Gardens Development Ltd filed against Gems Africa Ltd in Dubai.
Justice Cooke ruled that no claims can be made against Gems Africa Ltd, even in existing cases like the one RGDL filed in 2024, following his orders.
A family business, GEMS Education has grown from a single school in 1968 to educating about 200,000 students around the world. Gems Africa Ltd approached the Burugus’ RGDL in 2016, seeking to have the property developer build infrastructure for leasing by the Dubai-based investors.
Mr Varkey’s group had hoped they would set up a school with world-class infrastructure but offering the competency-based curriculum (CBC).
The Burugus, through RGDL, owned a 30-acre land parcel on which it had developed the Runda Gardens gated community.
They had reserved a seven-acre portion for the establishment of a learning institution.
At the time, a local learning institution with religious ties was also in talks with the Burugus for the establishment of a campus on the same land.
Gems Africa Ltd incorporated Gems National Academy Ltd in 2018, and used it as a vehicle to enter a lease agreement with RGDL. Construction was completed in 2018, but Gems Africa Ltd was not ready to occupy the establishment.
The Varkey group wanted the lease commencement period pushed to January 2020.
Mr Burugu instead offered that Gems Africa Ltd pay rent despite not being ready to occupy the property to spare the developer from the wrath of lenders who helped finance the construction of both the school and the gated community.
The rent would be offset in the first two years after Regis School opened its doors.
Even after altering the lease agreement to effect that deal, GNAL defaulted on several rent payments, culminating in a 2022 deal that would see RGDL take over operating Regis School Runda.
RGDL also accused GNAL of attempting to evade stamp duty payments by allegedly altering dates on the lease agreement and colluding with KRA officials.
GNAL denied Mr Burugu’s accusations, maintaining that it had obtained an exemption from the KRA.
Mr Burugu held that the documents made available by Gems National Academy Ltd only indicated a waiver of penalties.
The stamp duty dispute, coupled with continued default on rent, prompted the Burugus to take over Regis School Runda’s operations.
In 2022, Mr Varkey and his group revealed to Mr Burugu that they had no interest in operating any school outside the Middle East.
Mr Burugu protested the alleged clandestine transfer of 70 percent of all shares to Ernestem Holdings, a firm owned by Dr Mureithi.
Both Mr Varkey’s group and Dr Mureithi instead allowed the Burugus to take over operations at no cost and to shield him from previous liabilities.
Mr Varkey also appointed Crowe COR LLP to conduct a forensic audit of the period Dr Mureithi handled operations, after assuring Mr Burugu that all debts would be paid, and that RGDL taking over operations was the most amicable solution.
The audit would implicate Dr Mureithi and Chief Operating Officer Terrance Ndanyi in the loss of over Sh118 million from school bank accounts, allegedly with the assistance of two other individuals – Ian Kuria and Joseph Rabillo.
Following staff appeals and an agreement with Dr Mureithi, Mr Burugu’s RGDL took a bank overdraft to pay staff salaries for October, November and December 2022. Dr Mureithi assured Mr Burugu that Gems National Academy Ltd would repay the money used to pay staff arrears.
The Burugus obtained a temporary operation licence, allowing them to operate Regis School Runda through a new company, Regis Runda Academy Ltd, for one year starting January 2023.
The Burugus owed Sh26 million for the overdraft used to pay staff salaries, and Sh19 million in rent.
The Burugus also claimed Sh754.9 million in payments for the 10-year lock-in period provided for in the lease.
Negotiations with Mr Varkey saw Mr Burugu slash his claim to Sh394 million. Further negotiations saw Mr Burugu accept a $1.85 million (Sh239 million) counteroffer from Mr Varkey, which was to be paid by August 2024.
When Gems Africa Ltd failed to honour the payment, Mr Burugu and RGDL sued in Dubai.
In March 2025, Gems Africa Ltd filed for voluntary insolvency, which Justice Cooke granted at noon on May 12, 2025.
