Mauritius takes over Britam director’s bank after Sh63.7bn Ponzi scandal

The Mauritius government was Wednesday getting ready to take over Britam’s top owner Dawood Rawat’s bank whose license was withdrawn for running a Ponzi scheme.

Mauritius’ Finance minister Vishnu Lutchmeenaraidoo told news agencies Tuesday that the state would assume ownership of the Bramer Banking Corporation (BBCL) by end of the week.

The move comes after the island nation’s authorities appointed two PricewaterhouseCoopers (PwC) officials as conservators of British American Insurance Co (Mtius), a subsidiary of Mr Rawat’s conglomerate Seaton Investment.

The decision to temporarily place the management of BAI Co under government appointees was made to “to safeguard the interests of policyholders”, signalling fears that the insurance business could be exposed to the troubled Bramer Banking Corporation (BBCL).

Bramer lost its licence last week after an on-site inspection found evidence that it had been running a Sh63.7 billion Ponzi scheme.

A Ponzi is a scam where investors are promised or paid unrealistic returns from cash paid in by new members, necessitating an endless recruitment drive that eventually proves unsustainable.

The bank resumed operations on Wednesday, in receivership, after the Bank of Mauritius granted it a new licence to provide restricted banking services including cash withdrawals capped at Sh128,000 per day.

A new company, the National Commercial Bank, has been created to take over Bramer. The new entity’s operating licence isto be issued by the end of this week.

READ: Ponzi scheme fells Mauritius bank tied to Britam director

The Ponzi revelation is expected to shake Mr Rawat’s business empire, which only recently tried to raise Rs350 million (Sh885.5 million) from British American Investment Co (Mtius) to save the bank.

The Bank of Mauritius also noted that an article appearing in the press in Mauritius on April 4 had alleged that Mr Rawat had taken steps to transfer Rs1.4 billion (Sh3.5 billion) from Kenya to the troubled bank.

The central bank, however, said that such a commitment was never communicated to it.

Mr Rawat is a director and the single largest investor in Britam which has issued a statement saying it has no exposure to the Mauritian’s businesses, noting that only common directorships and ownership exist.

Britam’s CEO Benson Wairegi is a director of the collapsed bank where Mr Rawat is also a board member. The nationalised entity is expected to have a new board of directors.

Mr Rawat holds a 20.3 per cent interest in Britam, making him the single largest investor in the Nairobi Securities Exchange-listed firm.

He is followed by five Kenyan billionaire investors, who are his long-term co-investors in the firm including Peter Munga and Jimnah Mbaru who have 16.9 per cent and 10.2 per cent stakes respectively.

Besides his shareholding, Mr Rawat has in recent years moved to firm his grip on Britam through his own directorship and that of his allies.

He joined Britam’s board in late 2013 alongside his nephew Moussa Rawat as part of changes in directorships across his conglomerate.

Mr Rawat was forced to cede a third of his stake in Britam to local investors in 1984 to comply with a government directive that Kenyans needed to have significant ownership in the company. In 2006, Kenyan investors acquired an additional 30 per cent stake from BAI.