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Ex-Co-op Bank boss faces auction over Sh1.7bn debt

Former Coop Bank MD Erastus Mureithi
Former Coop Bank MD Erastus Mureithi. PHOTO | FILE | NMG 

Former Co-operative Bank #ticker:COOP Managing Director Erastus Mureithi’s flower farming empire was yesterday facing total collapse after auctioneers put up for sale his property worth billions of shillings.

The looming sale of Mr Mureithi’s empire is expected to raise Sh1.7 billion to settle loans owed to a local bank, according to Garam Investments Auctioneers.

The auctioneer’s hammer is expected to fall on the prime commercial farming empire, mostly located near the Nyahururu airstrip, on August 23, dealing the former Olkalau MP a heavy blow.

He retreated to farming since 2013 when he failed to recapture his parliamentary seat.

Mr Mureithi confirmed his predicament but declined to offer any further information on the subject.

“Forget about it my friend. When you have a wound inflicted on you, it is good to first let it heal. Let me sort that out first then we can talk about it,” Mr Mureithi said.

The list of property earmarked for sale includes residential houses and office buildings, greenhouses with horticultural crops, water pans and cold rooms. The impending auction has earmarked Mr Mureithi’s four-bedroom houses in Nairobi’s upmarket Karen estate from which the auctioneers are seeking to recover Sh960 million.

The former MP’s 89-acre prime agricultural land on the Nyahururu-Ol Kalou Road is also targeted for sale in what is arguably one of the biggest insolvencies in Kenya’s flower farming sector.

Creditors are looking to recover Sh393 million from sale of the property, which has 17 greenhouses covering some 19.8 acres. The greenhouses have close to 760,000 rose flowers, priming it as a key target for those with an interest in the lucrative industry that earns Kenya billions of shillings every year.

Clement Tulezi, the Kenya Flower Council chief executive, dismissed concerns that Mr Mureithi’s troubles may be a signal of the sector’s troubles.

“Not the entire 200 acres was under production and we have more than 250 farms.
Suera is just one of them so the industry is very stable. Besides, statistics show that we are expanding in areas like Mt Kenya,” Mr Tulezi said.

Suera was in June 2016 among the four farms that the Kenya Flower Council awarded for good performance, making the impending collapse barely two years later quite intriguing.

Mr Mureithi jointly owns the flower firm with his wife, Susan, and are known for Rose flower growing. But it now appears that the business of flower farming has not been a rosy affair for the former legislator who quit employment as Co-operative Bank chief executive in March 2001.

Upon leaving office, Mr Mureithi found himself at the centre of a bruising legal battle with the Kenya Revenue Authority (KRA) over a Sh25 million tax demand said to have accrued during his tenure at the bank.

The taxman had raised issues with the bank’s calculation of taxes on benefits Mr Mureithi enjoyed such as motor vehicle allowances, insurance premiums, fees and air fares to the UK and the USA as well as security guards services at his home.

Trouble deepened in March 2003 when his former employer, Co-op Bank, sued him after settling his tax liabilities. The bank argued that it was Mr Mureithi’s responsibility to ensure his personal tax compliance and not the company.

“It was submitted by the plaintiff (of Co-operative Bank) that the defendant, as provided under Section 37A of the Income Tax Act, did not ‘take all reasonable steps to ensure that the offence was not committed’ and was thus personally culpable and entitled to compensate the plaintiff in the amount of Sh11,194,097,” Justice Jonathan Havelock ruled as he gave Mr Mureithi 30 days to make the payment.

The looming auction is the latest blow to the businessman, who kept a tight lid on who is chasing him for payment.

“Please let’s leave that for today and thanks for your concern. God bless you,” Mr Mureithi said a text message when asked which bank was behind his latest woes.

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