KenolKobil CEO David Ohana deleted selected text messages and call logs just hours before detectives raided his office, the stock market regulator has told the court in the ongoing investigations into suspected insider trading of the oil firm’s shares.
Capital Markets Authority (CMA) investigators have in affidavits said they believe that Mr Ohana and Mr Andre DeSimone, the chief executive of stockbrokerage firm Kestrel Capital, got a tip-off on the impending raid, leading them to clean their devices ahead of the raid and seizure of documents.
"It is the belief of the applicant that considering that it has been possible to successfully extract information from all other devices whilst it has not been possible to extract information from the electronic devices under paragraph 4 above, deliberate efforts may have been made to update, programme and/or calibrate the said devices with the objective of frustrating the applicant’s data and information extraction process," says the CMA in the latest court filing.
Sources familiar with the ongoing investigations, however, say the investigators managed to retrieve the deleted information, including e-mails, text and WhatsApp messages from the devices.
The regulator asked for a three-day extension of a court order it had earlier obtained to detain the devices to give it more it time to extract information from the gadgets that had been allegedly interfered with.
The devices that were allegedly altered are a Samsung mobile phone and MacBook pro laptop seized from Mr Ohana and a blackberry mobile phone seized from Mr DeSimeone. Other gadgets seized were an iPhone and a laptop belonging to stocks dealer Aly-Khan Satchu.
The sources say the regulator could use evidence of the selective deletion of messages to build its case in what is shaping up to be Kenya’s biggest-ever insider trading investigation.
The CMA reckons that privileged trading in the oil marketer’s shares ahead of last year’s announcement of a Sh35 billion takeover stood to benefit the company CEO, Mr DeSimone and Mr Satchu.
CMA investigators seized mobile phones, laptops and computers belonging to the three in the initial simultaneous raids at their offices on January 15.
Senior resident magistrate Peter Muholi on January 23 granted the CMA three more days to retrieve information from the devices.
East African Data Handlers, an IT firm, was hired by the regulator to assist with the investigations.
CMA filings reveal its suspicions that Mr Satchu contacted several traders informing them of the intended takeover announcement.
These traders purchased 62.6 million KenolKobil shares worth Sh938.3 million, with potential to make a profit of Sh503.7 million once the deal was sealed.
Subsequently the regulator blocked the 14 accounts which it suspects engaged in the illegal trading.
The presence of an insider who has access to privileged information prior to its being made public has to be established to sustain a charge of insider trading, according to the CMA Act.
The regulator is also required to establish evidence that the insider or its agents traded based on such information.
The CMA says that Mr DeSimone and Mr Ohana were insiders with access to information.
Mr Satchu was allegedly in close contact with Mr DeSimone during the period a majority of the frozen shares were traded through Kestrel Capital.
Detectives are seeking to establish whether Mr Ohana tipped Mr Satchu off on KenolKobil’s planned sale to French firm Rubis Energie before the information became public, sparking huge stock purchases that were placed through Kestrel Capital just days ahead of the deal’s announcement.
KenolKobil moved 433.8 million shares valued at Sh6.1 billion in the six days of trading to October 23, a day before the Rubis deal was made public, compared to 472,500 stocks in the week preceding the start of the share buying frenzy on October 16.
The Business Daily’s analysis of trades in KenolKobil shares shows a significant increase in the volume of trades between October 15 and October 23, excluding the Rubis deal.
Investors moved 66.8 million shares worth Sh948.5 million in the October period, averaging a turnover of Sh151.6 million a day at an average price of Sh14.20.
The CMA has its eyes fixed on the fact that buyers of the shares stand to earn about Sh588 million once the takeover is complete, taking into account the Sh8 premium on Rubis’ offer price of Sh23 valuing the suspect shares at Sh1.53 billion.