CMA digs deeper into share deals at CMC

Businessman Peter Muthoka's and former Head of Civil Service Head Jeremiah Kiereini's shares in CMC Holdings will be frozen if ongoing investigations prove fraud was involved in their acquisition, the Capital Markets Authority said Friday. The regulator said some work still has to be done regarding Muthoka’s dealings with CMC. His logistics firm, Andy Forwarders, is the largest single shareholder in CMC and was the sole clearing agent for the troubled motor-dealer. Kiereini’s Kingsway Family Holdings has about 12.5 per cent shareholdings in CMC.

“Our hands are tied until the investigation proves that fraud was involved,” said CMA chairman Kung’u Gatabaki. “The same case applies to the Pewin Motors deal with CMC,” he said, adding that further investigations are on into the circumstances surrounding the firms contracting by CMC as a commission agent for government.

The regulator will publish a final report on possible fraud cases at the motor dealer. CMA said as part of action against fraud, funds stashed abroad must be returned to CMC as they remain the firm’s assets. Directors who benefitted from the offshore arrangement will have to pay twice or thrice the amounts as principal and interest.

“We’ll get government agencies concerned to ensure directors involved return the funds. We are sending a message out there that no one will get away with fraud,” said Gatabaki. The CMA said it has requested for additional information from Jersey authorities to establish the actual amount siphoned out of CMC Holdings through the irregular offshore arrangement.

It has also raised complaint with the Institute of Certified Public Accountants of Kenya (ICPAK) in relation to the conduct of Deloitte as the external auditors who ought to have pointed out the deficiencies highlighted especially with respect to the preparation of financial statements contrary to IFRS.

An ad hoc committee chaired by Justice (Rtd) Aaron Ringera said the firm’s board had abdicated its fiduciary duties to the then CEO Martin Forster, the result of which was accumulated provisions from bad debts amounting to Sh1.37 billion as at September 30, 2011. As part of long-term reform measures, the CMA now capped the age limit at 75 years for one to be allowed to serve as a director of a listed company.

“We will not approve those above that age even if their appointment is approved through an AGM. We wish to see directors of listed companies knowing the time to leave,” said Gatabaki.Directors will also be required to prove they have attended recommended corporate governance workshops. They will also be required to undergo similar training every three years and compliance must be reported in the annual reports.