Kakuzi Plc workers packaging avocados.
A tribunal has cleared the Capital Markets Authority(CMA) to dig into business and financial dealings at Kakuzi Plc that are alleged to have cost shareholders dearly for years while enriching some officials of the company.
The Capital Markets Authority (CMA) Tribunal rejected a bid by the Nairobi Securities Exchange-listed agricultural company and its directors to bar the market regulator from investigating the alleged scam.
“In the upshot, this Tribunal finds no merit in the appeal, and the same is hereby dismissed with costs to the respondent (CMA),” according to the ruling delivered by the Tribunal on September 19, 2024.
CMA is now expected to proceed with its investigations into allegations of conflict of interest and financial impropriety against Kakuzi and its directors.
The company officials are accused of forming companies and approving payments totaling millions of shillings from Kakuzi to these entities without disclosing their interests.
The company officials under probe comprise eight currently serving directors of the company, one director who is a secondee to the company, and a former employee of the company who retired on June 30, 2022, according to the Tribunal’s documents.
One of the officials is said to be facing a conflict of interest charge for doubling as a Kakuzi director and a senior executive whose board services are outsourced through a company in which he is the owner.
Another official, who is a director of Kakuzi-related company is identified as a recipient of millions of shillings that were wired out of the company between January 2018 and May 2021.
CMA accused three officials of Kakuzi of entering into a contract with another company for the provision of technical services for finance and administration without disclosing to the board that they were the only shareholders and directors of the company.
The regulator also found that Kakuzi entered into a management support services agreement that had no end date.
An inquiry by CMA established that the three Kakuzi officials are the directors and shareholders of the company that rendered the management support services.
Last year (2023) CMA as part of investigations, dispatched show cause letters to all board members of Kakuzi before drawing formal charges against those responsible for abetting the alleged suspicious dealings at the company.
The latest Kakuzi probe evokes memories of a similar probe on directors of auto trading company CMA Holdings a decade ago where investigations revealed decades-long siphoning of company cash by directors and senior CMC managers through secret offshore bank accounts.
The Kakuzi directors through their amended Memorandum of Appeal dated December 7 2022 sought orders from the tribunal to set aside the decisions of the CMA and to direct the regulator to furnish them with documentation and evidence on the allegations relating to the hearing and inquiry which were the subject of the disputed directions and decision.
The directors also sought an order from the tribunal to restrain CMA from litigating the inquiry in the media or disclosing to any third party the particulars of the inquiry, the responses to the summons, or any unsubstantiated information whatsoever in connection with the inquiry and this appeal.
CMA issued a summon for information dated June 14 2021 informing the directors that it has initiated, on its own motion, an inquiry into the affairs of the company.
The inquiry was said to be based on the regulator’s findings and recommendations on the company’s governance Assessment audit for the 2019 financial year.
These findings related to human rights abuse payment of Sh696 million and weak management and board governance structures at the company and the management and operational services agreements signed between Robertson Bois Dickson Anderson Ltd and Kakuzi plc on December 11 2017 and Eastern Produce Regional Services Ltd and Kakuzi Plc in March, 2024.
There are also allegations of business dealings and agreements with related companies, namely Robertson Bois Dickson Anderson Limited, Eastern Produce Regional Services Limited, EPK Empowerment Company(Kenya) Limited, Lintak Enterprises (K) Ltd, Linton Park (Kenya) Ltd, and Siret Tea Ltd.
Kakuzi argued that its directors by a letter dated September 5 2022 requested CMA to disclose the particulars and the evidence of the allegations forming the basis of their directive and or decision under the summons but the Authority failed to provide such information.
Instead, the regulator communicated vide a letter dated September 7 2022 that the hearing will proceed as scheduled, and should the directors fail to appear, they will be deemed to have waived their right to be heard.
CMA, on the other hand, said it was still conducting investigations and hence within its statutory mandate and powers to issue summons for information to the appellants to supply information to aid in its investigations.
The five-member Tribunal chaired by Paul Lilan considered whether the amended Memorandum of Appeal should be struck out for material non-compliance with the Rules, whether CMA’s disputed inquiry proceedings were being conducted in violation of the directors’ constitutional rights, and whether the findings on Corporate Governance dated November 15, 2022, can be used to determine an inquiry and who should bear the cost of the appeal.
“Overall, the Tribunal upholds the position taken by the respondent (CMA) that the inquiry that was instituted against the appellants (directors) and the evaluation of the findings on Corporate Governance dated 15th November 2022 were two separate statutory processes with different legal consequences and the latter could not be held to have determined the inquiry that was still ongoing,” according to the Tribunal ruling.
Other members of the Tribunal include Godwin Wangong’u, Dr. Constance Gikonyo, Paul Wanga, and Josephine Eboko.
