An angry president and how the SportPesa takeover was plotted

Those accompanying the president at the Marina Bay Street Circuit recall he was in a jovial mood until the Silverstone-based UK team, well-known as BWT Racing Point F1 Team, showed up. For that season, it had been rebranded "SportPesa Racing Point F1 Team", acknowledging SportPesa as the lead sponsor.

“The President was furious,” recalls a member of the presidential team.

“Is this our money?”  He posed.

Extravagant bookmaker

It was this event that would finally sink the fate of SportPesa, showcasing it as an extravagant bookmaker, and a tax dodger.

For SportPesa, the Singapore Circuit was jinxed – not only that the President had seen where they had put their money – despite an earlier warning – but that  one of the SportPesa-backed Mercedes AMG High Performance Powertrain driven by Sergio Perez had retired with an oil leak. His team mate, Lance Stroll, finished at number 13.

Back in Nairobi, President Kenyatta wanted to see action taken against the betting companies and their tax arrears.  His earlier attempts to have SportPesa and other betting companies pay the taxes had been ignored. For instance, the July 2017 law, which had slapped a 30 per cent tax on gross gaming revenue, had been ignored – and yet, SportPesa was still sponsoring multi-million dollar projects abroad.

Kenyan board made redundant

Inside SportPesa, the Kenyan board had been turned redundant and the now deported Bulgarians had taken over the decision making process.

Investor Paul Ndung’u, a known friend of President Kenyatta and Jubilee fundraiser, started complaining about SportPesa’s money transfers and in December 2019, frustrated, he quit as its chairman. During Anne Waiguru’s wedding, both Ndung’u and Uhuru shared the same table – and Uhuru insisted, and in public, that SportPesa had to pay up the tax arrears.

While Ndung’u’s resignation revealed the infighting within SportPesa, more was to follow after the deportation of the Bulgarians, who still had access to the billions of shillings in separate bank accounts in Kenya. Like Dick Wathika, the chairman who died while fighting to have his space restored, Ndung’u was starting to realise that the gambling industry was not for the faint hearted.

Major shareholder

The deportation of the Bulgarians meant that they would lose control of Pevan East Africa Limited which was generating 97 per cent of all the SportPesa revenue. Besides Pevan East Africa Limited, which owned the SportPesa trademark, several subsidiaries had later on been registered abroad under SportPesa Global Holdings Limited; in UK, Italy, South Africa, Russia and Tanzania. Ndung’u was a major shareholder with 17 per cent.

The revocation of the Kenyan licence was bound to hurt. And it did.

Records indicate that shortly after the revocation of the licence, a non-executive director, Assenath Maina, demanded for a forensic audit of the company since 2015 starting with management reports, which had never been tabled at the board.

By then, the Kenya Revenue Authority had claimed that their preliminary investigations had established that SportPesa was involved in an intricate “web of tax evasion, money laundering syndicates and violation of tax laws”. More so, President Kenyatta was personally following them to pay.

The push by Assenath Maina to have the management report tabled came as a shocker to all the shareholders.

Funds transfer

“The management report indicated that within three years Pevans East Africa Ltd (SportPesa) has transferred over $250 million (Sh25 billion) to various offshore accounts in Isle of Man, Dubai and Las Palmas/Canary Islands and the UK,” Ndung’u would later reveal in a press statement.

He also requested Central Bank, KRA and BCLB and Financial Reporting Centre “to assist in establishing where the funds were ultimately destined”.

After the deportation of the Bulgarians, records now indicate, their next plot was on how to sustain the Kenyan business and the SportPesa trademark, which was in the hands of Pevan East Africa, wholly controlled by Kenyan shareholders.

On June 2, 2020, a secret meeting was held without the knowledge of majority of Kenyan shareholders in which Pevans East Africa was to enter into a deed of assignment with the UK-registered SportPesa Global Holdings Limited. Only Ndung’u is a director, but he was not invited into this meeting.

For only £100,000, SportPesa Global Holdings was to acquire the SportPesa trademark from Pevans East Africa. Under clause 22, the deed indicated that no money would change hands and that “any payments to be made to (SportPesa Global) shall be set off against any amounts owed by Pevans…”

The persons behind this transfer were Kalina Karadzhova, a director with no shares in SportPesa Global, Pevan’s CEO Ronald Karauri and Nikolay Karadzhou (Kalina’s husband), whose address is given as 17 Suppress Apartments, Douglas, Isle of Man. The other signatory was Mwirigi Imungi, Pevan’s Finance Director.

Ms Kalina is a sister of Gene Grande, who was late Wathika’s friend in Nairobi, while Ivalyo Bouzokov was the other director representing Nikolov Guerasim – the other Bulgarian operative in Nairobi.  Why Ndung’u, who was a director, was not invited into this takeover is not clear.

Website blocked

In Nairobi, SportPesa’s website had been blocked and the Bulgarians were desperate to seek a way out.

In a bid to beat the system, and after the Communications Authority of Kenya wrote a technical report dated July 16, 2020 to the National Kenya Computer Incident Response Team (KE-CIRT) informing them that the domain name Sportpesa.co.ke was operating illegally, Pevans registered another domain name ke.sportpesa.com which, apparently, is still offering online gambling services despite the government’s insistence that it had blocked it.

While the deed of assignment had been signed in June 2020, it was only presented in September 14, 2020. Despite the entire hullabaloo generated over SportPesa’s mischief, a certificate was issued on September 15, 2020 meaning that the trademark had now changed hands. It was a coup against the shareholders – and the most valuable brand name was now gone.

“There was neither AGM nor a board meeting to approve the transfer,” Ndung’u would later claim. The aim of that transfer was to allow SportPesa to continue trading.

In Form TM1 SportPesa Global Holdings Limited appointed Robert Macharia as its trademark agent, yet, he was also a director, shareholder and legal officer for Pevans. Karauri was also a shareholder and CEO for Pevans and the bid to take over the most valuable asset of Pevans East Africa had started in earnest.

The form was dated September 9, 2020 and a stamp duty paid before it was filed with the Kenya Industrial Property, the local trademarks custodian.

The next plot was to happen in the corridors of Betting Control and Licensing Board (BCLB) – the playground of the gambling fraternity.

Ever since he was picked to head the Betting Licensing and Control Board, former provincial commissioner Cyrus Maina had been out of the limelight. That was until a notification arrived that a new company, Milestone Games Limited, had acquired the SportPesa trademark from SportPesa Global Holdings.

Due diligence

It is now known that shortly after SportPesa Global Holdings managed to register its newly acquired trademark with Kenya Industrial Property,  Milestone Games Limited on  September 17, 2020 paid Sh200,000 to BCLB to carry out due diligence on its shareholders in order to get a betting licence.  The shareholders were Nob Five Limited and Wilson Karungaru. Nob Five was owned by John Nderitu, Jackline Kung’u and Joseph Mutua.

After vetting, the board gave Milestone a licence number 0000205; after all these were ordinary Kenyans – or so they thought.  But shortly after acquiring the licence, Nob Five shareholding changed hands and a new company Selenium Limited purchased majority shares. This company was owned by SportPesa CEO, Ronald Karauri (400 shares) and Francis Kiarie (300 shares).  In turn, Nob Five Limited owned 9,950 shares of Milestone Games Limited while Wilson Karungaru owned 50 shares.

The next move was to have SportPesa Global Holding pass on the SportPesa trading rights to Milestone, which was now in Karauri’s control.  On October 30, Milestone wrote to Cyrus Maina saying that they would start trading as SportPesa and within two hours of that letter, the trading resumed without BCLB’s approval.

Karauri’s Twitter post

That evening, Karauri wrote on his Twitter handle: “SportPesa is back under a new BCLB license holder ke.sportspesa.com. #sportPesaIsBack”.

It was the first time that other shareholders were learning of these changes.

“Being a director of SportPesa Global Holdings at what board meeting was the use of SportPesa brand approved by the Board or was it approved only at a board attended by Ms Kalina Karadzhova and Mr Ivalyo Bozoukov only without Director Paul Ndung’u?” posed Mr Ndung’u in a letter sent to Kalina.

Back in Nairobi,  Maina wrote back saying that BCLB had only authorised Milestone to use the trading name ‘Milestone Bet’ and that SportPesa belongs to Pevans East Africa.

“In the light of the foregoing, the Board is of the opinion that Milestone Games Limited will create confusion to the general public to which trade name the company wishes to adopt,” said Maina, while prohibiting the company from using the SportPesa domain names and short codes 29050 and 79079.

By this time, Maina had not known that he was actually dealing with an outfit controlled by SportPesa’s Karauri.  It was in November 2020 that BCLB got wind of the changes and summoned the Milestone directors to “show cause” why their licence should not be cancelled.

The show cause meeting was set for December 3, 2020 at the BCLB boardroom. Those summoned included Karauri, Wilson Ngatia and Robert Macharia and after the meeting, BCLB cancelled Milestones licence. The other shareholder, Jackline Kung’u sent an apology.

Court case

The meeting had taken place at a time Milestone had filed a case in court seeking orders to stop BCLB from cancelling its licence on the strength that they had legally acquired the SportPesa trademark.  Documents filed in court indicate that the court was shown a World Intellectual Property Organisation (Wipo) registration with SportPesa Holding Limited of Isle of Man as the owner of the SportPesa trademark and not SportPesa Global Holding.

Whether employees of SportPesa had rights to transfer the trademark without a full board approval is now a battle that is in court.  Within Wipo, the registered trademark is still under Pevans East Africa and this will create a new nightmare as the court starts to navigate through this tricky case.

Meanwhile, Milestone got stay orders on the cancelation of their licence but there is fear that they are still using Pevans offices and employees to operate.

“Why would Milestone be allowed to use offices of Pevans East Africa, furniture, computers, and infrastructure?” Ndung’u protested in a letter to BCLB.

Also, and in a new twist, Pevan’s lawyer Robert Macharia has threatened to sue BCLB for “claiming” that Pevans owns the SportPesa trademark as the twists and turns deepen.

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