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Investigations

‪KRA Boss Njiraini Entangled In A Tax Evasion Scam On Undervaluing A Sh2.93 Billion Property Paying Only Sh160 Instead Of Sh29M‬

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Njiraini

Kenya Revenue Authority Commissioner-General John Njiraini undervalued a Sh2.93 billion property acquired in Nairobi, denying the taxman millions of shillings in stamp duty after paying only Sh160, documents filed in court claim.

The filings, which effectively allege tax avoidance, indicate that Mr Njiraini paid the amount as stamp duty for a property jointly owned with Kenya Revenue Authority Staff Pension Scheme Registered Trustees that was bought at a staggering Sh2.93 billion.

In the High Court filings, it is alleged the taxman potentially lost Sh29 million, being one percent of each share that Mr Njiraini — listed as a director and respondent in the case — and KRA Staff Pension Scheme Registered Trustees acquired.

In transfer documents presented as part of the evidence, Mr Njiraini and the KRA Staff Pension Scheme Registered Trustees acquired Corporate Business Centre in 2015, a building in Nairobi’s Upper Hill, which currently hosts some of the taxman’s offices.

The acquisition saw Mr Njiraini and the pension scheme replace the original owners and became new shareholders — effectively owning the property and the land it occupies.

The property is registered under Corporate Business Centre Limited. The previous shareholders and directors were Kirankumar Manubhai Patel and Mandip Singh Amrit.

Mr Amrit transferred his one share to Mr Njiraini while Mr Patel transferred his one share to the KRA Staff Pension Scheme Registered Trustees.

The two shares were valued at Sh100 and, therefore, it is this amount that stamp duty was paid for and not the Sh2.9 billion.

The revelations are contained in a suit filed by Lustman and Company Ltd that was designated as the lead estate agent between Mr Patel and Mr Amrit as directors of Corporate Business Centre Limited and the new directors.

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Lustman Ltd accuses both sides of engaging in fraud by “deliberately avoiding payment of taxes by not declaring the actual purchase price of the suit property by sale of the shares purchased and allotted, failing to disclose the correct and true value of the sale transaction in the shares transfer and failing to pay the requisite stamp duty for the shares transferred”.

Lustman insists that by undervaluing the value of a share capital to Sh100 and not half of Sh2.9 billion amounts to contravention of Section 45 of the Anti-Corruption and Economic Crimes Act.

Mr Njiraini, KRA Staff Pension Scheme Registered Trustees and the Corporate Business Centre denied the accusations.

“The defendants deny the particulars of fraud enumerated by Lustman. The defendants were under no legal obligation or contract to disclose to Lustman details of the purchase transactions,” the defence says.

In the suit papers, Lustman further charges that despite having been the lead agent for the transaction, the two sides secretly connived and dropped them from the proceedings when the deal reached the penultimate stage thereby denying the company its commission.

“By an agreement in writing contained in the letters dated 08/08 2014, 12/08/2014 and 14/08/05 2015, Lustman Limited, which is a duly registered estate agent, was requested and agreed to act as the Corporate Business Centre Limited agent in getting and sourcing for a purchaser for its property and the building thereon situated in the upmarket area of Nairobi Upper Hill area … In consideration for a commission of two per cent of the sale price,” Lustman noted.

The agent would have pocketed at least Sh58 million. Lustman further says it dutifully devoted time to search for a buyer before settling on the pension agency.

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But unknown to the agents, the property was acquired through purchase and transfer of shares of the company registered as the owner of the building namely Corporate Business Centre Limited.

“Out of the sale transaction valued at Sh2.93 billion, the defendants failed, refused and have rejected to pay to Lustman Ltd for its services rendered as an estate agent thereby denying it its rightful commission despite being aware that Lustman introduced Mr Njiraini and the KRA Staff Pension Scheme Registered Trustees to the Corporate Business Centre Ltd after which they bought and had transfer in their favour,” Lustman says.

On December 18, 2015, Corporate Business Centre Ltd directors, Mr Patel and Mr Amrit, held a meeting that resolved to transfer the shareholding to the new owners.

Additional directors appointed on that day include Constantine Kandie, Evans Kaikai, Kimotho M’ Mukindia, Fiona Waithira, Christopher Were, Samuel Tororei and Alfred Maritim.

The property in question is located on Elgon Road, Upper Hill Nairobi. It sits on two acres and has a lease of 99 years from October 1, 1988.

It has 266 parking lots and its initial selling price was Sh1.8 billion as indicated in a letter by Lustman Ltd to KRA in July 2015.

In his defence, Mr Patel said at no time did he and Mr Amrit contact Lustman Ltd as estate agents.

He said the three letters Lustman Ltd mentions that originated from Corporate Business Centre Ltd were not from him or Mr Amrit, and disowns one Morrison Wayaya who had signed the letters on behalf of the property company.

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“All transactions by the Corporate Business Centre over the property and in particular letters and contracts were always signed by both the directors. Further, all the agents were engaged through signed contracts which bore the signatures of both the directors,” Mr Patel swore in his response.

He further states that correspondence between the Corporate Business Centre and KRA Staff Pension Scheme Registered Trustees was not copied to Lustman Ltd.

“In any event, there was a billboard on site advertising the property for sale and the recommended letting agent on the billboard was Knight Frank. The availability of the building for sale was therefore a matter of public knowledge,” Mr Patel says.

In his defence, Mr Amrit echoes Mr Patel’s stand. Mr Njiraini and the pension scheme trustees said that at no time did they contact Lustman Ltd.

But in their reply to the denials of Mr Patel and Mr Amrit, Lustman Ltd states that Mr Woyaya was the general manger of their property.

The company further indicates that its employees introduced the representatives of Mr Njiraini and those of KRA Staff Pension Scheme Registered Trustees to the offices of Corporate Business Centre in Westlands, Nairobi.

“The claim of there being a billboard by Knight Frank and the issue of public knowledge is therefore not applicable to this suit,” Lustman Limited says. The High court is yet to set the hearing dates for the suit.

via DN.


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Investigations

Shadowy Billionaire Humphrey Kariuki Is On The Run Over Sh3Billion Monthly Tax Evasion And Massive Fraud

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Businessman Humphrey Kariuki.

Kenya’s leading alcoholic spirits manufacturer Africa Spirits Limited (ASL) is on the spot following a raid conducted by DCI and Kenya Revenue Authority officers. The joint raid that was conducted at the company’s factory in Thika was headed by the head of Flying Squad Musa Yego in conjunction with senior officials from KRA.

Investigators from KRA and DCI during the raid seized around 21 million counterfeit excise stamps and 312,000 litres of suspected illicit ethanol with an estimated tax potential of Sh. 3billion monthly at Africa Spirits factory in Thika, in an operation that commenced on 31st January 2019.

Yego said they conducted the raid following a tip-off. He added they were also investigating possibility of production of sub-standard alcohol in the factory. “We have arrested three employees who would be arraigned in court. We are also looking for the owner of the company,” said Yego. Ann Iringu a deputy commissioner at KRA said the raid was geared towards fighting illicit trade. Iringu said they were also investigating to see if the company conforms to taxation laws.

She added they had also confiscated some of KRA stamps.“We will also carry out investigations to ascertain if ethanol that has been confiscated here is illicit and if alcohol production going on in the factory is illegal,” said Ms Ngugi. The KRA official said ongoing investigations which will take about a week will reveal if the company has been evading tax and to what extent. She appealed to KRA officials at the country’s border points to be vigilant in order to ensure no illegal goods get access to the Kenyan market.

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Established in 2004, African Sprit Limited has been instrumental in shaping the local alcohol beverage market, with its brands leading various segments of Brandy, Gin and Vodka.

Some of it products include Legend Gold Brandy, Blue moon Vodka, Blue Moon Vodka flavors (Apple, Mango & Ginger), Gypsy King Gin and The Furaha Range among others.

African Spirit Limited is owned by shadowy Billionaire Humphrey Kariuki who has been implicated in other scandals including drug trafficking even though the courts recently cleared his name of the accusations. Kariuki who co owns empire with Harun Mwau are said to be falling apart after a 40 year partnership.

The two were named in the drug cartel. Amongst their known businesses includes The Hub an upmarket mall in Karen, Mount Kenya Safari Club In Nanyuki, Wines of the world amongst many others that we shall mention in our subsequent series in exposing a long history of fraud including Kariuki’s Involvement in South Sudan war where his oil company was involved in looting the funds and fueling the escalating war.

Last year, the government scuttled Wine of the World Beverages bid to exclusively import and distribute exotic wine and spirit brands from seven international suppliers to avert a monopoly.

In a statement, the Competition Authority of Kenya said the company’s exclusive distributorship agreements with the distributors would have seen it dominate the market and lock out rivals at the expense of consumers.

His roots in South Sudan is so deep that Salva Kirr spends at his opulent Dik Dik Gardens, Kileleshwa home. Kiir In a report by Sentry was named amongst South Sudan’s leaders use the country’s oil wealth to get rich and terrorize civilians.

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Investigations

‪DCI Recommends Charges Against Five Local Banks Over Involvement In The NYS II Heist As DPP Haji Forms Team To Review Files‬

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DPP Noordin Haji.

Trouble looms for banks and officials who were involved in the illegal NYS II transactions a scandal that saw Sh8B embezzled. DPP Noordin has issued a statement on the progress following investigations on the marked banks by the DCI.

DCI investigations as directed by the DPP on the criminal culpability has found five banks liable; Standard Chartered, KCB, Equity,Co-Op bank and DTB all have a case to answer. The banks violated restrictions that govern banks in Kenya by facilitating flow of proceeds from crime and money laundering.

Investigations established that the Standard Chartered Bank received a total of Sh.1,628,902,000 between January 2016 and April 2018 out of which Sh.588,558,000 was suspiciously transacted by bank’ Officials without reporting to the Financial Reporting Center as opposed to the POCAMLA regulations.

KCB according to the investigations had received Sh800M of which Sh148,397,000 was suspiciously transacted by bank officials without sticking to the POCAMLA regulations.

Equity Bank received Sh.886,426,904 and that Sh264,200,000 and USD58,000 was transacted without adherence to the regulations.

Diamond Trust Bank which is currently under prove over involvement in helping Dusit terrorists launder their money for the attack, is in the frying pan as well. Investigations reveal that, the bank had received Sh.164M out of which Sh27,946,298 went without being captured by the regulatory board.

Co-Op Bank received Sh.250M and suspiciously transacted Sh.25M without reporting. DPP has since constituted a team of senior prosecutors who’ll review the files and give recommendations in the next two weeks.

DTB had been fined Sh56 million by CBK while Co-operative Bank will pay Sh20 million. The five banks handled a total of Sh3.5 billion from NYS with StanChart handling the largest transaction worth Sh1.6 billion followed by Equity Bank at Sh886 million, while KCBprocesses Sh639 million. The same banks involved in the NYS I are also the ones being chopped over NYS II. It seems the fines never worked so the punishment this time should even be heavier.

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Investigations

How Gulf African Bank Conspired To Defraud A Client His Sh500M Property In An Insider Mortgage Fraud Scheme

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Gulf African Bank managing director, Abdallah Abdulkhalik.

In March 2009, SAX Limited had sought a loan from Gulf Bank to buy two aircrafts and related equipment. Mohamud Sheikh Hussein offered his property L.R No. Eastleigh 36/11/1 as the guarantor. By then, his property was worth Sh160M and has since gone up. For him it was just another of many bank engagements but unknown to him, it would end up in a decade long fight to regain full control of his suit property.

In April, 2009, Gulf Bank after reviewing the securities, agreed to advance a Murabaha Asset Finance Facility To SAC Ltd as the borrower Sh95M. This amount would be used in purchasing a used Aircraft Beechcraft Baron 95-E55,5Y-BPC at a cost of Sh11,200,000. A 5 tonne, Sideley HS478 Aircraft From Track Mark Ltd at Sh80M and Sh2.9M to purchase propellers.

The Sh160M property of Mohamud was to guarantee for Sh120M with SAC directors guaranteeing Sh94M but the registration was to remain jointly in the name of the bank and the company SAC. The terms for this MURABAHA facility was that profit and not interest would be charged at 16.5% of the facility.

That was a deal sealed and so Mohamud thought his work was finished. Things started making twists on 4th May barely weeks after SAC was advanced the principal amount of Sh95M. Gulf issued SAC with a second letter of offer varying the terms of the MURABAHA facility and this would translate into review of security terms for the mortgage. In a offer letter dated 4th May 2008, now the security property as the first ranking had a legal charge of  Sh95M, Mohamud switched to guarantee Sh95M.

In a letter of offer dated 4th November 2009 and seen by Kenya Insights, a second Murabaha stock finance was advanced to SAC the borrower for the sum of Sh15M. This amount was over and above the sums secured by the initial mortgage dated 9th September according to court papers.

Now here’s the point Fraud started playing, this second facility of Sh15M was given by the bank to SAC using Mohamud’s knowledge and consent as the guarantor and so the Murabaha facility wasn’t secured by the initial mortgage according to a court of appeal ruling on this case.

Gulf representatives liaised with SAC, reviewed the terms of mortgage while using the guarantor’s property, went ahead and issued another facility of Sh15M without his consent just to make the open breach clearer. The varied terms of repayment of the loan facility were of no effect and as a result, Mohamud was discharged from his obligation. Gulf unlawfully accommodated SAC the borrower and varied his terms of payment.

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Having been fully discharged by the bank as a guarantor, there was no way in law the bank would reviver any amount on the second facility from Mohamud but from SAC the principal borrower. To affirm this in a demand letter dated 26th April 2010, in admission to this fact, wrote to SAC seeking the payment of the second facility. Mohamud wasn’t copied since he had been fully discharged by the bank as the guarantor on the principal amount.

In June 24th 2010 according to court documents, Gulf confirmed that SAC had fully settled the Murabaha loan facility which was done by the insurers on payment of the insurance of $370,000.

It didn’t end there, SAC(borrower) went ahead and sought a third facility(Tawarraq Working Capital Finance) Of Sh58,672,978 which was to be repayable in 24 months. Once again, Mohamud’s Eastleigh property without his knowledge and consent, was used to guarantee this third and illegal loan facility which wasn’t registered against his property according to court papers.

SAC the principal borrower defaulted in the payment of the third facility and Gulf sent him a demand letter dated 19th November 2010 seeking the settlement of arrears of Sh4,174,525.31. This letter wasn’t copied to Mohamud in tacit admission by the bank that Mohamud wasn’t liable as the guarantor.

Despite of all the accusations of playing dirty, the bank insisted that Mohamud was aware of the variations and approved them contradicting their body language. They never engaged him at any point after inking the initial mortgage facility.

In a sharp twist by a letter dated 26th January 2011, a firm Mohamed Muigai Advocates purported to issue a three months statutory notice on behalf of the bank seeking payment of Sh67,078,541.08. Here’s where the real games started playing.

SAC as the principal borrower informed Mohamed Muigai firm that the bank had waived the purported statutory notice by accepting payment and rescheduling proposal. By this, SAC admitted to liability as the principal borrower and the numerous proposals for settlement.

Despite all the breaches of all standard banking precepts, Gulf Bank purported to restructure the loan facility to make Mohamud who was the guarantor to make him the principal borrower. This, Mohamud says in court letters that it was illegal,l and vitiated by Fraud, duress and coercion so as to constitute an unconscionable bargain in law.

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In play, the security documentation and letters were all drafted by the Gulf’s legal department and Mohamud wasn’t allowed the privilege of independent legal advice on the implications of signing the letter of offer dated 26th May 2011 in what he says the bank unlawfully coerced and duped him by purporting to restructure the loan facility and waive its exercise of statutory power of sale while in law, the bank didn’t have any statutory power of sale.

It doesn’t make sense that the bank purportedly made Mohamud the principal borrower yet there wasn’t consideration for the diminishing Musharaka sale and lease back Finance facility and not a single cent has been disbursed to Mohamud.

Worth noting that the bank had initially discharged Mohamud as the guarantor when it rescheduled the facilities in favore of SAC the principal borrower. For a fact, Gulf Bank has forwarded Mohamud a re-conveyance Of mortgage confirming that all the money secured under the mortgage of Sh95M the principal amount that is the only one he approved to had been fully paid.

Reconveyance of mortgage forwarded by the bank to Mohamud clearing him.

Amina Bashir, the Then Bank’ Company Secretary and Head of Legal Department is a key person of interest in this ploy. According to court documents seen by Kenya Insights, Amina drew agreements dated 26th May 2011 and purchase agreement dated 30th June 2011 in which she made Mohamud liable for payment of Sh68,455,295.08. In this reversal of roles, Amina purported to make Mohamud the principal borrower (SAC) now the guarantor to Mohamud when in fact no facility was advanced to him.

The Sh68.4M that now the bank was putting on Mohamud, Musharak Asset Purchase Agreement that Mohamud alleges he was duped and coarced into signing is described as a clear fraud on his side to enable the bank sale his property. Simple question that the bank need to answer is if Mohamud was a principal borrower as they purport then where’s the proof that he was paid? None as it never happened.

September 4th 2012, SAC the principal borrower in admission through a letter, confirmed it owed the bank the Sh68,455,295.08 that the bank purported to have been borrowed by Mohamud in their reversal roles theatrics. This debt according to court documents is fictitious and fraud that can’t be basis of any valid statutory notice.

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In arguing their case to hold the statutory notice, Gulf Bank lies to the Court of Appeal by not disclosing that they had registered a re-conveyance of mortgage dated 8th August 2011 on 18th 2011 and there wasn’t mortgage in force.

The Chief Land Registrar confirmed that the last entry on the file was the re-conveyance of mortgage confirming that the property is fully and legally under Mohamud and held no debt, keep in mind the bank has cleared him of the loan.


With everything working against them and all factors exposing this clear fraud, Gulf Bank has served Mohamud with a notice of sale by public auction by Garam Investments on 17th Dec in respect of his Eastleigh property that he used to guarantee a loan and which the bank had cleared him of. The property would be auctioned on 19th February 2019 despite there being no mortgage registered against the property, non whatsoever

Following the sustained efforts to illegally acquire and sell his property, Mohamud has since published a Caveat Emptor Buyer Beware on local dailies warning the public against being duped into the purported public auctioning of his Eastleigh property.

PUBLIC NOTICE!

At Kenya Insights, we’re just opening a case which we believe if it’s the norm, then there could be many  frustrated customers like Mohamud. We’re asking members of public who might have fallen prey to such mannerisms of coercion and duping to write to us with solid proof on either Gulf Bank or any financial institution, we will highlight. Our email is below this post.

As for Gulf Bank, we’ve picked this case and will be going into much deeper details in subsequent series, how a bank turned against a guarantor is a reason to worry many other potential or existing guarantors to their facilities. What does the bank know that Mohamud or the courts doesn’t know? Why is the bank withholding Mohamud’s land documents despite having cleared him of any debt? Why did Amina Bashir change the loans agreements along the way without consent of the guarantor? What’s the level of BODs involvement in this scheme? Series continues…


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