BY JACKSON OKOTH

The turbulence in boardrooms of listed motor companies Cooper Motor Corporation (CMC) Group and Marshalls (EA) Ltd continues to raise eyebrows in corporate circles.

Apart from the intense wrangles among directors of CMC, an interesting transaction took place recently at Marshalls, adding logs to a huge fire burning up in the local vehicle industry.

A long drawn boardroom wrangle within Marshalls appears to have made investors to flee from this counter. Matters have been made worse by the firm’s poor performance. A record four managing directors have left the company in the last three years.

In a surprise move, business tycoon Kamlesh Pattni has sold a 15 per cent stake in Marshalls, earning more than Sh30 million in the process. This transaction comes a few months after Pattni gained control of the loss-making auto dealer from his business rival Ketan Somaia.

Court case

While this is happening and with some of the thorny issues finding its way in the court of law, an intense power struggle is still playing out at CMC with no end in sight. The Capital Markets Authority (CMA) has in the meantime extended its suspension of trading in the motor dealer’s shares to 90 days due to allegations of fraud and fund diversion to an offshore account in New Jersey by some of the directors. CMC has also issued a profit warning for the year ended September, meaning that its net earnings will fall.

As fault lines within the CMC board continue to grow, details continue to emerge of interesting happenings within the firm.

Documents available to Weekend Business shows an invoice dated October 17, and numbered PML0016-011/PNK sent to CMC Group Limited showing that 50 Land Rover pickups were sold to the Ministry of Internal Security and Provincial Administration, through Pewin Motors Ltd, the agents for CMC Group. The deal earned Pewin Motors, whose chairman is one Peter Kirigua, formerly working for automaker DT Dobie, Sh11.7 million in commission.

In yet another transaction, Pewin Motors was paid Sh2.8 million in agency commission on the sale of 16 Ford Ranger Double Cabins to the Ministry of Education, through a Local Purchase Order (LPO) No 1032932.

Perhaps, it is these somewhat large commissions paid out for delivery of vehicles to the Government that wrangles at CMC can be understood.

Interestingly, it is the taxpayer who has to shoulder the bill when the State procures public vehicles whose prices are uncompetitive and inflated. It’s possible to argue that the taxpayer got a bad deal from the sales of these vehicles to Government departments, which puts Treasury managers on the spot.

Shareholding structure

A glimpse of the top 10 shareholders at CMC, as outlined in the company’s annual reports and financial statements lists Kingsway Nominees Ltd as the largest with 72.8 million shares. Andy Forwarders Services Ltd, a company associated with Peter Muthoka, the company’s board chairman, is the second largest shareholder with 68.8 million shares. Then there is Paul Wanderi Ndung’u, considered one of the biggest players at the Nairobi Securities Exchange (NSE) with 55.8 million shares.

Other notable shareholder is Mobicom Investments Ltd, an exclusive distributor of Telkom Kenya’s orange brands, which owns 11.5 million shares, Joel Kamau Kibe, 21.5 million shares and APA insurance Ltd holds 16.6 million shares.

In an extraordinary general meeting that was to be held on November 21, the agenda was to remove Paul Ndung’u, Joel Kibe, Andrew Hamilton and Managing Director William Lay from office, to be replaced by Mark ole Karbolo, Prof Francis Njeru and Peter Gachuhi.

This meeting did not take place because of a court order stopped it.

In the past few years, CMC has witnessed infighting within the board of directors, negatively impacting on its performance. These wrangles have intensified driven largely by directors allegedly teaming up with a section of top management to push their own interests.

As a result, the board has been rendered dysfunctional and unable to discharge its mandate, as the company performing dismally.

One of the key issues causing the present disagreements within CMC board appears to be why Pewin Motors, a firm associated with Peter Kirigua, was appointed commission agent without any competitive sourcing.

The commission paid to Pewin Motor, which has a five-year contract, is a whopping six per cent of gross sales. There are concerns that these huge payments could erode the firm’s fortunes and affect shareholders value if not help inflate purchase bill for the firm’s single largest clientele – that is the Government and by extension the taxpayer.