CMC probe recommends return of monies

By standard team

An investigation by a South African firm of secret offshore accounts operated by former directors of CMC has recommended repatriation of monies held there and a probe to establish if the same directors can be charged with evading taxes.

Directors Jeremiah Kiereini, PK Jani and former CMC Holdings CEO Martin Forster are named in letters as being signatories to the secret accounts.

The accounts, which were funded by overbilling CMC Group for vehicles, were never disclosed in the company’s financial reports or board meeting minutes.

The Standard has obtained copies of communications regarding the accounts in the tax haven of New Jersey, that appear to suggest money siphoned from CMC by the overbilling was again lent to the Group at exorbitant interest rates in an illegal transaction that should draw the interest of both the Central Bank of Kenya and Kenya Revenue Authority.

"We’ve cited also evidence of lending arrangement involving CMC Group and the second offshore accounts operated by the directors," reads one letter.

It further says: "This reveals that the company was paying interest as way of siphoning funds to the beneficiaries of the offshore accounts."

It is not clear if the lending arrangements were reflected in the CMC books regarding outstanding balances payable to the said accounts, or whether external auditors stumbled on the matter.

evidence

There is evidence of lending to CMC Uganda at nine per cent interest on a loan of £100,000 in December 1999 and CMC Holdings at the same rate on a loan of £500,000.

According to the evidence seen by The Standard, proceeds into the accounts came from Japan. In one instance, 18,240,600 Japanese Yen and 6,045,600 Yen was credited to an account in the National Westminster Bank in New Jersey.

One intriguing paragraph in a letter read: "On the subject of Japan, I understand from Martin that they are becoming more concerned about remitting commissions to Corival (one of the secret accounts). He suggests that the name be changed to something more appropriate and perhaps we should consider ‘CMC Holdings International Limited’. I will approach the secretaries to see if the name is available and then it will require a resolution signed by yourself and Martin to put in motion."

One of the accounts known as the Fairvalley Trust was set up in September 1999 and £1.54 million (about Sh201 million) were in the account at the time.

Njonjo

In one payment schedule, payments of varying amounts were made in 2009 to directors but to the exclusion of former Attorney General Charles Njonjo.

Letters seen by The Standard indicate there were efforts to get former Attorney General Charles Njonjo to be a signatory, but there is no evidence that he received payments from any of the accounts.

Only recently, the Capital Markets Authority recommended the sacking of the entire CMC Motors board and its place taken by an interim board following claims that they had grossly misreported their books of accounts, and authorised financial transactions without following rules.