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Court orders seizure of suspects shares in Sh1b air tickets fraud

BUSINESS
By Dominic Omondi | August 4th 2021
[Courtesy]

The court has ordered Dyer and Blair Investment Bank to sell shares belonging to suspects in a Sh1 billion air ticket fraud.

After the sale of shares, High Court Judge David Majanja ordered that the proceeds be transferred to Mercantile Insurance Company which is said to have lost Sh1 billion through the scam.

The 15,000 shares in Mumias Sugar belonged to Ibrahim Sheikh Issak, one of the suspects, while the 61,600 Safaricom shares belonged to Akarim Agencies Company Ltd.

“That Dyer and Blair Investment Bank be and is hereby directed to sell the aforesaid shares and thereafter transfer the amount realised to the second decree holder (Mercantile Insurance Company),” said Justice Majanja in a judgment delivered on July 30, 2021.

However, what the insurance company will recover is way below the Sh350 million they want from the suspects.

Mercantile Insurance, formerly Saham Insurance, had requested the court to seize money belonging to the suspects’ within seven days. 

The suspects had accounts at Equity Bank which has revealed that the dollar account and Kenya shillings account, which were in the name of Akarim Agencies Company (first defendant) had a balance of $350.57 and Sh28,106.34, respectively, as of June 15, 2021.

The suspects are said to have signed up for a sales agency with the International Air Transport Association (IATA) - an umbrella for global airlines in which they were to sell air tickets on behalf of the global aviation body.

Ticket sales

Ticketing agents are expected to remit some cash for every ticket purchased from them to IATA to forward to respective airlines.

The travel agents are the policyholders.

However, a number of agents failed to remit air ticket sales, attributing it to mass defaults.

IATA, which had taken up insurance against such defaults, lodged the claim under a type of cover known as default insurance cover that they had  from Saham Assurance Kenya (now Mercantile).

After making the payment, IATA decided to investigate.  The probe revealed that some of them may have pocketed the cash instead of remitting it to IATA. 

The mass default saw IATA revoke the licences of about 20 air ticketing agents. Saham settled with some of the ticketing agents out of court even as it brought charges against others.

The unremitted amount has risen by 318 per cent since 2016 when it stood at Sh239 million, according to a report by the Insurance Regulatory Authority. Following massive defaults by ticketing agents, IATA in 2016 made some changes in its payment cycles, requiring air-ticketing agents to remit their money in 15 days.

Initially, air-ticketing agents were given up to 30 days to remit their money to the airlines’ body, making it possible for travellers to book their air-ticket on credit.

“Effective September 1, 2016, the credit period enjoyed by IATA accredited air-ticketing agents will be reduced to 15 days from the current 30 days,” Kenya Association of Travel Agents told its members in a notice at the time.

Travel agents have also been accused of playing a part in Kenya Airways’ huge losses by overcharging the airline’s corporate clients, making its tickets non-competitive.

A report by audit firm Deloitte gave an example in which in 2014 and 2015, travel agents overcharged corporate clients by $312,650 (Sh31.3 million).

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