Corporate cases of the year 2015

Acorn Group Vs Britam

British-American Asset Managers (BAAM) resolved its biggest property dispute this year after it fell out with some of its employees that quit to start a rival outfit. Acorn Group had earlier entered into a deal that would have seen Britam provide financing for 10 real estate projects worth Sh40 billion while it focused on the development of the properties. Some of the properties planned were shopping malls, office complexes and mixed-use projects.

The two fell out in what saw their fight end up in court. However, Britam later this year dropped the claim it had filed against the property development group and seven of its affiliates after it secured an out-of-court settlement. The deal also saw Britam relinquish its 25 per cent stake it held in the real estate firm. Acorn is understood to have paid Britam Sh5 billion, funds whose transfer from the financial services firm’s accounts by four of its former employees was contested.

BAAM also re-acquired four major development projects that Acorn had handed over to Cytonn – a rival private equity firm formed by the former Britam employees.BAAM had accused former employees Edwin Dande, Elizabeth Nkukuu, Shiv Arora and Patricia Wanjama of irregularly transferring Sh5 billion from it. BAAM says it will still pursue criminal charges against its former executives.

Following the legal settlement, Britam will now recover high-value land in Nairobi, which includes five acres in Kileleshwa, 2.5 acres along Elgon Road in Upper Hill, 25 acres in Mlolongo and 182 acres in Lukenya, Machakos County. Acorn also agreed to transfer to Britam the mandate to operate the various bank accounts and cash balances in relation to the projects.

Equitel court battle

Equity Bank’s subsidiary, Finserve Africa, won a major court battle that allowed it to roll out its mobile service – Equitel. The had been sued over concerns around its Thin SIM technology. However, the High Court cleared the cloud on the service after it declared that the petition filed to stop the Thin SIM roll out did not have grounds to warrant the court to bar the bank from competing in the lucrative money market. The judge ruled that the Communication Authority of Kenya (CA) had already addressed security worries expressed in the case and there was a chance to rectify any breaches during the one-year trial.

Finserve Africa had been put on trial with the petitioner in the case, lawyer Bernard Murage claiming that his account’s security was at risk as there was no law in place for compensation in case of losses.
The judge said he would not stop the process until Data Protection Bill is enacted into law, as the court did not have powers to interfere with the legislative process. In the petition, the lawyer had argued there was a high probability that account holders would get into untold losses if their monies went missing due to the technology, since the country does not have data protection policy. Mr Murage argued that the guidelines provided by the Cabinet to mitigate any possible losses were not adhered to when CA allowed Equity Bank to enter the mobile money services market using the Thin SIM technology.

Safaricom was the first to cry foul about the technology. The telco wrote to the regulators stating that the overlay SIM card technology had the ability to quietly steal data from the main SIM, including the secret personal identification numbers and pass them to a third party. However, CA and the Central Bank in August last year okayed Equity Bank’s roll out of the service, after dismissing Safaricom’s objections. The SIM cards are film-thin, embedded with a chip that can be layered over the active side of another operator’s Sim to act as a bridge between the phone and the primary card. The mobile money market currently serves more 25 million people in Kenya and in the Diaspora with the monthly transactions valued at about Sh200 billion.

Safaricom Vs Telkom

Safaricom went to court seeking to stop the sale of France Telecom’s 70 per cent stake in Telkom Kenya to Helios Investment Partners until it is paid Sh639 million claim against the telecommunications company. Safaricom argued that it would suffer irreparable loss and damages if the sale and takeover of France Telecoms’ stake in the Kenyan company is concluded before it is paid the amount.
This is after France Telecoms announced that it had signed a binding agreement with Helios Investment Partners to acquire the entire 70 per cent stake it held in Telkom Kenya. Treasury owns the other 30 per cent stake in Telkom Kenya. The announcement triggered a similar demand for debt repayment from the industry regulator, the Communications Authority of Kenya (CA). Safaricom also wants to stop Telkom Kenya from disposing of its assets, including land and telecommunication equipment. It also wants the court to order Telkom Kenya to either deposit Sh639 million in cash with the court or issue a bank guarantee or insurance bond of an equivalent amount.

Tatu City

The warring shareholders in what would have been Kenya’s single largest real estate project by the private sector are set to carry their fight into the New Year as the court battle rages on. Local shareholders in the Sh240 billion Tatu City project broke their silence this year and came out to fight their claim on the controversial real estate project that has been rocked by a fierce court battle.

Former Central Bank of Kenya (CBK) governor Nahashon Nyagah and businessman Vimal Shah in February sued the project’s majority shareholders, Stephen Jennings and Christopher Baron, through Tatu City and Kofinaf. Also, Renaissance Group has alleged in the protracted court battle that Kenyan shareholders represented by families of Vimal Shah of Bidco, Nyagah and Steve Mwagiru have no stake in the investments. The group has portrayed local shareholders as ‘leeches’ arguing that they have not contributed a single cent in the investment. The fight, which started as a boardroom war has been getting ugly by the day as allegations and counter allegations pile up in court from fraud, underhand dealings to simple theft.
At least eight entities among them companies and individuals own different stakes in the Sh240billion project hidden behind layers of companies registered in various tax havens including Mauritius, Cyprus, and Bermuda.

Imperial Bank Vs former managing director

Imperial Bank filed a case against its former managing director Abdulmalek Janmohamed, accusing the late manager of colluding with 20 companies to siphon out more than Sh34 billion from the bank, the High Court heard. The lender moved to court seeking orders to freeze bank accounts of 20 entities in an effort to recover the money. The case gave the public the first glance into the scale of fraud at the middle-tier bank that forced the Central Bank (CBK) to put it under receivership.

Through Oraro & Company Advocates, the lender argues that the defendants in collusion with the deceased managing director and other senior officers defrauded the bank in excess of Sh34 billion.
The revelations came days after the regulator shocked the banking industry by placing Imperial Bank under receivership on October 13, citing “unsafe and unsound conditions to transact business” linked to Mr Janmohamed’s parallel banking at the mid-tier lender.

The bank had Sh58 billion in customer deposits. To execute the decade-old scheme, Mr Janmohamed enlisted the services of Imperial Bank’s head of credit Naeem Shah and chief finance officer James Kaburu, documents filed at the High Court show.

Mumias Vs former employees

Mumias Sugar Company moved to court in February this year seeking to recover a total of Sh1.1 billion from its former CEO Peter Kebati and three other executives who are alleged to have plundered the sugar miller through an illegal sugar import deal.

Mr Kebati was forced out of the company in June last year following accusations of abetting shipment of cheap sugar from Sudan’s Kenana Sugar Company, which was later re-sold under the listed firm’s brand. Mumias makes the claims in court papers.