The immediate former Nairobi Governor Evans Kidero is to face legal action from the Capital Markets Authority (CMA) over Kshs. 3.1 billion that was looted from the giant Mumias Sugar Company during his tenure as Chief Executive officer of the company.
According to a detailed press release from the Authority the other former senior manager who is targeted is Paul Kimutai Murgor and former member of the board of directors peter Hongo who were found directly implicated in the loss of the billions after a forensic audit commissioned by the CMA.
The statement signed by MPRSK head of Communications Anthony Mwangi reads in part: “The Capital Markets Authority conducted a forensic investigation through J Miles & Company. The forensic auditors reviewed the financial and governance operations of the company for ten years, between 2006 to 2016.”
It goes on: “Following a review of the report and the supporting evidence provided by J Miles & Co, the Authority initiated several enforcement actions in July 2017 against three former senior managers and one former board member of Mumias Sugar Co Limited.”
Mr. Mwangi said that the inquiry revealed that between 2009 to 2012, discounts amounting to Kshs. 3.1 Billion were granted to select customers of MSC (at the point of sale or subsequently through credit notes), one of whom,YH Wholesalers, was granted discounts of Kshs. 1.6 Billion.
“It was further noted that out of the discounts granted, discounts above the Board approved rate of 10 % cumulating to Kshs. 634 Million were granted contrary to the MSC Sugar Price Administration Policy,” he said.
He said the Investigation established that the former CEO and senior members of the MSC Management, devised a scheme to fraudulently embezzle the company’s funds through under-billing specific customers who then made “kick-back” deposits in specific bank accounts for distribution amongst themselves as well as their associates.
The statement states: “In one such bank account assessed to have been used in this arrangement, deposits amounting to Kshs. 151 Million were made to a bank account belonging to Mr Hongo during the period 2010 – 2014. The deposits into the bank account were received from the select customers of MSC who were granted special rates of discount.”
“The funds deposited in the bank account were noted to have been subsequently disbursed to the select group of senior members of the company’s management and their associates,” said the statement.
The Authority’s investigations on other bank accounts of senior employees of Mumias Sugar Co Ltd, established they that may have been used in the scheme were ongoing until their owners moved to court and were granted orders to halt the investigation of their bank accounts until their matters are heard and determined.
Mr. Mwangi said that the former board member’s case was dropped after satisfactory answering in writing to the allegations raised in the notice to show cause.
He said the other three Dr. Evans Kidero, the former managing director, Mr. Peter Hongo, the former head of Sales and Mr. Paul Murgor, former commercial director did not respond to the Notice to show cause but instead sued the Authority seeking orders to stop the Authority from investigating their bank accounts.
The notices from the CMA were served to the individuals in July 2017, but they immediately moved to court to stop their accounts being investigated until when their suits had been heard and determined in an apparent effort to block or delay the authority’s investigations through legal action.
Mr. Mwangi said that on Conflicts of interest, the Authority established that the former CEO had close business and personal relationships with several contractors hired by MSC in transaction involving massive cash outlay without disclosing the said relationship to the board of MSC.
Those contractors include Schindler Ltd which in which in which in which in which in which in which in which in which in which in which in which was awarded the tender to install lifts in the new administration block at the contract sum of Kshs 9,288,854.00. Mr. Symmon Kidero, former CEO’s brother, was a director in in the Schindler Ltd Board.
He said: “From 2011, Phillip Kung’u, whose firm Otieno & Kung’u Associates, was awarded a Direct Tender as project consultants in construction of the new administration block. The agreement signed between Mumias and Otieno &Kung’u Associates provided that the firm would receive 10% of the construction costs with initial costs being 423 million.”
The CMA said that Mr. Wilfred Madung, who was awarded the tender for the water bottling project through the company Equitech Limited. Equitech Limited was awarded the tender without meeting the prequalification requirements for shortlisting among the firm which submitted Bids for consideration by the company.The contract price for this project had been set at USD 3.4 Million.
