Regulator disputes Lakestar Insurance owner’s Sh12bn claim

Insurance Regulatory Authority chief executive Sammy Makove. Photo/Diana Ngila  Nation Media Group

By GALGALLO FAYO

In Summary

• Sammy Makove, chief executive of IRA, said that owner of the insurance firm, John Kipkemboi Kilel, was responsible for its collapse through misuse and siphoning of funds, hence cannot claim compensation.
• Mr Kilel is seeking an award of Sh2 billion for business opportunities lost, Sh3.7 billion for loss of property, capital gains and cash loss as well as Sh6.2 billion for reputation damage.
• The regulator placed Lakestar under statutory management in 2002 before the managers recommended the firm be wound up a year later.

Insurance Regulatory Authority (IRA) has told the court to dismiss a claim of Sh12 billion on it over the collapsed Lakestar Insurance because its owners plundered the business.

Sammy Makove, chief executive of IRA, said that owner of the insurance firm, John Kipkemboi Kilel, was responsible for its collapse through misuse and siphoning of funds, hence cannot claim compensation.

Mr Kilel, a former ally of President Daniel Moi, sued IRA and Mr Makove in November and is asking Sh12 billion compensation arguing that Lakestar winding up was falsely engineered.

READ: Moi ally demands Sh12bn from IRA over fallen insurer

The regulator placed Lakestar under statutory management in 2002 before the managers recommended the firm be wound up a year later.

Mr Makove in court documents has accused Mr Kilel of mismanaging the insurer and taking unsecured loans.

“On or about August, 2001 after an analysis of the accounts of December 2000; it was further revealed that the plaintiff as a claims director had taken…to the tune of Sh170 million as unsecured borrowings from the company in contravention of the Insurance Act,” says Mr Makove, adding that Mr Kilel had also “blatantly” borrowed Sh26.2 million between 1998 and 2001.

“The siphoning out of such sums within a short period without repayments exposed and weakened the financial base of the company.”

At the time Lakestar was placed under statutory management its chairman was the late Ezekiel Barng’etuny, then a nominated MP during former President Moi’s era, while the managing director was Zephaniah Juma Ajowi.

IRA claims statutory manager obtained court orders compelling Mr Kilel to pay back the cash. But the Lakestar owner did not comply.

The shareholders of the insurance firm were also expected to inject Sh20 million to the business.

The regulator alleges Lakestar directors sent it a letter in 2002 claiming it had paid the Sh20 million, which turned out to be false.

IRA disputes Mr Kilel’s claim that at the time company was wound up, it was solvent to the tune of Sh44 million.

The regulator says Lakestar was insolvent to the tune of negative Sh494.7 million against required level of Sh51 million.

IRA denies Mr Kilel’s claim that it frustrated efforts by local investors to inject Sh400 million in 2003, arguing the owners wanted to stagger the capital injection over two years despite the insurer holding a matured debt of similar amount.