CMC gives up bid to recover billions in Jersey slush fund

Corporate News

CMC Holdings chief executive Mike Kass. PHOTO | FILE 

By DAVID HERBLING

In Summary

• Mr Mark Kass, the new chief executive of CMC, said the company is not interested in pursuing the offshore accounts that were allegedly setup by former directors and shareholders.
• Instead, he said, Dubai-based firm Al Futtaim – which wholly acquired CMC Holdings in a Sh7.5 billion deal – will focus on expanding market share and growing earnings.
• The decision should come as a big relief to former long-serving directors who were named as having benefited from the secret accounts.

The new owners of motor dealer CMC Holdings have given up the fight to recover billions of shillings that former directors allegedly siphoned from the company and stashed in secret Jersey Island account

Mr Mark Kass, the new chief executive of CMC, said the company is not interested in pursuing the offshore accounts that were allegedly setup by former directors and shareholders.

“We want to leave that legacy behind and progress with our vision for the company. These things happened a long time ago and we frankly don’t know what exactly happened,” he said.

Instead, he said, Dubai-based firm Al Futtaim – which wholly acquired CMC Holdings in a Sh7.5 billion deal – will focus on expanding market share and growing earnings.

The decision should come as a big relief to former long-serving directors who were named as having benefited from the secret accounts.

They include Joshua Kulei, who served as private secretary to former President Daniel Moi, former Attorney-General Charles Njonjo, billionaire Jeremiah Kiereini, former CMC MD Martin Forster and CMC founder (deceased) Jack Benzimra.

Al Futtaim’s change of heart comes barely a year after CMC hired investigators and lawyers to recover the funds allegedly stashed away in foreign accounts by past directors.

A forensic audit by South African firm Webber Wentzel established that the Jersey secret slush fund had received £8.6 million (Sh1.2 billion) in commissions between 1977 and October 2013.

CMC delisted from the Nairobi bourse early this year following the acquisition by the Dubai firm.

Mr Kiereini is, however, not out of the woods yet as he is currently in court fighting the Capital Markets Authority (CMA), which accuses him of fraudulently receiving Sh65.2 million during his tenure as CMC chairman.

READ: Capital markets watchdog revives fight with Kiereini over CMC’s millions

CMA last month told the High Court that it had noticed aggressive selling of Mr Kiereini’s portfolio at the Nairobi Securities Exchange-listed firms, interpreting the move as an attempt to frustrate its recovery plan.

Claims of financial impropriety have forced the capital markets watchdog to freeze the trading of shares owned by Mr Kiereini at the Nairobi bourse.

The CMA says it lifted the ban in May to facilitate the buyout of CMC by Al-Futtaim Group, a deal from which Mr Kiereini earned Sh947 million for his 12.5 per cent stake. The regulator says Mr Kiereini used the opportunity to sell his shares in other companies.

Audit reports say that CMC directors accumulated the slush funds by colluding with suppliers to overcharge CMC on invoices