Genesis of Britam’s Sh4bn dispute with former bosses

Britam Group Board directors Agnes Odhiambo (left) and Peter Munga during the firm's annual general meeting held at the Safari Park Hotel in Nairobi on June 20, 2014. PHOTO | FILE 

In Summary

• Court has ruled that four former managers of the investment company have, on the face of it, a case to answer

By ABIUD OCHIENG
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Last week’s order by Mr Justice David Onyancha to indefinitely freeze bank accounts associated with former Britam managers accused of Sh4 billion fraud ushered the country to what could be a high profile and most fought corporate battle.

The judge ruled that on the face of it, the four former managers, Edwin Dayan Dande (managing director), Elizabeth Nailantei Nkukuu (senior portfolio manager), Patricia Njeri Wanjama (head of legal and assisting company secretary) and Shiv Arora, (investment analyst) have a case to answer.

The four have been accused of illegally transferring Sh4 billion from British-American Investment Company (Britam) accounts to other companies where they have interest.

In his ruling, Judge David Onyancha granted permanent orders stopping the former managers, their company, Cytonn Investments Management Ltd, and other companies involved in the matter, to withdraw money from bank accounts until the case is concluded.

The companies whose accounts are to remain frozen are Acorn Properties Ltd, Acorn Investments Ltd, Acorn Group Ltd, Edenvale Developments LLP, Starling Park Properties LLP, Crimson Court Development LLP, Sinopia Properties LLP, Mikado Properties LLP, Crescent LLP and Spring Green Properties LLP.

Britam’s acting chief executive Jude Brian Oluoch said the former managers conspired to mobilise third parties to contribute to real estate developments undertaken and controlled by other companies while alleging that they were sanctioned by Britam.

“Only a few days after their well-choreographed resignations, Mr Dande, Ms Nailantei and Ms Njeri incorporated Cytonn Investments Management Ltd, with themselves as directors and shareholders and Mr Arora as an associate,” Mr Oluoch said.

He said that on or around August 12, “having secured the seed capital for real estate development projects undertaken by other companies, from the funds illicitly and fraudulently transferred from us, Acorn Properties Ltd and Acorn Investments Ltd, then issued breach notices of the purported joint venture agreements but retaining the funds they illegally obtained from us.”

Mr Dande, formerly managing director British-American Asset Managers (BAAM) Ltd, however, says in his court papers that the transactions was known to top Britam management and should not therefore be termed as a fraud.

He said the partnership with Acorn Group Ltd (AGL), was because AGL was good in property development and had been involved in numerous prominent projects in the region but had problems securing funding.

Some of the projects AGL has undertaken are Equity Centre, Britam Towers, Deloitte headquarters and Coca-Cola headquarters.

“We informed BAAM’s board that we were going to develop structured real estate products, for high net worth investors, institutional investors and investment vehicles. This was a deal between BAAM and AGL, and it specified each other’s role,” Mr Dande said.

However, when the matter came to the asset management’s investment committee for approval, the board without explaining, “felt that a better strategic fit would be made if the investment was made by the Britam group, which is the holding company.”

He said the board later approved the investment but referred it to the holding company as the investor, thereby denying BAAM investors the opportunity to share in the attractive Acorn investment opportunity.

“This was the beginning of the conflicts in AGL, BAAM and Britam group with regard to dealings with Acorn,” said Mr Dande.

He said the two parties to the transaction, BAAM and Acorn, wanted to develop real estate for third party investors and this was in no way detrimental to the group because they too could participate alongside other investors.

Nevertheless, the management proposed a structure, which was also accepted by AGL, in which the investing entity in AGL would be Bramer Properties LLP, and Britam group would be the investing entity in Bramer while BAAM would have sole management rights over Bramer.

“Unfortunately, as soon as the arrangement with AGL had been finalised with the knowledge and approval of everyone concerned, much to my surprise and chagrin, I started hearing imprecise murmurs from some members of the BAAM board and management team as well as the group who were not happy with the structure of the transaction,” said Mr Dande.

Despite the friction, BAAM team continued to work with Acorn, identifying sites, setting up joint ventures and funding them.

Dande said that it later emerged that the main issue in the dispute was the interest of the group, which was not satisfied with the returns it was getting through its investment in BAAM.

“Britam wanted a bigger stake in Acorn and the Britam group managing director was aware of the deal between Acorn and BAAM,” Mr Dande said.

Throw in the towel

He said on July 31, 2014, they wired from BAAM Real Estate Fund, as equity disbursements, the sums that were due with respect to the various Special Purpose Vehicles, with respect to the various real estate deals that were pending.

However, by August 2014, other members of the real estate team including Mr Dande, had essentially thrown in the towel and resigned to go start another alternative investment shop.

“The tension around Acorn made work environment too difficult. I was asked to keep my resignation confidential and try to work out other issues but I said the issues were about philosophy and principle and it was not possible to reconcile,” said Mr Dande.