Ponzi scheme fells Mauritius bank tied to Britam director

Corporate News

Mr Dawood Rawat, a Britam director. PHOTO | FILE 

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• Bramer Banking Corporation (BBCL), which is part of Dawood Rawat’s Seaton Investment conglomerate, had its licence revoked by the Bank of Mauritius last Thursday.
• The decision was linked to a $693 million (Sh64 billion) Ponzi scheme whose discovery led to a run on the bank, leading to a serious liquidity crisis.
• Mr Rawat is the single largest investor in Britam, which is listed on the Nairobi Securities Exchange (NSE).

A Mauritian bank associated with Britam director and top shareholder Dawood Rawat has lost its licence after it was found to have been running a Ponzi scheme.

Bramer Banking Corporation (BBCL), which is part of Mr Rawat’s Seaton Investment conglomerate, had its licence revoked by the Bank of Mauritius last Thursday.

The decision was linked to a $693 million (Sh63.7 billion) Ponzi scheme whose discovery led to a run on the bank, leading to a serious liquidity crisis.

“The Bank of Mauritius has appointed PricewaterhouseCoopers (PwC) as receivers for BBCL,” Reuters news agency reported the Prime Minister of Mauritius Anerood Jugnauth as having announced on Friday.

“We had to act rapidly because we are in (the) presence of a Ponzi scheme of about 25 billion rupees ($693 million),” he added without giving further details.

A Ponzi is a scam where investors are promised or paid unrealistic returns from cash paid in by new members, necessitating an endless recruitment drive that eventually proves unsustainable. It is similar to a pyramid scheme in the way it handles cash outflows but differs in the way it is structured.

The development is expected to shake Mr Rawat’s business empire, which only recently tried to raise Rs350 million (Sh885.5 million) from British American Investment Co (Mtius) to save the bank.

“On March 31, BAI Co (Mtius) had, by way of a letter copied to the bank informed BBCL of its willingness to invest Rs350 million in BBCL subject to all regulatory, corporate and shareholder’ approvals,” the Bank of Mauritius said in a statement.

The Bank of Mauritius, which regulates the Island nation’s banks, also noted that an article appearing in the press in Mauritius on April 4 had alleged that Mr Rawat had taken steps to transfer Rs1.4 billion (Sh3.5 billion) from Kenya to the troubled bank.

The central bank, however, said that such a commitment was never communicated to it.

“At no time did BBCL or Mr Rawat, for that matter, signify its or his intention to bring in Rs1.4 billion as alleged in the article,” the central bank said.
The Mauritian is the single largest investor in Britam, which is listed on the Nairobi Securities Exchange (NSE).

His interest in the financial services company, held through two investment vehicles, stands at 20.3 per cent.

He is followed by five Kenyan billionaire investors, who are his long-term co-investors in the firm including Peter Munga and Jimnah Mbaru who have 16.9 per cent and 10.2 per cent stakes respectively.

Ms Jane Michuki has a 9.2 per cent interest while Equity Bank’s CEO James Mwangi owns a 5.3 per cent stake. Britam’s chief executive Benson Wairegi holds a 5.1 per cent equity in the company.

Reacting to the news of the Ponzi scheme, Britam Kenya clarified that apart from common directorships with BAI (Mtius) and Bramer Banking Corporation, and a shareholding held at arm's length, there is no other relationship of concern.