Alexander Forbes faces subsidiary sale probe

Sundeep Raichura, Alexander Forbes Chief Executive. PHOTO | SALATON NJAU | NMG 

By BRIAN WASUNA

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Summary

• The Directorate of Criminal Investigations (DCI) is investigating the transaction’s legality following a complaint by Zanele, which is fighting off Alexander Forbes’ attempts to recover a disputed Sh554 million loan from the local firm.
• Details of the probe have emerged in a suit filed by Zanele to stop Alexander Forbes from recovering the money.
• The suit has shed some light on the sale of Alexander Forbes Healthcare Limited which has remained a closely guarded secret since 2012.

International financial consulting firm Alexander Forbes is facing investigations over the sale of its Kenyan healthcare arm to a local investor, Zanele Investment Holdings Limited.

The Directorate of Criminal Investigations (DCI) is investigating the transaction’s legality following a complaint by Zanele, which is fighting off Alexander Forbes’ attempts to recover a disputed Sh554 million loan from the local firm. Details of the probe have emerged in a suit filed by Zanele to stop Alexander Forbes from recovering the money. The suit has shed some light on the sale of Alexander Forbes Healthcare Limited which has remained a closely guarded secret since 2012.

Alexander Forbes is yet to respond to the suit, but Justice Grace Nzioka has granted it until July 14 to file a replying affidavit. Zanele bought a majority stake in Alexander Forbes Healthcare Limited in 2012 as the South African firm exited the sector citing regulatory requirements. The firm now says that Alexander Forbes failed to reveal to the Insurance Regulatory Authority (IRA) intimate details of the share transfer, the loan at the centre of the dispute and other facts when completing the sale.

The South African firm held that its move was advised by an IRA directive requiring companies offering medical insurance to either convert to insurance companies or revert to brokerage services by the end of December 2012.

“The entire transaction was unlawful due to deliberate misrepresentation of material facts to the IRA on the sale of shares to Zanele, obtaining approval for the transfer of business from the Competition Authority by misrepresentation and failure by Alexander Forbes to fully fund its liabilities before exiting the business thereby exposing policyholders.

The local firm says Alexander Forbes agreed to pay it Sh524 million to cover liabilities that the healthcare arm was suffering at the time. It claims that the funding was however disguised as a loan to Zanele.