Four lessons on money you can learn from Njenga Karume estate woes

Mbatau wa Ngai  The late billionaire Njenga Karume. The estimated Sh500 billion at the core of inheritance disputes filed in courts between relatives of departed billionaires is a cautionary tale of what happens when patriarchs fail to have structured talks with stakeholders on how their empires should be run after they die. 

 The late billionaire Njenga Karume’s family dispute is only one of many that are dragging their way through the country’s lethargic court system that appears to only benefit estate administrators and the
lawyers on both sides. The events unfolding in public would have been comical had the consequences not been so tragic, especially for family members who fall sick as Karume’s granddaughter, Michelle Wariara, and his daughter, Jane Mukuhi Kihoto, found out last year at the cost of their own lives. This was barely seven years after the death of the former Cabinet minister on February 24, 2012. Wariara died in the United States of America in September begging for financial help to pay her medical bills and the family reportedly had to overcome many financial hurdles to bring her body back home for burial.
SEE ALSO :From billionaires to beggars: The tragic fall of Karume's empire
This was said to inform the family decision to bury Jane Mukuhi in Israel where she had travelled to seek treatment. The irony is that this was in stark contrast to the wishes of the veteran politician who had presided over the setting up of a trust and the appointment of trustees with instructions that they look after the welfare of Karume’s eight children and his grandchildren. The Njenga Karume Trust also spelled out how the vast business empire would be managed for the benefit of all his offspring.

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The veteran politician was even said to have challenged his children to ensure they tripled the assets he left behind five years after his death. That would have been a tall order even for top managers with years of experience let alone individuals whose hands were also shackled with the setting up of a trust and nomination of trustees, arguably, without their consent. SEE ALSO :Tycoon’s case highlights need for succession planning
Mistake no.1: Putting relatives as trustees But things appear to have gone tragically wrong soon after Karume’s death. Even before the dust had settled on his grave some of the children leveled all manner of accusations against the trustees and took them to court. It did not help matters that the trustees included some of Karume’s close relatives and one of the widows as this only served to inflame passions. One of the accusations made against the trustees is that they had run down the family assets whose value had shrunk significantly from Sh40 billion. It is instructive that the phenomenon of shrinking assets is common for assets managed by trustees or estate administrators whenever the differences between them and the beneficiaries end up in court as the usual practice is for judges to freeze all business transactions. SEE ALSO :Billionaires who could not manage their mega riches
Disputes also put the individuals running such businesses under so much pressure that they act more as liquidators or undertakers than as managers whose goal is to grow the businesses and make profits for the sake of the beneficiaries. Analysts opine that businesses, like human beings, need oxygen to grow. The failure to earn profits inevitably leads to their shrinking with the very real possibility of eventually collapsing.
Mistake no 2: Not nurturing enough passion for your business in your dependents Equally instructive, problems facing Njenga Karume’s relatives are becoming increasingly common among families whose patriarchs grow business empires but fail to involve their wives and children to ensure they understand their operations that there would be a smooth transition when the time comes. Although Karume’s inheritance disputes appear huge and, at times, intractable, they cannot be compared to the ones swirling around the late Jomo Kenyatta’s allies and close confidants, Mbiyu Koinange and James Kanyottu.
SEE ALSO :Four lessons on money you can learn from Njenga Karume estate woes
Koinange, a long-serving Minister of State in Kenyatta’s government and Kanyottu, a former boss of intelligence died and left behind estates estimated at Sh17 billion and Sh20 billion shillings, respectively. Their families have been locked in fierce inheritance disputes that they have failed to get letters of administration that would give them authority over the assets left behind by their departed patriarchs. The result is that the Unclaimed Financial Assets Authority (Ufaa), a department under Treasury, has taken over the idle assets. The populist politician JM Kariuki, who died in 1975, is yet another prominent individual whose assets Ufaa took over following disputes pitting the first wife against her two co-wives and their children. The family of the late John Michuki, a former Interior Minister whose earlier career included a stint at the Treasury as Permanent Secretary and also served as the first executive chairman of KCB Bank has also not escaped the suffocating net enveloping prominent families. To be sure, the family had appeared as though it would be an exception until Michuki’s youngest daughter, Yvonne Wanja, dragged her older siblings to court accusing them of accumulating huge debts at Nairobi Hotels Limited, which holds a big chunk of Windsor Golf Hotels and Country Club shares. Her fears are that the huge debts might diminish the value of her shareholding in the estate which was estimated at Sh60 billion.  
Mistake no 3: Keeping your property and business dealings information from close family Some analysts suggest that the reason behind the failure by the founders of these huge businesses to share the nitty-gritty of their operations with members of their own families may be traced back to the way they acquired their wealth. It has not escaped these analysts that the majority of these tycoons had ties to governments of the day which may have given them opportunities to make money in ways that might not have stood a closer scrutiny. In hindsight, the tycoons’ fear of a closer look at how they acquired their wealth in a country where the majority of its citizens are wallowing in poverty, is now working against the best interests of their families— the very people for whom they created the business empires. Be that as it may. Even after the court battles the businesses must be run in a way that brings maximum benefits to the living. Family businesses around the world are also known to struggle with governance, leadership transitions and even their very survival after their founders die.

This suggests that today’s empire builders could learn from experiences of their peers in other countries. The first lesson is that the patriarch must open and sustain lines of communication between him and his family. This would allow him to understand his children’s strengths and weaknesses and, therefore, agree on those who would join the company and those who would pursue other interests. Mistake No 4: Not being clear while alive, how your property will be shared The family would then need to agree on how both groups would benefit from the business. This agreement would form part of the contracts signed by all the parties during the lifetime of the patriarch. The family members who would join the business would need to start working in the firm early to ensure they learn the requisite skills and gain the management experience under the watchful eyes of the founder. In the event that no family member is either qualified or interested in taking over the business, the better option would be to sell it and distribute the proceeds to the beneficiaries while the founder is still alive and able to oversee the process. This would enable the beneficiaries to follow their own preferred paths and save them from avaricious trustees, administrators and a horde of grasping lawyers who see a chance to make easy money by fueling or exacerbating inheritance disputes.