One morning on May 9, 2016, two months after Peter Munga had executed his controversial “Manowari Project” that left Mauritian insurance policyholders Sh5.5 billion poorer, the billionaire businessman met a visitor from the island nation.
The meeting followed the execution of the controversial project, which saw the businessman purchase 452.5 million shares of Britam Holdings from the government of Mauritius for 2.4 million Mauritian rupees (Sh6.1 billion in the current exchange rate), according to an inquiry report.
The shares had been seized by Mauritius government in 2015 from its citizen Dawood Rawat Bramer for running a Sh71 billion Ponzi scheme. Munga’s high-profile visitor was Efsar Ebrahim, the ex-deputy managing partner of the auditing firm BDO.
Although not a transaction advisor, BDO was nonetheless involved in the transfer of the Britam shares to a nondescript outfit owned by Munga and his family, according to a presidential inquest by the United Nations Economic and Social Commission for Asia and the Pacific on the sale of Britam shares belonging to BAI Company. The shares would, later on, be sold to Munga’s Plum Investments for 2.4 billion Mauritian rupees (Sh6 billion at current exchange rate) in an intricate scheme that has baffled the UN agency.
The deal saw the special administrators bypass three bidders – the World Bank Group’s International Finance Corporation (IFC), Barclays Bank (now Absa) and South Africa’s MMI Holdings – which were willing to give between 4.3 billion Mauritian rupees (Sh11 billion) and 4.5 billion Mauritian rupees (Sh11.5 billion) compared to Munga’s and his associates’ offer of 2.4 billion Mauritian rupees (Sh6.1 billion).
BDO, which has a subsidiary in Kenya, had earlier given Bramer’s financial statements for the year ending 2013 a clean bill of health despite glaring financial impropriety, according to the commission. This, the commission found, pointed to a clear conflict of interest.
Before the Mauritian government took over, Bramer had a long-standing relationship with Britam as a key shareholder and Mr Munga as its chairperson.
At first, BDO’s former deputy managing partner, Ebrahim, denied ever meeting anyone in Nairobi during his visit, insisting that his only mission was to find out the shareholding structure of Britam, something the commission stated would easily have been done on the phone.
But Ebrahim did actually meet Munga, the commission found out.
Earlier, when Munga and his team visited Mauritius, it was Mr Ebrahim who linked the Equity Bank founder with the then Mauritius Minister of Financial Services, Good Governance and Institutional Reforms Roshi Bhadain.
At first, Bhadain insisted that Munga and his entourage had just paid him a courtesy call of five or so minutes. Again, the commission would learn that it was a crucial meeting.
The commission would even retrieve an email that Munga had written to Bhadain touching on the same meeting and which it reckons is at the heart of Munga’s Manowari Project.
In Swahili, manowari means submarine.
In the email written on November 14, 2015 and copied to BDO, Munga tells the minister that “we will continue engaging BDO & Co, the special administrator on the lines agreed during our meeting.”
The special administrator included Yacoob Ramtoolah, who also worked at BDO, and Georges Chung.
The Commission insisted that the two parties continued to engage after this meeting until the deal was sealed in March 2016, but details of their engagements remain scanty. Nearly everyone in Mauritius, according to the report, was kept in the dark – the Cabinet, parliament, and the public.
And no one in Nairobi was uttering a word. Not even the Office of Attorney General.
“The Kenyans have not cooperated with the commission’s request for mutual legal assistance,” said the UN agency. The commission wants Kenyan witnesses probed for refusing to answer or omitting to answer fully and satisfactorily all questions put to them.
In the course of its sittings, the commission had received an anonymous tip that the difference between the 4.3 billion Mauritian rupees that was to be paid and the 2.4 billion Mauritian rupees that Munga finally paid could be traced to UAE Bank. But they never made any progress.
This was as a result of the choice of currency in the transaction – the Kenyan shilling.
The commission reckoned that had the transaction had been done in dollars, the US government “would have been able to trace any foreign account where kick-backs may have occurred.”
But according to the commission, the Kenyan tycoon, who had all along been acting as an agent for some Kenyan investors, had played the Mauritian government. “He was, in fact, the principal all through but projecting himself as an agent of a number of investors who never, in fact, existed and using Kenyan officials to have his way,” read the 352-page report.
An intriguing fact is how, up to the end of the negotiation, the “Kenyan shareholders,” were willing to match the price given by MMI Holdings only for them to backtrack at the last minute. Their only condition was that they would pay the money over a longer period of time. It is an issue that might have landed some Mauritian officials in hot soup, with the commission recommending that some the officials be investigated for forgery.
In the course of the commission’s work, a copy of the notes of the meeting was submitted to it by first, Vidianand Lutchmeeparsad, the then Permanent Secretary in the Mauritian finance ministry, during his interrogation.
Mr Lutchmeeparsad, noted the commission, talked of the Kenyan shareholders willing to match the South African investors’ price.
Another copy produced by the late Sir Anerood Jugnauth in his deposition on March 22, 2018, talked of how “Kenya are willing to buy the shares at the same valuation as MMI Holdings had offered, but they wanted a longer payment period.”
However, BDO, Bhadain, and his political advisor Akilesh Deerpalsingh were not aware of the two letters. Mr Deerpalsingh is reported to have forged the minutes, with his copy reading that “Kenyans are willing to buy shares at a mutually acceptable valuation, but they wanted a longer payment period.” Deerpalsingh, well before any suggestion was made by the commission that the matter was one for criminal investigation, stated that he would proceed to the police and report the matter.
“It looked much more like the thief being run after himself running after a phantom thief to divert attention,” said the commission.
But why would Deerpalisngh attempt to forge the minutes?
The answer, said the commission, can be found in a high-level meeting held on November 18, 2015 at the Britam Centre in Nairobi at 5pm on the impending sale of BAI’s shares in Britam. The meeting was chaired by Munga.
High-level seminar
Also present on the Kenyan side was the then Controller of Budget Agnes Odhiambo and Wanyambura Mwambia, deputy director of economic affairs in charge of tax administration and private sector issues in the Finance Ministry.
The Mauritian government has not sent someone that Munga and his team were familiar with. If anything, Mr Lutchmeeparsad found himself in the meeting by accident.
Between 17 and November 20, 2015, he was nominated by the Mauritian government to attend a high-level seminar on livestock policy and public investment.
A day before he left, the then Minister in the Ministry of Finance and Economic Development Seetanah Lutchmeenaraidoo along with his counterpart Dharam Manraj, proposed to Mr Lutchmeeparsad to seize the opportunity of his visit to Kenya to meet Britam directors and discuss the sale of the 452.5 million shares.
He was told to inform the directors of the offer from MMI Holdings for the purchase of the 24 per cent stake in Britam Kenya for a price of 4.3 billion Mauritian rupees and to see whether they could match the price or do better than the South African firm. Also present in the meeting was Sandeep Khapre, the representative of BDO office (Kenya).
Lutchmeeparsad is reported to have passed the message to Munga, adding that Mauritius urgently needed the 4.3 billion rupees to pay back a loan that the Mauritian government had taken from its central bank.
Munga is reported to have said that Britam was an important institution in Kenya and would not accept a foreign investor like MMI Holdings to purchase the shares as they had their own strategy and vision, which might not be compatible.
Thereafter, Munga along with the officials left the meeting for 15 minutes and met in another room. When they returned, Munga told the Mauritian official that “there is a probability that the Britam Kenya shares would be purchased by themselves, by their shareholders at the same price of 4.3 billion rupees.”
On the very evening after the meeting, Lutchmeeparsad remembers having dinner with Mr Khapre and another Mauritian government official.
“The dinner was organised in the form of a celebration for the success that the Kenyan side namely Mr Munga and his directors had accepted to offer the same price as MMI Holdings for the sale of shares of Britam Kenya,” said the commission.
Then things changed. In the first week of March 2016, Ebrahim said he received a call from Gladys Karuri, Britam finance director, that she would be accompanying Munga, who would be representing a pool of investors to sign a memorandum of understanding relating to the sale of Britam shares.
Munga and his team stayed in Mauritius for four days and managed to sign the MoU on March 12, 2016. It was on a public holiday when all the citizens of Mauritius were celebrating independence day.
That night, Munga and his “pool of investors” flew back to Kenya contended for having signed a deal to buy the shares at a reduced price of 2.4 billion rupees (Sh6.1 billion).
The “pool of investors,” it turned out, was none other than Munga, who had bought the shares through a vehicle known as Plum Investments that he had hurriedly set up almost the same day that the deal was struck, the commission noted.
The commission was struck by how the Mauritian side failed to conduct any client due diligence.
“Barclays was known. MMI Holdings was known. IFC was known. They stand tall in the open market. But a “pool of investors?” posed the commission.
On March 10, 2016, Ms Karuri sent another email to Ebrahim, explaining why they had settled on the 2.4 billion rupees payment, in what the commission described as “a clear market strategy used by financial strategist on behalf of Munga.”
“Before the BAI matter came up in April 2015, the share price of Britam was at Sh28 per share. In contrast, the share price yesterday was Sh11,” said Karuri.
She added: “From various analysts who actively cover the Kenyan insurance market, there is currently a sell recommendation on the stock with expected negative returns.”
The then CEO Benson Wairegi also weighed in on the matter.
“The shareholders have maintained that the deal only makes sense at a maximum price of Sh16, which is anyway much higher than the price advised,” said Mr Wairegi, adding that all the modelling done is based on a projecting support a premium of 15 per cent.
MMI Holdings was to pay a premium of 50 per cent. But the commission insisted the use of the fall in the share price was a red herring. “Mr Peter Munga obviously had with remarkable ruse walked out of his 4.3 billion rupees offer and able to drive home to the Mauritians that the share price had fallen in between,” said the commission.
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