Suit reveals high stakes in real estate projects

Property firm Acorn Group has accused Britam’s subsidiary, British-American Asset Managers Limited, of plotting a forceful takeover of one of the most ambitious real estate development partnerships in the East African region.

Acorn chief executive Edward Kirathe, responding to a multi-billion-shilling suit, said Britam had already acquired a 25 per cent stake in Acorn but was pushing to increase its shareholding by trading off Britam and Acorn shares in violation of their original agreements.

As Acorn filed their defence, they suffered a setback after their move to have the order freezing their accounts lifted hit a brick wall.

Acorn filed an application on Friday before Justice J. K. Sergon seeking to have orders issued by Justice David Onyancha lifted.

But Justice Sergon declined to set aside the orders and sent them back to Justice Onyancha who issued the orders in the first place.

Britam moved to court early this week seeking to recover Sh3.9 billion from former executives who recently quit its asset management unit accusing them of fraudulently transferring substantial sums of money to bank accounts held by Acorn.

SYPHONED MONEY
The four who include Mr Edwin Dande (chief executive), Ms Elizabeth Nkukuu (portfolio manager), Mr Shiv Arora (investment analyst) and Mr Patricia Wanjama (head of legal) are accused of wiring out of Britam Sh1.16 billion in five tranches to multiple accounts held by Acorn at Chase Bank and a further Sh2.78 billion to seven Acorn subsidiaries.

Britam accuses the employees of using their positions to syphon off the money from the company and forming rival companies dealing in similar services.

Mr Justice David Onyancha ruled that pending the determination of the suit by British-American Asset Managers Limited and Baam Advisory LLP, no money should be withdrawn from the four former managers’ accounts or their private company accounts.

The dispute between Britam and its former top managers is a rare breach of trust suit in banking and investment.

The judge also put a caveat on several properties registered in the private companies’ names, ruling that they should not be disposed of, leased or mortgaged until the case is concluded.

The properties include prime parcels of land in Nairobi and Machakos counties.

Reacting to the takeover bid, Mr Kirathe, in a 15-page sworn affidavit, said he rejected proposals made by Britam’s managing director Benson Wairegi at various meetings between May and July this year on grounds that Britam had not surrendered to the Acorn Group huge chunks of land acquired in Ngong, Nyangumi and Mlolongo.

“Once Britam realised that Acorn was not willing to accede to Britam’s demands that Acorn sell or trade shares to enable Britam acquire a larger equity interest, Britam orchestrated a deliberate plot to arm-twist Acorn by unilaterally stopping funding,” Mr Kirathe said.

CRIPPLING ARCON
He said the move was intended to cripple Arcon and failed to honour obligations with vendors who it had entered agreements to buy land as envisaged under the shareholders agreement.

Mr Kirathe said the Britam principals, who include billionaire investor Peter Munga, investment banker Jimnah Mbaru and Mr Wairegi embarked on a campaign to paralyse the proposed projects by the Acorn-Britam partnership by suspending funding.

This, he said, was in breach of their mutual agreement to settle arising disputes through negotiations and arbitration.

Mr Wairegi and Mr Mbaru represent Britam on Acorn’s 10-member board. Mr Mbaru, Mr Wairegi and Mr Munga are also among the largest individual shareholders in Britam with 11.59 per cent, 5.30 per cent and 3.97 per cent respectively.

The scheme, disclosed Mr Kirathe, escalated when Acorn decided to work with the key management team that quit British-American Asset managers Ltd.

 “Upon Britam’s default in meeting its funding obligations, Acorn took urgent steps to obtain an alternative facility from Chase Bank to ensure compliance in meeting the commitments it had already entered into for the acquisition of various properties.

Acorn would not have taken this step if it was not acting in the best interests of the partnership or if its intention was to defraud Britam,” Mr Kirathe pointed out in his replying affidavit.
JOINT VENTURES
He said the Acorn-Britam partnership had invited land owners as Special Purpose Vehicles (SPV) and entered into joint venture agreements to steer the real estate development projects.

These were Edenvale Developments LLP, Starling park properties LLP, crimson Court Development LLP, Sinopia Properties LLP, Mikado Properties LLP, Crescent Developments LLP and Spring Green Properties.

Britam created Baam Advisory LLP to manage Baam Real Estate Fund (BREF) from which the SPVs were funded.

According to Mr Kirathe, Britam’s affiliate had similarly signed the joint venture agreements with the SPVs and the monetary contributions and mobilisation of funds by third parties had been approved.

Mr Kirathe further observed that Mr Dande and Mr Mbaru represented British-American Asset Managers Ltd on the Acorn Strategy and Investments Committee that approved the structure of the deals that were approved. 

“It is, therefore, inconceivable that British-American Asset Managers and Baam Advisory LLP could have paid out more than Sh3billion towards the financing of the various SPVs without the knowledge and approval of the highest echelons of British American Investments Company (K) Ltd, including the MD Mr Wairegi,” Mr Kirathe said.