KRA boss sucked into firm ownership row

A shareholding dispute in a Nairobi-based company has sucked in chief taxman John Njiraini in a complex case involving a tax dispute, an offshore company and proxy directors.

Court papers indicate that Mr Njiraini, the Kenya Revenue Authority Commissioner General, has been sued by a city businessman, Mr Njama Wambugu, for allegedly initiating tax inquiries and demands with ulterior motives, and putting pressure on the trader to forgo his shareholding in Space and Style Ltd, a multimillion-shilling supplier of building materials.

INVESTIGATIONS

But Mr Njiraini insists that he is not a shareholder in Space and Style, arguing that Mr Wambugu is using the court to blackmail him into helping the trader stop tax-related investigations into his firms.

“To my mind, these malicious and unfounded allegations are driven largely by my refusal to accede to requests by the 1st Petitioner, delivered through two emissaries between August and September 2018, seeking my intervention to halt tax investigations, said to have been in progress at the time against the petitioners,” Mr Njiraini says in court papers.

Mr Wambugu swore an affidavit that was filed at the High Court on March 4. 2019.

In his affidavit, in response to a petition by Mr Wambugu and four companies — Roser Roofing East Africa, A One Healthcare Limited, Tradeline Express Kenya and Citigates Development — Mr Njiraini says that KRA is pursuing over Sh159 million in taxes from the businessman’s companies.

The chief taxman claims in his affidavit that emissaries sent by Mr Wambugu threatened to drag Mr Njiraini’s name in the mud if he did not stop tax investigations into the four companies.

In his affidavit, Mr Wambugu, a shareholder in Space and Style Ltd, alleges that Mr Njiraini is a “proxy” shareholder of Decamis Ltd, a claim Mr Njiraini had denied in a previous letter written by his lawyers, Waweru Gatonye and Advocates.

TAX ARREARS

While Decamis Ltd is registered in Hong Kong, Mr Wambugu insists in various court papers that Mr Njiraini appointed Ms Cecilia Muhoho and Ms Lucy Kimani as his liaison persons, and that he (Njiraini) was brought on board Space and Lifestyle Ltd after helping the company resolve a multimillion- shilling tax dispute.

Registration documents filed in court show that Decamis Ltd is owned by Ms Lucy Kimani Mumbi and Ms Mary Wambui Njoroge, and it is not clear whether they are related to Mr Njiraini.

The KRA, in its response, says it accorded Mr Wambugu a fair hearing even as it demanded the tax arrears.

KRA says Mr Wambugu and his firms underpaid taxes, which the State agency says was discovered through intelligence gathering.

In the case of Tradeline Express, KRA says the firm owns properties but did not declare any rental income, and that it under-declared its sales.

For Roser Roofing, KRA says the firm under-declared income for VAT and corporation tax.

A One Healthcare has been accused of not paying VAT on imports, and of having vehicles that are not commensurate with the taxes the firm has paid.

Citigates, KRA holds, has not filed returns despite being registered for the same since 2007.

KRA wants the levy disputes left to the Tax Appeals Tribunal for determination.

PENDING

Before Decamis Ltd was brought in as a shareholder in Space and Style, the court documents say, some KRA officials had solicited Sh15 million to lower the Sh439.9 million demand for unpaid levies.

Space and Style founders N. Wambugu and Ms Winfrida Wanjiku Ngumi are said to have reported the officials’ action to the Ethics and Anti-Corruption Commission (EACC) on the recommendation of Mr Njiraini.

A KRA domestic taxes department manager, Mr Robert Maina Ngumi, was charged in the Milimani Chief Magistrate’s Court. The case is still pending.

While the tax issues were eventually resolved through an agent, Mr Edward Mwachingwa of Viva Africa Consulting, Mr Wambugu now claims that Mr Njiraini agreed to help only in resolving the tax issue on condition that he would be given shares in Space and Style.

Mr Wambugu alleges that the KRA boss promised to inject capital into Space and Style, and to procure lucrative contracts for the company.

As a result, the two original Space and Style directors ceded 2,500 shares each and transferred them to Decamis Ltd, a Hong Kong-registered company.

The Nation has seen registration documents for a related company, Decamis Global Ltd, also registered in Hong Kong.

Decamis Global is owned by Decamis Ltd (990 shares), Ms Lucy Mumbi Kimani (10 shares) and Ms Sylvia Wanjiku Kimani (no shares but listed as a co-owner).

COMPLETION

Space and Style was hardly in the news until January last year when squabbles between Ms Ngumi and Mr Wambugu emerged after it emerged that the latter was a director in Roser Roofing E.A Ltd, a rival tiles manufacturer.

In January last year, Mr Wambugu agreed to sell his stake in Space and Style to Ms Ngumi and leave the firm. Space and Style and Ms Ngumi both hired valuers to put a price on the company and its assets but to date there has been no consensus, which has delayed the completion of the deal.

On February 9 last year, Mr Wambugu executed a power of attorney in favour of Ms Ngumi in respect of the 4,197 shares pending the completion of the sale.

With the power of attorney, Ms Ngumi appointed three new directors which did not go down well with Mr Wambugu. The new directors were Lucy Mumbi Kimani, Edward Mulewa Mwachingwa — the Viva Africa agent that helped resolve Space and Style’s 2013 tax issues — and David Otieno Opiyo.

That was when trouble started in earnest.

FRUSTRATE

Mr Wambugu filed a case in the Milimani High Court’s commercial division through Havi & Company Advocates claiming that Ms Ngumi and Mr Njiraini were colluding to frustrate the exit agreement and deny him dues from the remaining 43,303 shares.

He sued Space and Style, Ms Ngumi, Cecilia Njoki Muhoho and the three new directors.

Mr Wambugu believes that his troubles with KRA, which has asked for bank records, is connected to the fight for his shares at Space and Style — and thinks that KRA boss has a hand in it.

He accuses Mr Njiraini of using KRA to initiate tax inquiries from him “for an ulterior and unlawful purpose” — and to “frustrate him from pursuing his legitimate claim in Space and Style Limited.”

Last year, Mr Njiraini’s lawyer warned Mr Wambugu’s lawyer against associating him with Decamis Limited. He dismissed as “blatantly malicious attempt to drag his (Mr Njiraini’s) name into matters of which he is not party to.”