alexa Sh41bn tax evasion case lifts lid on the hidden business life of city billionaire - Daily Nation

Sh41bn tax evasion case lifts lid on the hidden business life of city billionaire

Sunday August 11 2019

Humphrey Kariuki

Business mogul Humphrey Kariuki. The DPP has ordered his arrest. PHOTO | FILE | NATION MEDIA GROUP 

JOHN KAMAU
By JOHN KAMAU
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Reclusive billionaire Humphrey Kariuki’s fortunes were never supposed to slide this way – but they have, or rather, they will.

With Mr George Kinoti, the abrasive Director of Criminal Investigations breathing on his neck – and an international warrant of arrest hanging over him like the Sword of Damocles, Mr Kariuki is certainly going through a rough patch after the Director of Public Prosecutions, Mr Noordin Haji, ordered for his arrest.

EXCISE STAMPS

His alleged crime alongside eight others: Tax evasion and fraud amounting to more than Sh41 billion by Africa Spirits and WoW Beverages in Thika.

Close aides say the tycoon – who also holds a Cypriot passport number K0627485 – is out of the country; meaning that if he does not fly back voluntarily, he may have to live like a fugitive.

When police raided the Thika-based African Spirits – which they have since secured as a scene of crime – on the evening of January 31, 2019, they stumbled upon a finding that astounded them. There were 21 million counterfeit Kenya Revenue Authority excise stamps that were disguised as water labels and which KRA officials estimated to amount to a loss of Sh6 billion had they hit the market.

When the issue emerged, Mr Kariuki’s London-based lawyers clarified that the tycoon was not involved in the day-to-day running of the brewery but was a “venture investor” who neither holds directorship nor managerial positions at the company.

That never ended the trouble. It had all started in January 2019 when police followed a lorry carrying illicit ethanol to Thika town hoping to see the final destination. The police had intelligence that the ethanol drums were hidden under sacks of maize – which had disguised the cargo as it passed through the Uganda border.

In a raid that was led by Mr Kinoti, the police not only discovered fake KRA stamps at the factory but an array of pipes – an amazing engineering prowess that bypassed the flow meters fixed by KRA to determine the amount of alcohol produced and for taxation purposes. What this meant was that KRA had no way of knowing how much alcohol was produced at the firm – given that the company also had fake stamps in its custody. But to sustain the lie, they usually ordered some genuine stamps from KRA and allowed some flow to the KRA meters. And for that, the owners of Africa Spirits will have to fight a legal battle to get back the multibillion-shilling factory and this will be an uphill task. The Excise Duty Act of 2015, which was amended last year, now permits KRA to seize the factory and goods found within premises where a tax offence has occurred.

ILLICIT LIQUOR

When I met Mr Kinoti sometime back, he said as much: “The factory is a crime scene and it will be seized by the State.” And before he became the KRA commissioner-general, Mr James Mburu, one of the top KRA officials involved in the raid had also told me that the “the law is very clear. If you are caught with fake stamps and once we have legally verified that a law has been broken, Section 31 of Finance Act 2018 gives us powers to seize the plant and the goods.”

And that is where this “venture investor” had put his money and spirit. Before it was closed down, African Spirits was one of the largest alcohol manufacturing plants in East Africa and, ironically, has been one of the most vocal in the fight against counterfeits and illicit liquor. And with that, there was no better camouflage.

For six months, detectives had been going through the books to determine how much Africa Spirits and WoW Beverages had apparently swindled the taxman.

The other mystery is how KRA stamps that were not captured in the institution’s track and trace system – Excisable Goods Management System (EGMS) – found their way into the Thika factory. KRA had always thought that it had a secure system and that they could determine how many stamps were in stock and also track their usage at the touch of a button. After the Thika raid, they discovered that this was not the gospel truth.

That is how Mr Kariuki, a former Central Bank of Kenya employee and one of the country’s richest men, found himself in trouble — as detectives cornered him to explain why a company associated with him was involved in illicit trade.

DUAL CITIZEN

It was during the interrogation that they discovered that Mr Kariuki – who also owns Karen Hub and Mt Kenya Safari Club, originally a retreat for famous Hollywood stars such as William Holden – also held a Cypriot citizenship.

Afraid that the DCI would nail him on that, Mr Kariuki’s lawyers went to court and challenged the section of the law that specifies punishment for failure to disclose dual citizenship. He was lucky after Justice James Makau temporarily suspended that section of the law after Mr Kariuki pleaded with him that he was in danger of being arrested at any of the airports on account of a crime under the Kenya Citizenship and Immigration Act.

Rather than make a ruling that favoured Mr Kariuki alone, the judge said the order also applied to any Kenyan citizen at home or in the diaspora who had acquired dual citizenship. By rushing to court, Mr Kariuki had confirmed that he had broken the law by not informing the government about his dual citizenship as required by the Kenya Citizenship and Immigration Act.

According to the law, one is to declare and record his or her acquired citizenship in the prescribed manner within three months of becoming a dual citizen.

The law further says that anyone who fails to disclose the dual citizenship “commits an offence and shall be liable, on conviction, to a fine not exceeding Sh5 million or imprisonment for a term not exceeding three years or both”.

While Africa Spirits is one of the ventures in which Mr Kariuki has put his money, he also runs other multibillion-shilling ventures under the name Janus Continental Group. But Africa Spirits is not part of Janus Continental Group – which encompasses transparency and philanthropy.

LUCKY ESCAPE

That way, Mr Kariuki has two empires – strikingly distinct in mannerisms. Perhaps that is the reason he named his group Janus, which means “the beginning and origin of things”.

In history, Janus is an ancient two-faced Roman god who provided protection in the beginnings and endings “at the gates, the doorways, and passages and endings”.

But Mr Kariuki might have to seek the help of the two-faced god, to escape the current predicament.

If he does, it would not be the first lucky escape.

Born 61 years ago in Nyeri in a family of 10, Mr Kariuki studied at Nairobi School and Kagumo High School before joining Central Bank of Kenya when he was only 19 as a clerk.

“I was at the bottom of the ladder. I always tell people that in life you need to start from the bottom; the only place where you start at the top is when you’re digging a well. So I started as a clerk, and then went on to work in various other departments in the bank,” he told Forbes magazine in 2017.

He had told the magazine that he made “decent income” at Central Bank before he started importing cars, established Green Corner Restaurant behind Kencom House, Nairobi, and rose to become a billionaire. How true? We don’t know.

SH2 BILLION

Besides Green Corner, Mr Kariuki also had another restaurant which he named Twigs – serving the higher end of clients.

For some strange reason, Green Corner was better known than Twigs Restaurant.

At the indoor parking of Tumaini House, Mr Kariuki’s car business blossomed and here, one could find the latest state-of-the-art European motor vehicle models such as BMWs, VWs, Mercedes and Range Rovers. Having worked at the Foreign Exchange Department of CBK, which was approving foreign currency for businessmen intending to import goods, Mr Kariuki was able to easily use his contacts and knowledge.

It was while still in his 20s that Mr Kariuki ventured into wines and spirits distributorship through Wines of the World Limited as the distributor for Jack Daniels, Bacardi and the Edrington Group, whose premium brands include The Macallan, The Famous Grouse, and Brugal rum.

But he only came to national attention in 2001, after the police were alerted by the Federal Bureau of Investigations that Sh2 billion had been wired into Mr Kariuki’s company Crucial Properties Ltd, at Charterhouse Bank.

TROUBLED CHILD

The CBK moved in and froze the Crucial Properties’ account and Mr Kariuki insisted that unusually large transfer was legitimate and was part of a $150 million (Sh11 billion) package the company negotiated with international lenders to be invested in Kenya.

Later on, Justice Samuel Oguk lifted the order and the Sh2 billion vanished before attorney general Amos Wako could file for a stay.

With money — and a big break in oil and horticulture — Mr Kariuki put his money into real estate and brewing. And thus, Africa Spirits Limited – the company that was raided by detectives – was born. And like a troubled child, Mr Kariuki has been left holding the baby.

[email protected] @johnkamau1