Eight directors of Kakuzi Plc have moved to the High Court seeking to prevent the Capital Markets Authority (CMA) from investigating them over alleged conflicts of interest and financial irregularities.
In a petition to the court, the directors said the Capital Markets Tribunal erred when it allowed the CMA to delve into business and financial transactions at Kakuzi Plc, arguing that the process was unfair and did not meet the constitutional threshold.
“The court erred in law when it failed to find that the respondent (CMA) violated each of the appellant’s constitutional rights under Section 3591)(a) of the Constitution and was entitled to details of the complaints and information regarding conflicts of interest,” the directors said in the petition. “And the financial violations committed by the defendant during the investigation stage.”
The Capital Markets Authority (CMA) court has rejected a bid by the Nairobi Securities Exchange-listed agricultural company and its directors to prevent the Capital Markets Regulatory Authority (CMA) from investigating the alleged fraud.
“Ultimately, this court finds no basis for appeal and this order is dismissed with costs to the respondent (CMA),” according to the ruling made by the court on September 19, 2024.
The court, headed by Paul Lelan, said it was satisfied that the summonses on June 14, 2021 and September 1, 2022 were issued within the legal powers of the regulatory body.
The court added that it did not see any bias, procedural irregularities, ulterior motives, lack of consideration of relevant issues, abuse of discretion or unreasonableness as alleged by Kakozi’s directors.
“Upon filing the appeal, the entire investigative process was generally fair to the appellants and met the constitutional threshold,” the court said, adding that no basis had been established to enable it to quash the summons.
The directors challenged the subpoena as illegal because it failed to identify the complaint, when it was received, what allegations were made, and against whom.
They also added that the subpoena failed to identify a record or document relating to the alleged conflict of interest as well as financial impropriety.
From the company’s perspective, the issues raised have been addressed in the corporate governance assessment report, which gave it an overall weighted score of 72 percent.
But the CMA defended the summonses, arguing that the corporate governance self-assessment report and the investigation launched into Kakozi’s affairs were based on similar but different issues.
“The court erred in law when it held that the appellants were not entitled to any grounds by the respondent (CMA) for withholding information and details of the investigation,” said Kakozi, through Kaplan & Stratton law firm.
The Capital Markets Authority said that the investigation will be based on its findings and recommendations regarding the audit of the company’s governance assessment for the fiscal year 2019.
These findings relate to human rights violations worth Sh696 million, poor management structures and board governance of the company and management and operational services agreements signed between Robertson Bois Dickson Anderson Ltd and Kakuzi plc on 11 December 2017, and Eastern Produce Regional Services Ltd. and Kakuzi Plc in March 2024.
There are also allegations of business dealings and agreements with related companies, namely Robertson Bois Dickson Anderson Limited, Eastern Produce Regional Services Limited, EPK Empowerment Company (Kenya) Limited, Lintak Enterprises (K) Ltd, Linton Park (Kenya) Ltd and Siret. tea ltd.
Last year, the CMA, as part of investigations, sent show-cause letters to all members of Kakozi’s board of directors before filing formal charges against those responsible for instigating alleged suspicious transactions at the company.
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