Mr Chris Kirubi, former Uchumi Supermarkets board chairman. File photo
Businessman Chris Kirubi and his co-accused walked free on Tuesday after a city magistrate acquitted them in the last pending criminal case relating to Uchumi Supermarkets.
In what could close the chapter on the troubled past of the chain set for re-listing at the Nairobi Stock Exchange on Tuesday, chief magistrate Gilbert Mutembei said the industrialist had no case to answer on the charge of conspiracy to defraud Uchumi by irregularly selling a prime property in Nairobi to some investors for Sh147 million.
Mr Kirubi and his 13 co-accused faced fraud allegations and have been in and out of court in the past three years in the rare high-profile State litigation against prominent personalities.
They were accused of selling the retail store’s Aga Khan Walk branch to Allgate Ltd and leasing back the landmark building to Uchumi for Sh1.7 million per month in 2004.
Mr Kirubi faced a separate charge of breaching public trust as the former Uchumi board chairman by allegedly approving the sale without an independent valuation of the property.
He was charged in June 2008 together with former Uchumi board members and directors who included managing director Kennedy Thairu, Francis Emmanuel Oyugi, Joseph Munyiri Munene, Isaac Awuondo and Nigel Ralph Pavit and Allgate directors. But the trial magistrate yesterday ruled that the retail chain was not a State parastatal and therefore the board members were not accountable to the public.
The magistrate absolved all the suspects from accusations of breaching any laid down procedures when they disposed of the asset, saying the evidence by the prosecution fell short of proving any conspiracy to defraud the retail store.
Defence lawyers argued that the government did not oppose the sale then and only raised the issue long after the transaction had been concluded. The defence also faulted the evidence adduced by state witnesses saying the sale was conducted in the open and the highest bidder carried the day.
Uchumi Supermarkets receiver manager, Jonathan Ciano, has said the retail chain’s shares will resume trading at the stock exchange on May 31 after a five-year suspension that followed temporary closure of the company on June 1 2006.
The acquittals follow last year’s dismissal of two cases of insider trading against former Kenya Commercial Bank (KCB) chief executive Terry Davidson and former Uchumi general manager Bernard Mwangi Kibaru.
Both were cleared of the charges of insider trading—the buying or selling of a stock based on information not available to the public — in the firm’s shares.
Mr Mutembei ruled that Mr Kibaru, who had denied charges of instructing Drummond Investment Bank to sell 111,400 Uchumi shares on April 26, 2006 contrary to the Capital Markets Authority (CMA) Act, was not guilty on the main and alternative charges of irregular trading.
He ruled that the prosecution failed to prove the accused exploited information not generally available to the public that Uchumi was performing poorly when he sold his shares.
Mr Mutembei observed that although the defence had demonstrated Uchumi’s poor performance and the pulling out of its major shareholders, these were matters that had been publicised in the media, and the accused had not exploited such information for personal gain.
CMA classifies insider trading as use of unpublished price-sensitive information to trade in listed shares—an offence for which a first-time offender is liable to a Sh2.5 million fine, five years imprisonment or both.
But the precedent-setting findings by the magistrate concluded that trading in listed shares on the basis of company information that has not been published did not amount to front-running the market. Mr Davidson was also set free after the magistrate ruled that the charges facing him were non-existent in law. Mr Davidson’s and Mr Kibaru’s insider trading charges were the first of their kind in the 56-year history of Kenya’s capital markets.
Mr Davidson had been charged on August 2008 with four counts of irregular trading contrary to the CMA Act by allegedly disposing of 300,000 shares following information that Uchumi was experiencing financial troubles.
At the time, Mr Davidson was deemed an insider because of KCB’s lender-client relationship with Uchumi Supermarkets, which allegedly gave him access to financial details that were not in the public domain.
He had been accused of instructing Suntra Investment Bank to buy for him 664,899 Uchumi shares worth about Sh9.5 million on December 2, 2005 and advising the intermediary to sell 300,000 shares worth about Sh5 million on May 9, 2006, three weeks before the retailer crashed under a Sh2 billion debt owed to KCB, PTA Bank and suppliers.
By then, KCB Group and PTA Bank had lent Uchumi Sh956 million, making Mr Davidson privy to the financial status of the supermarket as the bank’s chief executive.
But the trial magistrate disagreed with the prosecution, saying Mr Davidson could not have exploited what was not in the Act and “on that basis, the prosecution has failed to prove the charges beyond reasonable doubt.”
The acquittals were seen as a big blow to CMA’s effort to restore investor confidence in the NSE following the collapse of three stockbrokers with investor funds, amid accusations of stockbrokerage employees and regulators making a killing from confidential information accessed in the course of their duties.
Analysts said the rulings would force the market watchdog to reconfigure its strategy of enforcing market transparency and bringing rogue stock traders to book as the cases exposed the rough legal terrain the regulator faces in leveling the playing field for investors at the NSE.
Comentários