Hello, did Gupta leave CFC fs or he is still there? Let me search for a story I saw on him.
As Uchumi Supermarket crawls back to the stock market after three years in bankruptcy, the bigger picture of what happened to its shares before it collapsed is beginning to emerge.
But as it turns out, investors may never know the whole truth. Authorities who are supposed to uncover the truth and punish the culprits, it seems, appear to be selective on what goes out.
The slow death of Uchumi, which started in 2004 until it closed shop in May 2006, created a lot of opportunities for people to trade on price-sensitive information unknown to the public, in what is known in the trade as insider trading.
A report detailing the historical investigation on Uchumi Supermarket’s insider trading, six people were recommended for prosecution and a similar for further investigation.
Only two – Mr Terry Davidson, the former Chief Executive Officer of Kenya Commercial Bank and Mr Bernard Kibaru, then general procurement manager at the retail chain – have been prosecuted, raising the question of selective justice in legal circles.
The forensic investigations commissioned by the Capital Markets Authirty (CMA), and dubbed “Project Tafuta” (tafuta is the Swahili word for search), were done by lawyers from Anjarwalla & Khanna Advocates and Mohammed Muigai Advocates, auditors from DCDM Consulting, receivers from Begbies Traynor, and stock market experts from the Indian Institute of Capital Markets.
In their final report, the investigators noted that the information gathered from the forensic investigations and interviews was matched with the law on insider trading to build up cases against those suspected of having been involved in the vice.
“From this process we have concluded that the following persons could be considered for prosecution with the offence of insider trading,” the Project Tafuta team noted.
The list included Mr Davidson and Mr Kibaru. The two will appear in court on May 24 and 25 to answer charges of insider trading after the court ruled that the two have a case to answer. The court ruling means the State has proved its case against the two.
Also on the list, but whose fate is yet to be known, are Yana Trading Company Ltd and its three directors, Naushad Merali, Sameer Merali and Akif Butt.
The Capital Market Authority says it handed the report and recommendations to the Attorney General for further action and has no control over how its handled. It is not clear how far the AG office has gone with this matter, as we could not get comment from his office.
Yana Trading is a subsidiary of Sameer Investments Ltd, the holding company of the Sameer Group of companies owned by billionaire Naushad Merali.
“The three directors gave contradictory verbal responses and made statements which were inconsistent with documentary records. This together with admissions in the interview(s) and a lack of cooperation provides potentially strong evidence that the sale of Uchumi shares by Yana was prompted wholly or substantially as a result of ‘inside’ information, such information having been obtained by virtue of the appointment of Mr Akif Butt to the board of Uchumi.”
Trail of evidence
The trail of evidence kicked off with Yana buying 18 million shares of Uchumi between December 23, 2005 and January 3, 2006, translating to 10 per cent of the total Uchumi shareholding.
Forensic audit shows by the time it went to the market, Yana had not done due diligence on Uchumi to determine whether it was in good financial health worth the investment.
Mr Butt was subsequently, at Yana’s request, appointed a director of Uchumi. Although he claims he never attended any Uchumi Board meeting he is said to have had access to “extensive non-published price sensitive information in the form of board papers plus confidential briefings of Uchumi.”
According to the information provided by Uchumi’s Company Secretary Waweru Mathenge, as a tradition the management accounts were sent to the directors at the end of every month.
Mr Martin Ernst, a financial manager with Sameer Investments, confessed to the auditors having been given the confidential information with instructions to analyse them.
On analysing the information, he found the figures “pretty depressing,” according to the auditors’ account. He then told Mr Butt that he did not think much of Uchumi.
Mr Butt also confirmed having met Uchumi chief executive officer John Masterten-Smith at Yana offices on February 21 and 28, 2006, but said the discussions were centered on Uchumi’s request to “us to give them more money. They needed Sh300 million.”
On February 28, the board of Yana met and decided to stop further purchase of Uchumi shares, pass up the board position and sell its stake in Uchumi.
“We decided if we could not have control then we would have no say in the running of the business so we opted out,” Mr Butt told the investigators. But this statement was later contradicted.
The shares were then sold between March 23 and April 20, 2006. Before then Mr Butt wrote to Uchumi informing them of his resignation from the board in letter dated March 14, 2006, but received by Uchumi on March 30.
“By this time, Mr Butt had received board papers that are normally circulated before every board meeting. He had also received management accounts sent to board members every month and he was therefore already in possession of insider information,” the investigators noted.
While the main actor was Mr Butt, the two Meralis are entangled by association.
“While during the interviews Mr Merali (Naushad) attributed all decisions to Mr Butt, there is ample evidence that the real decisions were made by him,” says the report.
Senior Merali is said to have personally accessed 20 pages of confidential information including management accounts disclosed by senior Uchumi officials and personally sanctioned the sale of the shares in Uchumi.
During the interview, the directors noted that the investment in Uchumi was not strategic but only short-term and the reason why they sold shortly after buying.
However, Mr Butt’s evidence that after purchasing the shares Yana demanded two positions in the board and that they sold when this was not assented to contradicted the position that the purchase of the share was short-term.
More on the list
“We have also recommended that further investigations be carried out against the following persons with a view to establishing whether there is sufficient evidence to prosecute them.”
The list included Mr James Murigu, then managing director of Suntra Stock Investment Bank. He is noted to have given inconsistent responses during the interviews, “which fundamentally lacked credibility and justifies further enquiry into possible contacts with insiders of Uchumi in May 2006 and particularly May 30 and 31 2006.”
Mr Murigu is the stockbroker who traded the shares on behalf of Mr Terry Davidson.
The other person on the list of further investigation is Mr Amish Gupta – at the time an associate director at CFC Financial Services, which has rebranded to CFC Stanbic Financial Services – who holds a position at the Standard Investment Bank and Mr Ahmed Ndope, the managing director of Sterling Securities Investment Bank.
The two are said to have been the brokers who sold the 1.6 million shares traded a day before Uchumi collapsed.
The investigators note: “Trading in Uchumi shares started at 10:43 on the morning of May 31, 2006. Within a minute of the start of trading of Uchumi shares a single trade of one million shares took place. The two brokers, Sterling Securities Ltd and CFC Financial Services, represented 93 per cent of the Uchumi share trades on May 31, 2006.”
On further review, the investigators noted that the “volumes of share trades by these two brokers are unusual in the context of other dates for which they have represented trading in Uchumi shares.”
Mr Ndope was also the broker who represented Yana Trading in the purchase of Uchumi shares and also took instructions from Mr Butt to sell the shares. He is also said to have sold his own on May 29, saying the sale was out of speculation.
“He is a potential prosecution witness who can help to establish what the brokerage community knew about the trading in Uchumi shares during the critical phase prior to insolvency,” the investigators noted.
On Mr Gupta, the investigators noted: “The pattern of trade shows that he knew of information that precipitated the urgent sales.” The investigators, however, noted that the circumstantial evidence at that point in time was inconclusive.
Others on the list are Ms Catherine Kimura, then a director of KCB, Mr Sunil Shah, a board member of KCB and a director of Suncity Ltd, which had a franchise agreement with Uchumi supermarket.
And finally Martin Ernest, then the financial manager at Sameer Investments, the parent company of Yana Trading Company.
wkangaru@nation.co.kehttp://www.nation.co.ke/.../-/12jwlt1/-/index.html
By inference, the man is all that Mr Phantom is not: an untrustworthy radical, divisive, too many enemies, a dictator, and a persistent liar...Gaitho dialogues.