- A forensic audit on the investment group’s operations by KPMG revealed that half a dozen top executives were discreetly siphoning cash meant for projects and investments.
- Mr Korir expressed frustration that despite reporting the matter to the Directorate of Criminal Investigations in March 2015, police are yet to take any action on the case.
- The integrity queries at FEP add to a list of scandals that have rocked corporate Kenya in the recent past.
Fountain Enterprise Programme (FEP) Group has hired an asset recovery agent to pursue six former senior managers and confiscate Sh67 million allegedly stolen from the organisation.
A forensic audit on the investment group’s operations by KPMG revealed that half a dozen top executives were discreetly siphoning cash meant for projects and investments.
FEP chief executive Maurice Korir said the bailiffs had already recovered Sh20 million from the disgraced managers whose identities he declined to disclose.
He added that the company is adopting a two-pronged strategy to pursue recovery of stolen funds, saying FEP also plans to file cases in court to recover the monies.
“We have hired an asset recovery professional to recover the stolen cash for us. We fired the six people,” Mr Korir, who took office in October from founding chief executive John Kithaka, told the Business Daily in an interview.
“We combed our books and realised some funds were missing. We also plan to file civil suits to recover the assets.”
The funds were stolen in cash, Mr Korir said, and mostly involved money diverted from projects, payments to consultants who did not offer any services and irregular award of insider loans to themselves from FEP’s Fountain Credit Services.
Mr Korir expressed frustration that despite reporting the matter to the Directorate of Criminal Investigations in March 2015, police are yet to take any action on the case.
“I can’t explain why they haven’t been charged yet.”
The forensic audit also unearthed massive discrepancies in the chama’s share registry.
A total of 3,392 investors had paid for 4.58 million shares but were not allotted the proper number of stocks, the KPMG report showed.
A special resolution had to be passed at the 2015 annual general meeting to incorporate these shareholders into FEP’s share register.
The loss-making FEP had an asset base of Sh4.4 billion as at December 2015 but was in the red to the tune of Sh905.7 million, compared to a net loss of Sh1.4 billion a year earlier.
It has a membership of 70,273 investors, with a significant stock held by Kenyans residing in the UK and US.
The integrity queries at FEP add to a list of scandals that have rocked corporate Kenya in the recent past.
Top former Uchumi Supermarkets directors and managers including ex-chief executive Jonathan Ciano were last month hit with penalties totalling Sh21.7 million for their roles in conning investors through a flawed rights issue held in 2014.
Others firms facing a corporate governance issues are collapsed Chase Bank, Mumias Sugar, CMC Holdings, KQ, East African Portland Cement Company, National Bank, Communications Authority of Kenya, Imperial and Chase banks, BAT Kenya, Kenya Revenue Authority and listed insurer Britam.
For FEP, this is just one of the misadventures it has experienced lately. It recently sold nearly two thirds of its shares in Nyachae-backed Credit Bank after the regulator rejected its bid to take control of the small lender.
It has so far offloaded 412,124 shares or 61.5 per cent of its holding in the tier III bank to members at a price of Sh162 a share.
FEP last year invested Sh107 million in return for a five per cent stake (669,737 shares) in Credit Bank and was fundraising with an eye on ultimately controlling 75 per cent of the lender, before the Central Bank of Kenya rejected the bid.