Insurance firm, Xplico being run down by managers, CID says

01 Jun 2016 | by
Insurance firm, Xplico being run down by managers, CID says

A report by the Directorate of Criminal Investigations (DCI) has indicted the current management of Xplico Insurance Company Limited of deliberately misappropriating and mismanaging the company.

Based on their scrutiny of an audit by the Insurance Regulatory Authority (IRA) and a complaint by an investor, the DCI says the regulatory authority has failed to resolve issues revolving around the directorship of the company.

"The management of the company was left at the mercy of individuals who were not answerable to the genuine shareholders and directors and therefore prone to mismanagement and also risking the interests of innocent members of the public  who have bought premiums in the company. The current management at the company have deliberately misappropriated/mismanaged the company, something that has been noted in the audit released by IRA including engaging in an unauthorised businesses but IRA looks unable or unwilling to take any action possibly because there are no shareholders to address the problem perhaps because the current company directors were not appointed by shareholders and have no regard to the interest of the owners of the company," the report says.

The insurance company is currently being run by Principal Officer Benson Chege and other individuals who are not among the initial directors.

Attempts to get comments from from Xplico Insurance were futile as the did not reply to emails sent to them nor respond to telephone calls.

 The report signed by John Kariuki for the Director of Criminal Investigations Muhoro Ndegwa also reveals that although IRA, through its regular audits has identified a number of irregularities committed by Xplico Insurance's current and previous management, they have failed to take any legal action against the culprits.

Detectives investigating the case observed that  there is a disconnect between the Insurance Regulatory Authority(IRA) and the Registrar of Companies  in regard to corresponding  regulatory matters and that the Registrar of Companies doesn’t seem to know who are the paid up shareholders of Xplico Insurance according to regulations.

According to the DCI's report reference CID/IB/SCU/SEC/4/4/1/VOL. XXXV/82 dated February 5th 20916 addressed to the Attorney General Githu Muigai, the Registrar of  Companies is also accused of issuing a controversially letter reference number  Ref:CPR/209/12818 dated February 14th 2016 that reverted the Xplico Insurance's shareholding and directorship without consulting  the shareholders and IRA.

The report was as a result of a complaint lodged by Rajeshwar Sahi on behalf of Obsidition Investment Ltd and three other companies against Keith David Beekmeyer who are alleged to have conspired to defraud him of sixty million shillings injected into the insurance company.

In his complaint, Sahi accuses lawyer Ahmednasir's law firm of significantly benefiting  from Xplico Insurance company  by receiving millions of shillings paid to him without shareholders approval.

Xplico Insurance Company Ltd  was incorporated on October 23rd 2009 with the directors listed as Xplico Investments group Ltd with 1,100 shares and Salim Hussein Dungarwalla holding 100 shares. The company had 3 million shares divided by 1200 shares of Sh 2500 each as nominal capital shares.

In 2010 Xplico Investments Group Ltd transferred its 1,100 shares to its individual shareholders including  200 shares to Salim Dungarwalla making a total of 300 shares, Keith David Beeckmeyer 300 shares, 300 shares to Shiraz Hussein Dungarwalla and 300 shares allocated to Atlaf Hussein Bhrawaka.

Xplico Investments Group Ltd therefore ceased being a shareholder in Xplico Insurance Company Ltd.

However, when Keith David Beeckmeyer applied for an insurance licence, it was denied because the company did did not raise the requisite Sh 300 million paid up mandatory capital share.

The company required to have a minimum of five directors, a minimum  nominal paid up sh 300 million shares and that no single shareholder hold more than 25 per cent of total paid capital.

Consequently the nominal capital shares were raised from Sh 3 million to Shs 300 million through an additional 118,00 shares and was distributed to as follows. Salim Dungarwalla 29,700 shares, Keith D Beeckmeyer 29,700 shares, Shiraz Dungarwalla 29,700 shares and Atlaf Bhurawalla 29,700 shares.

According to the report, although Xplico Insurance company had not met the mandatory minimum  Sh 300 million, the company fraudulently acquired its first trading licence in August 2010 after incorporating  two non shareholding directors namely Fredrick Masagho and Martin Maina Mwangi.

"Atlaf Bhurawalla who was based in UK sent 1,260,000 British pounds which was deposited in Xplico's account held at Standard Chartered Bank Westlands branch. This amount was deposited on 1st July 2010 in the company's foreign currency account  and on the following day (2/7/2010)the same money was converted into KShs and transferred to the company's Kenya Shillings account. In order to beat insurance requirement for the the 300 million paid up capital, the company produced the two bank statements, one with  1260 million pounds and the one from Kshs account, which was Kshs152 million after the same was converted to Kshs. They did not reveal that the two bank statements were for the same amount or still, IRA did not confirm from the bank or atleast carry out due diligence for unexplained reasons,"the report says.

None of the other three shareholders paid any money for their shares and the company immediately began operations immediately after being issued with the licence. 

In July 2011, hardly a year after Xplico Insurance began operations, the chairman Salim Dungarwalla, who was also the only paid up shareholder representative Atlaf Bhurawalla fell sick and died.

"Atlaf was basically, the owner of the company because he had bankrolled the company hundred per cent. Immediately  after his death, Keith Beeckmeyer staged a boardroom coup and took over operations of the company since Atlaf was busy in the UK. By mid 2012, the company became insolvent-almost to shut down," the report says.

Bhurawalla through the company's principal officer Patrick Ndirangu transferred Sh 101 million back to his foreign accounts in UK. The Director of Public Prosecutions Keriako Tobiko  vide letter ODPP/CAM/013/9/25 dated August 20th 2014 recommended that Ndirangu and Bhurawalla be charged with stealing Sh 129 million after perusing through file No. 80 of 2012.

When in June 2012, IRA wrote to Xplico Insurance demanded an additional Sh 107 million share capital injection before being issued with a licence that year, Keith Beeckmeyer approached Sahi to buy shares in Xplico Insurance which he did after putting in Sh 60 million on October 29th 2012 through his lawyer.

Sahi was then issued with share certificate through his companies Open Scope Ventures Ltd, Obsidition Investments Ltd, Green Space Properties Ltd and Red Stone Holdings Ltd. Xplico Insurance was then issued with a CR12 indicating that  the four companies were among the Xplico Insurance shareholders.

After the Sh 60 million injection by Sahi and a further borrowing of Sh 47 million from UBA Bank Xplico Insurance was yet again issued with a licence  for 2012.

However, on February 6th 2014, the Registrar of Companies wrote to Xplico Insurance directors  vide letter Ref:CPR/2009/12818 informing them that his office had reverted  the company's shareholding  to the original four directors namely Salim Dungarwalla, Keith D. Beeckmeyer, Shiraz Dungarwalla and Atlaf Bhurwalla.

The reverting of shareholding effectively, the Registrar of Companies had rendered Xplico Insurance incapable of operations because the Sh 3 million nominal share capital was far below the minimum paid up share capital requirement by the Insurance Act.

Attempts by Sahi to challenge the Registrar of Companies  through Misc Cause No. 490 of 2014 were thwarted by an intervention by Xplico Insurance lawyer and the restraining order was removed.

The report further says that lawyer Ahmednasir's involvement in that matter is full of dishonesty because he was first invited to the issue by Raj Sahi who had requested him to represent his interest in the case and given all correspondents between Sahi and Registrar of Companies and Commissioner of Insurance required but he shifted loyalty to adversaries.

"Again after he (Ahmednasir) was dumped by the accused person in the criminal case, he jupmped wagon and now acts for the company in the civil case. It is not clearly known who instructed him to act for the company, since the shareholders claims that he is acting arbitrary. It was also noted from Xplico audited accounts of 2015 that the lawyer received Sh26 million from Xplico Insurance Company Ltd on claims that he represented the company in Raj Sahi's 60 million dispute with Xplico Insurance Company Limited," the DCI's report says.

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