On November 13, the High Court stayed orders that froze all bank accounts and paybill numbers used by sports betting firm Sportpesa, marking the return of the company to the Kenyan market.
The orders had been issued following a long tussle between the Kenya Revenue Authority (KRA) and Sportpesa parent company Pevans East Africa Ltd over Ksh14 billion withholding tax.
The tussle seemed to have been buried when Sportpesa resumed operations in Kenya under a new entity, Milestone Games Limited, which has caused jitters in the boardroom.
One of the founding shareholders, Paul Ndung’u, wrote a public statement revealing an alleged fraud and money laundering in the firm, amounting to over Ksh30 billion.
In his statement Ndung’u said, “Pevans East Africa Ltd (Sportpesa) has transferred over US$250,000,000 to various offshore accounts in Isle of Man, Dubai and Las Palmas/Canary Islands and the UK. Again, numerous email requests from the Non-Executive Directors seeking evidence of Board approvals, contracts and details of beneficiaries went unanswered over the years.”
“The intended forensic Audit is supposed to indicate and reveal the actual amounts and the ultimate beneficiaries including any backdating of contracts or falsification of board minutes. Shareholders have also come to learn that subsequent to ceasing operations, US$500,000 has been transferred from Pevans to Sportpesa South Africa while within the two years $17,500,000 has been transferred to Sportpesa Tanzania,” he added.
The National Kenya Computer Incident Response Team – Coordination Centre (National KE-CIRT/CC), a multi-government agency function that is domiciled at the Communications Authority of Kenya (CA), had flagged Sportpesa’s domain for operating illegally in July 2019.
“The National KE-CIRT/CC has been notified of a domain name, SPORTPESA.CO.KE, which is operating illegally in the Republic of Kenya. The domain name is therefore being used to defraud unsuspecting members of the public, by purporting to offer online gambling services,” said National KE-CIRT/CC in a statement dated July 16, 2019.
The Sportpesa brand formerly belonged to Pevans East Africa Ltd, a matter that has been disputed by a section of shareholders, arguing that the brand belonged to SportPesa Global Holding.
“We also came to learn the claim that the Sportpesa brand is owned by Sportpesa Global Holdings Limited (SGHL) which is contrary to the fact that Sportpesa brand started trading long before SGHL formation,” said Ndung’u.
SGHL is the holding company that owns the trading licences and businesses of Sportpesa Tanzania, Sportpesa UK, Sportpesa Italy and Sportpesa Russia. SGHL ownership was a mirror of Pevans EA Limited.
“However, within this year the foreign shareholders have fraudulently transferred the shareholding to themselves along with their associates and the matter will be handled by UK Authorities,” he added.
Pevans East Africa Limited ceased business in July 2019 following revocation of its license by BCLB arising from a huge tax arrears dispute with KRA.
According to court documents in our possession, KRA contended that preliminary investigations established that the Sportpesa is suspected of being in intricate and complex tax evasion and money laundering syndicates involving violation of provisions of the Income Tax Act, Value Added Tax Act, Excise Duty Act, Proceeds of Crime and Anti-Money Laundering Act among other statutes.
Following these preliminary findings, KRA invoked section 43(2) of the Tax Procedures Act (TPA) and issued the Preservation Notice dated August 20, 2020 to the Sportpesa’s bank accounts and Paybill/Till numbers held by Sportpesa’s various commercial banks to ensure that the subject matter of the investigations is safeguarded by prohibiting transfer, withdrawal, disposal of or otherwise dealing with that money.
KRA said in court documents that it established that there are additional taxes that the taxpayer (Sportpesa) has not paid.
“KRA has taken the position that the ongoing investigation may lead to further enforcement action being taken but not limited to recovery of taxes and tracing of the proceeds of crime under the Proceeds of Crime And Money Laundering Act, among other options available to KRA in enforcing the tax laws and other economic crimes normally handled under the Multi Agency Team approach,” the court ruling dated November 13 reads.
The court extended the Preservation Order on September 11, 2020 for 21 days, then on October 5, 2020 for another 60 days. The orders have since been vacated.
Despite being cleared by the court to operate, there are still two cases in the courts that could see Sportpesa tumble.
Also, the Betting Control and Licensing Board (BCLB) has summoned new SportPesa owner, Milestone Games Limited, to explain why the firm’s licence should not be cancelled or varied.
This comes at a time Pevans shareholders are engaged in a bitter fallout, with Kenyan shareholders accusing CEO Ronald Karauri and foreign shareholders of defrauding them.
Nob Five Limited has 9,950 shares in Milestone while Wilson Karungaru Ngatia has 50 shares.
Nob Five is owned by Selenium Limited, holding 9,600 shares while Jacqueline Nyambura Kungu owns 400 shares.
Selenium Limited is owned by Ronald Karauri with 400 shares and Francis Waweru Kiarie who has 300 shares.