Details have emerged that Kofinaf Company Limited and Tatu City Limited, the companies involved in land dealings at the Tatu City could have swindled the Kenya Revenue Authority (KRA) of more than Ksh6.5 billion in tax dues, as well as unsuspecting land buyers.
The company (Kofinaf), owned by New Zealand millionaire and investor Stephen Jennings and Stephen Mwagiru is at the top of the fraudster list, while other faces in the scandal include Vimal Shah, the face of the Thika-based Bidco Africa and Nahashon Nyagah, a former Central Bank of Kenya governor.
Stephen Jennings is a banker who made billions of dollars in Russia in the 1990s using his cunning and political connections. He fled Russia six years ago after conning his partner in business, Mikhail Prokhorov.
According to evidence presented in parliament by Stephen Mbugua Mwagiru, who is a shareholder of the two companies, they deflate land prices to evade tax.
The companies form a special purpose vehicle (SPV) to which they transfer the land at a highly discounted value without paying any stamp duty as it is a related entity transaction which is exempt. In some instances, the companies have paid duty based this highly deflated price.
Once the SPV has acquired the land, 99.9% of its shares are transferred to a Mauritian entity (SPV). This new SPV is then sold to any third party buyer at the lower value attracting one per cent stamp duty as this transaction is now deemed a share transfer not a land transfer which normally attracts four per cent stamp duty.
The companies then create a fake Sale & Purchase Agreement transferring the land to the SPV. An example is the transfer of land number L.R. No. 11428 to Zefus Properties Limited, in which no money exchanged hands according to Mwagiru.
“In this transaction no money changed hands and it is just a paper transaction,” says Mwagiru.
The land was purportedly sold for Ksh219,124,960. However, the property was charged to equity less than three months later for Ksh618,800,000.
The actual purchase of the land, which was actually sold to Splendor Properties, was Ksh884 million.
The same cycle applied to L.R. No. 11486 which was transferred to Meteor Properties Limited on June 12, 2013, for Ksh340 million then charged to Cooperative Bank one month later for over Ksh1.1 billion.
L.R. No. 11287 suffered the same fate, which was transferred to Green seal Properties for Ksh330 million then charged to Cooperative Bank two months later for Ksh1.2 billion.
In lands where the companies deflated prices to evade taxes, an example is Land number L.R. No. 10877 sold to JKUAT, which is valued at Ksh842,400,00 but the companies declared that the land is valued at Ksh235 million. Another is L.R. No. 11,428 sold to Splendor investments. The companies declared that the land is worth Ksh219 million, despite being valued at Ksh884 million.
In an affidavit by former Central Bank of Kenya (CBK) Governor Nahashon Nyagah, KRA lost approximately Ksh185.3 million of stamp duty due to such transactions involving six parcels of land, and a total loss of Ksh1.4 billion income tax from the same transactions.
Appearing before a parliamentary committee on land, the former CBK Governor warned Kenyans from investing at the Tatu City, citing several cases of swindling by Stephen Jennings.
“I must warn that the property is under control of foreign investors (Jennings) and directors now and if anyone purchases the land they are not given full ownership so in case something happens and the foreigners take off its at your own peril,” Nyaga warned.
A source close to the dealings reveals that most of the monies in these transactions are sent to offshore account, which could b a case of money laundering.
“The Elephant in the pocket I am told are these two companies registered in Mauritius. Jennings purports to have loaned them money to buy the properties in Kenya. The money never came to Kenya but was sent to Belgium. At an interest of 33 percent all the land sales in Kenya are sent to offshore accounts belonging to Jennings . All the money will finally end up in offshore accounts and nothing will remain in Kenya. This is the smartest way of money laundering. With Nation media Gagged. Nobody was expected to know The truth,” says a source who sought anonymity.
According to local partners, Jennings wired more than USD5,500,000 (Ksh550 million) to his personal account in a foreign country without their knowledge.
USD 3,750,207 (approximately Ksh375 million) was wired to Renaissance partners on 09/11/2012 [same date it was banked] and the remaining USD1,579,861 (Ksh158 million) was wired to Renaissance Partners on 13/09/2011 [4 days after the money was banked] This information was not briefed to the local partners till recently when they instituted a court case against Jennings.
Mr Jennings says in court records that he extended to Mr Shah, Mr Nyagah and Mr Mwagiru “a loan of almost $11 million (Ksh11 billion) to enable them to participate in the purchase of Tatu City” — meaning that they had made no monetary contribution to the acquisition of the property.
In a petition filed by residents of Kiambu County, Tatu City directors (Kofinaf Company Limited)are being accused of evading tax amounting to Ksh1.5 billion. The other company involved in the Tatu City Land dealings, Tatu City Limited is said to have evaded tax amounting to Ksh5.1 billion.
In the same petition, over 1,300 local shareholders claim they bought shares from the two companies – Tatu City Ltd and Kofinaf Company Ltd – in 2007 for Ksh200,000 each at the firms’ invitation, but have not been compensated for their investments despite a court order.
In 2016 a multi-agency task-force comprising representation from the Ethics and Anti-Corruption Commission, Directorate of Criminal Investigation, Office of the Director of Public Prosecutions among others was formed to investigate Tatu City, but the report of its findings is yet to be made public or made available to genuine owners of the land.
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