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How UK ‘Expats’ Brought Down One Of Kenya’s Giant Construction Firms, Spencon

Steven Haswell and Andrew Ross. [PHOTO/ COURTESY]

“We wish to confirm that your services with the company have been terminated effective today” was the message that marked the beginning of an end for employees of Spencon, a giant construction firm that was based in Kenya.

This was on Friday January 13, 2017, through a memo authored by PricewaterhouseCoopers (PwC) executives Kuria Muchiru and Muniu Thoithi who were appointed administrators of Spencon.

The company that once recorded revenues worth $100 million (Ksh10.3 billion) in 2007 was  now crumbling, and going down so fast than expected.

In 2006 and 2007, US investment firm Emerging Capital Partners (ECP) invested $15 million (Ksh1.5 billion)  in Spencon, including $1.5 million (Ksh150 million) of British government aid money designed to boost the Kenyan economy and create jobs according to the BBC.

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The loan was due in 2009, but Spencon was unable to pay it and it was converted into equity, amounting to 37.4 percent stake.

In February 2013  the two parties could not reach an agreement, forcing ECP to acquire a further 60.68 per cent stake from the other shareholders, as per a Put Option Agreement (POA) signed earlier, making it the majority shareholder at 98 percent.

Almost immediately after the acquisition, ownership tussle followed as Mr Patel and other founders accused ECP of pushing them out of their own company fraudulently.

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On their part, ECP accused the shareholders of siphoning funds from the company, making it unable to service its loans.

For instance, Naveen Prakash Sharma, a former shareholder, was accused of stealing Ksh515 million from the construction firm while Kiran Saroop Sagaar, another former shareholder, lost his  3.1 per cent stake due to an unspecified fraud.

Andrew Ross (left), former Spencon chief executive officer and Jitendra Patel, Spencon founder. [PHOTO/ COURTESY]
By 2014, the firm that was once a shining star was on its death bed, recording loss after loss, making the shareholders worried of losing billions .

The controlling shareholder, ECP, in Novembers 2014 hired Andrew Ross – an engineer and business director who would assume overall control of Spencon.

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To solidify what would have become the turn-around dream team, in April 2015 ECP hired a turn-around accountant, Steven Haswell. Haswell was to be paid $25,000 (Ksh2.5 million) a month, Ross $30,000 (Ksh3 million).

The two were tasked with turning around the fortunes of the company, with an aim of selling it by the end of 2016, something that was never to be.

Extravagant expenditure and bribes entailing colossal amounts marked the reign of Ross and Haswell, sinking the company further within months.

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By April 2015, the company was running out of cash, and in leaked emails Ross is quoted saying that “we are losing the patient”, meaning that the company was almost collapsing.

“I think we are going to lose this patient! We have 4 months of cash left … It’s not looking good,” Ross wrote according to emails quoted by BBC.

By July 2015, several workers had been sent home, some without pay even as the company sought to cut costs. The company relocated its offices from Kilimani area, one of the most expensive office sites in Nairobi to one of their depots out of town.

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This looked like the right move, and in fact it was, but immediately after shifting Ross and Haswell started spending again, using $70,000 (Ksh7 million) to buy their cars, a Range Rover and Volkswagen Touareg.

Also, the two started the construction of a golf green using company resources. BBC reports that the lead groundsman was hired from one of Kenya’s leading golf clubs to design the plush practice area – complete with two bunkers containing 120 tons of sand.

The course was meant for the two, as other staffers were kept at bay from the golf green.

As if that is not enough, the company started selling company equipment and the funds went to individual pockets.

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The sales were engineered by Tony Sanghani, a security consultant hired by Ross and Haswell.

In 2002, Tony Sanghani and his brother Rajendra Sanghani were charged with robbery with violence. The brothers were locked up at Kamiti Maximum Security prison after being accused of inciting their guards into beating two men.

Leaked email conversations show that Mr Sanghani sold the assets with Mr Ross’ full backing and instructions.

“Please all help and support Tony convert the old equipment and spare parts into cash,” wrote Haswell in an email to staff in October 2015.

“Please ensure Tony is given full support,” wrote Ross in a separate email as quoted by BBC.

Sanghani was given a decent salary, a free serviced apartment, a car and a driver, and massive bonuses from the sales.

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“It seemed to be a clearance sale completely, assets sold at giveaway prices. What we found was a gross under valuation,” said Kabiito Karamagi, a receiver who investigated the sales made by Sanghani in Uganda.

The money that was meant to pay debts ended up in Sanghani’s personal account, something Ross confirmed after a staffer asked about it.

“It’s ok… we can pay to Tony’s bank account,” wrote Ross in some of the leaked emails.

An audit by PwC discovered that Sanghani was paid a salary of $20,000 (Ksh2 million) a month and a 25 percent commission on sales.

By the time Ross and Haswell fled the company, the company could not account for $1.6 million (Ksh160 million), an amount PwC said could be higher.

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“There was an intention to defraud creditors, pure and simple. What you have here is a situation of embezzlement, fraud,” said Karamagi.

“Haswell said the equipment sale cash was deposited into Sanghani’s account to protect it from creditors who had “dubious” court orders to seize it, and to allow Spencon to “disburse the funds as it chose,” reported BBC.

In 2016, Sanghani refused to open his accounts for auditing by PwC.

In 2015, Spencon hoped to get a boost from a payment owed by the Kenyan government, amounting to $16.5 million (Ksh1.7 billion).

The payment was subject to production a the certificate of completion of works, something that was missing, opening another hole to loss of funds through bribes. They had 10 days to present the certificate.

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This roped in the services of a lawyer, Rose Osiemo, who was tasked with getting the certificate in Mombasa. She obtained a letter from the County Secretary authorising a new certificate, but another trouble arose. The person who was to produce the certificate demanded $80,000 (Ksh8 million) cash payment.

Whatsapp messages leaked confirmed the same, and Haswell withdrew the funds while in Tanzania and handed them over to Ms Osiemo.

“Remember 11 people minimum know that you are travelling with $80k. Stay alert and safe,” wrote Haswell.

They got a replacement of the certificate, but the money was never paid.

Even as the turnaround deadline approached, there was little progress and the company was also fighting court battles instituted by Patel and other former shareholders, who felt that they were fraudulently squeezed out.

Ross and Haswell tried to arm twist Patel to drop the case, by roping in the names of the dreaded drug lords and criminals, the Akashas.

Ross and Haswell said the Akashas were planning to buy the company, and they would eliminate anyone who stood their way.

One of the known victims of the Akashas is Tony Sanghani, who was beaten to comma during a gangland drugs turf war in 2014.

Tony Sanghani in hospital after the beating. [PHOTO/ COURTESY]
Patel refused to cede after two meetings, putting the two executives at crossroads.

By 2016, the turnaround dream was dimming away, and the company was no longer paying employees promptly as cash flow issues worsened.

Ross now would choose which employee to pay and which one not to, as witnessed by the then human resource officer, Nancy Ntinu.

“There was one female colleague who was on maternity leave and he took off her name. I asked why, and he said, ‘Well you snooze you lose’,” says Ms Ntinu.

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Several staffers went for months without pay, hoping that things would be better someday.

By the time Ross signed insolvency papers, Ms Ntinu alone had not received pay for seven months, and there was no hope, as she lost over £39,000 (Ksh3.9 million).

After signing the papers, Ross and Haswell vanished, leaving the multi-billion company in shambles.

“We heard one morning that they had boarded an aircraft and gone back to the UK. And that was it,” says Ntinu.

The two got ‘big’ jobs in UK, leaving most of the 5000 employees that were employed by Spencon living in poverty.

Some had their assets auctioned due to debts.

Email your news TIPS to news@kahawatungu.com or WhatsApp +254708677607. You can also find us on Telegram through www.t.me/kahawatungu

Written by Francis Muli

Senior reporter at Kahawa Tungu, Muli has a passion for human interest stories. Believes in unearthing societal rots that have been hidden from the public eye.
Follow me on Twitter @FmuliKE.

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