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FEP: FBI now invited to probe Firm that “used the Bible to promised investors the moon but delivered false hope”

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He came armed with a Bible, silver tongue and hope. But a decade and about Sh6 billion worth of investments later, the bounty dividends that architect John Kithaka promised have not been delivered, The Sunday Nation is reporting.

According to a story appearing in Today’s edition, thousands of Kenyans both at home and abroad put their savings in Fountain Enterprises Programme (FEP) and, 12 years later, they are yet to receive their dividends.

COLLAPSED

“In 2012, investors were promised that dividends would start being paid in 2015, then in 2018 and then this year, 2021 was announced as the new magical date,” writes the paper.

Tired of the tall tales, some investors have invited the Directorate of Criminal Investigations (DCI) to investigate the firm and those in the United States are calling on the Federal Bureau of Investigations (FBI) to intervene. Last year, the company estimated to be worth Sh4 billion made a loss of Sh650 million. So, what went wrong?

An interview with former managers show wrong investments, an overbearing founder, fraud by managers and lack of systems punctured the momentum of what was once a promising company.

“As of May 2011, members were able to sign up on the Sh399,381 per share offer. Original founder members bought tier two founder shares at Sh760,000. By close of share selling in August 15, 2012 a share was going for 465,000,” said an investor who was heavily involved in mobilising Kenyans in United States.

The money was to be invested in hotels, tours and travels, schools, real estate and banking.

To realise this, several companies were established including MobiKash, Fountain Media, Fountain Group of Schools, Fountain Sacco, Nobel Insurance Agency, Suntec Supermarket, Fountain Credit Services, Fountain Technologies, Fountain Safaris, Kisima Real Estate, Nobel Insurance Agency, and Citadelle Security. Several have since collapsed.

According to interviews with some board members, that was the company’s first mistake. It spread itself too thin and was unable capitalise on all the businesses it ran.

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Current FEP Holdings chairman James Kaguchia admitted to the Sunday Nation that the slow progress of projects was due to undercapitalisation triggered by a failed private placement in 2014 but the company is still on course. Fountain radio and TV, for instance, were understaffed and had little cash for operations and thus collapsed.

OVERBEARING

MobiKash, a money transfer service, was one of the earliest investments but it was closed under unclear circumstances down without benefiting investors.

“Although FEP had initially partnered with MobiKash, the deal was later deemed as not viable. FEP therefore exited the partnership with CBK’s approval,” Mr Kaguchia said.

But, perhaps, one of the most iconic investments was Suntec Hotels in Sagana, Kirinyaga County, which has stalled.

“An estimated Sh800 million of investors’ cash has been used to put up the four-star Suntec Hotel in Sagana which is 70 per cent done with a current valuation of Sh1.2 billion. The hotel is due for launch later this year in partnership with a Swiss hotel operator,” said Mr Kaguchia.

Mr Kaguchia said FEP Group comprises three arms, namely, FEP Holdings (the holding company) with 74,000 shareholders; FEP Society (the network) with over 200,000 members; and FEP Sacco (savings and credit), with over 15,000 members.

The firm’s CEO has been accused of being overbearing, accusations he has denied in previous AGMs arguing that as the dream carrier, he needed to be firm.

With a new corporate structure courtesy of the FEP Society Strategy 2019-2021, Dr Kithaka’s designation is no longer President but Patron of FEP Society. He remains the holding company’s CEO but is not directly involved in running the subsidiaries as was the case in the past.  Mr Kaguchia said he is aware of the anxiety among members but adds that all is not lost.

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“In 2017, FEP made a loss of Sh650 million. FEP value currently stands at Sh4.15 billion,” he said.

In 2012, Mr Charles Kabaiku, who was tapped from the United States to help manage the company, left within months after his advice on the need to have systems put in place was disregarded.

“When I came in as the Group Operations Manager, we declared a positive profit on our annual reports at the AGM of about Sh58 million for the year ending 2012. I tried to centralise the financial management system but the move was resisted,” said Mr Kabaiku.

Mr Charles Kabaiku, an investor and former Group Operations Manager at Fountain Enterprises Programme (FEP), speaks during an interview at Nation Centre in Nairobi on June 5, 2019. He said his efforts to streamline financial systems at the company were strongly resisted. PHOTO | EVANS HABIL | NATION MEDIA GROUP

An audit by KPMG revealed that some managers were pilfering the firm. The company did not disclose the nature of theft.  Fearing that they may lose their investment, Kenyans in the US complained to the embassy in Washington.

The then Kenyan ambassador to US Robinson Githae forwarded the complaint to the Directorate of Criminal investigations but little was done.

Now, fearing that their investigations on the operations of FEP may not be conclusive, Kenyans who also hold US citizenships are mulling forwarding the issue to the United States federal government authorities.

“The Kenya Embassy in Washington DC actually contacted FEP and proposed that CID intervenes regarding alleged misappropriation of investors’ money. However, upon review of the case, the CID did not find a basis to investigate FEP,” said Mr Kaguchia.

Some of the cases the diaspora cites are an investment in Mombasa. Diaspora investors were told to purchase beach plots in Mombasa with fliers showing plots numbers and a hotel to be built, but little progress has been made.

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In 2016, Mr Kithaka went around selling shares of a Tier three bank. The issue has not been heard of since despite shareholders having been promised a stake in the bank.

“FEP Holdings had intended to acquire a stake in the said Bank. However, following further internal deliberations and consultations with the Central Bank of Kenya, FEP decided to pull out of the deal. However, some individual FEP shareholders have invested in the bank in their personal capacities,” said Mr Kaguchia.

Mr Kaguchia said FEP Group currently owns an estimated 6,000 acres of land valued at over of Sh2 billion. The land is earmarked for housing projects and hotels.

CONSULTATION

“We are also exploring agribusiness and any other viable ventures. The new board is currently reviewing and re-aligning the Real Estate strategy to guide the group’s investment through the three-year ‘FEP Mpya’ turnaround journey,” he said.

But the most baffling issue was the sudden creation of a new company, Tai Eagles and Tai Housing, which was done with minimal consultation with investors.

“Tai Ltd is an associate company of FEP Holdings. There exists no financial or governance relationship between TAI and FEP. Tai Eagles deals with healthcare and housing. Tai runs two health facilities, Tai Eagles Hospital in Thika Town and Nairobi CBD. Tai is currently in discussions with KRA regarding certain aspects of compliance. During the 2014  AGM, members passed a resolution to close all FEP offices as a cost-cutting measure. Tai Ltd, an associate company to FEP Holdings, was co-sharing the physical space with FEP,” said Mr Kaguchia.

The chairman calls for patience.

“The best laid plans do not always yield the intended results,” Mr Kaguchia said.

SOURCE: nation.co.ke

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Inter-Continental Hotel considering permanent closure of its Nairobi unit

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The iconic Intercontinental Hotel in Nairobi is set to be closed permanently over “operational reasons.”

The facility’s proprietor, InterContinental Hotels Corporation Limited (IHCL), announced the closure through a notice to its employees.

The company said it is winding up its operations in Kenya, adding that the five-star hotel will shut its doors in the next 45 days and declare all workers redundant.

“We write to inform you that InterContinental Hotels Corporation Limited Kenya (IHCL) is for operational reasons, considering a permanent closure of InterContinental Nairobi and winding up its operations in the Republic of Kenya. As a consequence of such intended winding up, all employment positions would become redundant,” part of the notice reads.

The 389-bed capacity hotel has been in existence for the past 51 years and was almost auctioned in 2019 over unsettled debt amounting to nearly Sh1 billion.

InterContinental  is strategically located inside Nairobi Central Business District near Parliament Buildings, making it an ideal destination for business travelers. It boasts a poolside restaurant, a coffee shop and some bars.

The Privatization Commission earlier this year sought to sell the government’s stake in the hotel through the Tourism Finance Corporation (TFC) following previous unsuccessful offers. The State owns 33.8 percent of stake in the hotel’s mother company.

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How hair scavenged from Nairobi dumpsite ends up in salon

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Stylist Julia Wanja picks her way delicately through piles of food waste, discarded masks, rubber gloves and other rubbish at Nairobi’s Dandora dumpsite, looking for used hair extensions she can clean and resell to customers.

The pandemic means fewer clients with less money and she is cutting down on costs by cleaning and reselling hair from the dumpsite. Officials direct trucks to dump their loads depending on where the waste has come from. Domestic and commercial waste – which includes bags of hair extensions discarded by other salons – goes to different sections.

Medical waste is usually incinerated. “I have fewer customers,” the mother of three told Reuters from her wooden stall near the Dandora dumpsite as vehicle horns blared in the background. “If you are not going to work, there is no need to style your hair.”

Wanja said she washes the used hair extensions carefully using detergent, Dettol and hot water. Most of her customers trust her to wash the hair well, she said, although a few like to clean it themselves as well. Like other scavengers, she wears a mask to sort through the trash.

“We cannot allow anyone to enter the dumpsite without a mask on,” fellow scavenger Denis Githaiga said, as he ripped through piles of plastic bags.

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Wanja has been selling second-hand hair since 2008 but says there is more demand now since many people cannot afford new extensions. “New hair is more expensive than second-hand hair,” the 38-year-old said. “People don’t have money.”

Wanja’s customers say as long as the hair has been cleaned, they do not mind where it is from.

The hair looks new: long, luxuriant locks hang from the walls in Wanja’s stall or are perched on a battered styrofoam head.

“The hair bought new from a shop and bought used only differs in price. But once it is plaited, there is no difference,” said Cecilia Githigia as Wanja’s fingers worked a weave into her hair.

By Standard.co.ke

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How Kenyan family stole billions in the US

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When in November last year, the National Police Service said it had received information from Interpol that some Kenyans were wanted in the US for alleged fraud offence, one of the names released was that of Edwin Sila Nyumu, a man who had been on the run.

Nyumu and his family were behind a US based crime syndicate that launched  hundreds of millions of dollars in the country but managed to escape the FB dragnet to hide in Mlolongo Machakos.

In total, the family members are believed to have stolen more than Kshs.2 billion in a tax fraud, the Nation has established. It is one of the biggest cyber-crime heists in the blossoming industry.

The Daily Nation reports that how this Kenyan family laid a scamming web and managed to bilk millions of dollars and send them to Kenya without raising an alarm has always petrified the investigators.

TheDaily Nation reports that for 12 years, since his name first appeared on the Interpol list, Nyumu oiled the palms of all those who his identity and the Nation was informed he was a cash cow of police officers, until the money ran out last year.

By then, and after 12 years, he could no longer be charged with fraud since the federal crimes have a statute limitations which protects the people from being harassed and having to constantly defend themselves from old charges.

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Record indicate that on November 6 last year, Corporal general Kamwaro swore an affidavit seeking a fresh order to arrest Nyumu.

Kamwaro said Nairobi Interpol office has contacted the US Nationla Central Bureau Interpol to forward extradition documents against the suspect.

By Daily Nation

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