The Britam Commission report has recommended an investigation into Yacoob Ramtoola and BDO, alleging it had a conflict of interest and submitted a fake document to the commission. The group’s managing partner has now asked the Supreme court for a judicial review to quash the whole report. On what basis is Ramtoola making this request?

Ramtoola’s appointment

The affidavit put forward by Yacoob Ramtoola, BDO’s Group managing partner named in the Britam Commission report, has asked for the “quashing of the report as a whole and expunging it from the public records”. The first point that Ramtoola contests in his affidavit is the commission’s view that appointing him as special administrator was unethical and against the Insolvency Act. According to the report, the Financial Services Commission (FSC) drew up a list of auditing companies, KPMG, PwC, Grant Thornton, Ernst & Young and BDO. The problem with choosing BDO was that it was involved in auditing BPFL – one of the related entities of BAI – until its collapse in April 2015

The commission report points out though that Ramtoola, testifying at the commission on April 24, 2018, said that BPFL was being audited by BDO until its collapse, whereas BDO sent a letter to the commission on October 21, 2019 saying they had only audited BPFL until December 31, 2013. “That was tantamount to misleading information concerning BDO and gravely compromising its lack of professionalism in the matter,” the report notes. Now, here is the problem for the commission: although BDO could not be special administrator given its dealings with BPFL, Ramtoola said he could in his personal capacity rather than as BDO’s managing partner.

The commission however pointed to section 109 (1) of the Insolvency Act that prohibits anybody from being appointed as liquidator of a company if he has been an employee or auditor for a company or any of its related entities in the past two years as well as section 109 (3) of the Act, which goes on to say that ‘auditor’ also means “the auditor or partner of the audit firm that has been appointed auditor of the company”. A fact delved into further in section 217 of the Act. In other words, the FSC by appointing Ramtoola on August 26, 2015, as special administrator, broke the law. Still less, by allowing others from the BDO, such as Afsar Ebrahim to play such an outsized role in the Britam deal. “What the FSC had decided is that BDO was disqualified but Mr Ramtoola of BDO could be appointed to act as SA with the staff of BDO. That we have stated is ethics applied without due regard to ethical principles,” the report quips.

The ‘forgery’

The second major conclusion of the report is the alleged ‘forgery’ of the minutes of a meeting between the permanent secretary at the finance ministry, Vidianand Lutcheeparsad, and Kenyan businessman Peter Munga with Sandeep Khapre of BDO (Kenya) taking notes, in Kenya on November 18, 2015, where Lutchmeeparsaid had supposedly convinced Munga to buy the Britam shares for Rs4.3 billion, matching an earlier offer from South African MMI Holdings. Now, according to the commission, one version of the minutes from this meeting was produced at the commission by Akhilesh Deerpalsingh, a former adviser of ex-financial services minister Roshi Bhadain, who had got it from BDO. One version of the note mentioned an ‘agreement’ for Rs4.3 billion, while the version from Deerpalsingh said ‘mutually agreeable price’. “This document produced by BDO on which ex-minister Bhadain relies is fake and has been tampered with,” the commission concludes and it is the reason why it has called for the police to investigate.

What is Ramtoola’s version? In his affidavit, he argues that, given that Khapre is quoted as the source of the document, there is no evidence that Khapre was officially responsible for taking down minutes at the meeting, that Khapre did send the document to Ramtoola in a word version in an email and that “there is no evidence of Mr Khapre ever complaining of a document emanating from him being tampered with”.

Where Ramtoola and Bhadain agree

The aim of the commission was to find out why the Britam Kenya shares were sold for Rs2.4 billion when previous ‘offers’ of Rs4.3 billion were supposedly on the table. Firstly, from MMI Holdings and then from Peter Munga himself at the meeting with Lutchmeeparsad in Kenya. So, what does Ramtoola have to say about these? First, regarding the offer from MMI Holdings: in his affidavit, Ramtoola says that the MMI Holdings offer depended on carrying out due diligence, regulatory approvals from Kenyan, South African, and Mauritian regulators, and a deposit of 10 percent of the deal in an escrow account until the deal was done. Ramtoola said that they accepted the MMI Holding’s offer in a letter on October 16, 2015. “I had done everything I could to procure that the MMI offer materialise into an actual agreement,” Ramtoola insists in his affidavit. The MMI deal did not come through because it did not come up with the 10 percent deposit and the fact that Kenyan shareholders in Britam and authorities did not want the South African group getting into Britam Kenya.

Now what about the ‘offer’ from Munga to Lutchmeeparsad to buy the shares for Rs4.3 billion? Here, Ramtoola’s criticism of the report echoes Roshi Bhadain’s. First, he points to statements from Dev Manraj at the commission admitting there is no formal document outlining Munga’s offer of Rs4.3 billion or pointing to the letter from Kenya’s cabinet secretary Henry Rotich to Manraj on December 11, 2015 – after the alleged agreement between Munga and Lutchmeeparsad in November – that the sale price still had to be agreed. On these points, Ramtoola is making the same arguments as Bhadain is in criticising the report. So, it is not surprising that both Ramtoola and Bhadain come to the same conclusion: since there was no firm, formal agreement to sell the shares in Britam Kenya for Rs4.3 billion either from MMI or from Munga to begin with, the report’s conclusion that selling it for Rs2.4 billion – resulting in a shortfall of Rs1.9 billion is wrong.

Why Ramtoola denounces the commission’s bias

Like Bhadain, one of Ramtoola’s major arguments against the commission is about what he called its “bias”. The allegations and language used in the report, Ramtoola has argued, “is indicative of an unexplained animosity towards BDO and its professional staff, in particular Mr. Afsar Ebrahim and I, is that the commission allowed itself to be swayed by the personal circumstances of at least two of the respondents, which resulted in the whole investigation being tainted by procedural impropriety”. Like Bhadain, Ramtoola points to Bhushan Domah, who headed the commission, and one assessor of the commission, Sattar Hajee Abdoula. But perhaps not for the same reasons entirely.

At the commission, challenging Domah’s chairing of the commission, Bhadain argued that the latter had himself Rs1 million invested in the ex-BAI ‘Super Cash Back Gold’ scheme and was repaid between June 2015 and September 2017; that he was a chairman of the Financial Reporting Council and a member of the Integrity Reporting Board since December 23, 2016. Ramtoola points to these same criticisms to argue that Domah was biased and, in recommending that anybody aggrieved by the actions of BDO in his report, Ramtoola argued in his affidavit, Domah himself would qualify as one of these aggrieved parties.

But it is on Abdoula that Ramtoola’s affidavit focuses a lot of its fire. Abdoula, Ramtoola’s document points out, is CEO of Grant Thornton, “a direct competitor of BDO & Co”; he already was involved in the BAI affair having been originally named as administrator by the former BAI administration; he had negotiated with former BAI head Dawood Rawat on behalf of the prime minister; and Ramtoola had refused to pay Abdoula Rs26 million for his 18 days as administrator, which Ramtoola says he was ordered to pay later on March 8, 2017.

How did the Britam deal allow Peter Munga to get an additional Rs43 million? 

The Kenya-based publication “Business Daily” posed the question of how Peter Munga in 2016 could pocket “dividends from Britam shares he did not own”, raising yet another question mark on the Britam deal. One of the questions raised in the report of the Britam Commission is whether the state-owned NPFL (a company set up by government out of the ashes of ex-BAI), who theoretically owned the Britam Kenya shares before they were sold to Kenyan businessman Peter Munga for Rs2.4 billion, should have got the money from dividends earned on its shares before the Britam deal was concluded.

As it turned out, Munga not only got the Britam Kenya shares for Rs2.4 billion, but also an additional Rs43 million in dividends on shares he did not own at the time. How did this happen? On April 18, 2016, the board of Britam Kenya announced that it would be paying out a dividend of 0.30 Kenyan shillings per share for the year ending December 2015. For the just over 23 percent stake that the NPFL then held in Britam Kenya, the dividend payout would come to approximately Rs43 million. The problem was that Britam Kenya closed its books on June 9, 2016, to process dividend payments for 2015. The shares still technically owned by Mauritius’ NPFL. That was a day before the share purchase agreement was officially signed between Mauritius and Munga’s company Plum LLP, which was set up on the same day, on June 10, 2016.

So why did NPFL not get the Rs43 million? Why did the money instead go to Munga? Oodaye Prakash Issary, CEO of NPFL at the time testified at the commission that he had asked about the Rs43 million that were theoretically supposed to go to state-owned NPFL, “but had been told that NPFL was not entitled to receiving dividend” (sic). The commission also quoted Yacoob Ramtoola, special administrator of former BAI companies, as saying that he had received the dividends for the year 2014, “but as far as he knew, the 2015 ones accrued to the new shareholders”. That is, Munga. The question is why dividend owned by NPFL was paid instead to Munga, who did not own the shares at the time? The commission points to clauses 3.5 and 3.6 of the share purchase agreement signed between Munga and the Mauritians, which stated that, “as per these clauses, the NPFL would never be entitled to the 2015 dividend. This is not usual or good practice,” the commission report insists, adding that it “notes with utmost concern that such clauses do not seem to have been questioned by NPFL or even the special administrator. It is not clear whether this SPA had been duly vetted by the legal advisers of NPFL. The commission therefore considers that NPFL had been unfairly deprived of an amount approximately Rs43 million…”