Court told how Nyaga boss withdrew millions

July 7, 2008

, NAIROBI July 7- The Nairobi High Court was told Monday how a former Managing Director with the collapsed Nyaga Stock Brokers, Patrick Ndwiga Gakiavih, had withdrawn millions of shillings from the collapsed firm to his personal accounts.

Capital Markets Authority‘s (CMA) lawyer David Mwaura had told the court that a preliminary audit report compiled by PricewaterhouseCoopers (PWC) indicated that Gakiavih  withdrew money from the brokerage firm and deposited colossal sums in his personal account.

Mwaura told Lady Justice Joyce Khaminwa that deposit slips of close to Sh180 million obtained from the bank matched withdrawals from the broker’s bank accounts done between October 2007 and March 2008 by the accused.

He argued that a total of Sh523 million was withdrawn from the brokerage firm’s account and Sh73 million from the petty cash.

The lawyer claimed that of the Sh596 million liquid cash, only Sh234 million could be traced, according to the PWC preliminary audit report.

"Unless he (Gakiavih) can explain otherwise that he had another source, we have reason to believe that all the money on his account was drawn from the firm," Mwaura argued.

He claimed that during the probe (which he said were still underway), investigators were unable to access computer documents and a further insistence saw the systems go off in three instances.

"My Lord, the unfortunate circumstance of this case is that the suspect has an account with Barclays Bank; but the interim statement shows two different names: Patrick Ndwiga Gakiarih and Patrick Ndwiga Gakiavih," the lawyer claimed.

Gakiavih’s lawyer however dismissed the claims arguing that CMA had infact erred in appointing both Nairobi Stock Exchange (NSE) as a lead Statutory Manager and Wycliffe Shamia as the Statutory Manager.

Mbaka said the appointed managers subsequently failed to run the firm, and instead closed it down on assumption of office.

"That is not management your Ladyship," he argued.

He insisted that CMA’s decision to put the brokerage firm under statutory management fell short of its purpose since the firm was consequently closed without having been allowed time to recover, after The Nairobi Stock Exchange injected Sh100 million to salvage it.

"Under the law (CMA Act) the Capital Markets’ Authority can only appoint one or two persons as statutory managers, but here it employed one of its employees (Wycliffe Shamia) who apparently had inspected the firm before," he said.

The lawyer further argued that claims of unauthorised withdrawals were unfounded allegations because most of the customers "worked through agents who are authorised to give instructions on their behalf" and were only injecting additional capital into the beleaguered brokerage firm.

"It is true that some customers complained and we have indicated how all the complaints were handled," Mbaka submitted.

But Gakiavih\’s lawyer Muciimi Mbaka protested the bank statements from Barclays Bank, arguing that the bank had neither his client’s nor the brokerage firm’s consent to produce the statements as evidence.

CMA wants to freeze Gakiavih’s accounts on claims that it is unclear what he (Gakiavih) has acquired using the customers’ money besides the alleged Sh523 million withdrawn from the broker’s accounts.

Nyaga Stock Brokers went under early this year, after plunging into a financial crisis amid allegations of irregularities levelled against Gakiavih who owned 99 percent of shares at the brokerage firm, the remainder of which was owned by his wife.

The CMA has also accused Gakiavih of over-drafting his clients’ accounts and failing to remit fees to the regulator and the Investor Protection Fund between December last year and January this year.

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