Exposed

How Victoria Commercial Bank Aided Money Laundering, Tax Evasion in Mumias Sugar Saga

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The future of troubled Mumias Sugar Company hangs in the balance with numerous legal battles challenging its leasing to a private entity. Amid the protracted dispute over the miller’s take over,  money laundering and tax evasion allegations have surfaced, further revealing intrigues behind attempts by various firms to control assets of the once-popular giant sugar firm.

In documents, Victoria Commercial Bank is alleged to have been involved in money laundering in the Mumias Sugar saga.

Mumias was placed under receivership by the Kenya Commercial Bank (KCB) in 2019 to protect its assets and maintain operations.

The miller owes KCB and several other creditors over Ksh29 billion.

KCB placed the miller under the hands of Ponangipalli Ramana Rao in a resuscitation plan.

Documents in our possession show how some of the Mumias assets that had secured loans from Eco Bank and French Development Agency Proparco shifted from the two banks to Victoria Commercial Bank in a suspicious transaction that has raised eyebrows.

The two assets, co-generation plant and Ethanol valued at Ksh1.9 billion and Ksh4 billion respectively, later ended up with Dubai-based firm Vartox Resources Inc.

In transferring the assets, the parties ignored an inter-lenders agreement signed on September 27, 2010.

The deal details exclusion of the two syndicated assets from the existing lender security.

The agreement required each lender to notify other parties of ‘any modification, termination, amendment and transfer of any security.’

Other lenders in the deal included Barclays Bank and Stanbic Bank.

“If any lender wished to discharge its security it will notify the other lenders prior to affecting the discharge…Consultation notice to be issued to all lenders for a period of 10 working days,” the agreement reads.

Contrary to the agreement, however, Proparco and Ecobank went ahead to assign their right to Victoria Commercial Bank on October 4, 2021, without notice to KCB, Barclays Bank or Stanbic.

Interestingly, the transactions happened when the receiver-manager was engaged in the leasing process for the survival of the sugar firm.

Besides the investment of Victoria Commercial Bank in Nonperforming Asset Definition (NPA) contravening the Banking Act, the source of money to pay Proparco and Ecobank also raises questions.

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The lease rental would also give more than their consideration value, a move seen by experts as an act to avoid Corporation Tax.

How Victoria Commercial Bank, which is one of the smallest banks in the country, acquired assets of USD 45 million and Ksh800 million is also suspicious.

Similar questions also arise in the transfer of the assets in question to Vartox Resources Inc as no notice was given to the listed lenders during the execution of the sale.

Vatrox Resources director’s name Kristian Khachatourianis in the Panama leak papers, pointing to a classic case of money laundering.

Vatrox’s director Khachatourianlisted as a shareholder in Jankle Group Limited in the giant leak of more than 11.5 million financial and legal records that expose a system that enables crime, corruption and wrongdoing, hidden by secretive offshore companies.

In a case of conflict of interest, we also established that Anjarwalla & Khanna Advocates has represented a number of parties in the saga.

Anjarwalla & Khanna Advocates was involved in the transaction between Eco Bank, Proparco and Victoria Commercial Bank which has Mauritius ownership. The law firm represents Jaswant Singh Rai, the chairman of Rai Group, who is among the firms fighting the leasing of Mumias to Sarrai Group, a company associated with his younger brother Sarbi Singh Rai.

Anjarwalla & Khanna Advocates also represents West Kenya which was the highest bidder in the disputed leasing of Mumias to Sarrai Group which has its headquarters in neighbouring country Uganda. Notably, Jaswant is a shareholder in Victoria Commercial Bank, through a Mauritius company fronted by Anjarwalla & Khanna.

The law firm also represents Vartox. Sonal Sejpal, a partner in Anjarwalla & Khanna Advocates, is said to have played a leading role in the Mumias Sugar asset transfer saga.

Vartox recently filed an application in court faulting Rao for ignoring the highest bidder, West Kenya Sugar, and instead awarding the deal to the third-lowest bidder.

The receiver-manager had earlier told the court he dropped off West Kenya Sugar Company from the bid race due to conflict of interest.

According to Rao, West Kenya has a factory that is 36 kilometres east of Mumias and was harvesting 50 per cent of the sugarcane within MSCL’s territory.

Amid the conspiracy, it has now emerged that West Kenya’s fight to take over Mumias is part of a plot to asset strip the miller.

Key players now want the Central Bank of Kenya (CBK), the Kenya Revenue Authority (KRA) and the Financial Reporting Centre to investigate Victoria Commercial Bank, Anjarwalla & Khanna, Eco bank and Proparco for money laundering, tax evasion and various fraud and save Mumias Sugar’s assets from fraudsters to avoid asset stripping.


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