Martin Foster – Exit Stage Left
He had joined CMC in 1978 as a Sales Director and worked his way up to the Managing Director position. It did not end there for him as he was promoted to the position of Chief Executive Officer in 2003. His 3 hour dismissal notice was beyond shocking to him as he had served the company for 33 years.
Part of the reason he was fired was because he sought to transfer freight forwarding services for tractors from Andy Forwarders to a Japanese Trading company called Marubeni. According to Foster, the company would have charged CMC around KES 360 million, about half of what they were being charged by AFS for freight.
The former CEO said that he traveled to Italy in 2010 to meet with tractor suppliers with the intention of negotiating for loosening the credit terms as CMC was facing cash flow problems then. He later presented the successful proposal to CMC directors to have the tractors they were importing transported by Marubeni. Mr Muthoka is said to have approached him to ask him to alter the deal. He knew that if the Marubeni deal was to pass, his company would lose a lot of business. Mr Foster communicated his intention to Mr Muthoka to request for a refund from Andy Forwarders as he had noticed an overcharge the company was paying. According to Martin Foster, it was at this time that Mr Muthoka ganged up with other board members to dismiss him in March 2011.
Mr. Muthoka Peter – Le Head Honcho
According to the forensic audit by PriceWaterHouseCoopers (PWC), Mr Muthoka had joined the board in May 2006. This report also notes that he noticed the weaknesses within the procurements procedure and started taking advantage of it. By the end of the 2006, Mr Muthoka had raised the price twice and obtained a contract for new service. Services to be offered by Andy Forwaders included freight, cost & freight (C&F) and warehousing. The report adds that none of the achievements and contracts went through any tendering process as required of internal procedures.
Despite having previous dealings with CMC, Mr Peter Muthoka allowed himself to be appointed as chairman of CMC Holdings, while he was fully aware that he was not an independent director. This move happened in April 2011, and was a take over from Mr Kiereni. It was deemed as a new and assertive upheaval by investors against Mr Kiereini the previous month.
Allegations would later arise in light of this appointment about a conflict of interest between those of Andy Forwarders and CMC holdings, with Mr Muthoka as the center piece. It was in the course of this month that the letter of employment for Mr Bill Lay was signed by Mr Muthoka while he was still the chairman and part of the caretaker community.
A report from the Capital Markets Authority, which was put together after an analysis of the PWC report and Webber Wentzel report, noted the following regarding change in shareholding in CMC Holding during this era;
- Andy Forwarders Limited held 24.72%
- Mrs. Agnes Ngina Wambua, the wife of Mr.Muthoka, held 0.26%
- Master Felix Muthi Wambua, the son to Mr.Muthoka, held 0.09%
Shareholding by the three persons came to 25.07% of CMC Holding. They acquired effective control of the company since they controlled over 25% of the shares. This was done without neither application for approval from CMA since it implied a takeover of CMC nor an application for an exemption if they had no such intention.
Mr Bill Lay – The Inciter Catalyst
As mentioned in part one, he met the “international experience” requirements and had a reputation for being a skilful government lobbyist, an ability CMC needed to drive government vehicle contracts. Not too long after his appointment, Mr Lay announced plans to spend 1 billion shillings of CMC’s cash reserves in a turn-around strategy to grow its waning earnings. It was in this period that he also came into contact with the file that contained Mr Foster’s findings regarding dealings with Andy Forwarders.
His intention was to raise the issue with the board and bring to light the loss of nearly KES 2 Billion over the 5 year period, after which one of the options suggested was to cancel the contract. Mr Muthoka was in the board room then as he defended the contract. These findings were to be later supported by an audit by PWC, conducted for 10 weeks between September and December 2011.
3 months into Mr Lay’s employment to the CEO position, Mr Muthoka was ousted. Amongst the reasons for this was CMA regulations which demand that the chair of the board of a public company must be an independent director and not have any business relationship with the company. The move was arguably part of Mr Bill Lay’s plan to restructure the company so that it could operate with a leaner and efficient workforce, and lower the cost of operations.
The action was not taken lightly.
Mr Lay’s name would soon grace a Parliamentary hearing where a heated query debate would arise pertaining his leadership. Questions regarding his work permit were raised in Parliament when the Finance Minister Uhuru Kenyatta was put to task on his legal status. A document dated 26 May 2011 suggesting a denial to renew his work permit was tabled, but was countered by one stating that Mr Lay had already renewed it.
Stay tuned for scenes from the next episode