A major supermarket chain and a commercial bank were yesterday linked to money laundering and the evasion of taxes amounting to Sh18 billion.

Nakumatt Holdings and Charterhouse Bank were also accused of being behind the legal problems faced by suspended Central Bank of Kenya governor Andrew Mullei.

Shadow Finance minister Billow Kerrow tabled documents in Parliament to back his claims of tax evasion and money laundering by several companies, including the owners of Nakumatt and the bank.

As he made the claims, there were shouts of "Shame!" from the Opposition benches.

And some MPs demanded that the Government should reveal the full extent of its knowledge of the roles of the two companies.

MPs Charles Keter (Belgut), Justin Muturi (Siakago) and Nick Salat (Bomet), all of Kanu, urged Mr Kerrow to reveal more.

The events at Nakumatt and Charterhouse were linked to the collapse of Uchumi - the country's premier supermarket - earlier this month.

Mr Kerrow, the Mandera Central MP, told MPs that Dr Mullei was pushed out of office after he recommended that Charterhouse should be shut down for helping some companies to evade payment of taxes amounting to Sh18 billion.

He said that Dr Mullei was suspended for asking Finance minister Amos Kimunya to withdraw the licence for Charterhouse Bank.

Dr Mullei is facing charges of abuse of office brought by the Kenya Anti-Corruption Commission.

He denied all the four charges of illegally awarding consultancy projects worth Sh9 million and was freed on Sh5 million bond.

Mr Kerrow's disclosures came as he spoke in the debate on the Budget Speech and criticised the Government's proposal to change the law so a chairman could be appointed for the Central Bank of Kenya. This amounted to ensuring the CBK governor reported to the President, he said.

Economic crimes

It would make it impossible for the governor to fight economic crimes such as tax evasion and money laundering.

"The CBK Act states that the governor should be independent in order to fight money laundering and tax evasion. But the proposal intends to make him answerable to the President. This is what they wanted so that he has no express powers to fight economic crimes," Mr Kerrow said.

While tabling the documents, Mr Kerrow accused the Government of protecting some people who had been evading tax and he demanded action against Charterhouse and Nakumatt.

"Nakumatt's income is 20 times what Uchumi used to get, yet Uchumi was paying VAT of Sh30 million. Nakumatt has never recorded profits. Can the Government tell us who is being protected?" he asked.

Trade and Industry minister Mukhisa Kituyi said on Tuesday he had consulted attorney-general Amos Wako and Justice minister Martha Karua about why Nakumatt did not offer its goods for inspection.

As a result, the AG said he had taken over two cases on Nakumatt involving an injunction obtained to block the Kenya Bureau of Standards from inspecting its goods and another involving tax payment.

He said that unlike Uchumi, whose 250 suppliers were locals, Nakumatt sourced most of its products from abroad.

Revive Uchumi

He accused Nakumatt and Tesco of trying to frustrate efforts to revive Uchumi, which collapsed on June 1 under the burden of Sh3 billion debt. It is now under receivership.

Dr Kituyi told the House that an official of Nakumatt, whom he did not name, called him last week to ask why he was trying to revive Uchumi.

"We have firms that have been fighting any move to revive Uchumi. The managing director of Nakumatt called me and dared me that if I had such much money to waste, why couldn't I give it to Nakumatt? "he said.

The two supermarket chains, he said, had written to him asking for Sh2 billion from the Government. "I do not only consider these letters as an insult but in bad taste," he said.

Mr Kerrow yesterday tabled letters from Dr Mullei to Mr Kimunya on March 20 2006 and to former Finance minister David Mwiraria on October 29, 2004 and September 23, 2004 about investigations into the status of Charterhouse Bank.

Also tabled were interim reports by the Due Diligence Inspection team formed in 2003.

Trading licence

The investigations were aided by the Banking Fraud Investigations Department, the KACC, the Directorate of Public Prosecutions and the Department of Governance and Ethics.

In his letter to Mr Kimunya, Dr Mullei recommended that the trading licence for Charterhouse Bank be withdrawn on the ground that it was a "liability to the probity of the financial sector."

He said a detailed examination into the activities of the bank found that some organisations held multiple bank accounts, "which is a standard way of detecting tax evasion."

The corporations and people found to hold multiple accounts were Creative Innovations, which had evaded paying Sh247 million in VAT, Mr Sailesh Prajapati who had no account opening forms but had a turnover of Sh2.186 billion from Nakumatt, and a Mr D. Shah who it was discovered had transferred money from his account to sundry creditors and then moved it overseas.

Creative Innovations, which supplied most of its imports to Nakumatt, operated four accounts at Charterhouse Bank, but only two were disclosed in its company records.

The Prajapati account was found to have received cash and cheques amounting to Sh551.5 million from Nakumatt. "It reflected huge cash withdrawals between May 2, 2003 and August 2, 2004," the letter stated.

An account named Paolo Sattanino received Sh52 million in US dollars and Sh40 million in Euros by way of transfer "mostly" from Creative Innovations and a firm called Kingsway Tyres.

Investigators also found out that the account held by one W. E. Tilley (Muthaiga) showed receipts of Sh5.89 billion against sales of Sh1.35 billion which the report indicated, "suspected money laundering."

Fast growing supermarket chain store Tusker Mattresses, it was discovered, operated a current account containing Sh4.3 billion opened in 2001. However, it was not shown in the books for 2001 and 2002. Furthermore, it had evaded paying VAT of Sh270 million.

"It was found that almost all of them (multiple accounts) were linked to Nakumatt Holdings," stated Dr Mullei's letter to Mr Kimunya.

"Kingsway Tyres, its associate companies as well as the John Harun Group had multiple accounts which are linked to the Nakumatt network, but were not fully examined," it added.

The reports expressed fears that Nakumatt had evaded paying tax of between Sh2 billion and Sh3 billion "in any one year" with the collusion of Charterhouse Bank. Focusing on Nakumatt Holdings and Kingsway Tyres, the letter indicated that their accounts raised "serious questions relating to collusion with Charterhouse Bank."

"It should be noted that Nakumatt has never shown a profit to date; always loses. Its VAT payments are between Sh33 and Sh85 million per annum. Uchumi pays Sh500 to Sh600 million per annum. As Nakumatt's turnover is much higher than Uchumi, you would expect corporation tax and VAT to be in the range of Sh1.8 to Sh2.5 billion per annum," states Dr Mullei.

The CBK boss then suggested that Mr Kimunya passes over to KRA information on the accounts and recommended that he "also query the most anomalous difference between Uchumi's payment of VAT and Nakumatt's." It is then that he made the recommendation which Mr Kerrow claimed led to his suspension:

"I am concerned that the evidence of collusion between Charterhouse and its customers which infringes Know Your Customer relations seems to have made Charterhouse Bank a liability to the probity of the financial sector and I would recommend that you consider withdrawing its licence," he wrote.

But he warned that the action should be taken carefully to ensure information stored in the bank was not destroyed.

The caution stems from the actions of Charterhouse Bank officials who, he said, had resorted to putting obstacles in the paths of investigators.

For instance, in a letter to Mr Mwiraria on September 22, 2004, Dr Mullei reported that the bank's archives were burnt under suspicious circumstances.

He says in the letter: "Although CBK obtained a court order to compel Charterhouse Bank to provide the required information, it was, on September 22, 2004 led to Industrial Area and shown a burning store which its officials said contained the bank's archives burnt on the night of September 21, 2004."

Mr Kerrow asked why Mr Kimunya had not taken action in spite of being given the information by Dr Mullei.

Attempts to contact Nakumatt did not bear fruit.