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Kenya: All Eyes On Nyaga Owner As Landmark Case Starts
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The Nation (Nairobi)
15 May 2008
Posted to the web 15 May 2008
Nairobi
The wealth of the owner of the collapsed Nyaga Stockbrokers was revealed Wednesday.
And for a man who made his name trading in shares and earning a commission for it at the Nairobi Stock Exchange, he seems to have had much faith in land.
Mr Patrick Ndwiga Gakiavih, who is set to appear before the High Court Wednesday, for the mention of a fraud charge brought against him by the Capital Markets Authority, built an enviable asset portfolio.
It largely comprised parcels of land in his native Embu District.
Parcels of land
According to court documents, Mr Gakiavih owns at least eight parcels of land, two of which are within the Embu Municipality.
There are also five units in Kagaari, a small township near Runyenjes, and another at Sagana in Central Province.
The assets, which also include an account at Barclays Bank of Kenya, were frozen by the High Court on April 29 through an order by Lady Justice Lesiit, following a successful application by the market regulator.
The CMA has, in what has all the makings of a landmark case, drawn up a litany of allegations against Mr Gakiavih.
In a case brought against him by his firm, Nyaga Stockbrokers, which is now under statutory management by the CMA and the NSE, he is accused of withdrawing some Sh523 million from the brokers' account.
In addition, some Sh362 million was not traced to the broker's accounts or cash account after a forensic audit by PricewaterhouseCoopers.
"The defendant has been involved in a well-planned, large-scale and calculated scheme to fraudulently use cash and finances belonging to the broker and its customers to enrich himself," the CMA argues in its plaint.
Mr Gakiavih owns 99 per cent of the brokerage house, which made a name for being something of a magnet for retail investors.
His wife, Elizabeth. owns 0.01 per cent of the shares.
CMA alleges that while operating as a broker, Mr Gakiavih breached several regulations.
These include overdrawing the client's settlement account and failing to transmit transaction fees amounting to Sh1.29 million to the Investor Protection Fund.
He is also accused of executing unauthorised transactions on clients accounts, thereby committing fraud; and failing to secure or maintain records of written client orders for transactions.
Mr Gakiavih is also accused of failing to allow inspection of his books and operating with a negative working capital.
The case against Nyaga will be closely watched in the local capital markets.
First time
It is the first time a broker has been hauled to court for allegations of actual trade at the NSE.
Indications that Nyaga was having problems meeting its financial obligations started filtering into the public domain last year.
But it was not until February 10 that the NSE, chaired by prominent city broker, Jimnah Mbaru, injected a Sh100 million loan to help the firm shore up its finances.
Even then, the woes persisted, resulting in the firm being placed under statutory management by the CMA and the NSE.
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Wycliffe Shamiah and NSE chief executive, Chris Mwebesa, were subsequently appointed statutory managers.
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