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The Malpractices That Has Seen Shareholders Lose Billions at HF Group.


Robert Kibaara, CEO HF Group.
What started as warning signs back in 2014 by bloggers was ignored by many and now coming to reality. It is now clear that investors who bought HFC rights issue are over 80% worse off based on the current market price prior to Covid 19. This is sadly at the full knowledge of regulators such as CBK and CMA. The fraud by Senior Staff and Board directors of this company is public knowledge. CMA actually sent Investigators at HFC but the report has never been shared. One wonders what the Investigators led by a Mr Rueben Gitau did for the 10 months. Mr Rueben actually used to go around talking at Parklands Sports club of how he has unveiled massive fraud at HFC only for him to go quiet and CMA. Your guess is as good as mine if money changed hands. Today I’ll bring some of the issues that have been in public domain for a while.

One

HFDI is a subsidiary of HF Group. This was formed after Kenya Building Society collapsed. Recall KBS was brought down by mismanagement and fraud. The company embarked on developing Komarock Estate of which two phases where completed and titles handed over to buyers. The greed started here and with no proper procurement of professionals thus things went south. How one started a development without change of user for subsequent phases baffles many. The Contractor who was more at the bank(Rehani house ) than the site did a house for the then managing Director for the group- Frank Ireri, For HFDI MD – James Karanja and HFC MD Sam Waweru. The contractor was given more contracts for other projects that later stalled. Projects such as Clay city were started without a clear feasibility study.

HFDI could not pay the contractor thus all certificates were discounted as loans to CM. construction by HFC. HFDI was to get a facility from Britam which was never approved as there was no clear source of funds and after all the project sale was not forthcoming. This was in total disregard of prudential guidelines that HFDI was not allowed to guarantee a facility from sister Company (HFC). The facility was actually approved by Directors of HFC who was sitting on the same Board for HFDI. Amazing that a loan approver such as Sam Waweru could sign on the Loan approval and also The Board resolution for the borrower-HFDI. Note that as per CBK regulations this facility was to be paid by receivables from HFDI thus it was insider and was to be fully secured.

Mr Manji of CM construction upon completion realized he had been duped to a borrowing that is not for his. He thus refused to hand over the project and thus HFDI and no option but to take over the already non-performing loan. This loan was thus taken over by HFDI but in HFC books as unsecured facility and no charge has ever been created. This contravenes CBK prudential guidelines.


Housing Finance
In Dec 2019,it became apparent that HFDI was Insolvent thus a decision was made for HFC(The bank to take over HFDI).This thus implies HFC was to pay-off the Loan in its book in return. CBK never gave the approval. The Loan standing at 1.3b was removed from HFC financials prior to publication of the Dec 2019 Financials. Someone at CBK noted this and insisted that loan must reflect in the books. Shocking enough the published accounts for March 2020 still do not reflect this thus a question of if someone is sleeping on the job at CBK.

Another shocking revelation is how HFDI went into a joint venture for a project in Juja . The land has had many court battles since independence having belonged to one land buying company. The last owner of the Land is a Director of HF group -Mr Peter Munga . HFDI took a facility from HFC to buy shares in the joint Venture and Money was paid to Mr Munga Directly. This Loan of Kes 80m was not approved by the Board as required but signed by Sam Waweru in total disregard of CBK guidelines. When the Joint Venture was formed by the name Theta Groove, HFC declined a facility to service the plots for sale. As it stands the title
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