” Andre DeSimone
Abdul Hameed Sheikh
Adrian Simon Tiwari
Aly Khan
Aly-Khan Satchu
Canada
Capital Markets Authority
Charles Field-Marsham
Credit Suisse First Boston
Entrepreneurial Leadership Initiative
Farzeen Zaherali Jamal
Field-Marsham
Kenol Kobil PLC
KenolKobil
KenolKobil Plc
Kenya
Kestrel Capital
Kestrel Capital (East Africa) Ltd
London
McGill University
Muthaura
Nairobi
Nairobi Securities Exchange
New York
Next Canada
NSE
Nureen Moledina
Paul Muthaura
Petro Holdings Ltd and Tasmin Ltd
Reza Satchu
Rubis
Rubis Énergie
Rubis Energie SAS
Satchu
SEE
Sh8.415
Tasmin Limited
The Capital Markets Authority
Trader
Treasury
Waheed Sheikh
Wells Petroleum
Wells Petroleum Holdings Ltd

How three rich friends rigged small investors out of KenolKobil sale

The Capital Markets Authority (CMA) has intensified investigations into the KenolKobil insider trading case with show-cause letters to three people suspected to have facilitated illegal transactions.

Financial advisor Aly-Khan Satchu and two executives of securities trading company Kestrel Capital, Chairman Charles Field-Marsham and Chief Executive Andre Desimone are under probe for making gains of up to Sh458 million using privileged information.

The case stems from the bid by French firm Rubis Energie to take over local oil marketer KenolKobil by buying all the shares listed on the Nairobi Securities Exchange.

SEE ALSO :Former bank boss gets reprieve in case with markets regulator

By virtue of being a major shareholder in KenolKobil, Mr Field-Marsham is alleged to have leaked information of the potential buyout price to Satchu, who then mobilised his trading network to buy the shares on the exchange and later sell to Rubis at a premium.

At the time, KenolKobil shares were trading at Sh14.30, with the share set to be sold to Rubis at Sh23 – a 60 per cent premium.

“We refer to the above matter and previous engagement between yourself and the Capital Markets Authority with respect to the insider trading investigations of the KenolKobil Plc counter during the period prior to the announcement by Rubis Energie SAS of the intention to take over KenolKobil on October 24, 2018,” says the show cause letter.

Field-Marsham was set to get about Sh14.2 billion for selling his KenolKobil to Rubis, as a director of the three firms.

He controlled Tasmin Limited with 62 million shares which would earn him Sh1.426 billion, Petro holdings with 190 million shares which would get Sh4.370 billion and Wells Petroleum with 367 million which would bring in Sh8.415.

SEE ALSO :Treasury asked to issue bonds in Kenya shillings

The French bought 367 million shares or 23.8 per cent in October last year from Wells Petroleum at Sh15.30 with a promise to top up Sh2.8 billion under the deal.

“At all material times, between February 2018 and October 2018 you were the Chairman of Kestrel Capital (East Africa) Ltd and a representative of the ultimate beneficiaries of Wells Petroleum Holdings Ltd, Petro Holdings Ltd and Tasmin Ltd (companies holding majority of shares in Kenol Kobil PLC),” Capital Markets Authority boss Paul Muthaura said in the letter to Field-Marsham.

By virtue of chairing Kestrel Capital which traded most of the KenolKobil shares, Field-Marsham was bound to get even more of the sale proceeds through commissions.

But the deal he allegedly helped craft cheated other investors in the market out of a windfall when he conspired with his close allies to buy the shares on the cheap and sell them out once the deal was announced, gifting the conspirators almost Sh458 million on stock tips.

Field-Marsham arrived in Nairobi in the early 1990s and founded Kestrel Capital, among other investments.

SEE ALSO :Burden of proof: Why insider trading at NSE is hard to crack

It is unclear whether he would benefit directly from the insider trading, but what is emerging is that he passed information to someone he had known for years.

He may have met Satchu at McGill University in Canada or as a fellow member of Canada’s Entrepreneurial Leadership Initiative.

Around 1991, fortune would bring the two men back together working for the same organisation, Credit Suisse First Boston. Field-Marsham worked in the New York office while Satchu was in the London office.

The two coincidentally then served as board members at Canadian technology incubator, Next Canada co-founded by Satchu’s cousin Reza Satchu.

In 2007, Field-Marsham introduced Satchu to Kestrel Capital and contracted him to be a stockbroking agent of the firm.

SEE ALSO :Trader fined Sh166m for fraud

It was this close friendship that gave investigators confidence that Satchu had inside information, but also led them to link Field-Marsham to the insider trading conspiracy.

After Field-Marsham had negotiated to sell KenolKobil to Rubis, he allegedly told the trader about the deal and timing, giving his friend a golden opportunity to make quick cash.

Satchu quickly contacted deep pocketed speculators and asked them to buy KenolKobil shares from hapless investors cheaply and wait for the impending announcement – then the profits running into millions would be shared among them.

An email October 13, 2018 that Satchu wrote to one Waheed Sheikh convincing him to take a position on the KenolKobil shares before the intended takeover is part of the evidence that CMA is relying on to press its case against the suspects.

“I am a personal friend of Charles Field-Marsham and have 100 per cent visibility on everything,” Satchu wrote in the email.

CMA also pulled suspect deals from the Sh6.5 billion Kestrel Capital trades in the oil marketer’s shares with some of Satchu’s executed trades to customers like Abdul Hameed Sheikh, Farzeen Zaherali Jamal, Nureen Moledina, Adrian Simon Tiwari and Radia Kantilal.

As he sought speculators to take positions, Aly Khan was also preparing an exit strategy through setting up an overseas account to receive the proceeds.

When regulators caught wind of the stocks rigging, the traders tried to hide their tracks by coordinating the statements they would make to the investigators while downplaying the need to probe the trades.

“On October 24, 2018, October 26 and November 8, it was observed that you were involved in the cover up of the insider trading offence through preparing Mr Satchu for an anticipated investigations, involved in the editing of Mr Satchu media article downplaying the need for investigations and revising Mr Satchu statement to the authority,” Muthaura wrote to Desimone.

Desimone even tried to distance himself from being directly linked to the trade in a notice in the dailies on February 4, stating that he had been talking to Satchu and had nothing to hide.

“Mr Satchu has been an active client and stockbroking agent on the NSE since 2009 and we have always maintained regular communication,” he said.

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