The prosecution on Monday suffered a big blow in the Sh41 billion tax evasion case against tycoon Humphrey Kariuki, with the High Court faulting the role of the Director of Criminal Investigations (DCI) in the matter.
While obtaining orders to freeze the accounts of nine companies linked to Mr Kariuki, the Director of Public Prosecutions and the DCI told the Kiambu Chief Magistrate’s Court that they wanted the monies held in Kenya Commercial Bank (KCB) and National Bank of Kenya (NBK) preserved.
On Monday, lawyer Cecil Miller, for Africa Spirits Limited (ASL) and eight other companies, urged the judge to quash the orders allowing the DCI to freeze the accounts on allegations that the monies they held were proceeds of money laundering, a matter he was investigating.
The lawyer noted that the Kenya Revenue Authority (KRA) and other relevant government agencies were legally enabled to handle issues relating to tax and recovery of assets bought using proceeds from fraud.
While upholding the case by Mr Miller, Justice Luka Kimaru said the DCI usurped the role of statutory bodies charged with the responsibility of pursuing alleged tax evaders and asset recovery when he froze the companies’ accounts.
Mr Kimaru quashed the freeze orders, thereby allowing the companies to proceed with their business of manufacturing alcohol.
He noted that the law is clear on the role of the DCI and the tax regime.
“It is evident that there is an element of jurisdictional overreach by the DCI on matters which are statutorily under the jurisdiction of Assets Recovery Authority (ARA) and KRA,” the judge said.
In his 23-page ruling, Justice Kimaru explained that there are legal regimes which deal with investigating money laundering under the law enacted by Parliament.
The judge said that under Section 7 of the Tax Procedures Act 2015 and Section 7 of the East African Community Customs Management Act (EACMA), 2004, the KRA has been given “all powers, rights, privileges and protection of a police officer” in performance of its duty.
As authorised officers under the law, KRA officers have the powers to investigate cases and seize goods.
The judge said the Commissioner of Customs and the ARA are recognised as proper officers when it comes to tax matters.
Consequently, the judge said, the freeze orders the DCI obtained on August 16 were illegal.
He quashed the orders that froze the accounts of ASL, Wow Beverages Limited, Dalbit Petroleum Limited, Rhine Hart Limited, Section Investments Limited, Janus Continental Group Limited, Belgravia Construction Limited, Azalea Holdings Limited and Kisima Management Company Limited
“The application filed by the DCI at the Kiambu court was in breach of the law. The same is hereby revised – it shall have no legal effect and is hereby ordered dismissed,” ruled Justice Kimaru.
The judge declined to interfere with criminal cases filed by the DPP at the Thika and Milimani courts against Mr Kariuki, ASL, WBL and others, saying those courts have jurisdiction to determine the cases based on evidence availed.
Mr Kimaru said, however, “The DPP, DCI and KRA are at liberty to pursue whatever action they deem appropriate against the applicants (ASL and interested parties) in the case provided they follow the laid down procedural, statutory and constitutional requirements that protects the rights to fair trial of the applicants.”
Mr Miller and lawyer Macmillan Ouma, for WBL, had argued that the rights of the applicants had been violated as they were not informed of the case to close the accounts, thereby leaving hundreds of workers without salaries.
The judge also heard that the factories face closure since production stopped.
Mr Miller further said the government has lost Sh1.2 billion in taxes since January as a result of the KRA’s move to shut down ASL.
ASL and WBL have been remitting more than Sh150 million per month to the taxman.