The High Court has allowed the Ethics and Anti-Corruption Commission to probe the multibillion- shilling Tatu City real estate project in Kiambu.
This follows claims of tax evasion and money laundering leading to Justice Esther Maina granting the go-ahead on grounds the anti-graft agency, has the powers to investigate the offences.
According to EACC, Tatu City was practicing a form of money laundering known as loan back scheme.
It said tax evasion and money laundering are effected through paper transactions involving a chain of interlocking companies, nominee shareholders and purported loans and financing structures.
A sister company- Kofinaf- for example incorporates special purpose vehicles such as Purple Saturn Properties, with shareholding and directorships held by its nominees specifically to hold parcels of land.
It then enters into sell agreement with SPVs and purports to advance them loans- in effect Kofinaf finances its SPVs to finance its own properties.
“It is my finding that in this case the matters being investigated transcend the dispute between the individual shareholders and the petitioners as they revolve around the commission of the offences of tax evasion and money laundering,” the judge said.
Tatu City and Kofinaf Company filed the suit in 2019, seeking to quash letters sent to the Lands PS seeking the State to place caveat or purchase warning on 33 pieces of land.
EACC also sought from the government documents including survey plans, maps, valuation reports and official searches.
But Tatu said EACC has no powers to order issuance of caveats on tax disputes nor investigate money laundering claims. The companies argued that claims of non-payment of taxes are civil in nature and not under EACC’s mandate.
The commission started the investigations accusing Tatu City of undervaluing property that is later transferred to related firms to allow payment of lower stamp duty–tax equivalent to 2 percent of land transfer value.
The land pieces were later transferred to newly formed foreign-registered companies as shares with the non-Kenyan firm disposing the plot at market value locally, ultimately escaping paying stamp duty because it’s not listed in Nairobi.
EACC says the chain of transactions on the sale of land and corporate special vehicle created were intended to separate, screen and conceal the control of the real owners over the funds generated from the property deals.
Some of the companies involved, EACC adds, were registered in Mauritius and used to deny KRA taxes.