What you need to know:
- A case filed in the United States in 2017 and another in Mauritius in which its founder Jitendra Chhotabhai Patel is seeking Sh5.1 billion exposed the intrigues that resulted in the collapse of the company.
- Mr Patel said the Spencon intrigues began in 2011, five years after ECP Africa FII Investments LLC gave the construction company Sh1. 6 billion (US$15 million) as funds for capital expansion.
Before its collapse, Kenyan firm Spencon International was a giant in East Africa's construction industry, employing an estimated 5,000 workers across Africa.
Founded by Jitendra C. Patel and two of his friends in 1979, Spencon had expanded operations to seven African countries, and had over 200 complete projects by 2007.
At the time, Spencon, had big dreams and even planned to list on the Nairobi Securities Exchange (NSE) in 2018.
However, things went awry in 2011 according to the firm's former owners.
This is five years after it embraced an investment deal with US-based Emerging Capital Partners (ECP). At the time, it was valued at Sh10.9 billion (US$100 million).
A case filed in the United States in 2017 and another in Mauritius in which its founder Jitendra Chhotabhai Patel is seeking Sh5.1 billion exposed the intrigues that resulted in the collapse of the company.
Now the firm's former owners are calling on the Directorate of Criminal Investigations to act on its requests for probe on the firm's downfall. They are also seeking a public enquiry on the circumstances leading to its downfall from regional governments.
"We believe that, at the very least, the East African governments should allow for an independent enquiry to establish what actually happened in Spencon since one of East Africa’s largest indigenous infrastructure companies that employed thousands across Africa had all but been destroyed," Pragnesh Patel former Executive Director at Spencon told the Nation in an email interview on Saturday.
According to Mr Patel, the former owners of the firm have a detailed evidence and a 15 man witness list, which he and other former directors at Spencon claim could bear witness to "allegations of fraud, corruption and waste" that sunk the company following what he alleged as a "hostile takeover" by ECP.
ECP has vehemently maintained its activities have been above board and dismissed these allegations as unfounded. ECP had not responded to Nation queries by press time for this story.
Mr Patel said the Spencon intrigues began in 2011, five years after ECP Africa FII Investments LLC gave the construction company Sh1. 6 billion (US$15 million) as funds for capital expansion.
He says ECP gave a loan "that was to be converted into shares upon the company meeting certain conditions (Conditions Precedent)."
ECP Africa also entered into a number of agreements with the other shareholders—including a put option agreement, a shareholder’s agreement, and a share pledge agreement—that provided ECP with the right to require Spencon’s original shareholders to buy back all of ECP Africa’s shares in Spencon.
It also gave ECP Africa 50 percent control of Spencon’s board of directors, and required Spencon’s original shareholders to pledge their remaining shares to secure their obligations to buy back ECP Africa’s shares under the put option agreement. Nevertheless, the general understanding was that ECP would exit Spencon by listing on the NSE, said Mr Patel.
The battle for ownership raged all the way to the London Court of International Arbitration that resulted in ECP taking over the company with 98 per cent shareholding, a move that Mr Patel claimed led to Spencon’s collapse.
The owners also filed a case in Mauritius challenging the share transfers and claiming millions in damages and in Uganda over alleged mismanagement of the company assets.
They also turned guns to ECP’s parent firms like CDC and EIB to assist to salvage the business since 2015. They are now calling for an internal review of the whole saga including assistance towards the recovery of several million dollars’ worth of assets that they say were suspected to have been siphoned out by ECP’s executives through fire sale of Spencon’s assets.
"We have offered to finance an independent forensic investigation to ECP’s appointed administrators since 2016 to find out what really happened in Spencon," Patel told the Nation.