Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Conflicts of Interest in KRA and Citi Bank Legal Representation?

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Kenya: Conflicts of Interest in KRA and Citi Bank Legal Representation?

Saturday, 27 September 2008

While the results from the out-of-court negotiations between Citi Bank and the Kenya Revenue Authority (KRA) are still pending, documents from meetings between the KRA and Citi Bank show that lawyer Njoroge Regeru acted for both KRA and Cit Bank in the past.

In the current case between Citi Bank and KRA (Kenya Revenue Authority and Citibank to Settle Out of Court in Tax Dispute0, unconfirmed reports indicate that lawyer Njoroge Regeru was intent on an out-of-court settlement between his two clients. This, it is believed, played a role that led the two parties, Citi Bank and KRA, to agree to negotiate the KES800m case out of court. Cited as a ‘facilitator’ in minutes of a meeting held at the KRA Commissioner Services Office at Times Tower, Mr. Regeru is not only the principal lawyer for Citi Group in Kenya, but is also a lawyer for the KRA.

“That is the main reason why the case had to be given to Mr. Oraro,” says a tax lawyer familiar with the issue but who sought anonymity as he is not authorised to speak to the press. “The truth is that Mr. Regeru was not for the idea of a prolonged court battle between two of his clients and thus the facilitation role,” says the lawyer adding that the other reason might have been that Oraro, being better versed in tax issues and being a senior lawyer to Regeru, was better placed to sludge it out for Citi.

A well known lawyer and expert in the capital markets, George Oraro, who is currently representing Citi Bank in the case against KRA, is said to have clinched the tax case through the succinct support of Mr. Regeru. Oraro has dealt in precedent setting cases involving the takeover attempt of Carbacid Gases by Boc Kenya and the antecedent legal challenges that involved the Capital Markets Authority (CMA) in the takeover attempt. Mr Oraro also does extensive legal work for the Central Bank of Kenya (CBK).

Minutes of the meeting show that Mr. Regeru and Mr. Oraro were in agreement on what they wanted the facilitation between Citi and KRA to achieve: “The purpose (of the meeting) was to discuss the above appeal where both litigants (Citi and KRA) have filed appeals to the High Court against the decision of the local committee. Mr. Regeru and Mr. Oraro advised that they had instructions from the bank to explore ‘without prejudice’ out of court negotiations.”

At the time of the meeting, Citi wanted, “to make an application to the minister (of Finance) for waiver of interest and penalties.” The reason for this is that penalties and interest for large amounts of money always end up being extremely substantial and can be more than double the initial principal tax amount. In the Citi Bank case for example, the principal amount was about KES330m, but with penalties and interest, this ballooned to the over KES850m currently in dispute.

The meeting noted that in the interest of all parties, the proposed out of court negations take into account that the principal amount that was paid under the statutory provisions for the law in order to allow the tax payer file the appeal to the High Court and that appeal in the High Court is inclusive of the principal, interest and penalties.

Contacted on the Citi Bank issue and his role as a facilitator, Mr. Regeru promised to give an interview on the issue in the coming week as he had to consult with both his clients.

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