Former CMC boss sues capital markets regulator over sacking

Former CMC Holdings Chief Executive Officer Martin Forster, has moved to court challenging the decision by Capital Markets Authority (CMA) to axe him from directorship positions three years ago. Mr Forster, in his case filed in the High Court registry is seeking to be compensated by the regulator for what he says damaged his reputation.

This is after CMA ordered that he be disqualified from being a director of any listed company over CMC Holdings saga. In his case papers, Forster said he has neither seen the findings of an ad hoc committee, nor was he given an opportunity to defend himself. He argued that the regulator used a secret dossier prepared by a South African law firm to kick him out of management. “The board of CMA relied on the said secret report to make various adverse determinations and resolutions against the petitioner and to impose drastic sanctions, penalties and offenses on the petitioner,” he argued in his court papers, adding that the resolution was a prejudgement. CMA authorised Webber Wentzel to scrutinise the firm and make a report which strengthened investigations that involved the regulator.

Largest shareholder

The directors who were then blacklisted in 2012 included former Attorney General Charles Njonjo, former head of Civil Service Jeremiah Kiereini, Forster and Sobakchand Shah.

The largest shareholder at the firm Peter Muthoka, Richard Kemoli and Joseph Kivai complete the list. However, Mr Kiereini, Muthoka and Kivai lodged different suits in the High Court against the regulator, saying it overstepped its mandate and thus the findings were a nullity. Mr Kiereini was the first to move to court after the CMA revoked his CFC Stanbic and CFC Insurance Holdings directorship after CMA investigations implicated him in an alleged scandal of hoarding money belonging to listed motor firm CMC Holdings in offshore accounts. Mr Muthoka and Kivai then lodged a case against the regulator and obtained orders from the court blocking the regulator’s directive.

The committee that probed the conduct of the seven was chaired by former Anti-Corruption Commission Director Aaron Ringera. The accusation was that the directors betrayed shareholder interests.

CMA informed Forster that he was disqualified from any appointment as a director of any company listed in the security exchange and that he had been barred from signing of the financial year 2009-2010 accounts that had not been prepared in compliance with the International Financial Reporting Standards. After disqualification and ban, he was informed CMA would recover twice the amount CMC lost if he was found culpable for the offence. “CMA does not have powers to appoint a law auditor to undertake a forensic investigation into the affairs of a publicly listed firm such as CMC Holdings,” he said. Mr Forster said the decision to appoint the law firm, which was arrived at in November 14, 2011, was illegal.

He argued that CMA made wrong interpretations of the law. “The decision to appoint Webber Wentzel to conduct a forensic investigations into the affairs of CMCH is therefore illegal and unconstitutional,” Forster argued in his court papers.

He said the decision alienated his right to gainful employment and further branded him as a rogue person. He wants the court to quash the decision and compel CMA to pay him.