Court upholds Sh256 million seizure from Mozzartbet, declares funds proceeds of crime

The Court of Appeal has dismissed Mozzartbet Kenya Limited’s bid to reclaim Sh256 million, ruling the funds were proceeds of crime.

The court dismissed Mozzartbet's appeal, stating that the betting firm failed to satisfactorily explain the connections with an entity that was conducting its affairs in a questionable manner.

The betting firm had claimed that the money was paid to Kimaco Ltd, a software developer, for the delivery of betting software.

But appellate judges Francis Toiyott, Fred Ochieng and Aggrey Muchelule dismissed the appeal, saying it lacked merit.

"We hold that there was sufficient evidence, on the statutory threshold of balance of probabilities set by section 92 of the Act, to implicate Mozzartbet as well, and it cannot benefit from protection of a third party," ruled judges in their decision.

The judges further ruled that the totality of the evidence put persons holding directorships or connected with Mozzartbet as beneficiaries of funds from Kimaco. They pointed out that the alleged developer received substantial payment from Mozzartbet.

In the judgment, the appellate judges noted that although a proposition was made that civil recovery cannot be sustained solely on the basis that a respondent has no identifiable lawful income to warrant its lifestyle, the evidence against Kimaco was not simply a gap between identifiable lawful income and lifestyle.

Suspicious payment

"The evidence revealed that Kimaco received payment under suspicious circumstances, made out payments in similar circumstances and concealed its business from the tax authority. Is it not said that "if it walks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck"? Posed the judges.

While turning their attention to Mozzartbet, the court said it was the entity which paid a substantial sum of Sh256,851,910 to Kimaco for monies on account of two contracts.

They added that there was evidence of payment made by Kimaco or Pescom, or Makua himself, to two of those directors under suspicious circumstances that have not been adequately explained.

The court noted that Branimir Melentijevic is a shareholder of Mozzartbet Africa, which is the majority shareholder of the Kenyan-registered betting firm.

"There was evidence that some funds initially paid by Kimaco to Pescom Kenya made their way to Melentijevic," said the judges.

They added that the payments were made in two invoices, for USD 69,964.30 and USD 34,599.00, allegedly for the software business.

The judges further said Kimaco did not contradict the allegation by Senior Sergeant Fredrick Musyoki that the payments bespeak the alleged software agreement between Open Skies and Kimaco, which was to service Kimaco's contract with Mozzarbet.

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• Court upholds Sh256 million seizure from Mozzartbet
• declares funds proceeds of crime

Before the appeal, the High Court had found that Kimaco was a shell company lacking in financial capacity to undertake the alleged contract.

Proceeds of crime

The Asset Recovery Agency (ARA) had proved, on a balance of probabilities, that the funds in the bank accounts were proceeds of crime, and the appellants did not provide a convincing explanation as to why they received such colossal amounts of money. Some of the money ended up in the pockets of directors of Mozzartbet.

The fact that Kimaco filed a nil return with the Kenya Revenue Authority (KRA) during the period was sufficient proof that it was not engaged in any business, and payment to KRA upon demand did not legitimise money whose source was illicit.

During the hearing in the High Court, ARA told the court Mozzartbet was involved in money laundering and that all funds held in the impugned account were proceeds of crime.

ARA told the court that Mozzartbet were not an innocent third party for the reason that the directors associated with Mozzartbet received funds from Kimaco's and Pescom's bank accounts.

It was submitted that Kimaco was a shell company that was incorporated as an SPV for purposes of laundering funds under the guise that it was engaged in the business for the supply of software systems and solutions and ICT products and lacked the human resource, the speciality of technical capacity to deliver on the purported contract for the supply of software solutions and ICT products. In addition, despite being paid an advance sum of Sh256,051,910, Mozzartbet confirmed that Kimaco had not delivered as per the purported contract milestones.

State counsel submitted that there was an M-Pesa transaction that showed that Kimaco received funds from Mozzartbet, which was linked to Kimaco's bank account at DTB and a bank account held at Co-operative Bank.

"The funds were further transferred from Pescom's bank account to individuals associated with Mozzartbet as directors, namely, Emmanuel Charumbira, Musa Cherutich Sirma and Branimir Melentijevic," the court heard.

Kimaco Connection Limited, through lawyer Patrick Lutta, backed Mozzartbet's argument that the source of funds in issue was from Mozzartbet's betting business and that the investigations by the DCI established that Mozzartbet made Sh. 17,057,136,032 from the sale of bets and gave a clean bill of health regarding any alleged criminal implication.

Lawyer Lutta argued that while Mozzartbet was the best person to respond to questions on the legality or otherwise of the source of the funds, ARA failed to enjoin Mozzartbet as a party to the proceedings and the only plausible reasons for this failure was that it was convinced that the sums were from a legitimate source and not proceeds of crime.