The Court of Appeal has rejected Mozzartbet Kenya Limited‘s attempt to recover Sh256 million, determining that the funds in question were derived from criminal activities.
The court found that the betting company did not adequately clarify its relationship with an entity that was operating under dubious circumstances.
Mozzartbet had argued that the funds were intended for Kimaco Ltd, a software developer, as payment for betting software. However, appellate judges Francis Toiyott, Fred Ochieng, and Aggrey Muchelule deemed the appeal to be without merit.
They concluded that there was ample evidence, meeting the statutory standard of balance of probabilities as outlined in section 92 of the Act, to implicate Mozzartbet, thereby denying it the protection typically afforded to third parties.
The judges further indicated that the evidence presented linked individuals associated with Mozzartbet directly to the benefits derived from the funds transferred to Kimaco, highlighting that the alleged developer received significant payments from the betting firm.
In their ruling, the judges acknowledged a defense suggesting that civil recovery could not be based solely on the absence of identifiable lawful income to justify a respondent’s lifestyle; however, they clarified that the evidence against Kimaco extended beyond merely a discrepancy between lawful income and lifestyle choices.
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.
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 submission of a nil return by Kimaco to the Kenya Revenue Authority (KRA) during the specified period served as compelling evidence that the company was not conducting any legitimate business activities. Furthermore, the act of making payments to the KRA upon request did not validate the origins of funds that were deemed to be illicit.
During the High Court proceedings, the Asset Recovery Agency (ARA) presented allegations against Mozzartbet, asserting that the funds in question were derived from money laundering activities and constituted proceeds of criminal conduct. ARA further contended that Mozzartbet could not be considered an innocent third party, as its directors had received funds from the bank accounts of both Kimaco and Pescom. The agency characterized Kimaco as a shell company, established as a Special Purpose Vehicle (SPV) for the purpose of laundering money under the pretense of being involved in the supply of software systems, solutions, and ICT products.
It was noted that Kimaco lacked the necessary human resources and technical expertise to fulfill the obligations outlined in the purported contract for software solutions and ICT products. Despite receiving an advance payment of Sh256,051,910, Mozzartbet acknowledged that Kimaco had failed to meet the contractual milestones.
Additionally, state counsel highlighted an M-Pesa transaction indicating that Kimaco had received funds from Mozzartbet, which were linked to Kimaco’s bank account at DTB and another account at Co-operative Bank. The court was informed that these funds were subsequently transferred from Pescom’s bank account to individuals associated with Mozzartbet’s directorship, specifically Emmanuel Charumbira, Musa Cherutich Sirma, and Branimir Melentijevic.
In defense of Mozzartbet, Kimaco Connection Limited, represented by lawyer Patrick Lutta, argued that the funds in question originated from Mozzartbet’s legitimate betting operations, asserting that investigations conducted by the Directorate of Criminal Investigations (DCI) revealed that Mozzartbet had generated Sh. 17,057,136,032 from betting sales, thereby exonerating the company from any alleged criminal involvement.
