A Walk Inside The Collapse Of Spencon: Is There Light At The End?

Andrew Ross and Steven Haswell hired a consultant from one of Kenya’s leading golf clubs. Trees were ripped up and replaced by bunkers and the smooth playing green was laid and nourished by a sprinkler system.

“How cool is this?” wrote Haswell in an email home. “We’ll have chipping area, putting green, bunker and driving net.”Ross and Haswell were in Nairobi on a rescue mission: to save the struggling Kenyan construction giant Spencon.

They had been appointed as directors of the company by US investment firm Emerging Capital Partners (ECP), which had in 2006 and 2007 invested a total of $15m (Sh1.6 billion) in Spencon – including $1.5m (of British government aid money designed to boost the Kenyan economy and create jobs).

But Ross and Haswell did not succeed in saving Spencon. According to thousands of leaked company emails, messages, and documents obtained by the Africa Eye, the two British bosses appear to have engaged in a pattern of highly questionable business practices as they tried to turn the company around.

They now stand accused of allegedly working with a convicted criminal to defraud banks of millions of dollars, of implicitly threatening to sell-out business partners to notorious Kenyan gangsters, and of making potentially illegal cash payments.

This is the story of the 18 months Ross and Haswell spent in charge of Spencon before the company went bust, leaving hundreds of Kenyans out of work, some already missing months of pay.

Nancy Ntinu, Spencon’s former head of HR, took Africa Eye on a tour of the now-abandoned golf green built by Ross and Haswell.

“Having a golf course for a company that is insolvent, on the verge of financial distress, that just doesn’t add up,” she said as she walked on the overgrown putting area.

“It was a mockery for Kenyan employees to watch this lawn being watered daily because these two gentlemen wanted to play golf.”

Spencon was once one of the largest construction firms in East Africa – a giant that employed more than 5,000 staff at its peak and boasted major infrastructure projects across seven countries.

It was headquartered in a tall office complex in the Upper Hill neighborhood of Nairobi with successful multi-nationals for neighbors.

In early 2014, ECP, the US firm which had invested $15 million (Sh1.5b), took control of the construction company from its founders.

In November 2014, ECP hired Ross – an engineer and business director who would assume overall control of Spencon.

In April 2015 he was joined by Haswell – an accountant with experience of restructuring African businesses, who would run the finances. Haswell was to be paid $25,000 (Sh2.5 million) a month, Ross $30,000 (Sh3m).

Their job was to turn around Spencon’s fortunes so that ECP could sell it by the end of 2016. They had just 18 months. With the business already on the brink, it was never going to be easy, but the fate of hundreds of staff across East Africa lay in Ross and Haswell’s hands.

Wycliffe Ochieng, a 38-year-old assistant mechanic, was one of those staff. Ochieng had found happiness in his work at the company. It had allowed him to rent a small home with his wife and young daughter in Nairobi, with running water and electricity, and he began to dream of a better life for his family.

When Spencon finally went bust, in November 2016, Ochieng found himself without work and in crippling debt. He was owed months of pay and he owed months of rent.

“He used to buy us things, like shoes and clothes,” recalled his wife, Lynet. “Some of the things he did for us when we lived in town are different compared to now.”

Now the family lives in a small hut on Ochieng’s parents’ property, 370 kilometers from Nairobi. They have no electricity and no running water. Ochieng shares a bed with Lynet and their young daughter and works the land to feed them as well as he can.

Some days he barely eats at all.”I used to take care of my family as a man should,” he said, dejectedly, when Africa Eye visited him there last year.

“It has brought down my self-esteem.” Back in July 2015, Ochieng was arriving at Spencon for his first day as an assistant mechanic, blissfully unaware that the firm was already in serious trouble.

Shortly after Ochieng started, Ross promised the staff that no one was going to lose their jobs, he said. But an email sent in April by Haswell shows he was already worried.

“I think we are going to lose this patient!” he wrote. “We have four months of cash left … It’s not looking good.” The two bosses cut costs by July, making a round of redundancies and relocating Spencon from its upmarket Nairobi headquarters to a dusty out-of-town maintenance depot owned by the company, where simple pre-fab workshops were converted into offices.

A week after the move to the depot, Ross and Haswell paid $70,000 (Sh7 million) for their company cars – a Range Rover and Volkswagen Touareg.

Haswell told Africa Eye the cars projected an image of an organization of substance rather than one close to insolvency. Ross said the vehicles were deemed appropriate by the board. But the staff were not impressed. “It was a lavish expenditure,” said Spencon’s equipment manager, Mike Hyland, who arranged the purchase.

Dickens Omollo, the head of security at the depot, was taken aback by Ross’s Range Rover. “We wondered – this is a lot of money, and we don’t have money, and he is saying he wants to bring this company up?” Ross and Haswell also got to work on their golf green.

The head groundsman they had hired from one of Kenya’s leading golf clubs set about designing the plush practice area – complete with two bunkers containing 120 tonnes of sand. The two bosses told Africa Eye the golf course was built at negligible cost using Spencon staff and equipment and projected a positive image of the company.

Simeon Randinga, a janitor at the firm, felt the course was off-limits to ordinary staff. “The golf course was out of bounds for the rest of us,” he said. “It was theirs alone.”Ross and Haswell told Africa Eye the green was open for all the staff to use.

Getting a job at Spencon had meant the world to Randinga. He was newly married and had begun to fear his wife would leave him if he could not provide for her.

The regular income from Spencon eased his fears, and after a few months of work his wife moved to Nairobi to join him, and they had a child.

Then in mid-2015, Randinga noticed something that worried him, he said. The company appeared to be selling off perfectly good equipment alongside scrap and redundant machinery.

“When they were selling those things, I asked, ‘These are very good things, why are you selling them? Are you sure we still have our jobs?’.”The man behind the sales was Tony Sanghani, a security consultant hired by Ross and Haswell. As well as security, the two bosses tasked him with a fire sale of Spencon equipment.

They would later say they had no idea Sanghani was a convicted criminal. A simple Google search shows that he and his brother were sent to prison in 2002 for inciting their company security guards to assault two men. Hyland, the Spencon equipment manager, was convinced Ross and Haswell knew. “I’m 100 percent certain they did,” he said.

“I told Andrew Ross when I resigned;  you know you were dealing with a criminal.” According to Hyland, Ross replied: “We have to do what we have to do.” Ross denied knowing about Sanghani’s record or replying in that fashion. Leaked emails show Sanghani had the two boss’s full backing to sell assets.

“Please all help and support Tony convert the old equipment and spare parts into cash,” wrote Haswell in an email to staff in October 2015. “Please ensure Tony is given full support,” wrote Ross in a separate email.

As Randinga and other staff at Spencon grew concerned about their jobs, Sanghani was taking home a huge salary and living in a free serviced apartment with a car and driver, with the promise of cash bonuses on top of his pay for delivering on the equipment selloff.

READ: Con Investors Use Dubious Means To Want To Take Over Spencon

“It seemed to be a clearance sale completely, assets sold at giveaway prices,” said Kabiito Karamagi, a receiver appointed after Spencon went bust to look into sales made by Sanghani in Uganda. “What we found was a gross undervaluation.”

The proceeds from those sales should have gone to paying off the firm’s bank debts in Uganda, but the money was instead deposited into Sanghani’s account.

When a member of Spencon staff emailed Haswell querying the arrangement, and asking if it would present the company with legal issues, Haswell replied: “It’s ok… we can pay for Tony’s bank account.”

Karamagi, the receiver, questioned how the money had been accounted for. “It’s certainly most unusual that these monies are not banked on the company account, but an individual’s account. It is most unusual,” he said. “It smacks of fraud.”

After Spencon went bust, the administrators – international accounting firm PWC – discovered Sanghani had been paid $20,000 (Sh2 million) a month by Ross and Haswell, plus up to 25 percent commission.

PWC called the amount “outrageous” in the context of Spencon’s financial position.PWC also discovered a huge black hole in Spencon’s books – at least $1.6 million had not been accounted for. According to Karamagi’s calculations, the amount missing maybe even higher.

PWC did find some money had been paid to Spencon creditors, but none to the Ugandan banks, which had agreed to the asset sales in the expectation they would get the sale funds.

Questions also remain around the sale of Spencon assets in Kenya, and PWC has handed over files to Kenyan police.

“There was an intention to defraud creditors, pure and simple,” said Karamagi. “What you have here is a situation of embezzlement, fraud.”

Ugandan police told Africa Eye they were working with Interpol to question Ross and Haswell. Both men categorically denied any wrong-doing and said they were unaware of any criminal investigation or any claims brought in administration relating to the sales.

Haswell said the equipment sale cash was deposited into Sanghani’s account to protect it from creditors who had “dubious” court orders to seize it and to allow Spencon to “disburse the funds as it chose”, he said.

READ: Africa Eye By BBC Unearths The Reason Behind Spencon’s Bankruptcy

Part 2 Coming Up this week.

Credits: BBC Africa Eye

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