Julius Kipng’etich has warned of dire consequences for past managers of Uchumi Supermarket who propagated more than Sh1.6 billion in fraud, which has dogged the retailer.
Such consequences could involve legal action to recover the funds lost through understatement of expenses and supplies.
“There are serious consequences to the forensic audit, but we are leaving it to the regulators,” Mr Kipng’etich said over the weekend, after the listed chain store reported a Sh3.4 billion after-tax loss in the year to June.
More than Sh1.6 billion was undeclared in unpaid supplier expenses, which were restated, resulting in the record loss.
Cooking books
The CEO, who took over in September, said the past management— which has since been sacked — concealed Sh1.6 billion in unpaid supplier expenses over the last three years.
Already, three directors, including board chairperson Khadija Mire, who are thought to have owned up to the mismanagement that has depressed the retailer’s operations have resigned. A standby chairman has been appointed to hold brief until an annual general meeting is held to constitute a substantive board.
A forensic audit commissioned by Kipng’etich to go back three years revealed the financial hole and indicated the firm’s results had been cooked.
A recent report revealed Uchumi had not actually made a profit in the last two financial years, although reported figures had shown that it had. The forensic audit is expected to reveal who exactly in the past management was culpable in concealing the losses.
Former CEO Jonathan Ciano has further been accused of doubling as a main supplier to the retailer in a possible case of conflict of interest in the settlement of supplies.
The recently enacted Companies Act now makes directors individually culpable for the mismanagement of the businesses they oversee. Kipng’etich’s statement could indicate that Mr Ciano and other past directors could be headed to the dock as suspects or witness.
Uchumi has tied its revival prospects to the disposal of assets, including its Langata Road premises, which has in the last two weeks been claimed by the Kenya Airports Authority (KAA). A legal spat is now in the offing as KAA moves in to claim the property, which it claims to have been annexed from the Wilson Airport.
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