Former Uchumi CEO Jonathan Ciano loses case against CMA, to pay Sh5m fine

Former Uchumi Chief Executive Officer Dr Jonathan Ciano. [File, Standard]

The Court of Appeal has found that Capital Markets Authority (CMA) gave former Uchumi Chief Executive Jonathan Ciano a fair hearing before slapping him with a Sh5 million fine over the collapse of Uchumi Supermarket.

In their judgment, Justices Hannah Okwengu, John Mativo and Ngenye Macharia unanimously agreed that Mr Ciano and his lawyer actively participated in the trial before the regulator and never raised questions before he was fined.

The judges reversed a verdict handed by High Court Judge George Odunga (now a Court of Appeal judge) in favour of the former Uchumi executive.

They found that Justice Odunga erred by failing to find that Ciano was served with an audit report prepared by KPMG four days before the CMA hearing on October 25, 2016.

According to the court, Ciano could not turn back and cry foul simply because he failed to convince CMA that he had nothing to do with the retailer's collapse.

Ciano in his case had claimed that CMA served him with the audit report late. However, the Court of Appeal found that the claim was an afterthought as CMA records indicated that he put up a spirited defence against the allegations.

"Having fully participated in the proceedings and having adduced evidence touching on the report and even discredited the report, the first respondent cannot turn around and allege prejudice after losing the case, citing late service of the report," the bench headed by Justice Okwengu found.

The import of the finding is that the sanctions by CMA against Ciano stand unless he moves to the Supreme Court and the verdict by the Court of Appeal is set aside.

He also cannot hold office as a director or sit as a key officer of a publicly-listed company or any approved institution by CMA. Uchumi's board fired Ciano On June 15, 2015, on alleged gross misconduct and negligence.

Financial operations

It then commissioned KPMG to do a forensic probe on whether Uchumi collapsed from acts of fraud and misconduct in financial operations.

KPMG's audit was to also spread to Uchumi's subsidiaries for the period between June 1, 2013, and May 31, 2015.

The court heard that the forensic audit revealed massive malpractices.

Uchumi's board then prompted CMA to commence an inquiry into allegations of financial mismanagement, impropriety and violation of regulations in Uchumi.

After preliminary inquiries, CMA served Ciano on August 31, 2016, with a notice to show cause citing six contraventions of the Capital Markets Act.

Ciano contended the notice was written in a manner suggesting that a verdict had already been passed even before he was heard. He also claimed he had been served late with the report.

In the High Court, Odunga quashed the CMA's verdict. He clarified that if CMA still intended to try Ciano, it had to adhere to the law. Aggrieved by the finding, CMA moved to the Court of Appeal raising six grounds on why it felt that Odunga had erred.

It argued that when it informed Ciano about the specific charges against him, he responded to the claims and orally submitted why they could not stand.

At the same time, the regulator stated they also informed him that he could appeal the verdict and was given an opportunity to clarify any issues before the verdict.

CMA also told the Court of Appeal that although it supplied Kiano with the KMPG report, the document was not crucial to its hearing as it had conducted its own independent investigations to ascertain whether the former CEO violated the law.

"Therefore, the appellant (CMA) never relied on the KPMG report in taking the administrative action against the first respondent (Kiano)," CMA argued.

On his end, Kiano argued that he received the report on the eve of the hearing.