Former Uchumi boss Jonathan Ciano has asked current managers to concentrate on turning around the company, even as he dismissed an audit that has listed him among five other employees that have a case to answer.
KPMG’s Factual Findings Report details how the wife of the retail chain’s former boss, Mr Ciano, became Uchumi’s fresh produce supplier. Despite the conflict of interest, and her being found to have over-invoiced the retailer, she was allowed to continue supplying the supermarket.
The report further notes that Ciano, who is one of Kenya’s most celebrated turnaround CEOs, failed to disclose that he was related to the fresh produce supplier. KPMG says Ciano’s spouse was a director at Eliehon, based on Registrar of Companies records and her identification card found on the former CEO’s official computer.
But when this information was presented to the security manager, he instructed that the matter be “put to rest and no further action taken on the staff concerned”. Yesterday, Ciano came out to dismiss the report, saying it was ‘totally full of false allegations. “Can you ask the management to concentrate on creating business during their tenure,” Ciano said in a text message after The Business Beat ran a story on the troubles of the retailer on Tuesday.
But he did not say which parts of the reports were false or respond to the specific allegations against him as requested. The audit alleges that he misrepresented Uchumi’s financial position to the public. The assets sold to RentCo were captured in the financial statements as at 30 June 2014 as a sale with cash received, whereby cash was actually received in September 2014.
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It also accuses him of not making appropriate disclosures on the sale and leaseback transaction in the 30 June 2014 financial statements. KPMG also found that he failed to inform the strategy committee of changes in interest rate from 12.75 per cent, which was changed to 16 per cent.
The former boss did not disclose in the Rights Issue information memorandum published in November 2014 that a sale and leaseback agreement had been signed by himself and two transactions of Sh489 million had been undertaken at that time.
“He approved Rights Issue proceeds certificates that were in contravention of the set guidelines and resource allocation as presented to the board. In May 2015, he approved withdrawal of Sh220 million of funds set aside for refurbishments and were transferred to finance working capital,” the report adds.
His finance boss at the time, Mr Chadwick Okumu is also accused of failing to inform the Board that he had begun discussions on the sale and lease back of Uchumi Supermarket assets in January 2014 prior to the board approving this option in April 2014. Another allegation is that he reported incorrect results at the half-year board and also the NSE, whereby he should have been aware that the actual results on his machine for the same period indicated materially different.
On his part, Mr Okumu said the issues highlighted were being investigated by credible and independent institutions and he did not want to comment ahead of their findings.