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KPMG saga: London threw me under the bus when I sought justice – Ndung’u

Financial Standard

Former KPMG CEO Richard Ndung'u. [Courtesy]

Richard Ndung’u, a pioneer tax consultant in Kenya, stared at a bleak future at KPMG East Africa.

The chief executive of the audit firm, Josephat Mwaura, had on October 3, 2016, launched an investigation against him for allegedly having a love affair with his personal assistant.

If the then head of the tax department was found guilty, he would be kicked out of the partnership of the firm, regardless of the wealth of experience and reputation he had built for over two decades.

The CEO was intimidating him, said Mr Ndung’u in court documents. Moreover, an investigation that he had been assured would take just two days had already taken two weeks.

Fearing that this could as well be a witch hunt by someone he had spurred with several times before, Ndung’u frantically sought help from KPMG International.

On October 17, he sent a complaint against Mwaura to Trevor Hoole, the then CEO of KPMG Southern Africa.

But London, he says in a lawsuit at the High Court, threw him under the bus. If anything, they egged on the Nairobi-based partners to gang up and eject him from the audit firm located on Waiyaki Way, Nairobi. 

Ndung’u, a tax consultant whose attempt to get a job as the commissioner general of Kenya Revenue Authority (KRA) in 2019 fell through, is now seeking compensation from KPMG International, separate from the Sh379 million he has already received from the Kenyan unit.

“That KPMG took up my complaint, but in breach of their duty of care to me and in breach of the promise espoused by its ‘KPMG Values’ and ‘KPMG Global Code of Conduct,’ KPMG International abdicated its role in the stewardship of the complaint and expressly visited and, or acquiesced to and countenanced retaliatory action against me,” he says in the court papers.

Failure by KPMG International to take charge of the complaint saw Mwaura launch what the court termed a “retrial” against Ndung’u’s past indiscretions, for which he had already been sanctioned.

Mr Mwaura laid bare some of Ndung’u’s past conduct before the executive committee of KPMG East Africa.

But Justice Tuiyott wondered: “The question to be asked is whether Richard Ndung’u would have faced a ‘retrial’ on those past indiscretions had he not lodged a complaint against the CEO.”

In addition, his removal, which arbitrator John Ohaga described as unprocedural, was done out of spite after Ndung’u decided to tell on his boss, he claims.

Ndung’u was finally ejected as a partner at KPMG East Africa in January 2017.

His complaint to Mr Hoole against Mwaura was one of the items in the agenda of a meeting that was to be held by the KPMG East Africa partners on December 16, 2016.

Earlier, KPMG International had ruled that the Nairobi-based firm had the capacity to thrash out the issue.

Hoole had also allegedly told Ndung’u’ in an email that his complaint “was not without merit.”

“Given that the subject complaint related to the manner in which the senior partner (Mwaura) had investigated the matter against me and considering the sentiments expressed by Trevor Hoole, I was perturbed that when the matter came up for discussion the same was chaired and guided by the said senior partner who had a direct interest in the matter under consideration,” said Ndung’u.

Although KPMG International advised that the case be handled by the highest decision-making organ of KPGM East Africa–the executive committee which comprises some chosen partners– Ndung’u wanted the global firm to attend and guide the meeting.

“I believe this is extremely important, and confirm that in 2008, John Saker, John Vice and Jack de Raad attended, and very firmly, guided the discussion and outcomes,” said Ndung’u.

When Hoole received the complaint against Mwaura, he escalated the case to the London-based KPMG International.

KPMG International then appointed two senior officers, Andrew Cranston and Patrick Simmons, to look into the matter.

Mr Simmons was a senior partner at KPMG Belgium and the court documents do not say a lot about his role in the investigations.

It was Cranston, then serving as legal counsel for KPMG International and more recently appointed the chief operating officer at KPMG International, who landed in Nairobi to investigate Ndung’u’s complaint.

The CEO told the partners that Cranston had since reached the conclusion that Ndung’u’s complaint was without merit.

Indeed, in court documents, the partners talked of how Cranston, who had told them to look into the complaint, had also urged them to get rid of Ndung’u.

Cranston said something that they decided to deal with: “Why all this happened over the years and Richard had gotten away with all this history and what he is saying regarding your partner.”  

But High Court Judge Francis Tuiyott noted that Cranston was on one hand calling for Ndung’u’s removal even as he asked the partners to independently investigate his complaint against the CEO.

The arbitrator, Mr Ohaga, indeed found that Cranston did not look into the specifics of the complaint.

“I think it is unfortunate that Andrew Cranston, despite conducting the investigation, was not called as a witness by either of the parties as his testimony would have been pivotal to the determination of the issue,” said the arbitrator.  

For an audit giant with global representation, injustice at any of KPMG’s firms is seen as a threat in the entire ecosystem.

KPMG International was painfully reminded of this by the Gupta scandal in South Africa where it was forced to overhaul the leadership following revelations that the firm facilitated the powerful Gupta family in tax evasion and corruption.

The firm denied any wrongdoing, but admitted to missing several “red flags” in relation to the family’s accounts.

At least eight senior KPMG South Africa officials, including CEO Hoole, resigned in the wake of the scandal.  

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