South Africa’s Haco Tiger Brands on Thursday said it had dropped plans to pursue disgraced managers who were involved in an accounting scandal that took place at its Nairobi factory last year.
Peter Matlare, the chief executive officer of Tiger Brands, the majority shareholder in Haco, said in Nairobi that the company “will not engage in a witch-hunt against any of those involved or suspected of involvement in the scandal.”
Mr Matlare said Haco had instead sealed the loopholes that enabled the sacked managers to hatch the pre-invoicing scheme that helped them shore up profits and give the impression that they had met their targets last year.
“There are those people who have left the company. We have carried out some internal processes to make sure we fully understand if anybody else was directly or indirectly involved and what appropriate disciplinary action needs to be taken internally,” said Mr Matlare, adding that “one blemish should not give anybody the impression that there is something rotten at Haco.”
Haco sacked its managing director Geoffrey Mwathi Kiarie on accusations of falsifying operating profits for the full year ended on September 31, 2014 by Sh879 million.
Correcting the padding of profits in the Kenyan operation negatively affected the half-year results of Tiger Brands, which is listed on the Johannesburg Stock Exchange, forcing the South Africa firm to report the fraud.
Haco chairman Chris Kirubi said that the sacked managers did not steal from the company and there was nothing criminal in the actions of the former management team.
“There was no stealing, just procedural mistakes. They did not take anything from the company thus there was no material loss, and there were no bonuses paid either to them or to the agents,” he said, insisting that goods that were reported to have been sold to meet the performance targets had not been delivered.
“Subsequently in the new quarter all those goods were delivered and those invoices reversed and made legitimate.” Mr Kirubi’s position on Thursday was in stark contrast to his pronouncement earlier in the week that Haco’s lawyers were looking at the possibility of taking the sacked managers to court to face civil charges relating to the scandal.
South Africa’s Tiger Brands, which has operations in South Africa, Kenya, Cameroon, Ethiopia, Nigeria, and Zimbabwe, announced last week that its operating income for the six months to March 2015 declined by three per cent to Sh13.8 billion even as turnover increased seven per cent to Sh129.4 billion.
Mr Matlare said the drop in sales in the Kenyan unit was also caused by low morale among employees given that the investigations into the accounting scandal were on during the period.
The sacked senior managers had effectively sold forward by declaring sales and moving products off site to third party warehouses for customers who had not paid and collected their goods.
Haco deals in BIC brand of pens, personal and household care products such as Ace, Jeyes, Miadi, Motions, TCB, Bloo and SoSoft. Tiger Brands, the South African multinational, controls more than 50 of the group’s manufacturing facilities in Africa.
Tiger Brands owns 51 per cent of Haco while Mr Kirubi owns the rest. The South African group has invested over Sh50 billion in the Kenyan operation since it bought a controlling stake in the firm in 2008. Most of the money has gone into capacity expansion at Haco’s Kasarani-based factory.
Haco’s decision not to pursue Mr Kiarie, however, offers him only partial relief following an announcement earlier this week that he is under investigation for professional misconduct by the Institute of Certified Public Accountants of Kenya (ICPAK), alongside PricewaterhouseCoopers (PwC) – the accounting firm that audited the company’s books during the period.
ICPAK said it was investigating Mr Kiarie’s involvement in the scam and PwC’s failure to detect the huge and illegal financial adjustments.
PwC on Tuesday declined to comment on the matter insisting that it would be in breach of professional conduct to discuss matters concerning its clients.
If found culpable, Mr Kiarie faces disciplinary action that could potentially limit his career. ICPAK chief executive Patrick Ngumi said the association would either fine, suspend or excommunicate him for his role in the scam.