Watchdog probe on Deloitte over Tuskys family feud derails

A director of Tuskys Supermarkets has failed to provide the accountants watchdog with information that will help probe audit firm Deloitte for allegedly abetting fraud in the retail chain.

The Institute of Certified Public Accountants of Kenya (ICPAK) says Yusuf Mugweru, a director at the supermarket chain, has not offered evidence to kick off an inquiry on the auditors conduct.

Documents filed in court by Mr Mugweru accused Deloitte, who are Tuskys auditors, of concealing material information on registration of other companies without the mandate of the board.

It is through these companies; Mr Mugweru says in a sworn affidavit, that Sh1.6 billion was fraudulently diverted from the retailer, prompting the complaint to the Icpak—who confirmed receiving the protest.

The owners of the retail chain are locked in a family feud that threatens to tear apart one of Kenya’s successful enterprises after Mr Mugweru and his niece, Ann Gatei, made a complaint against co-directors last year, accusing them of mismanaging the company.

“The complainant has to date not furnished the Institute with supporting documents… he did not particularise his claim and this can only be inferred,” said Sally Mukabana, the legal manager at Icpak.

“As an Institute before any action or process is started we must be furnished with all the relevant supporting documents as we cannot commence the proceedings based on unsubstantiated claim or allegations.”

(Read: Tuskys directors’ feud sucks in audit, registry companies)

Mr Mugweru, who owns 17.5 per cent of Tuskys, argues that related companies and subsidiaries such as Enkarasha, popMEDIA, Kenspore, Magic Pay and Ndykak Investments were formed without a board resolution.

He says his brothers, Stephen Mukuha, George Gachwe and Frank Kamau, have been drawing funds from the retailer through the entities.

The business is run by seven siblings including Stephen Mukuha, who serves as the managing director, and directors Yusuf, John Kago, George Gachwe, Sam Gatei, Mary Njoki and Kenneth Mwangi Njeri.

“Both Livingstone Associates and Deloitte have in the recent past colluded with other directors in attempting to make the questionable companies subsidiaries of Tusker Mattresses Limited (TML) and fraudulently convert the Sh1.6 billion into a loan from TML to Orakam Holdings,” Mr Mugweru told the court in an affidavit.

Icpak enforce discipline and ethical behaviour of trained accountants. If an audit firm is found in breach, the practising certificate of their partners could be suspended.

They could also face a reprimand from the disciplinary committee through the Kenya Gazette and the media, hurting their standing since they hinge on their reputation to close deals.

With a network of 45 stores across Kenya, Uganda and Rwanda, Tuskys is now ranked the region’s second biggest retailer in terms of revenues after Nakumatt Holdings.