Two former Mumias Sugar Company directors have denied involvement in the opening of a secret bank account that the struggling miller says was used to plunder Sh1.1 billion through an illegal sugar import deal.
Emily Otieno (company secretary) and Paul Murgor (commercial director) say they had no knowledge of the secret Dubai Bank account, which they say was opened as a result of the supply contract Mumias had for the importation of 30,000 metric tonnes of sugar.
“The opening of an escrow account with Dubai Bank was a result of the contract entered into between Mumias Sugar and the importer, which provided for starting a joint account,” lawyers for the former directors say in court papers.
Mumias has sued Mr Murgor, Ms Otieno, former chief executive Peter Kebati and former finance director Chris Chepkoit for allegedly opening the account and using it to profit from illicit deals with suppliers.
Mr Chepkoit had in April denied instructing Dubai Bank to open the account.
The miller wants details of the bank account revealed so it can collect evidence to support its pursuit of the four former executives for the loss.
The former officials have, however, denied any knowledge of the account, arguing that the supply contracts with Park were approved by the board.
“I deny having knowledge that an account had been opened and customers were depositing money into the said account. The board refused to pass a resolution to endorse the opening of the account. Mumias’ inability to access the account is a result of the board’s refusal to pass the resolution,” the former directors said in court papers.
Mr Kebati, Ms Otieno and Mr Murgor were sacked in June last year while Mr Chepkoit resigned a month later.
The former CEO is yet to respond to the suit, but has hired Nyaundi Tuiyott & Company Advocates to defend him.
Mumias claims that the four, in their well thought out plan, first sought authorisation from the Treasury to import 115,000 bags of sugar citing a production shortfall caused by external factors.
They then allegedly presented the plan to the board of directors and before getting approval, entered into talks to supply Mumias with 100,000 metric tonnes at prices above the current market.
Mumias also says they convinced distributors to only buy the sugar from Park.
Mr Murgor, Mr Chepkoit and Ms Otieno, however, say they have never contacted any of the miller’s customers regarding payment of the imported sugar.
Ms Otieno adds that the nature of her work as legal representative and company secretary did not involve interaction with Mumias’ customers.
The former company secretary insists that she had no role in convincing the National Treasury that there was a sugar shortfall and nobody consulted her on the plan to approach the ministry.
“I was not part of the management that sought authorisation from the Treasury. I deny that Mumias’ Board of Directors ever sought my advice on the choice of Peak. It was not my duty to advice or decide on the best party to import the sugar,” she says.
Lost Sh1.1 billion
Mr Chepkoit had in his response denied that the struggling miller lost Sh1.1 billion from the sugar deal, as the miller sold the entire shipment from Park by April last year, and made a Sh581 million profit from it.
He adds that Mumias successfully applied for a refund of the Sh104 million it had paid the taxman to have the sugar that had been impounded released.
The Kenya Revenue Authority (KRA) had impounded the sugar on allegations that it was not imported from a Comesa member state. Sugar from Comesa members is accorded a tax waiver.
The importer was contracted to import the sugar from a Comesa member state so as to benefit from the tax break accorded to such countries.
Mr Chepkoit, Mr Murgor and Ms Otieno all insist that the sugar was impounded unlawfully, as it was imported from Sudan’s Kenana Sugar Company.
“The Sh104 million paid as Value Added Tax was claimed by Mumias in May 2013 and was duly reimbursed.
By April 28, Mumias had actually sold the imported sugar and received a net profit of Sh581 million, which it curiously failed to disclose,” he says.
An report compiled by audit firm KPMG has revealed that several of the struggling miller’s past and present officials colluded to make money through illegal deals at Mumias’ expense.
Consultancy firm KPMG’s forensic audit of the miller revealed massive misuse of funds, pilferage and tender manipulation. Mumias has in the past two years descended deeper into loss-making territory
A deal brokered by President Uhuru Kenyatta is to see it receive Sh1 billion from the government.
The President Kenyatta-brokered bailout will also see shareholders fork out Sh4 billion in a cash call aimed at resurrecting the miller’s profit-making days.