Former Uchumi Supermarkets chief executive Jonathan Ciano is this morning expected to record a statement with the police explaining his alleged role in the manipulation of the retail chain’s books during his time at the helm.
Mr Ciano, who headed Uchumi for nearly 10 years, was forced out of office in June last year alongside his chief finance officer, Chadwik Okumu, who was taken into custody yesterday before being released.
He was not arraigned in court to face any charges, but sources indicated that he would be brought to court once Mr Ciano came on board.
Mr Ciano, however, said he was not being sought by the police and that he had agreed to present.
himself to the Directorate of Criminal Investigations (DCI) this morning. “No, the police are not looking for me, I already have an appointment with them tomorrow afternoon. They want to find out about what you have been writing in the papers and I will explain to them,” Mr Ciano said.
Uchumi booked a Sh3.2 billion loss in financial year ending June 2016 after the retailer wrote off the Sh1.04 billion that had been included in the supermarket’s books through manipulation.
It has been suggested that the company used a revaluation of its properties to conceal losses it made in the preceding two years. Uchumi would have been in the loss-making territory from 2013, according to London-based Exotix and Kenya’s Equity Investment Bank.
The retail chain then hired audit firm KPMG to conducted a forensic audit of its books between June 2013 and May last year. KPMG delivered their findings early this month revealing fresh details of unscrupulous dealings at the supermarket.
KPMG’s audit report indicated that the supermarket lacked an adequate background and quality checks that led to the acceptance of conflicted suppliers, substandard products and dubious trade agreements.
The report also showed that the retail chain’s top management may have been involved in the cover up of the illicit financial transaction that took place under their watch.
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The investigators found that internal audit activities were not completed as planned and in some instances, findings were dropped from the report without any basis.
“Our review noted that a number of key pertinent issues, including profitability of subsidiaries, creditors’ payments and cash positions were identified and raised by internal audit at audit committee meetings, but we did not find any evidence of further deliberations and action plans on the same by the members of the committee,” KPMG says.
It adds that Mr Ciano received a whistle blower’s email from Mr Peter Waitara in 2014 claiming financial records were being manipulated to confuse the board, bribes were being demanded from suppliers to process payments and in turn the suppliers bribed staff for local purchase orders.
Evidence of misappropriation of funds in Uganda as well as advertising items in newspapers even when they were out of stock was also found.
The Uchumi boss forwarded the email to Mr Okumu and requested a meeting to discuss the issues although the auditors could not find out if the matter was followed up since Mr Ciano and Mr Okumu failed to appear before the audit team and requested for email queries ‘some’ of which were answered to, according to KPMG.
Wanted as a suspect
It is not clear whether the DCI investigations are tied to the audit or whether the report is part of a wider effort to bring those who brought down the retailer for the second time to book.
It is also not clear whether Mr Ciano is wanted as a suspect or to assist with the investigations but sources at the DCI stated that all those linked to the losses incurred by the supermarket will be arrested.
The arrests come shortly after the government promised to extend Sh1.2 billion bailout funds to Uchumi on condition that ‘the crooks that brought Uchumi into problems take responsibility for their activities’.
The KPMG report revealed that over 45 per cent of the procurement staff did not meet the minimum qualifications set in the retailer’s human resource guidelines.
The fact finding report also named Mr Ciano for allowing his wife to supply fresh produce to the supermarket. It faulted the retailer’s board for lack of oversight on management after they skipped meetings, failed to approve transactions allowing Mr Ciano all the room and did not keep records of its resolutions.
Uchumi has since parted ways with its chairperson, Khadija Mire, together with two directors, James Murigu and Bartholomew Ragalo, and replaced them with Catherine Ngahu (chair) and Louis Otieno of Microsoft Africa as a director.
The former board chair even signed and backdated minutes of the meetings held between July and October 2014, February and March 2015 while the auditors were conducting their investigations.