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Why Ciano got off the hook in Uchumi case

Former Uchumi Supermarkets CEO Jonathan Ciano. FILE PHOTO | NMG
Former Uchumi Supermarkets CEO Jonathan Ciano. FILE PHOTO | NMG 

Failure by the Capital Markets Authority to furnish former Uchumi chief executive Jonathan Ciano with sufficient material to defend himself adequately was wrong, leading to the quashing of a notice to show cause sent to him by the regulator.

Justice George Odunga ruled that Section 4(3)(a) and (g) of the Fair Administrative Action Act provides that where an administrative action is likely to adversely affect the rights or fundamental freedoms of any person, the administrator shall give the person affected by the decision adequate notice of the nature and reasons for the proposed administrative action and information.

While quashing the summons, the judge, however, said the regulator was free to carry out its mandate, but it must do so in strict adherence to the law, both procedural and substantive.

“It is my view that fair hearing must be meaningful for it to meet the constitutional threshold. The applicants in this application contend that their rights to be heard was violated as they were not given appropriate notice in order to enable them adequately prepare their case,” the judge said.

Unheard

Mr Ciano moved to court seeking to quash the notice arguing that the regulator had already condemned him unheard.

He told the court that his services were terminated by Uchumi’s board on June 15, 2015 because of alleged gross misconduct and gross negligence.

In the same month, the CMA Board raised concerns of potential fraud and misconduct in the financial operations of Uchumi Supermarkets Ltd and its subsidiaries and therefore commissioned KPMG to conduct a forensic audit of financial operations at the chain of supermarkets.

The audit was to cover the period between June 1, 2013 and May 31, 2015.

The audit allegedly revealed massive malpractices that took place in the Supermarkets between the said period.

And based on the said allegations of the malpractices and material non-disclosure of financial matters, Uchumi lodged a complaint with the regulator.

On August 13, 2016 CMA gave Mr Ciano a notice to show cause in respect of six contraventions of the Capital Markets Act.

Predetermined issues

The former CEO challenged the notice saying it was couched in a manner to suggest that a predetermination of the issues had been made against him.

He nevertheless appeared before the regulator on September 14, 2016 assuming that it was an avenue to clear his reputation, which he said had been maligned.

He said to the best of his knowledge, the report by KPMG alleged that he had refused to co-operate yet he answered all the questions in writing to prevent inclusion of any incorrect information.

Mr Ciano said that to cover up for their misgivings and reliance on the report and without any proper notice, he learned from the press that a determination had been made against him on the evening of November 17, 2016.

He accused the regulator of presuming him guilty before he was heard.

He said the process of determination took close to 10 months from the time the complaint was lodged.

Too short

He added that he was given the report on the eve of the hearing and the time was too short for him to respond adequately.

The regulator said it commenced its investigations on the request of Uchumi’s board into Mr Ciano’s possible involvement in financial mismanagement, financial impropriety and regulatory infractions.

The court heard that after the conclusion of the preliminary inquiry, Mr Ciano was then given the notice to show cause letter specifying the allegations against him to which he responded to.

CMA maintained that Mr Ciano was supplied with all the relevant information and materials, without any difficulty or impediments and that he confirmed receiving them.

The regulator said it made the decision after considering all the evidence before it.

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