Details continue to emerge on how shareholders of cash-strapped Uchumi Supermarkets were duped into thinking they had made a sound investment.
The chain store’s former management, led by chief executive Jonathan Ciano who has since been fired, made shareholders believe they were making profits and even recommended dividends as the firm sank into debt and loss.
Shareholders who left with no dividend after Wednesday’s annual general meeting watched in disbelief as the new management confirmed their fears of having been swindled by a team they had trusted for years.
Uchumi CEO Julius Kipng’etich had a tough time assuring the shareholders that those responsible for the poor returns would be held responsible.
“We have the forensic audit report and we just need to give the critical parties some time to review it.
Both the Capital Markets Authority and the professional association which Mr Ciano and Mr Chadwick Okumu belong to, which is ICPAK, is looking at the report.
That is not to say that the board is sleeping; we are looking at the possibilities of involving other arms of government and then file criminal charges.
We will also seek claims through civil suits,” Mr Kipng’etich said.
Mr Ciano, the former CEO who helped revive Uchumi after the retailer was declared insolvent on June 1, 2006, was ousted in June alongside Mr Okumu (former chief finance officer) over what the board termed as “gross misconduct” and “gross negligence”.
Uchumi has also replaced its former chairperson, Ms Khadija Mire, together with two directors, Mr James Murigu and Mr Bartholomew Ragalo.
Shareholders who spoke at the AGM said those culpable should face the law.
They were shocked that their internal auditors could join the conspiracy game and cheat them of their hard-earned investments.
“Let us not come back here next time and take another excuse because, how are we even supposed to believe these results when our own auditors lied to us?
How long shall it take before we get dividends when we still have all these debts to pay and all these expansion plans to do? We are so disappointed; don’t make us feel worse with any more disappointments,” an enraged shareholder said.
New chairperson Catherine Ngahu, however, believes the shareholders’ concerns are a show of support for the firm, which seeks a new financial footing in its turnaround strategy.
“Shareholders have asked many questions, which demonstrate their passion and interest. We know they will support us in the turn-around.
Many people, some of whom are not shareholders, have been coming to me saying, ‘We want our Uchumi back’.
So the public is also behind us. Even when they challenge us, it is because they want to see us doing better,” she told journalists after the meeting.
The forensic audit which identified fraudulent financial dealings - including the fictitious transfer of Sh1 billion to the now closed Uganda and Tanzania stores, weak internal controls, poor management and flawed procurement processes - now puts Uchumi’s former internal auditor David Mboya on the spot.
The retail chain is currently scouting for a Sh5 billion investment to repay supplier debts, loans and expand its operations.
After firing its head of procurement, it is looking for a new chief finance officer.
Five procurement officers are earmarked for possible dismissal while all members of staff will declare their wealth and undergo a lifestyle audit.
Revelations of book cooking at the listed supermarket chain confirms a June 2015 research note by London-based Exotix, which said Uchumi used revaluation gains from its properties to conceal losses made over the past two years.
Uchumi should have reported a Sh123 million loss in 2013 against the Sh357 million profit it made, and a Sh336 million loss in 2014 compared with the Sh384 million profit it declared, analysts at Exotix said.
The firm is now in the financial negative of Sh3.2 billion after restating the books to the year ending June 2015.
It will be using a new franchise framework to extend its footprint and regain market share.
Meanwhile, critical questions are being raised on how the listed firm, through the services of internationally accredited financial auditors, could cook books for three years.
Eyes are now on the regulators after receiving the damning forensic audit.