Audit report vindicates CMC boss over ousted chair

Embattled managing director of CMC Holdings Mr William Lay has got a major boost against the camp led by ousted chairman Mr Peter Muthoka after the first audit at the firm vindicated his allegations.

According to a PricewaterhouseCoopers (PwC) forensic audit the motor dealer lost up to Sh1.1 billion in extra charges to Andy Forwarders Services Limited (AFS), a transport and logistics company majority owned by Mr Muthoka which supplied logistics services exclusively to CMC.

The PWC audit found that Mr Muthoka used his position as a director of CMC Holdings to obtain contracts for his company priced at doubled the prevailing market prices. (READ: How CMC bosses stole millions from the company)

“It is our view that as a result of these dealings, CMC Group has suffered a substantial loss of around Sh1 billion — 1.1 billion which loss would have been avoided had CMC Group used rival competitor suppliers for the same services procured through a standard tender process,” the report read in part.

The money was lost in period between May 2006 and September last year, when the contract was terminated.

The report could be refuted by Mr Muthoka’s team given that it was sanctioned by Mr Lay.

Attention now shifts to the second audit commissioned by the Capital Markets Authority which is being done by a south African firm.

The report notes that Mr Muthoka managed to obtain two price increases for handling fees and freight rates just eight months after he joined the firm’s board in 2006.

Mr Muthoka also succeeded to obtain a new contract to offer the firm new services such as freight as was in the case in May 2006, none of which went through any tender processes applicable to internal procedures.

But PWC said its findings will not be sufficient to force Mr Muthoka to pay back the money unless relevant authorities compel key witnessed to produce relevant documents.

“Because of limitations on our powers which means that we can only rely on voluntary submissions as evidence, we were unable to obtain sufficient information to prove criminal culpability against Mr Muthoka,” it read in part.

The audit blamed the loss on an absence of tendering or other controls to ensure fair terms when new services were contracted by Andy Forwarders.

It also found that Andy Forwarders flouted a policy that required it to pay a deposit and interest when the acquired trucks under the Deferred Payment Arrangement.

PwC recommended that the money be recovered through negotiations with Andy Forwarders and the suspected senior staff.