How Uchumi cleared disputed Sh1bn deal

Uchumi Group CEO Julius Kipng'etich during the firm's at the Laico Regency on January 20, 2016. PHOTO | DIANA NGILA | NATION MEDIA GROUP

What you need to know:

  • A forensic audit by KPMG questions the validity of the contract RentCo entered with Uchumi on grounds that it was not approved by the supermarket chain’s board.
  • But on Sunday, Mr Nyasimi insisted that he had every reason to believe that the documents he got from Uchumi were genuine.
  • The Kenya Commercial Bank, which advanced the Sh1.1 billion loan to RentCo, has also refused to comment on the matter, citing confidentiality between the lender and its client.

The management of Uchumi Supermarkets Ltd approved a contested Sh1.1 billion leasing contract with a local company, documents show.

The sale and lease-back agreement between the retailer and RentCo, the leasing company caught in a financial ping-pong between Uchumi and auditors, was signed by former Chief Executive Jonathan Ciano and the company secretary on January 13 last year.

The contract allowed RentCo to enter into a leasing arrangement with Uchumi, and it is on the strength of the approval that RentCo went on to secure a loan with the Kenya Commercial Bank.

On Sunday, the director of RentCo, Mr Robert Kanda Nyasimi, said it was surprising that the management of Uchumi would turn around and claim they had never approved the lease contract.

He said Mr Ciano and the company secretary were bona fide signatories of Uchumi, “given powers to contract on behalf” of the supermarket chain, and so he had no reason to doubt the authenticity of the document he received from them.

A forensic audit by KPMG questions the validity of the contract RentCo entered with Uchumi on grounds that it was not approved by the supermarket chain’s board.

The auditors say that even though they were provided with a scanned copy of the board resolution by circularisation — where the board does not meet in full, but a document is circulated to members for approval — they were unable to get evidence of draft versions of the same from the personal computers of Mr Ciano and his chief finance officer, Mr Chadwick Okumu.

Interestingly, the non-executive board members whose signatures appear on the document — Mr James Murigu, Ms Mbatha Mbithi, Mr Barth Ragalo, Ms Khadija Mire, and Ms Joyce Ogundo — all told the forensic auditors that the transaction was neither discussed at the full, nor at a sub-committee of the board.

“They confirmed that the signatures on the second page of the resolution seemed to be theirs but suggested that it was likely the second page was taken from another document and attached to the resolution,” reads the KPMG audit report.

GENUINE
But on Sunday, Mr Nyasimi insisted that he had every reason to believe that the documents he got from Uchumi were genuine.

He also refuted the insinuation that he could have aided the falsification of the board resolution document.

“I received documents that were signed by the CEO,” he said. “The board appoints the CEO, who is assumed to act on behalf of the company.”

Mr Ciano, the CEO fired last year over irregularities at Uchumi, has refused to talk to the Daily Nation over the saga.

He says he has not seen the forensic report and so he cannot comment on the allegations made against him.

The Kenya Commercial Bank, which advanced the Sh1.1 billion loan to RentCo, has also refused to comment on the matter, citing confidentiality between the lender and its client.

The Daily Nation had sought to know, among other things, whether the bank had sought any clarification from Uchumi that the deal had been approved by the board before advancing a loan to finance it; and whether, in light of the new developments, the bank still believed the transaction was above board and in the best interests of Uchumi.

Mr Nyasimi said he was a genuine businessman who had built his career through hard work and diligence, and read mischief in the compilation and tone of the audit report.

STILL BINDING
Mr Martin Papa, a document examiner with Global Forensic Security Service, said should it be proven that the signatures used to secure the contract were forged, the law would still protect the lease agreement as only the falsified signatures would be “inoperative”.

That means that, in law, Mr Nyasimi’s contract with Uchumi would still be binding, whether or not the signatures approving it were genuine.

“The lease agreement can be enforced against those who are precluded from setting up the defence of forgery, even against those whose signatures have been forged,” said Mr Papa.

In this case, a forensic examiner would provide evidence of contact between individuals and the lease agreement, whether they signed it or not.

The examiner would also confirm the creator of the lease document and the people involved, as well as whether there were any modifications to the original text.