The revelation that Uchumi Supermarkets manipulated financial statements to the tune of Sh1.04 billion (Shs33b) has put former senior managers including, ex-chief executive Jonathan Ciano, on the spot.
The listed supermarket chain announced last week that the former management had cooked up books to prop up earnings, giving a false picture of Uchumi’s financial position.
Uchumi said a clear picture of the extent of accounting fraud orchestrated by the former executives would be revealed once a forensic audit by KPMG is complete.
“The former management cleverly played around with books. The true and fair position of Uchumi was never reflected,” said current chief executive officer Julius Kipng’etich, who was hired in August to turn around the fortunes of the struggling retailer.
“This is both professional misconduct and a criminal offence. We will pursue with authorities,” added Mr Kipng’etich in an interview.
The revelations of loss cover up at Uchumi vindicate a June 2015 research note by London-based Exotix which charged that Uchumi used revaluation gains from its properties to conceal losses it made over the past two years.
Uchumi should have reported a KSh123m (Shs3,9b) loss in 2013 against the KSh357m (Shs11.3b) profit it made and a KSh336m (Shs10.6b) loss in 2014 compared to the KSh384m (Shs12.2b) profit it declared, analysts at Exotix said.
Focus now shifts to the Mr Ciano’s executive team including Chadwick Omondi Okumu (chief finance officer) and David Mboya (internal auditor).
Mr Ciano, the former chief executive director who helped revive Uchumi after the retailer was declared insolvent on June 1, 2006, was ousted in June alongside Mr Okumu in what the board termed as gross misconduct and gross negligence.
Uchumi has also 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 supermarket chain also took a KSh1.6b (Shs52.3b) hit in impairment costs for closing all its branches and Uganda and Tanzania — which continually posted losses due to stiff competition and a weak expansion strategy.
This saw it post an after-tax loss of KSh3.4b (Shs 108.2b) in the year to June 2015 following a decline in revenue coupled with the provisions.
Meanwhile, former employees of Uchumi Supermarkets have sued the retail chain for not informing them prior to closure of its Ugandan branches and exiting the country without remitting their salaries.
The ex-Uchumi workers say in a case filed at the High Court that their employer tricked them into taking 21 days of leave to allow renovation of the supermarket’s premises.