FORMER managers of Uchumi who were sacked last year for gross misconduct risk prosecution for the Sh1 billion money raised from a rights issue which cannot be accounted for, the new management has warned.
The retailer, which sacked CEO Jonathan Ciano last June, said the money raised from the rights issue could not be traced in the company's financial records, a pointer to a possible criminal offence by the former bosses.
A forensic audit by consultancy firm KPMG has unearthed massive fraud in the company which was covered up by cooking of figures.
"We discovered fraudulent financial reporting going back two to three years. The profits you saw and the cash flow were not right," director Polycarp Igathe who currently heads the audit committee said yesterday. He was speaking during the company's annual general meeting held in Nairobi.
Uchumi Group recorded a net loss of Sh3.4 billion for the financial year ending June 2015, compared to a restated profit of Sh111 million for the year 2013/2014- a whooping decline of 3,438 per cent. Prior to the restatement of the 2013/2014 profit, the previous management had announced a net profit of Sh384 million for the financial year 2013/2014.
"On the rights issue that is where the criminal part comes in. It does not reflect...we are looking at asking the director of criminal investigations to come in and look at it," said CEO Julius Kipng'etich.
Uchumi raised Sh896 million from a rights issue in 2014 to help it address its cash crunch and work towards profitability. However despite the availability of the cash, the retailer was unable to restock its shelves following months of not paying suppliers. The retailer had said Sh200 million from the money raised would also be used to refurbish existing stores while the rest was to finance Uchumi's expansion.
"Money was wired but it does not reflect even as stock in the shop."
Aside from Ciano, Uchumi also fired its chief finance officer Chadwick Okumu and human resources manager Michael Kibe after months of deteriorating business. Uchumi's head of procurement has also been sacked.
The retailer has since also changed several of its directors bringing in Polycarp Igathe, Catherine Ngahu who replaced Khadija Mire as chairperson and Samuel Kimani a representative of Jamii Bora Bank which holds some stake in the company.
At the AGM, Uchumi announced an elaborate plan to revive the business which will include 1,200 franchise shops across the country over the next three years.
Uchumi has also directed that all its current employees declare their wealth by end of March, in a bid to eradicate corruption and conflict of interest.
The retailer's share gained 1.19 per cent yesterday to close at Sh8.