Former Uchumi Supermarkets chief finance officer Chadwick Okumu and three other directors have sued the Capital Markets Authority over a decision to penalise them for alleged fraud at the retail chain.
In suit filed at the High Court, Okumu said the move by CMA to impose punitive sanctions against him is not only illegal but in breach of his constitutional rights.
Similarly, ex-directors James Murigu, Barth Ragalo and Joyce Ogundo have also filed separate suits challenging the decision on grounds that the regulator has no jurisdiction to impose sanctions against any director with respect to decisions they make collectively.
On November 18, CMA said it had discovered former CEO Jonathan Ciano, Okumu and other managers failed to disclose important material information to investors and misused proceeds of the Sh895 million rights issue.
The regulator also banned the ex-managers from holding positions in any listed public firms for between a year and five years.
In addition, the directors were ordered to pay penalties totaling Sh 21.7 million.
The directors argues that the sanctions imposed against them are unreasonable and will have serious effect on their livelihood.
They said CMA is punishing them personally for wrongs allegedly committed by the board of directors while acting collectively.
“By purporting to impose the punitive action and penalties CMA has purported to exercise an origin criminal jurisdiction which is reserved solely for the court,” Murigu said.
Okumu, on the other hand, accuses CMA of making its decision without following procedures and giving him an opportunity to respond to the allegations.
An audit report commissioned by the current board of Uchumi revealed the retail chain might have lost as much as Sh900 million raised in a rights issue in 2014 to fraud, even as it plunged into a Sh3.4 billion net loss.
Last week, CMA revealed that it was also pursuing criminal charges against the directors.
CMA chief executive Paul Muthaura said they were working with the office of the Director of Public Prosecutions to bring criminal charges against former CEO Jonathan Ciano and Okumu.