Uchumi blames employees, fake suppliers for collapse

Fraudulent suppliers colluded with Uchumi employees to fleece the retailer through fictitious claims that contributed to its collapse, the supermarket chain has told the High Court.

Court papers filed in Uchumi’s fight with one of its suppliers have revealed how the fraud was propagated by the retailer’s employees, suppliers and distributors.

The Nairobi Securities Exchange #ticker:NSE listed Uchumi, in an ongoing case against one of its suppliers Smart Brands Ltd, says it unearthed the widespread fraud in an audit done by financial consulting firm KPMG.

“As a result of the audit, it was discovered that a large quantity of goods from various suppliers were neither ordered for and or delivered at our stores and thus became necessary to ascertain what goods were ordered and supplied by Smart Brands whilst simultaneously verifying the Local Purchase Orders,” says Uchumi in court papers.

Uchumi, which is fighting a liquidation application by its creditors, has recanted an earlier admission of Sh16 million debt owed to Smart Brands Ltd, claiming there is a likelihood the supplier benefited from a book cooking scheme in which employees recorded supply of goods that did not reach its warehouses.

Smart Brands Ltd had sued Uchumi in 2016 for the debt, and the retailer had admitted to owing Sh16,598,891.61.

In March 2017, however, the retailer made an about-turn in an application it filed seeking to be allowed to recant the admission of debt on the strength of the KPMG audit report.

Smart Brands wants the Chief Magistrate’s Court to enter a judgment against the retailer, arguing that the debt has been pending as far back as 2011.

But in a quick rejoinder, Uchumi stated that it had filed an application seeking to withdraw the statement of admission and file its defence, after conducting the audit by KPMG.

“The proposed defence raises triable issues worthy of consideration by the court and the application by Smart Brands should be stopped until our defence and supporting documents are filed,” Uchumi pleaded.

According to Uchumi, the defence it has filed will enable the court determine the real dispute between the parties and will not prejudice the fair trial of the matter before court.

The retailer says that if the application by Smart Brands is heard first, it (Uchumi) will be condemned unheard.

The Chief Magistrate’s Court was persuaded by the arguments advanced by Uchumi and on November 24, 2017 allowed Uchumi’s request to have its defence argued first before the application by Smart Brands.

Smart Brands now wants the High Court to overturn the orders, saying the magistrate court allowed Uchumi to withdraw its statement of admission, when there is no provision in law that allows the withdrawal of admission, especially when it has been filed in court.

“To make matters worse, Uchumi made no application and or expressed prayer to withdraw their statement of defence,” Smart Brands says in its appeal papers.