Former Uchumi CEO Jonathan Ciano/ CitizenDigital
NAIROBI, Kenya Apr 19- Former Uchumi Supermarket CEO Jonathan Ciano has been awarded Sh6.5 million for leave days, gratuity and unused leave days, after the High Court termed his sacking seven years ago invalid.
High Court judge Stella Rutto said Ciano’s dismissal was invalid because he had resigned two days prior to his ouster.
She added that the court didn’t establish that Ciano’s ouster was unlawful, and could not award him damages.
“The court arrives at the determination that Mr. Ciano effectively resigned on June 13, 2015, and his subsequent termination on June 15, 2015, by Uchumi Supermarkets Limited was null and void,” Justice Rutto stated. “There was nothing to terminate. Mr. Ciano had fired the first salvo and effectively extinguished the contract of employment. The termination by Uchumi was akin to flogging a dead horse.”
The former CEO was sacked back in June 2015, after allegations of gross misconduct and negligence arose leaving the listed supermarket chain in billions in debt.
Ciano sought Sh47.4 million from Uchumi in terminal benefits and compensatory damages arising from his dismissal, which he termed unfair, unlawful, and inhumane terms.
However, Justice Rutto awarded Sh6.5 million in terminal dues for Ciano’s June salary, 24 unused leave days and gratuity.
“As there has been no finding on unlawful termination, the claim for compensatory damages cannot be sustained,” she said.
In 2018, the former Uchumi boss was freed of a two-year legal burden after the High Court dismissed fraud charges against him over a flawed Sh895 million cash call in 2014.
The judge found that Ciano had been taken through a faulty disciplinary process, noting that the regulator (Capital Markets Authority) had not furnished the former Uchumi boss with the required information in time to enable him to prepare for his defence.
CMA had based its charges on a forensic audit report by global audit firm KPMG.
The firm found that Ciano and his wife were among Uchumi’s largest vegetable suppliers among others.
The capital markets regulator had hit Ciano with a Sh5 million penalty for the loss that his actions were deemed to have caused shareholders and sought to seize some Sh13.5 million as proceeds of crime for his failure to declare a conflict of interest to the Uchumi board.
Ciano, who helped revive Uchumi in 2006 when it was put in receivership and given a government-led bailout, was ousted along with the Chief Finance Officer after the retail chain fell behind on supplier payments.
In June 2015 the board was concerned about potential fraud and misconduct in the financial operations of Uchumi and its subsidiaries, prompting it to commission KPMG to conduct a forensic audit of financial operations.
The said forensic audit reportedly revealed massive malpractices that took place in Uchumi during the period.
In court, the company claimed that Ciano acted negligently and failed to exercise any reasonable care and skill expected of a CEO.
The firm further noted that as a result, Uchumi had suffered trading losses leading to its near-collapse and erosion of its stocks on the Nairobi Securities Exchange.
Ciano however denied the allegations, stating that he executed his duties with due diligence and to satisfaction since the retailer was making profits during his tenure.
It was his testimony that by the time he left, Uchumi was valued at about Sh7 billion and the only outstanding loan was Sh182 million on account of the ICDC.
Ciano argued that he was never served with the report of the forensic audit commenced by the company upon his exit and that he was never investigated despite presenting himself to the Directorate of Criminal Investigations (DCI).
In February, CMA was allowed to investigate audit firm Ernst & Young (E&Y) over claims that it helped cook Uchumi’s books, covering up transactions that left the retailer on its deathbed.
The Court of Appeal ruled that the regulator was free to inquire from E&Y about its role in Uchumi’s affairs amid claims the audit firm abetted fraudulent transactions involving the retailer’s former managers amounting to over Sh1.9 billion.
A bench of three judges said the audit firm failed to demonstrate that the CMA breached its right to a fair hearing when it summoned E&Y executives in 2016 to shed light on Uchumi’s 2014 and 2015 audit reports, following a probe by rival auditor, KPMG.
A forensic audit report by KPMG showed that Uchumi’s accounts for the financial years 2010 to 2014- prepared by E&Y as the retailer’s auditors at the time- contained misleading information.
Uchumi shareholders remain in the dark as the troubled retailer is yet to publish its financials for four years in an alarming regulatory breach.
The retailer has not released its fiscal results for the year ending June 2018 despite several extensions from the regulator and subsequent financial calendar results for 2019, 2020 and 2021.