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From auditor to receiver manager: How Deloitte left KPCU miller in tatters

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The Kenya Planters Co-operative Union (KPCU) mills in Nairobi. The mill was vandalised when the farmers' body was under receivership.

The Kenya Planters Co-operative Union (KPCU) mills in Nairobi. The mill was vandalised when the farmers’ body was under receivership.

A leading audit firm, Deloitte Consulting, forsook Kenya Planters Co-operative Union (KPCU) at its hour of need and walked to the side of Kenya Commercial Bank in a classic case of betrayal.

In July 2008, after several senior managers walked out of the KPCU, the board decided to carry out an audit of the firm to determine whether any fraud had taken place.

They reached out to Deloitte to carry out the forensic audit. The KPCU allowed them to access all the company documents, but before they could hand over the report, and after receiving a payment of Sh2.5 million, they returned as receiver managers.

KPCU directors complained to the Institute of Certified Public Accountants (ICPAK) over what they called a “betrayal” in a letter written by Mr James Munyi, the general manager.

The two receiver managers, Mr Daniel Ndonye and Mr Harveen Gadhoke, told the ICPAK in a letter dated January 18, 2010 that they were acting in their individual capacities and that the “forensic assignment” was “not in conflict with the receivership assignment”.

A month earlier, as the KPCU battled KCB in court over the receiver orders, Mr Gadhoke had warned Mr Munyi against making any statements on behalf of the union.

COURT ODERS

The KPCU had on December 21, 2009 petitioned the Constitutional Court and received orders that barred KCB from interfering with its affairs.

Three days later, a different judge in the same court stayed the orders, which allowed the receiver managers to strike on the first official working day of the New Year with police.

That morning, at 9.15am, Mr Munyi came face to face with a Deloitte manager, Mr Julius Muchiri. “So you are the Munyi, who is writing letters around here?”, he sarcastically asked.

Mr Muchiri wanted the keys to Mr Munyi’s office, but the latter refused to hand them over, arguing that the matter was in court.

“I also informed him that KPCU has outstanding issues with Deloitte that must be addressed, and his firm was not justified in seeking access to our offices due to conflict of interest involved,” Mr Munyi said in a court report.

That day, the receiver managers broke into KPCU offices and the matter was reported to Kamukunji Police (OB 23/91/2010).

In August 2010, the receiver managers attempted to sell Wakulima House through an auction.

The KPCU directors blocked the sale in court.

By this time, the Nairobi mill had been stolen, while the Sagana milling facilities and warehouse had been leased to the Kenya Co-operative Coffee Exporters (KCCE), which was popularised by then Co-operatives minister Joseph Nyagah.

Also computer hardware was stolen from KPCU’s Dandora Complex, where the organisation’s data and information back-up servers were located.

A report was made to Mowlem Police Post (OB No. 07/3/7/2011 and 10/4/7/2011).

SH800 MILLION MILL VANISHED

It was also during the receivership that the KPCU’s Sh800 million mill, the largest in Africa, vanished without trace.

Our investigations, however, indicate that a coffee milling machinery theft was reported to Kamukunji Police Station, after a truck, Reg KAH 262P, was intercepted at the gate of KPCU headquarters in Nairobi carrying parts of the mill. This matter is under OB No 99/20/3/2013.

The following day, March 21, the receiver managers’ representatives, in the company of a police officer from Kamukunji, visited the five-storey Ghala One, where the mill was housed to gather evidence of the theft.

Neither the arrested driver nor the chief security officer were charged with the theft.

When we sought the views of the Deloitte receiver manager Harveen Gadhoke, given that he had told ICPAK that they were acting in personal capacities, he wrote back saying:

“The issues you have raised are best referred to the debenture holder as I am bound by client confidentiality. The theft was reported to the CID, who at the time of our ceasing to act as receivers, had not concluded their investigations hence any comments on the matter may jeopardise the exercise”.

The current KPCU management says that the receiver manager lodged a claim of Sh55 million as compensation for the vandalised mill. A statement signed by Mr Joseph Kioko, KPCU managing director, says:

“He accepted a payment without challenge of Sh5 million. He even subverted the company’s claims by falsely informing the underwriter that the chief security officer was a mere officer as opposed to manager ,thus enabling the underwriter to downgrade the claim to a case of theft by servant, and to without challenge declare the theft of Africa’s largest mill a case of vandalism.”

The receiver managers left KPCU in a sorry state.

A walk into the vandalised mills shows the gravity of destruction at the hands of both KCB and Deloitte.

The current management accuses the receiver managers of ceasing to conduct core company operations such as milling and marketing and allowing statutory trading licences to lapse.

Interestingly, KCB did not demand revenue from the receiver managers during the five years KPCU was under their management, which makes the union’s officials wonder what it was all about.

“By October 2013, the receiver had collected over Sh312 million from rentals but had not paid any money to KCB towards defraying the outstanding debts. This beats the logic of hiring the receiver manager; if all he collects goes towards his upkeep,” says Mr Kioko.

“That was a betrayal of trust because that is not what we had agreed,” Mr Nyagah says about the running of the KPCU by the receiver managers.

So what became of the Sh312 million?  There is still no answer to that.

 

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-DN2

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