Banks owed billions of shillings by Nakumatt Supermarket are seeking a private investigator to trace and identify assets linked to the retail chain’s former chief executive, Atul Shah, over loss of cash at the stores.
Mr Shah and his son, Ankoor Shah, are accused of accessing and failing to refund interest-free loans amounting to Sh1 billion from the retail chain at a time when the stores were struggling to repay its suppliers, landlords and other creditors.
He is also in trouble for writing off stock worth Sh18 billion in May 2018, just weeks before the company ground to a halt, in what is linked to theft of suppliers goods. Now, banks are seeking to identify properties and bank accounts linked to Mr Shah, especially outside Kenya, with a view to seizing and recovering the billions of shillings the lenders are owed by Nakumatt.
“On the recovery bit, the banks are looking at engaging a private investigator to look into the directors’ affairs,” Peter Kahi, Nakumatt’s court-appointed administrator, told the Business Daily in an interview.
“Also the Banking Fraud Investigation Unit is investigating Nakumatt on theft and money laundering,” he added.
This will mark the first time Mr Shah would be facing criminal and civil proceedings over the collapse of Nakumatt should the creditors push for court action after the two investigations.
Nakumatt creditors will on Tuesday vote on whether to dissolve the once giant retailer after efforts to revive the supermarket chain failed.
Mr Kahi said the creditors’ only meeting set for January 7 will formally end the Nakumatt brands should the creditors support the liquidation plan.
The creditors, who include banks, suppliers and landlords, are owed Sh38 billion. The administrator will share about Sh422 million received from the sale of six Nakumatt branches and the retail chain’s only remaining assets to Naivas.
The banks, whom Nakumatt owes Sh13.2 billion, have now trained their sights on Mr Atul and his family in the struggle to recover the billions.
Alphonce Liposhe, a financial investigator attached to the Central Bank of Kenya (CBK), has been head of a team probing the money laundering aspect, said Mr Kahi.
Nakumatt Holdings had lent its directors more than Sh1 billion in interest-free soft loans by the time it was placed under administration on January 22, 2018, according to a review of the company’s financial statements.
The related party transactions were recently disclosed in a report for the year ended February 2018 by Parker Randall Eastern Africa, the retailer’s independent auditor.
The auditor did not specify which individuals owe the company money, but Mr Kahi said Nakumatt has only two directors—Mr Shah and his son.
The amounts owed by insiders, which did not attract interest charges, had dropped to Sh948 million as of February 2018, the period for which the latest financial records are available.
“Significant in this net balance is Sh948 million due from the directors. These receivables are not supportable based on the available evidence,” reads part of the report.
“The amounts due from a director are interest free. They relate to short-term advances through a current account.”
Mr Kahi said Mr Shah had acknowledged receiving the soft loans and informed the administrator that he had no cash, arguing he was distressed.
“Ideally, the directors should have refunded the company this money, but they claimed not to have the money,” he added.
“On prosecution, any aggrieved party (the creditors) can order for this based on the facts which are now available.”
Mr Shah did not respond to the Business Daily’s calls and text messages seeking comment.
The loans to the company’s directors are among a series of related party transactions amounting to Sh2.8 billion, which are unlikely to be recovered.
Others include amounts claimed from subsidiaries in Uganda, Rwanda and Tanzania, which ceased operations.
The administrator has written off Sh1.5 billion or 53 percent of the receivables, leaving a balance of Sh1.3 billion.
“There are no repayment plans for these balances; the companies frequently lend and borrow funds from each other,” the auditor said. The report paints a picture of loose governance at Nakumatt relative to other firms such as banks where insider dealings are more closely regulated.
There is a limit on the size of loans directors and employees of a bank can take in aggregate. The loans also typically attract interest charges, though sometimes at below market rates.
Mr Kahi said a forensic investigation to probe why Mr Shah wrote off stock worth Sh18 billion in May 2018 had failed to take off. “I did not have the funds to execute the forensic audit. I reached out to some creditors for support, but they did not want not want to throw good money after bad money,” he added.
At its height, the company, which began life as Nakuru Mattresses, had more than 60 outlets across Kenya, Uganda, Tanzania and Rwanda.
But its financial problems have led to empty shelves and store closures, opening the way for foreign retailers like Carrefour and local rival, Naivas, to take over space it is vacating.
Foreign investors could have helped overhaul management and inject cash, but despite a swarm of suitors, no deal was made.
One concern for investors was the stake held by former lawmaker Harun Mwau, who was named in 2011 under the US Foreign Narcotics Kingpin Act for alleged drug trafficking, which he has denied. The role of Mr Mwau in the company was the main stumbling block because they did not want to fall foul of US law enforcement, who froze Mwau’s US assets after the designation.