3 September 2014

Kenya: Mumias Suspends 27 Managers in a Fresh Probe

Mumias Sugar has sent home 27 middle-level managers in its agriculture department pending completion of fresh internal investigations that have unearthed anomalies in transactions.

The managers were suspended after irreconcilable accounts were discovered in an ongoing probe, hinting at possible creative accounting by the sugar miller's staff.

The purge is to spread to other departments including finance and procurement to clean up the rot in Mumias Sugar, according to acting chief executive Coutts Otolo who confirmed the new twist yesterday.

"Preliminary investigations have revealed irregular dealings in internal accounts but the amount involved cannot be confirmed as yet," Otolo told the Star on phone yesterday.

"Whichever department it is the matter touches we will get there," he said.

He said the probe has been going on since he took over and "may take time to conclude". The sugar miller has been undertaking a restructuring which is expected to be completed by early next year.

"Those suspended will await conclusion of the investigations and will be brought back if exonerated," Otolo said.

Mumias is Kenya's largest sugar miller and the only one listed on the Nairobi Securities Exchange.

The company plunged into a Sh1.67 billion full-year loss in the 2012/13 financial year, which it blamed on cane shortage resulting in low utility of its four plants for sugar, co-generation, ethanol and mineral water.

A probe into the sudden loss unearthed an illegal sugar import scam in which its top staff were involved, resulting in an estimated loss of Sh1.1 billion. The immediate former chief executive Peter Kebati and commercial director Paul Murgor were suspended early this year and eventually sacked following an audit by KPMG.

Otolo yesterday said Mumias Sugar has forwarded some names to the Criminal Investigation Department for further investigation based on the KPMG report, and will sue a bank involved in the illegal sugar imports scandal to reimburse the monies.

"We will sue the individuals once investigations are over to recover the losses and will proceed to sue the bank to claim back the money involved," Otolo said.

The bank, which he declined to name, is alleged to have struck a Sh460 million deal with the company, which was not above board.

The series of scandals at the sugar miller have seen its stock price at the NSE drop to Sh2.20 a piece as of yesterday. The stock is one of the worst performers at the bourse this year.

Mumias cut its half-year loss to Sh73.4 million as at December 31, 2013.

The miller's board of directors is to hold a press briefing tomorrow to give an update on the ongoing investigations.


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