NAIROBI, Kenya, Sep 14 – The boardroom drama that has engulfed car dealer CMC Motors seems far from over after fresh claims that a company associated with one of CMC directors had been over billing the auto dealer over the last five years.
Coming hot on the heels of a boardroom coup that led to the ouster of Peter Muthoka as chairman, it is now claimed that Andy Forwarders, in which he is the Chief Executive Officer, had been overcharging the publicly listed firm for logistics services.
On Wednesday, CMC Motors Chief Executive Officer Bill Lay said that an internal audit had shown that over the last 12 months, Andy Freight Forwarders overcharged CMC by up to half a billion shillings per year.
Andy Forwarders is one of Kenya’s biggest logistics companies which also handles the supply chain and distribution channel for CMC Motors.
Lay said they discovered that the amount being charged to them was much higher than what the same company was charging other players in the industry for logistics services, making their business uncompetitive.
“The management was of the opinion that the amount overcharged by Andy Freight Forwarders could be between Sh1.5 billion and Sh2billion in the last five years. Peter Muthoka’s continued chairing of the board became untenable once this report was presented,” Lay said.
The rising operational costs are said to have sparked off differences over strategy and concern over the slow pace of growth in sales.
The move by Lay to come out with the claims, stems from allegations from Muthoka sympathisers that he had been ambushed with the demand to quit at a meeting in early August.
The CEO however counters the allegations saying that the former chairman had been given adequate notice that his conflict of interest between the two companies was in questions citing that “CMA (Capital Markets Authority) requirements state that directors be independent, and we felt that he (Muthoka) had conflicting interests.”
CMA regulations require that the board of a public company be chaired by a non-executive and independent director who is defined, among other criteria, as not having had any business relationship with the company other than service as a director.
Lay said that the board action had been implemented in full cognisance of necessary procedures outlined by the CMA and the Nairobi Stock Exchange.
“Whilst the outcome of the internal audit is highly regrettable the board feels strongly the need to address the issue in an open and objective manner and will avail all information necessary to shareholders,” he said.
The board has since appointed Joel Kibe as chairman.
Also uncovered in another internal audit was evidence of clandestine off shore bank accounts in the Island of Jersey (United Kingdom) operated by two former directors for many years. While investigations are still ongoing as to how much had been siphoned off shore, one account is said to have Sh240 million.
The CEO said they were working on ways of having the money repatriated to the company to boost its business growth.
The management team led by Lay is currently implementing a business transformation program as it seeks to boost its operational efficiency.
Currently ranked the fourth largest automobile dealer in the country, the company is looking to cut down its structural cost by as much as half a billion shillings and grow its market share to 20 percent in the net financial year.