Slain auditor still haunts Nakumatt even in death

In all its years of existence, Nakumatt Supermarkets committed many sins.

Bullish refusal to pay suppliers, mismanagement that played poker with the lives of thousands who depended on the retailer for their livelihoods, tax evasion, money laundering.

But one of the most severe transgressions – embezzling an insurance payment intended for its slain auditor’s family – is the ghost that still haunts Nakumatt even in death.

Latoya Mghoi Kaka has spent a good chunk of the last seven years in and out of court waiting for the legal system, which in Kenya can be excruciatingly slow, to offer what is left of her young family some form of justice and closure.

Her husband, James Maina Karanja, was on the verge of becoming one of Kenya’s most respected auditors at just 27 years old, about to expose an unholy alliance of rogue managers and suppliers pilfering millions from Nakumatt, one of Africa’s largest retail chains.

Inflate supplies

Alongside a small group of other Nakumatt staffers, Mr Karanja had discovered that some suppliers were working with senior managers to inflate supplies and claim more money than they deserved.

Mr Karanja had just left Nakumatt’s head office on Mombasa Road at around 5pm on May 7, 2015 when a motorcycle passenger drew a Ceska pistol and shot him three times.

The auditor died on the spot.

While the rogue managers and suppliers fleecing Nakumatt may have been happy about Mr Karanja’s demise, his ghost continues to haunt many of them long after the retailer’s collapse.

In June 2021 the High Court in Nairobi barred the sale and distribution of Nakumatt assets until it determined a suit by Mr Karanja’s widow seeking payment of a Sh30 million insurance package that the retailer and its owner, Atul Shah, embezzled.

Nakumatt had taken out life insurance policies for some of its staffers like Mr Karanja to cushion their families from trouble in the event of death.

On March 1, 2016 police constable Ezekiel Momanyi Onsongo was charged alongside motorcycle rider Dennison Mose Maroko and Nakumatt manager Philip Manyura Maroko for the murder of Mr Karanja.

Around the same time, Kenindia Insurance released Sh30 million to Nakumatt’s Prime Bank account.

As the retailer was the entity that held the life insurance policy, it was to receive the money and remit it to Ms Kaka. But Mr Shah diverted the money into Nakumatt’s already struggling operations.

Mr Shah then led his slain auditor’s widow into an unfortunate game of hide and seek, as she juggled chasing the insurance payment and attending the trial of her husband’s suspected killers.

In the murder trial, it emerged that police had tracked down the owner of the motorcycle believed to have been used in the assassination, Daniel Nyongo Daudi.

Mr Daudi told the court that Mr Onsongo had hired him to trail Mr Karanja and find out where the auditor lived. Mr Onsongo lied to him that Mr Karanja had refused to pay a Sh500,000 debt and hence was on police radar.

Fast precision driving

But Mr Daudi could not keep up with Mr Karanja’s fast precision driving, so Mr Mose Maroko was brought in as the new getaway rider.

Mr Daudi was given a new job – to follow the motorcycle and act as a backup plan in the event they needed to dump the two-wheeled vehicle.

The court heard that Mr Daudi witnessed Mr Onsongo receiving a Sh80,000 deposit for the assassination from a Nakumatt manager, Mr Manyura Maroko.

After the assassination, Mr Daudi was paid Sh10,000.

But the boda boda rider could not live with the guilt of his role in a cold-blooded murder, so he went to the Loresho Police Station and spilled the beans to the commanding officer, Siamento Memusi.

The gun used to kill Mr Karanja had been stolen from a private citizen, Newton Osiemo, two years before Mr Karanja’s murder. Mr Osiemo had been robbed of money and the gun on his way to work, and is also a witness in the murder trial.

The Loresho police boss told Mr Daudi to borrow the gun from Mr Onsongo under the pretence that it would be used in a robbery with a Sh300,000 pay-out. The trap worked, and Mr Memusi arrested his junior officer after getting his hands on the weapon.

Case to answer

High Court Judge James Wakiaga on October 7, 2020 ruled that the three suspects had a case to answer. The trial is still proceeding.

As the court was taking evidence to determine whether Mr Onsongo, Mr Mose Maroko and Mr Manyura Maroko have a case to answer, Nakumatt collapsed under the weight of a Sh40 billion debt.

Suppliers, landlords, banks and other creditors had not been paid for years.

Rogue managers had pilfered at least Sh18 billion through various schemes.

Aside from inflating the supplies taken to supermarkets, some managers were disconnecting computers linking their branches to the headquarters and then pocketing money from sales.

Shoplifting also accounted for a good chunk of the Sh18 billion hole in Nakumatt’s books.

Insurance package not paid

By the time Nakumatt collapsed, Ms Kaka had not been paid her husband’s insurance package as promised.

And when Africa Cotton Industry filed an insolvency petition against Nakumatt in 2017, Ms Kaka was among hundreds of individuals and companies that joined the case to claim their dues.

Peter Obondo Kahi of consultancy firm PKF was appointed the retailer’s administrator.

In 2020, the High Court ordered Nakumatt’s liquidation. Mr Kahi has since asked the court to allow Nakumatt to continue operating though it no longer has an open branch and would struggle to get suppliers’ faith to place goods on its shelves.

The retailer’s Sh40 billion debt grossly outweighed its asset base, which meant that creditors would still take a hit. Mr Obondo’s role changed from administrator to liquidator. He had become the mortician who would dissect Nakumatt and share the few usable organs with creditors.

On September 9, 2020, Ms Kaka sued Mr Kahi and Nakumatt’s owner, Mr Shah. She wanted Mr Obondo to set aside Sh30 million when he sold Nakumatt assets to repay creditors.

Ms Kaka argued that the insurance money was only held by Nakumatt in trust, and was not the retailer’s to spend and hence should not be clustered with creditors.

Justice Alfred Mabeya has now found that indeed the insurance package did not form part of Nakumatt’s assets, and allowing the liquidation to proceed before determining Ms Kaka’s case may leave the widow high and dry.

“From the foregoing I find that the plaintiff (Ms Kaka) demonstrated that the claim amount was paid by Kenindia Insurance Ltd into an account held by Nakumatt. This was received by Nakumatt in trust for the estate of the deceased. The court therefore finds that the plaintiff has met the first limb for injunctive orders,” Justice Mabeya held.

“I am alive to the fact that the plaintiff does not contend to be a creditor of the company, but rather a beneficiary of trust funds received by the company. It would therefore be unlikely that her claim would be settled in preference to the company’s creditors. Her monies were separate and distinct from the company’s assets.”

Deposit Sh30 million

The judge also ruled that if Mr Kahi had started the sale and distribution of Nakumatt’s assets, the liquidator must deposit Sh30 million from the proceeds in an interest-earning bank account.

In addition, Mr Kahi was given 30 days to file statements for Nakumatt’s Standard Chartered Bank account in the court file.

Mr Kahi now fears that the widow will push for his committal to civil jail for failing to abide by the court’s orders, following a letter from Ms Kaka’s advocates.

Mr Kahi argues that there are no assets to sell or distribute to creditors, and that the collapsed retailer does not have Sh30 million to deposit in an interest-earning account.

“My professional standing as an insolvency practitioner will be irredeemably impeached in the event that the court finds that I have wilfully and deliberately disobeyed the court’s orders whereas I have not…” Mr Kahi argues.

He says he wants to challenge, at the Court of Appeal, Justice Mabeya’s refusal to allow Nakumatt to continue operating but is yet to be issued with certified copies of proceedings in the insolvency case.

As the liquidator fights on, the Nakumatt founder, Mr Shah, is in India seeking treatment for a myriad of health issues that have plagued him since February 2020.

For decades, Mr Shah was Nakumatt and Nakumatt was Mr Shah.

Many people in Kenya and beyond drew inspiration from the man who started a small store in Nakuru and grew it into a 62-branch retailer, the largest in East and Central Africa.

They were wrong.

Defaulting on payments

Perhaps if some suppliers had spoken early enough, it would have been known that Nakumatt was largely defaulting on payments.

If Mr Karanja and his team had managed to complete their investigations, perhaps the huge hole draining Nakumatt resources would have been plugged.

Today, the Directorate of Criminal Investigations is trying to locate assets Mr Shah allegedly bought outside Kenya using suppliers’ money.

A young Atul Maganlal Shah had just completed primary school when he started working in his father’s Tiku Fancy Store in Nakuru.

The young man dropped out of school to focus on business, learning from his father, Maganlal Shah.

When he was 15 years old, Mr Shah watched his father go bankrupt over a Sh1.2 million debt. The senior Mr Shah had been selling clothes on credit. The buyers did not pay up and the store’s debts spiralled out of control.

It was the end of the road for Tiku Fancy Store.

Mr Shah and his brother, Vimal, started afresh in 1978 armed with the experience and knowledge of how to navigate a clothes store.

Birth of Nakumatt

The Shah brothers’ Furmatts store was a hit, and it provided them with resources to buy another shop owned by one of their uncles. They continued selling goods off the government radar, but registered Nakuru Mattresses formally in 1987. And that was the birth of Nakumatt.

Mr Shah always sang praises of his retail chain, teased about strategic investors seeking to buy into his business and listing on the Nairobi Securities Exchange by 2021. A pipe dream.

He was, however, shrewd and he paid nearly nobody their dues. Not suppliers who make up a majority of the retailer’s debts, not landlords who are owed over Sh120 million, not the Kenya Revenue Authority, which is claiming Sh1.8 billion.

When Mr Shah tried to convince Nanyuki Mall owner Edward Waithaka not to join the insolvency suit, he inadvertently mentioned that Nakumatt’s troubles were sparked by the withdrawal of former Kilome MP John Harun Mwau as a shareholder.

Mr Mwau owned just 7.7 per cent through Hotnet Ltd, but was largely the source of Nakumatt’s liquidity, if Mr Shah’s confession to Nanyuki Mall’s owners is anything to go by.

When all the tricks in Mr Shah’s bag ran out, he tried to use Tuskys as a smokescreen.

Tuskys claimed it would buy Nakumatt and pay creditors, first with a Sh3 billion capital injection. Sibling rivalry plaguing Tuskys would reveal that the rival retailer did not have money to buy Nakumatt.

Shareholder wars led the Competition Authority of Kenya to dismiss Tuskys’ application to merge operations with Nakumatt.

Nakumatt was 33 years old when it died in 2017.

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