In the most dramatic of ironies, suspended Choppies CEO Ramachandran Ottapathu is the lone voice calling for the release of the much-vaunted report of the forensic investigation into the murky affairs of Botswana’s erstwhile runaway success retail story that has been declared out of bounds even to shareholders who find themselves having to sign non-disclosure forms for a mere look at a measly summary. KEABETSWE NEWEL reports
Save for the Choppies board of directors, no one will have full access to the Choppies report of the forensic investigation which was done and concluded by audit firm Ernst & Young, The Botswana Gazette has established.
The report was part of three parallel investigations, forensic, financial and legal, which are all with the board. Only the legal report has since been made public after it was filed as evidence in court. The financial and forensic reports are still a closely kept secret and may remain so indefinitely. The forensic report was expected to guide what happens next at Choppies, including paving way for the release of financials.
There have been questions over the valuation of Choppies stock as well as its true financial position, especially its South Africa and Zimbabwe operations. Forensic investigations were instituted after auditors PricewaterhouseCoopers (PwC) found Choppies to have been engaged in secretive financial dealings where the company transacted with related parties without disclosure. Choppies’ financial reporting methods have also been found to have been non-complaint to the International Financial Reporting Standards (IFRS). The forensic report, which should provide answers to red flags raised by PwC, is currently with the board of directors and the attorney to the Choppies board Rizwan Desai of Desai Law Group (DLG).
What The Botswana Gazette has established through the Choppies board’s attorneys is that no copies of the forensic report are presently available for distribution. According to DLG, this is a requirement strictly imposed by Ernst & Young, the forensic investigator. Desai says only shareholders and regulators are permitted to review the report, and that under a process involving the signing of a hold harmless letter and with no copies or photographs taken.
This publication also spoke to E&Y Partner Thomas Chitambo to understand why the forensic report cannot be availed to the public. “Whatever we do we maintain confidentiality to our clients,” Chitambo said. “We were commissioned by the Choppies board and we only act on their instructions. Find out from them.”
While shareholders can review the report after signing a non-disclosure agreement, it emerges also that the shareholders will not have full access to the original and full forensic report but will only view the summary of the full report, which means that they will not be privy to the full contents of the report. According to insiders, the board insists that the investigation was commissioned only for its purpose. The board is also insisting that the full forensic report is for the board of directors and that the public and investors will only be accorded a summary of the report.
It appears there is nothing that the shareholders can do to access the report because there is no law or regulation that compels Choppies from revealing it. Interestingly though, the suspended CEO Ram has been publicly calling for the Choppies board to release the report, saying he long advised them to make it public. “I do not know what they are hiding because the report is inconclusive. They must release it for the public to see. The legal report is out because I am the one who filed it at court,” he says.
A respected analyst at one of the top brokerage firms says for a public company, information should be made public to ensure transparency. Further, the analyst says because investors and the public will be trading with Choppies shares, they need to make investment decision equipped with any information that there is to know about Choppies. “What are they hiding? They should release the report,” says the analyst.
Highlights of the forensic report have been published on the BSE through a circular. The CEO there, Thapelo Tsheole, says the BSE is still reviewing the documents. Efforts to speak to Festus Mogae, the Choppies Chairperson, about why the report is being kept from the public were futile. Ram has always insisted that Choppies was run from the boardroom. He has maintained that should he be found to have done wrong, then the board too shall take the blame because all decisions were sanctioned from the board..
Through the Financial Reporting Act, Botswana Accountancy Oversight Authority (BAOA) is the supervisory authority of all Public Interest Entities (PIE) which was established through an Act of Parliament and is answerable to the National Assembly and the Minister of Finance and Economic Development. Choppies is therefore regulated also by BAOA. In a previous engagement with the CEO of BAOA Duncan Majinda, it became clear that the buck stops with the board chair and that governance oversight should be answerable by the board.
Majinda said then that statesman Mogae was and is still the board chair. All board sub-committees fell and still fall under Mogae’s supervision and he should have been aware of any transactions since they are sanctioned from the board. Then, he said, the board should be held liable.