CMA has full powers to prosecute company boards

The directors of Uchumi Supermarket will face the Capital Markets Authority again, after the Court of Appeal overturned a Justice George Odunga Ruling that had set them free.

The court ruled that CMA has the full mandate to punish errant board members saying the judge had erred by assessing the regulators case as a criminal case as opposed to an administrative action.

Three Uchumi directors, Joyce Ogundo, James Murigu and Barth Ragalo had rushed to court to stop the CMA from punishing them for “having only sat at Uchumi board”. The High Court judge agreed to stop the case on grounds that the charges were flawed, criminal or quasi criminal in nature and required higher standards of prosecution to safeguard their rights.

But the Appeals court begged to differ. According to the three-judge bench of Asike-Makhandia Jamila Mohammed and Helen Omondi, the High Court judge had no business assessing the merits of the case including its criminality and should have restricted himself to the process.

They said a judicial review should always restrict itself to procedural abuses including right to fair hearing but not the merits of the decision of a tribunal or market authority.

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Punishing board members

“It seems obvious that the learned Judge was convinced of the sufficiency of the evidence of charges as contained in the NTSC. Words such as the said charge, offence, conviction, can only mean that the learned Judge was embarking on an exercise of making value judgments regarding the evidence, weighing it and minutely examining or interrogating it to determine whether it reached a certain threshold of acceptance.

“With respect, that approach is far removed from process, the purpose and province of judicial review, and is a delving into the merits of the decision as one would do were he is dealing with an appeal,” the three judges said.

The judges said for avoidance of doubt, CMA should proceed with punishing the board members for their role in the collapse of Uchumi. CMA had already proceeded with investigations, had summoned the three directors for their roles in Uchumi’s rights issue, financial statements, USL branch network expansion program, asset sale and lease back.

James and Barth appeared before CMA’s Board of Directors (the Board) and the appellant’s external legal counsel for hearing accompanied by their advocates and were later fined Kes660,000 and Kes855,000 respectively as well as banned from holding office as a director and/or key officer of a public listed Company and/or issuer. Ms Ogunda had declined to appear before CMA but will now have her day with the regulator.

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