Karuturi, Stanbic trade fraud claims in debt war
4 months ago, 22 Mar 07:27
Troubled flower firm Karuturi has accused a local lender that assumed control of the company during receivership of using the receivers and managers to suppress its sales by more than Sh2 billion to justify disbursement of more loans and prevent it from coming out of forced management. Karuturi, which is one of the world’s largest flower firms, accuses Stanbic Bank #ticker:CFC of working with the receiver managers to suppress the company’s sales and inflate expenses to justify the granting of fresh loans in form of bank overdrafts to the flower firm. The bank denies the allegations. Karuturi made the claims in response to a suit that Stanbic Bank filed in court seeking settlement of a Sh1.8 billion debt. Stanbic-appointed receiver managers are accused of suppressing flower sales and of using suppressed currency exchange rate to the disadvantage of Karuturi during the receivership. Minui Thoithi and Kuria Mucheru were appointed Karuturi’s receiver managers in 2014 after Stabic went to court over the flower firm failure to meet its financial obligations. Two months ago, High Court Judge Francis Tuiyott directed owners of Karuturi - Surya Holdings Limited and RHEA Holdings Limited- to settle Stanbic’s Sh1.8 billion loan in 90 days or face auction in default. Karuturi, which exports more than one million stems annually, went into receivership in February 2014 after it failed to pay Sh400 million loan from CfC Stanbic. The debt has since grown to Sh1.8 billion, including expenses the bank incurred in the receivership operations in the wake of a trading deficit. Owners of the flower firm have disputed the amount. “In any event, there was no trading deficit as alleged, or at all. What was happening was a total manipulation of the trading figures to generate a trading deficit, and as a justification for the bank to inject additional funds, at the expense of the plaintiffs herein, who were not party to the said trading activities,” Karuturi owners have argued. Justice Tuiyot however directed that the whole amount to be settled, noting that the owners -- Surya Holdings Limited and RHEA Holdings Limited — had admitted the pre-receivership debt and the post-receivership debt had been assessed by an audit firm selected by their consent. Owners of Karuturi have disputed the Sh1.3 billion debt accrued during the receivership, but the judge ruled that the amount can be refunded if owners prove their case at the end of the trial which is pending in the commercial division of the High Court. Justice Tuiyott declined to delve into the merits of Karuturi owners’ claims of impropriety during the receivership noting that although the report had given the bank and receivers a clean bill of health, a decision on the allegations could only be made after full hearing and upon hearing the auditor’s defence of the report. “The court will grant the plaintiffs an opportunity to disprove the findings of the auditor. For that reason the court restrains itself from making a holding that the findings of the auditor constitutes a final ...
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