Choppies releases full forensic report as battle rages on
The release of a forensic report into alleged questionable dealings at the retailer is the latest salvo in the fight for control between the board and suspended CEO Ramachandran Ottapathu
The embattled retail group Choppies on Wednesday released the full forensic report into allegations of questionable past business dealings and related party transactions, which has stalled the release of its long delayed 2018 financial statements.
The delay also saw the suspension of CEO Ramachandran Ottapathu.
The forensic report, compiled by advisory firm EY, as well as the findings of a legal investigation by the Desai Law Group (DSL), are at the centre of an ongoing battle between Ottapathu and the Choppies board. The board has accused Ottapathu of serious misconduct and dishonesty in disciplinary proceedings. He has denied these allegations.
Both reports highlight alleged questionable dealings involving Ottapathu or those done under his watch. These include accounting irregularities around bulk sales and inventory at its stores in SA and Zimbabwe, and store acquisitions in SA. The reports also question why Ottapathu took up a substantial chunk of shares in a Choppies competitor, under his name.
The forensic reports were released ahead of an extraordinary general meeting in Gaborone, Botswana, on Wednesday, where the findings were to be discussed with shareholders.
Included on the agenda was the election of new board members including a series of nominations put forward by Ottaphathu, in his capacity as a shareholder.
However, the board sought a delay until October 16 after an emergency meeting over the weekend. It said in a Sens announcement on Tuesday that it would seek an adjournment through a shareholder vote.
All shareholders should have “unfettered access” to the forensic investigation first, it said. In addition, the findings of the forensic report, submitted on August 6, meant its 2018 results will not “be capable of finalisation until at least early November 2019”, the board said.
Ottaphathu has also received an interdict to postpone his disciplinary hearing until after the extraordinary general meeting. By early Wednesday evening, it was still unclear if the scheduled emergency meeting went ahead.
Ottapathu has called into question both investigations.
In a letter made available to shareholders, Ottapathu raised the incomplete and conflicting information provided to EY. He said the “credibility of the forensic report is questionable at best”.
But the board has said it stands by both reports.
The boardroom battle takes place against tough trading conditions for retailers. Choppies announced in August that it would be exiting the South African market — just four years after it first listed on the JSE.