Gloves Off As Board Reveals Case Against Ram
Mpho Mokwape | Monday July 8, 2019 18:00
As a listed entity, Choppies was muzzled by Botswana Stock Exchange rules, even as Ottapathu publicly railed against his board, accusing it of attempting to hijack the pan-African retail chain.
Ottapathu, popularly known as Ram, is credited for building Choppies into a multibillion pula revenue spinner through a formula involving aggressive expansion and cut-throat pricing at the lower tier of the Fast Moving Consumer Goods market.
The formula also includes building goodwill through engagement of political movers and shakers in the various markets Choppies targets.
In papers filed at the High Court as part of the group’s defence to the suit brought by Ram, the board says Ram is facing charges of serious misconduct and his lawsuit is an attempt to rally shareholders to remove the board before the full extent of the mess at Choppies is revealed by a forensic probe due by July 15.
On Friday, the High Court dismissed an urgent case brought by Ram in which he wanted the board compelled to quickly call an Extraordinary General Meeting (EGM).
Since his suspension on May 22, Ram, who holds nearly 20% equity, has been able to rally just above 51% of shareholders for the EGM, lower than the 60% which the Companies Act states is required to force the board to call the meeting.
While at one point, Ram had secured the 60%, papers in court show that the board lobbied investors and was able to convince one fund manager, Allan Gray, to pull its support for an early EGM. According to the documents filed in the High Court, not all the alleged misconduct and irregularities at Choppies are directly linked to Ram.
However, the suspended CEO, according to his contract, was in charge of entering into contracts on behalf of the company and “doing all acts in the ordinary course of business he considered in the best interests of the company”.
Preliminary results from probes ordered by the group claim Ram personally took up shares in the Fours Cash and Carry group, which should have been forwarded to Choppies. Fours had ceded the shares as part of obligations for a transaction.
The board, in an affidavit by Wilfred Mpai, also claims Ram helped a certain Mr Malique with P4.32 million irregularly sourced from Choppies. Malique apparently wanted the funds to purchase shares in Payless Supermarket.
The board also believes Ram “orchestrated” Payless’ acquisition without approval from the Competition Authority and then “misled” the regulator when challenged on the deal.
“The applicant is a central figure in the conduct and transactions that are the subject of the ongoing forensic investigations,” Mpai said.
“The applicant is aware that the investigations will inevitably uncover that the applicant is guilty of gross misconduct in relation to the matters being investigated.”
The board’s preliminary investigations found that certain executives, including Ram, had not properly disclosed their business interests, in violation of fiduciary rules.
Zimbabwe, where Choppies recently took back full ownership in a US$2.9 million settlement, was a hotbed of money laundering, according to the preliminary investigations.
“It is alleged that large amounts of monies were from time to time brought into different shops as cash and those transactions were recorded as sales, when in fact the cash was not from sales.
“This cash would then be removed from the shops without being banked, by paying the monies to suppliers significantly distorting the financial reporting by overstating sales.”
For his part, Ram, whose founding affidavit was supported in writing by long-time ally and acting Choppies CEO, Farouk Ismail, accuses the board of attempting to hijack the business and isolate him. Ismail holds just under 15% equity in Choppies and is the retail chain’s founder.
Ram said he was not given any reasons for his suspension and that the action had been done without a formal hearing.
“The only notice that I had of any thought of suspension was in a letter from Desai Law Group (Choppies’ lawyers).
“But significantly, it is clear from that letter that further reports needed to be received before a decision could be made.”
Ram has also filed a separate legal case against his suspension.