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Choppies bosses take auditors to task

MPHO MOKWAPE
Ottapathu PIC: PHATSIMO KAPENG
Choppies chief executive officer (CEO), Ramachandran Ottapathu and founder Farouk Ismail are demanding further particulars in their P450 million lawsuit against PricewaterhouseCoopers (PwC) Botswana.

Ottapathu and Ismail, who are blaming the auditors for alleged lapses that led to the regional grocer’s suspension from the Botswana Stock Exchange in 2018 and a collapse in value, have taken the auditors to court saying they want further particulars to clarify their (auditors) defence.

According to the two’s attorney, Tebogo Tladi, they are filing to compel the court to furnish them with further particulars after requesting the particulars from the auditors who chose to decline the request.

“The auditors have filed their plea. We requested further particulars from PwC to clarify their defences. They have declined to give all the particulars,” he said.

He explained that the case was still at a stage where they are exchanging pleadings and they wanted to get more documents from the auditors in preparation for the matter,  but the other party  declined forcing them to file at Court.

Ottapathu and Ismail, who are demanding P450m collectively, are claiming that PwC and its partner, Rudi Binedell breached the audit agreement they signed in 2018 and in the process made them lose millions. According to their Court documents, the two shareholders of Choppies accuse the auditors of breaching their ethical, statutory and common law obligations by prioritising their own interest and entrenching their position in Choppies without regard to the best interest of the company and its shareholders.

“In the course of the purported execution of their duties as statutory auditors in relation to the Choppies financial year ended 2018, PwC breached their statutory, common law and ethical obligations,” read the papers.

The duo said PwC and Binedell changed the scope of the audit as contemplated in the Audit Agreement 2018 in that they undertook what amounted to a full investigation into various issues, which were raised by Binedell at a meeting of the board held on September 17, 2018, rather than conducting an audit, as they were obliged to do. 

Ottapathu and Ismail explained that PwC and Binedell bypassed the Audit Committee and reported issues directly to the board of directors off the basis under the pretext that

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the issues were material irregularities under the Companies Act and Financial Reporting Act.  They also pointed out that the auditors failed and refused to complete the audit for Choppies for 2018 financial year or issue their opinion, imposing impermissible and unlawful stipulations on the finalisation of the audit and the release of their opinion including the stipulation that PwC could not finalise the audit in Botswana, South Africa and Zimbabwe unless and until Choppies had commissioned a full forensic audit. Furthermore, Ottapathu and Ismail said the auditors acted together with or under the directors of Mathews and Muller for purposes of discrediting them as the then management of Choppies.

They said that was done with the purposes of procuring either the suspension or resignation of Ottapathu and in order to put in place alternative management for Choppies.

“This was done with the purpose of securing the position and future employment of Binedell as the financial director of Choppies and or its subsidiaries and the entrenchment pf PWC as auditors of Choppies and its subsidiaries,’’ they argued.

The pair explained that as a result, the conduct of the auditors led to the deterioration in the market value of the Choppies shares traded on the stock exchange and in turn they suffered damages in the amount that represents the loss in the market value of their respective shareholding of Choppies.

On the contrary, the auditors have denied owing any legal duty to the Choppies’ bosses.

“We don’t owe legal duty to individual shareholders but only to the shareholders in general meeting and we do not owe the individuals the amount claimed in their lawsuit,” said the auditors’’.

The auditors in denying the allegations from Ottapathu and Farouk said the alleged loss as a diminution of the price of their shares in the company constitutes a loss that is merely reflective of the loss of the company.

They further said, accordingly the bosses suffered no legally cognizable loss, which may be claimed from them as auditors. The case is scheduled for management on August 6, 2021.



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