FIA books former Unity Foods CEO, four others over alleged fund misuse

Pakistan's Federal Investigation Agency registered a criminal case against former executives and directors of Unity Foods Ltd on August 29, following a referral from the Securities and Exchange Commission of Pakistan. The SECP investigation alleged the misuse of billions of rupees in company and shareholder funds, along with falsified accounts and other financial irregularities.

What happened at Unity Foods Ltd?

The FIA's Corporate Crime Circle in Karachi filed the case under Section 41-B of the SECP Act, 1997, naming five former Unity Foods officials. The FIR alleges a range of financial irregularities, including misapplied rights-issue funds, unauthorized advances and a large discrepancy between the company's published accounts and its internal records. The allegations have not been proven in court.

The FIR names former CEO Muhammad Farrukh Amin Godil, Fehmida Amin, Chief Financial Officer Jalees Edhi, former director and chief executive Amir Shehzad and director Safdar Sajjad. According to the FIR, SECP's investigation identified transactions involving shareholder funds, company assets and financial reporting that investigators said warranted a criminal probe.

What happened to the rights issue funds?

Unity Foods raised PKR 3.75 billion from shareholders and the investing public through a rights issue announced in February 2019, intended for expansion projects including a Port Qasim refinery and an oil terminal. Investigators said the company could provide supporting evidence for the use of only PKR 876.6 million of that amount.

The FIR alleges that documentation for the remaining PKR 2.873 billion, including vouchers or banking instruments, was not produced. It further alleges that investors were induced to subscribe to the rights issue based on representations about the intended use of funds that were later misapplied.

What other financial irregularities does the FIR allege?

The FIR alleges PKR 5.318 billion in company funds was paid to the former CEO's mother, Fehmida Amin, under the guise of loans recorded during the 2017-18 and 2018-19 financial years. Investigators said no banking instruments or board approvals were produced to support either the loans or the subsequent payments.

Separately, the FIR alleges PKR 2.6 billion in advances were made through subsidiary Sunridge Foods Pvt Ltd to two undisclosed parties without required documentation or approvals. It also cites the transfer of two former subsidiaries, Unity Technologies and Unity Plantations, to individuals within the group, with sale proceeds of PKR 499.9 million and PKR 787 million still outstanding.

What accounting discrepancies did SECP identify?

The SECP investigation found an alleged difference of approximately PKR 44.7 billion between Unity Foods' published financial accounts and its internal SAP records, according to the FIR. Investigators also cited an inventory shortfall of about PKR 5.2 billion between SAP records and physical stock.

The FIR alleges further irregularities, including PKR 5 billion in receivables recorded from Sunridge Mart Pvt Ltd without sufficient evidence that goods were delivered, delayed recording of sales worth about PKR 1.1 billion, and inconsistencies in trade-payable reconciliations. It also states Unity Foods failed to prepare and publish half-yearly accounts for the period ended December 31, 2025.

What happens next in the FIA investigation?

The FIA said the allegations, if established, could constitute offences including criminal breach of trust, cheating and falsification of accounts under Sections 406, 420 and 477-A of the Pakistan Penal Code. The agency said it would examine the roles of other directors, officers, recipients of the PKR 2.6 billion advances, and statutory auditors during the investigation.

SECP Chairman Dr Kabir Ahmed Sidhu said the regulator remained committed to protecting investors' funds and ensuring transparent financial reporting by listed companies. He said safeguarding minority shareholders' rights was a fundamental SECP responsibility, and that funds raised from investors should only be used for their disclosed purposes. The registration of the FIR initiates a criminal investigation, with the allegations against the accused remaining subject to investigation and judicial proceedings.

A copy of the FIA’s FIR against Unity Foods’ former chief executive and four others over alleged misuse of company funds and falsification of accounts. nukta.com

A copy of the FIA’s FIR against Unity Foods’ former chief executive and four others over alleged misuse of company funds and falsification of accounts. nukta.com