Johannesburg - Senior executives and employees in listed construction and engineering group Aveng were dismissed, demoted, forfeited their annual incentive bonuses, including their share allocations, and resigned because of their involvement in collusive behaviour and bid rigging.
Aveng chairman Angus Band for the first time explained on Friday how the group held executives and employees involved in anti-competitive behaviour accountable for these actions.
Responding to several questions posed by shareholder activist Theo Botha at its general meeting, Band said the group had instituted various levels of sanctions against the individuals involved, including:
- The suspension of seven employees pending disciplinary hearings, of whom five subsequently resigned and the other two were dismissed.
- Eight other employees resigned prior to Aveng being able to take action against them after the group withheld their annual incentive payments.
- The termination of the employment of an executive director and a senior executive who joined Aveng subsequent to the start of the group’s internal investigation to discover what had happened and who were found to be involved in anti-competitive behaviour and activity.
- The forfeiture by 11 other people of their entire annual incentive, including share allocations.
- The demotion of two people.
Band added that Aveng had taken legal advice on the possibility of claiming damages against executives. However, the advice received was that it would be difficult to do so but this would be reviewed on a routine basis.
He added that the majority of the people who had been involved in collusive activities were no longer in the construction company’s employ.
The Competition Tribunal in July confirmed 14 of the 15 consent agreements reached by the Competition Commission with construction firms in terms of the fast-track settlement process. The firms agreed to pay penalties collectively worth R1.46 billion for bid rigging and collusive tendering infringements. Aveng agreed to pay a fine of R306.57 million in respect of 17 prohibited practices or contraventions of the Competition Act.
The group had disclosed 57 prohibited practices to the commission, of which 22 were prescribed. Of the remaining 35 prohibited practices, Aveng was the first to apply for conditional corporate immunity for 26 non-prescribed prohibited practices.
Aveng and the other major listed construction companies were asked detailed questions in July about what action had been taken against executives and employees implicated in the collusion uncovered by the commission.
With the exception of Murray & Roberts (M&R), all the companies failed to respond directly to the questions and, instead, most provided a general statement about how they had internally handled the issue.
Band also told Aveng’s general meeting on Friday that the group had had engagements and discussions with the clients of projects where prohibited practices occurred after these clients had approached Aveng.
He said there could be civil claims arising from this and he was therefore not prepared to go into detail about the names of these clients but Aveng did not have any strategy to try and be “lacking in transparency”, and “if people want to talk to us, we are open to discussion”.
Band added that the collusion uncovered by the commission had cast “a cloud over the entire industry” and it would be foolish to say loser’s fees were not paid to losing bidders in terms of collusive agreements reached between some of the bidders.
Responding to another question about the 17.5 percent profit margin Aveng subsidiary Grinaker-LTA, Wilson Bayly Holmes-Ovcon, M&R, Group Five, M&R subsidiary Concor, and Basil Read allegedly agreed they should aim for on the 2010 Soccer World Cup stadium projects, Band said he could not speak for the other groups but Aveng never achieved that type of gross margin and achieved “a middle single-digit profit” on its stadium project.
Band added the 17.5 percent was a gross margin and not the net margin on these projects and overheads and other expenses still had to be subtracted from this percentage.
Aveng shares fell 1.69 percent to close at R29 on Friday. - Business Report