Sharks' financial misconduct woes

Published Oct 19, 2014

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Durban - A disciplinary hearing into allegations of “serious misconduct” by a senior staff member of the KZN Sharks rugby administration has exposed a number of alleged breaches in the financial management of the globally revered sport franchise.

A 47-page report described as “highly sensitive” and leaked to the Tribune this week details a litany of apparent unethical financial practice, spanning more than a decade.

Claims of irregular payments for “deserving” staff members, gifts and bonuses, free luxury stadium suites, inflated bonuses, free cars, nepotism, poor accounting and large unauthorised handouts were all part of the mix.

A source close to Sharks (Pty) Ltd said that several months ago a forensic investigation had been initiated as part of a good business practice to ensure sound financial management within its business.

Said one Sharks board member who asked not to be named: “It is in the public interest that we have a squeaky clean operation. As a global icon the Sharks are responsible to their supporters and the next generation of supporters to be honest and above reproach.”

The disciplinary charges subsequently brought against Leigh Heard, the Sharks (Pty) Ltd’s financial manager, were based, the Sunday Tribune was informed, on the results of the forensic investigation.

The primary allegation against Heard was that, on being awarded an expense allowance, she used the account to process personal expenses, thus avoiding VAT and PAYE.

Among the charges put to Heard were that she instructed the salaries department to pay her a special payment of R92 136 and a further amount of R143 500. Accountants called to testify suggested that she was not authorised to give such an instruction nor entitled to these amounts. Other allegations included buying goods for her home, including a TV, with the VAT being paid by her employer.

Earlier this year the Tribune hinted at the fact that a newly appointed Sharks’ board, headed by former Springbok and Sharks rugby captain, John Smit, had found that there were certain issues within the administrative arm that needed to be sorted out.

Heard, who was found guilty of gross negligence and summarily dismissed from the job she had held for 12 years, claimed she worked in a climate where illegal practices were rife.

She told the Durban tribunal investigating the suspected irregularities that she was only doing what everyone else in the Sharks administration was doing. And that was to bypass the taxman wherever possible.

In her defence, Heard said she was being unfairly targeted and asked why other so-called infringements, like scouting fees, sanctioned by Sharks Pty Ltd were acceptable, whereas hers weren’t.

Other infringements, she said, included image rights payments to some players in the Sharks squad and the non-payment of taxes by members of the board for honorarium allowances.

Heard said while she conceded that what she did was wrong, it did not render her unfit for office as she could refund any taxes that might be due. She admitted that income tax documents should have been issued to all board members receiving honorariums, but she had been told not to issue them.

She said it was not her place to go ahead with it as she “wasn’t part of the men’s club” and was just the “chick in finance”.

Although she knew that things weren’t right from a tax point of view, she said she had no voice to challenge the previous regime who she claimed would not have looked on her favourably if she had done so.

Giving evidence before the tribunal, businessman and chairman of the board for Sharks Pty Ltd, Stephen Saad said that he had been sought for his business and financial expertise. He said that last year was a tense time with Smit taking over the reins.

Saad stated that Heard was upset about Smit’s appointment as the new Sharks’ chief executive as she felt that she should have been given the job because her “safe pair of hands” would keep things running.

Early last year, the Sharks operation had received a tip-off from a whistle-blower alleging “all sorts of financial irregularities.

“I initially thought that this was a grudge against Leigh Heard and never imagined that any of the allegations could be true,” Saad told the tribunal.

“The offences” he said “were very serious and had irretrievably damaged the trust relationship.”

Using funds of R40 000 to go to Mauritius and pay for art, Saad said, was “not doing things “right.”

He said the Sharks had made a number of voluntary disclosures to Sars in relation to Heard’s irregularities and would assist Sars in any way it thought appropriate.

The hearing took place between June and last month. The employer was represented by Machael Maeso from Shepstone and Wylie Attorneys and Heard was represented by advocate Paul Schumann instructed by Larson Falconer.

A spokesperson for the Sharks said they believed that the independent chairperson’s sanction of summary dismissal in the circumstances was justified

Heard has referred a dispute of an unfair dismissal to the CCMA.

The charges against Heard

* Paying herself an expense allowance and/or bonus which was not properly authorised.

* Claiming personal expenses as expense allowances.

* Concealing personal expenses by creating journal entries that had no bearing on the actual expenses incurred.

* Processing or giving instructions to process personal expenses through the financial records of Sharks (Pty) Ltd.

* Instructions to pay her a special payment of R92 136 in February 2009 and a further instruction to pay her an amount of R143 500 in respect of a “car allowance”, both of which the employee was not authorised to do.

* Destroying the trust necessary for an ongoing employment relationship.

* Authorising payment for printing cartridges to a family business.

The findings

Heard was found guilty on three of these counts:

* Claiming personal expenses as expense allowances, contrary to proper use of an expense account without any/proper authorisation.

* Deliberately concealing personal expenses by creating entries that bore no relationship to the actual expenses incurred with the view to limiting personal income tax.

* An unauthorised payment to herself of R143 500 as part of a rugby suite “swop” when she was not authorised or entitled to this amount.

Heard’s response

“I was charged with eight counts of misconduct and found guilty on three, most of which I conceded,” she said.

“Most of the charges relate to my conduct of an approved expense account for which I did not pay certain fringe benefit tax. I am currently in discussions with Sars to rectify this.”

She said none of the charges against her were related to theft and she was disappointed that her “minor indiscretions” were considered serious enough to cause her dismissal.

“The Sharks (Pty) Ltd and KZNRU (rugby union) have far bigger tax avoidance issues which they steadfastly refuse to take responsibility for,” she said

“These include issues relating to the players and their agents; the funds that pass between KZNRU/Sharks from sponsorship funds/prejudice suffered by the other shareholder in the company/treatment of benefits paid to other representatives of the company.”

In considering the sanction to be imposed upon her she said she had asked the disciplinary enquiry to consider her offences against “the ongoing tax avoidance” offences of the company.

“I had two independent experts support my complaint and the company relied upon one expert, whose independence was not properly established, who simply refuted my expert’s opinions.”

These are her main points:-

* Superiors were aware of how she was handling her expense account, as they themselves operated their expense accounts in the same way.

* The amount of R143 500 documented as an unauthorised payment to her was “misunderstood” by the chairman.

* She was found “not guilty” on the charge of authorising the payment for printing cartridges to a family business.

The tribunal stated that Heard was “upset about Smit’s appointment as the chief executive as she felt that she should have been given the job because her “safe pair of hands” would keep things running.

Heard said that this was incorrect. It had been accepted that Smit would need her as she was a safe pair of hands.

She admitted she was upset about the appointment as she was excluded from applying.

“The board put in a condition that the applicant had to be a professional rugby player, deliberately to exclude me.”

This, she said, was admitted in the hearing.

Other issues she said would be raised at the CCMA hearing.

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Sunday Tribune

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