EOH: The suspicious transactions inside the company
EOH holdings tumbled on the JSE yesterday after an investigation by ENSafrica revealed the rot that involved a series of suspicious transactions by a group of individuals which the information and technology group said had been reported to the Hawks.
The stock fell nearly 13 percent in early trade before closing at R20.70 after it reported that the irregular tenders amounted to nearly R1.2 billion.
Chief executive Stephen van Coller said eight individuals were implicated in the report, but their actions affected all 11 000 employees in the group.
Van Coller said those implicated excluded the three directors who resigned from the group on Monday. “Clearly, today is not a great day. It is fairly devastating when you join a business and then you have to go through the process we have gone through over the last five months. I wouldn’t wish this on my worst enemies. It is disappointing that few people take so much from so many. I think this is why the zero tolerance stance on corruption by the board is so important and so important for the country,” Van Coller said.
The company released a statement saying that the suspects in the governance failings had been fired. “EOH is committed to ensuring that all perpetrators of wrongdoing are brought to justice. EOH has instructed ENS to initiate criminal charges and lodge civil claims to recover losses, as appropriate,” EOH said. Van Coller said the wrongdoings were committed between 2014 and 2017, and 93 percent of the R1.2bn suspicious payments came from EOH Mthombo. US technology giant Microsoft terminated its contract with EOH Mthombo in February. “But post-2017 we put in controls which led to a steep decline in wrongdoing,” he said.
The group said 84 percent of the payments were made to 20 entities. These payments were largely related to contracts entered into during 2014 and 2017. “However, the majority of these contracts have been completed,” Van Coller said.
The suspicious transactions arising from the investigation have since been reported to the Financial Intelligence Centre (FIC) in terms of section 29 of the FIC Act. Non-executive director Pumeza Bam, chief executive of EOH subsidiary Nextec Zunaid Mayet and chief executive of EOH’s ICT business, Rob Godlonton, tendered their resignations less than 24 hours before the release of the graft report.
“They have obviously been with the company for a long time. They have shown amazing leadership by allowing the company to move forward post this investigation by giving new management and board space to move forward. I think this is an example of good leadership that was shown by minister Nhlanhla Nene when he wasn’t implicated in wrongdoing, but he stepped down as finance minister just because he had been there when some things happened. I think we should applaud them for that,” Van Coller said.
Ron Klipin, a senior analyst at Cratos Asset Management, said Van Coller admitted that the past had been devastating for the company. Klipin said he believed a zero tolerance approach on corruption would send a positive message to current employees.
“The ENSafrica initiative, board support and whistle-blowers app have all been part of an initiative to uncover major fraud and corruption. This has led to R1.2bn of bribery fraud and corruption being uncovered, resulting in pending criminal as well as civil claims. This encompasses both the private and public sectors where overpayments and fraud were the order of the day,” Klipin said.
Klipin said the question now was whether the exit of the executives would solve the deep-seated ills of the company. “Van Coller will face major challenges to turn the operations around but the skills he has shown thus far in dealing and exposing the deep-seated problems may provide a light at the end of the tunnel. However, it will take time to see if the massive clean-up will yield the desired results,” Klipin said.