EMBATTLED sugar producer Tongaat Hulett seems to be finally taking action against senior executives identified in a PwC report as participating in “undesirable” accounting practices.
In a statement, the company announced that it had filed a R450million civil claim against some of its former executives and was also seeking an order declaring them as delinquent directors.
According to the company, the corruption, which was uncovered in 2019, led to the company's profits being overstated over seven years. It said this led to the crash of its share price, which was trading at around R130 at the time, compared to today's nearly R6. The JSE also fined the company.
The company said the civil action was based on the findings of a PwC forensic investigation which highlighted unjustified enrichment, damages consequent upon the breach of their fiduciary duties and misrepresentation.
“In September 2020, the company instituted civil proceedings in the Pietermaritzburg High Court against former chief executive Peter Staude, former chief financial officer Murray Munro, and former finance executive Sean Slabbert, who was also a director of Tongaat Hulett Sugar South Africa.”
Tongaat Hulett said in separate proceedings that Tongaat Hulett Developments, a subsidiary of the group, instituted a civil case in the Pietermaritzburg High Court in February 2020 against the former managing director, Michael Deighton. The company said it anticipated that the court cases would be scheduled for early 2023 as it had opened criminal cases against the former executives. The cases were opened both in South Africa and Zimbabwe.
Tongaat Hulett company secretary, Johann van Rooyen said: “While the process has been significantly delayed through the filing of a number of interlocutory objections on highly technical arguments by the defendants, Tongaat Hulett is determined to pursue this matter and do everything within its power to secure a fair outcome for our shareholders.”
Van Rooyen said the company was withholding Staude and Deighton's pensions until the finalisation of the litigation initiated against them. “Munro and Slabbert had unfortunately already left the business and withdrawn their pensions by the time the action was instituted,” he added.
Tongaat Hulett has not fully recovered from the accounting fraud as it is still struggling at an operating level. In September, it announced that headline earnings for the six months to September 20 would substantially decreased. Its interim results in December revealed that the operating profit was down from R1.67billion to R1.2bn. Profit after tax fell to R23m from R385m.
Recently, in a bid to put Tongaat Hulett on a sustainable trajectory through its turnaround process, the group said it planned a rights offer of at least R2bn, partially underwritten by Mauritius-registered company Magister. If the deal is successful, it might solve the company's debt problem. Since Tongaat Hulett currently has an equity value of R770m, the rights offer outcome might transform its ownership structure.
BUSINESS REPORT ONLINE