Vodacom accused of fraud in R7.5bn BEE deal

File photo: Nadine Hutton.

File photo: Nadine Hutton.

Published Sep 22, 2013


Johannesburg - One of the losing consortiums in Vodacom’s R7.5 billion black economic empowerment (BEE) transaction claims that the cellphone company lied about its decision to award the stake to Thebe Investment and Royal Bafokeng Holdings.

Tiger Consortium Telecommunications is demanding R100 million from Vodacom for damages it says were a result of Vodacom’s misrepresentation.

In papers filed at the Johannesburg High Court, the Tiger Consortium says Vodacom misrepresented the partner selection process to Tiger’s detriment.

“The selection process was misleading, procedurally flawed and implemented in bad faith,” it says in court papers, alleging that Vodacom’s misrepresentation was fraudulent, intentional and negligent.

It says Vodacom “failed to mention a fractional BEE allocation in or during the bidding process of the BEE stake”.

This, it says, is in breach of the spirit of the Broad-Based Black Economic Empowerment Act of 2003 and Trade and Industry’s 2007 BEE code of good practice.

Vodacom is demanding particulars of the misrepresentation and of Tiger’s claim that Vodacom’s financial adviser in the deal, Rand Merchant Bank, plagiarised the consortium’s funding model.

Earlier this year, Tiger Consortium subpoenaed KPMG director Leon Fouche, demanding that a copy of its 2008 forensic investigation report into a range of irregularities in Vodacom’s management and affairs.

Vodacom says the report is a confidential document containing not only its sensitive financial information but also that of others.

In the court papers, Vodacom’s chief legal and regulatory officer Nkateko Nyoka says certain interim findings could create an unfavourable impression in relation to third parties.

Nyoka says the report makes reference to numerous individuals and/or entities not party to the litigation and who have previously objected to its production.

Some of those named are reported to include former Vodacom chief executive Allan Knott-Craig, who now works for its rival, Cell C.

In December, the Tiger Consortium also served subpoenas on Vodacom chief executive Shameel Joosub and company secretary Sandi Linford demanding the KPMG report and other documents relating to the BEE deal.

These were later withdrawn.

KPMG was prepared to hand the report to the high court registrar as Tiger Consortium’s subpoena demanded, but Vodacom successfully argued for the setting-aside of the subpoena before Acting Judge Tony Mundell in June.

Vodacom is fighting hard to keep the KPMG report under wraps, saying the consortium wants access to the document to strengthen its stratagem designed to embarrass the company and humiliate it to score a favourable settlement in the lawsuit.

“In all likelihood, if Tiger Consortium obtained a copy it would threaten to leak to the press or cause it to be published in some or other manner with its attendant adverse publicity in an attempt to extort a settlement in terrorem (by way of a threat),” Nyoka says in court papers.

Vodacom says this has the potential of not only causing it reputational damage but also the individuals named in the report.

Even the judge hearing the matter would be given a “judicial peek” to be satisfied that the KPMG report has no bearing on the Tiger Consortium’s claim, according to Vodacom.

Even then, Vodacom says suitable arrangements would need to be made in order to preserve the report’s confidential and privileged manner.

Vodacom’s efforts to keep the KPMG report under wraps involved asking the court in its application to set aside the subpoena to hear the matter in camera, for the court registrar to place the court file in a place in which the public would not access it and for Tiger Consortium not to disclose the contents of the file or order granted.

Tiger Consortium says Vodacom should have informed it about its decision to give staff 25 percent of the R7.5bn stake.

At the time the consortium bid for the stake, it included controversial former SABC legal services head Mafika Sihlali, Yusuf Surtee, a close friend of former president Nelson Mandela, and top businessman Lester Peteni.

The Sunday Independent understands that fraud and corruption accused Sihlali now represents the consortium after the previous lawyer’s mandate ended in June.

Vodacom’s BEE transaction attracted 60 bidders to take a 45 percent of R7.5bn stake to be allocated to strategic partners expected to add value to the business, 30 percent sold to black South Africans through the Yebo Yethu share offer, while the remaining 25 percent would be for Vodacom employees.

Tiger Consortium previously failed in a bid to interdict Vodacom from proceeding with the BEE deal in 2008.

Sihlali said: “I have little faith in South African journalists, in fact I feel sorry for them. So you can write whatever pleases you”.

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Sunday Independent

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