Unsigned letter puts Tiger boss in a pickle

By Time of article published Nov 25, 2007

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Cape Town - The price-fixing scandal involving three major bread producers took a new turn at Tiger Brands last week, when the firm briefed lawyers in a step that could reopen an investigation into the role played by chief executive Nick Dennis.

The competition commission charged earlier this year that Tiger Brands was part of a cartel, which included rivals Pioneer Foods and Premier Foods. It alleged that in the week before Christmas last year, the company hiked bread prices by 30c to 35c a loaf, breaking the Competition Act.

The commission announced on November 12 that Tiger Brands had admitted that staff had committed practices that were anti-competitive and had reached a settlement, in which it paid a R98.8 million fine but maintained that consumers had not been negatively affected by its actions.

Tiger Brands, with a market capitalisation of R31.33 billion, maintained that only managers more than two tiers below Dennis had attended meetings with rival bread bakers before Christmas last year.

But chairman Lex van Vught said on Friday that the company had referred an "anonymous" letter, alleging that Dennis was aware of bread price fixing, to law firm Edward Nathan Sonnenberg, which had been hired originally by Tiger Brands to conduct an independent investigation into the competition commission's charges.

The letter, addressed to Van Vught, alleged that Dennis, chief financial officer Noel Doyle and former managing executive responsible for the bread business, Haydn Franklin, were all aware of price-fixing.

The investigation by the law firm had exonerated the three executives from involvement in price-fixing at its Albany bread brand, which the Tiger Brands board had accepted.

Van Vught, an independent chairman, said the letter, claiming to be "from long-serving and reasonably senior managers", had been submitted to Edward Nathan Sonnenberg for comment.

And "if they can see how we can do a proper investigation, we will do so", he said.

While Tiger Brands, the country's largest food company, again denied the involvement of senior managers on Friday, its admission that it had committed anti-competitive practices has rocked staff ranging from managers to unionised workers at the company, which employs about 13 000 staff.

At a presentation to shareholders in Cape Town early last week, Dennis said the conduct had been "devastating to our own people".

But investors did not question Dennis on the issue, despite the fact that the fine slashed profit by R98.8 million.

Van Vught said the company had taken the unusual step of responding to an anonymous letter because "the allegations are serious and bring the chief executive into disrepute, and we are obliged to follow them up".

Van Vught added: "The company must take full responsibility for the actions of its employees."

Asked if Dennis's annual bonus had been cut as a result of the saga, Van Vught said: "At this stage it is an internal matter and we will not comment."

Premier Foods has admitted involvement in price-fixing and been granted corporate leniency from prosecution, but the commission is still pursuing a charge against Pioneer Foods.

Katishi Masemola, general secretary of the Food and Allied Workers Union, said there was no alternative to bread as a staple convenience food, and "excessive pricing" had hurt workers, who were already hard hit by rising food price inflation.

Masemola called on the commission to investigate the involvement of chief executives at all three of the companies implicated.

Van Vught said on Friday he "understood the perception" in some quarters that it was reasonable to assume the chief executive was somehow involved in the policy of price-fixing, but the board was satisfied that Dennis had not.

Van Vught said Dennis had addressed "several hundred managers" in Cape Town and Johannesburg, where he disclosed the anonymous letter and called on the managers to report any knowledge of executive involvement to a confidential company hotline or to Edward Nathan Sonnenberg.

Since its founding in 1921, Tiger Brands has become the country's largest food processor, dwarfing supermarket groups in terms of market capitalisation and scale of profit.

The shares lost 0.94 percent on the JSE on Friday, to close at R180.07. The food processors sector gained 0.37 percent.

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