When Microsoft cancelled its longstanding two partner agreement with JSE-listed technology services group company EOH in February this year, it was clear that the group was in trouble. Shares of the company once described as a market darling tumbled, remaining close to the R20 mark, well below their all-time high of R180. The new CEO, Stephen van Coller asked law firm ENSafrica to investigate its public-sector contracts. Today, van Coller revealed the findings of the investigation and said he will approach the police after evidence of theft and bribery had been found. – Linda van Tilburg
Speaking in a webcast, Stephen van Coller announced that an internal probe had revealed that about eight people had been involved in a suspicious transaction totalling R1.2bn between 2014 and 2017. He said there is some silver lining in that the company found very quickly that a small group of people, actually eight were perpetuating wrongdoing out of one company, EOH Muthombo. 93% of the suspicious payments came from there. The names of the people involved in the fraud have not been released.
This group of eight were allocating 84% of payments to just 20 suppliers; some of which had the same directors. Van Coller said when they started interviewing staff, they said they haven’t seen any of the directors on the projects. What was also suspicious were the round numbers for payments, which is unlikely when you do calculations for time and material.
Van Coller indicated that he feels confident in releasing the preliminary report as the transgressions took place largely between 2014 and 2017. It accounted over four years for R300m a year in an R18bn turnover company. He believed that the fraud was localised and involved one legal entity out of 270 legal entities that the company deals with. Since then many of the contracts have run out.
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Earlier this week, EOH announced the resignations of three of its directors, Zunaid Mayet, who has also resigned as the CEO of EOH subsidiary Nextec; Rob Godlonton, who was the executive director and CEO of the ICT business and various EOH subsidiary boards and Pumeza Bam, a non-executive of the holdings board and various EOH subsidiary boards and trusts. Dr Xolani Mkhwanazi was appointed as group chairperson earlier in the year after founder and former chair Asher Bohbot stepped down.
Van Coller told TechCentral that the directors were not implicated in corruption. He said “the resignations were in line with leadership accountability to allow the new management and board to move the company forward.’ He said the former board members were helping with the handover.
EOH has announced that it would be lodging criminal complaints with the police for bribery, corruption, theft and overpaying enterprise development suppliers and they are also considering civil claims against the individuals who are implicated. Van Coller thanked whistleblowers who had come forward. He said the next step would be to probe the R1.2bn deals in more detail. EOH shares dropped by 7.38 % in the early hours of trading on the Johannesburg Stock Exchange, but managed to recoup some losses by mid-afternoon, cutting the losses to just over 2%.
