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Embroiled JSE-listed sugar refiner Tongaat Hulett is going after former executives for cooking the books between 2011 and 2018. The accounting irregularities, which have eroded more than R10bn in shareholder value, are regarded as South Africa’s second biggest corporate fraud behind Steinhoff. Peter Staude, Murray Munro, Sean Slabbert and Michael Deighton, all members of executive management during the period in question, have been implicated. As a result of a breach of their fiduciary duties and misrepresentation, Tongaat is seeking R450m in civil claims against these former executives. Tongaat is battling an unsustainable debt burden and looking to raise capital via a rights issue in order to pay down debt. The rights issue will be highly dilutive, given that the company is looking to raise a multiple of its current market capitalisation. To boot, the company had operational issues that led to significant losses last year and further complicated matters. The R450m would be a much-needed liquidity injection. Although, even more satisfying would be watching the accused face justice. – Justin Rowe-Roberts
Tongaat media statement:
Tongaat Hulett seeks R450m in civil claims against former executives
Tongaat Hulett is committed to its undertaking to act on the findings of the PwC forensic investigations which identified that certain senior executives initiated or participated in undesirable accounting practices which resulted in the company’s profits being overstated over a number of years. This led to the loss of value to our shareholders and many of our other stakeholders.
In September 2020 the company instituted civil proceedings in the Pietermaritzburg High Court against former Chief Executive Officer, 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.
The civil action is based on the findings of the PwC forensic investigation, namely unjustified enrichment, damages consequent upon the breach of their fiduciary duties and misrepresentation.
Tongaat Hulett is also seeking an order declaring them as delinquent directors.
In separate proceedings, 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.
In total, Tongaat is claiming some R450m against these past directors and executives. It is anticipated that full trials will be scheduled for early 2023.
As previously disclosed, criminal cases against former executives and senior managers have been opened, both in South Africa and in Zimbabwe and we continue to work with the relevant authorities. In South Africa, the matter is still with the NPA and we understand that a decision on the next steps is imminent.
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.
“Tongaat Hulett is 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.
“The Implementation of sound corporate governance principles is at the very heart of the progress made in our business over the past two years. Our Board, management structures, internal audit, risk and compliance processes, have been considerably bolstered.”
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