R12m fraud: Whistleblower, MTN in court

Aug 23 2012 16:12

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Cape Town - MTN Group [JSE:MTN], still reeling from the Iran cellphone scandal, is embroiled in a new bruising battle - this time involving its legal department and a retrenched whistleblower, timeslive reported on Wednesday.

According to the report the dispute between MTN and its former senior legal adviser, Violet Magagane, had been kept under wraps until this week, when the Johannesburg Labour Court heard claims of large-scale fraud involving more than R12m.

Central to the dispute is Magagane's claim that she was victimised and retrenched for blowing the whistle on alleged fraudulent transactions involving MTN's chief corporate services officer, Robert Madzonga.

The details of the alleged fraud are contained in an explosive forensic audit by PricewaterhouseCoopers.

The document shows that MTN paid R12.2m to consultancy Nozuko Nxusani Attorneys between March 2010 and March 2011. The consultancy was hired for work apparently done by the MTN legal department.

Magagane's employment at MTN came to an abrupt halt last year after she raised the alarm about Madzonga's alleged signing of 78 invoices from the law firm.

MTN told timeslive on Wednesday that Magagane’s retrenchment was part of it cutting 700 jobs in 2011 to maximise efficiencies.

In court on Wednesday, Magagane described her retrenchment as a "sham" and "camouflage" for getting rid of her for "spilling the beans".

MTN's advocate, Martin Brassey, dismissed her claims.

Timeslive reported that the draft audit report - compiled in August last year, after Magagane had lifted the lid on the alleged fraud - lists dozens of allegedly dubious invoices signed by Madzonga.

The report says that the invoices were mainly for drafting agreements, which Nozuko Nxusani was allegedly not contracted to do.

According to the PwC report, Madzonga flouted MTN procurement policy by failing to say why consultants were needed.

The report also raises concerns about Nxusani having been the only person in her firm who did any work for MTN, that invoices were issued before work was done, and that the hourly rate Nxusani charged varied from R6 246 to R168 358.

According to timeslive the report found that Madzonga:

• Knew Nxusani from university;

• Introduced her to MTN in 2001 with the intention of developing a black-owned law firm;

• Referred 62% of work to her despite his department having the capacity to deal with it;

• Did not thoroughly check the accuracy of invoices;

• Approved invoices based on trust;

• Acknowledged that the hours billed were incorrect; and

• Did not notify MTN legal advisers about outsourcing their work because he did not want to "hurt their feelings".

The report is a damning indictment of the lack of oversight in the MTN legal department.

Brassey challenged the PwC report, saying it was only a draft, had not been properly investigated and "was not worth the paper it was written on".

 - Fin24

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