Bribery claims rock Neotel as CEO takes special leave

2015-07-31 16:53 - Gareth van Zyl
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Neotel. (Duncan Alfreds, Fin24)

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Johannesburg - Telecoms company Neotel has placed its chief executive officer Sunil Joshi and chief financial officer Steven Whiley on special leave amid an investigation into bribery.

Newspaper The Mail & Guardian reported on Friday that Neotel stands accused of making illicit payments of R91m in fees to a ‘letterbox company’ company called ‘Homix’ to win a R1.8bn telecoms services contract from transport parastatal Transnet.

In turn, Homix is accused of receiving payments while not producing any work. Homix is also said to have untraceable directors and no clear office space.

The newspaper reports that Neotel’s auditors, Deloitte, notified the telecom company’s board of directors regarding the possible irregularity in April this year.

Deloitte also reported the issue to the Independent Regulatory Board of Auditors (IRBA) while Neotel’s board is obliged to use a law firm to investigate the matter, the Mail & Guardian reported. Neotel’s board has also reported the matter to police.

In particular, CEO Joshi stands accused of ordering Neotel staff to pay R36m as a ‘success fee’ to Homix after he met with Transnet finance chief Anoj Singh, according to the newspaper. The payment of the success fee coincidentally resulted in Transnet and Neotel resuming negotiations on the R1.8bn contract.

Neotel in a statement on Friday confirmed that its “CEO and CFO have taken special leave” as part of co-operation with an investigation into the matter.

“In the course of Neotel’s most recent audit, certain alleged irregularities were raised by Neotel’s external auditors. On learning of the irregularities, the Neotel board took immediate action, mandating an independent investigation," said the company in a statement.

“The investigation concluded that the irregularities indicated a possible non-compliance with the company’s internal procurement and payment processes," said Neotel.

Neotel on Friday further said that its board has “appointed a sub-­committee to continue an investigation into the non-compliance”.

The timing of this bribery scandal comes amid Vodacom looking to buy Neotel for R7bn. The Competition Commission and the Independent Communication Authority of South Africa (Icasa) have thus far approved the deal.

Meanwhile, the Competition Tribunal is set to make its decision on the deal later this year. The likes of Cell C and MTN have opposed the deal as they say it could make Vodacom a super dominant telecoms provider as well as giving it an unfair advantage regarding mobile spectrum.

It’s unclear whether the Neotel bribery scandal could affect the Vodacom deal.

Read more about: mtn  |  transnet  |  cell c  |  vodacom  |  neotel

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